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Estate planning is the process of anticipating and arranging the management and disposal of a person's estate during the person's life, in the event the person becomes incapacitated or dies. The planning includes the bequest of assets to heirs and may include minimizing gift, estate, generation skipping transfer, and taxes. 

 

Estate planning includes, planning for incapacity as well as a process of reducing or eliminating uncertainties over the administration of a probate and maximizing the value of the estate by reducing taxes and other expenses. The goal of estate planning can only be determined by the specific goals of the estate owner and may be as simple or complex as the owner's wishes and needs, as directed. Guardians are designated for minor children beneficiaries.

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To begin the process of estate planning, it is important to create a will, trusts, identify beneficiary designations, power of attorney (financial and medical), property ownership with rights of survivorship and gifting procedures. The Will should outline the allocation plan of the distribution of an estate in compliance with the laws within the jurisdiction created.  A trust could also be used to direct the distribution of assets after the person dies.  Advanced directives can also be used as a way to have documentation that states whether or not you want to be buried or cremated and who makes the final determination of whether or not you live when hospitalized on life support and incapacitated.

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When estate planning, you want to keep in mind that the person or people you allocate your estate to will be responsible for paying an inheritance tax.  However, assets left to a spouse or qualified charity are not subject to federal estate tax.  Assets left to an heir, including children, are usually subject to paying tax if the portion of the estate has a value in excess of the estate tax exemption.  To avoid paying federal estate tax, distribute the property in incremental gifts during the person's lifetime.  Individuals can give away as much as $15,000 per year without incurring gift tax.  Paying a child's college tuition or medical insurance premium paid directly to the college or insurance provider are tax free gifts as well.

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The probate process can be long and expensive when requesting a hearing from the courts to distribute assets, so many people use strategies called probate avoidance.  Some probate avoidance strategies are: 

-having a revocable living trusts

-joint ownership of assets and naming beneficiaries

-making lifetime gifts

-purchasing life insurance

 

If any disputes arise about the distribution of assets, consult with a mediator, who can help settle disputes.

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To learn more about estate planning watch the YouTube video:

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It is better to have a plan now, especially if you have assets that will need to be distributed when you die.

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By Jason Torrents

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