Estate planning is the process of organizing the distribution of a person's assets after death. Typically, this involves drafting a will or trust that specifies how assets will be dispersed to heirs and designating an executor or trustee to oversee the distribution process.
The Goal of Estate Planning
The purpose of estate planning is to ensure that a person's assets are dispersed according to their intentions and as efficiently as possible from a tax and legal standpoint.
What are the benefits of estate planning?
Control over asset distribution
Estate planning allows you to organize the distribution of your assets after death, ensuring that they are allocated in line with your wishes and intentions.
Estate planning may reduce the amount of assets subject to probate, which is the legal process for distributing assets after death. Probate has often been costly, time-consuming, and visible to the public.
Planning your estate may reduce the tax burden on your beneficiaries. By using a trust, for instance, you may be able to delay or minimize taxes on the trust's assets.
Planning for incapacity
Estate planning enables you to prepare for the risk of incapacity by appointing someone to handle your finances if you become incapacitated.
Providing for loved ones
Estate planning can help to ensure that your loved ones are provided for, even if you're no longer able to care for them yourself.
Top 6 Tips for Estate Planning
Make a will: Wills are the most crucial element of estate planning. It permits you to indicate how you want your assets divided and to name a guardian for your minor children.
Review your beneficiaries: Ensure that the beneficiaries on your accounts, insurance policies, and investments are up-to-date and aligned with your overall estate plan.
Consider a trust: Trusts can be a beneficial estate planning tool, especially if you have specific objectives, such as providing for a disabled relative or avoiding probate.
Power of attorney: Consider appointing a power of attorney who, if you become incompetent, will be able to make financial choices on your behalf.
Consider the tax implications: Consult with an expert to determine the tax consequences of your estate plan and to reduce the tax burden on your beneficiaries.
Review your estate plan regularly: Estate planning is not a one-time event; rather, it is a process that should be reviewed and adjusted periodically to reflect changes in your life and in the laws influencing estate planning.
How can insurance help with estate planning?
Estate liquidity: Life insurance can provide a source of cash to assist with estate taxes and other expenses that may occur following your passing. This can help ensure that your assets are dispersed in accordance with your preferences, as opposed to being used to pay taxes and other debts.
Replacement of lost income: Life insurance can be used to replace lost income for your family, particularly if you are the main breadwinner. This can ensure that your loved ones have the financial means necessary to sustain their standard of living following your passing.
Gift giving: You can provide gifts to your heirs using your life insurance proceeds. Either the policy itself or payments can be the gift.
Charitable giving: Life insurance can also be used to make charitable gifts. You can designate a charity as the beneficiary of your policy, which can result in a far higher contribution than you could contribute during your lifetime.
Business continuity: If you are a business owner, life insurance can be used to buyout your share of the business in the event of your death. This can secure the business's continued operation, growth and job creation.
A financial advisor can be an invaluable resource in this process as they can help you understand the financial implications of various estate planning strategies, suggest options that may be suitable for your unique situation, and integrate your estate plan with your overall financial objectives.
Financial Advisor, Manulife Securities Incorporated
Life Insurance Advisor, Manulife Securities Insurance Inc.
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