Put Fear Behind You – Estate Planning

Do you want to build wealth? The most likely answer is ‘yes’. Who wouldn’t want to build wealth? Wealth and money are the main topics of everyone’s adult life whether we accept it or not. But why do you we build wealth?

Money is needed not only to meet our basic needs, but also to achieve our life goals and support the things we care about most deeply — family, education, health care and charity. We work hard, make sacrifices during our working life to save and create wealth to achieve our dreams.

It is equally important to Protect, Preserve and make proper Provisions for the benefit of ourselves and our loved ones. Not knowing when the misfortune of debilitating disease, disability or death strikes could make it difficult to access the wealth for the purpose it is intended to.

An effective “Estate Plan” enables the distribution of wealth to intended beneficiaries for the desired purpose and at the right time.

Estate planning is the process of anticipating and arranging during a person’s life, for the management and disposal of that person’s residual assets during the person’s life and after death. It encompasses maintaining and enhancing of financial security, standard of living and welfare of the intended class of beneficiaries.

The Estate Plan should have adequate provisions for the protection of assets from being taken by unintended beneficiaries because of the loss caused to someone by negligent acts like accident or professional negligence, claims by creditors or due to divorce between couples.

What is the legal way to protect the estate for intended beneficiaries? It could be by taking a life insurance policy under “Married Women Property Act” which protects the proceeds from life insurance policy for the benefit of spouse and/or children, or by creating an irrevocable family trust for the benefit of intended beneficiaries or by any other means as advised by the Estate Planner or other competent professional.

Preservation of Estate involves maintaining or growing the value of estate consistently and to bequeath it to future generations. The focus is of preservation of Estate. Some ways of preserving the estate includes

  1. Earning a positive real rate of return
  2. Minimizing taxes and other levies within the provisions of law
  3. And most importantly, ensuring that wealth does not fall into the hands of extravagant, spendthrift, incompetent and irresponsible person(s).

Generally, those who have made a WILL would have made provision to bequeath real estate, other property and financial assets. But, the Estate of a person may include assets which may have more emotional value, if not financial value. This could be antique furniture, pets and a personal library.

In the process of Estate Planning certain factors need to be considered carefully and provided for.

  1. Preparing an advance medical directive to ensure your medical care wishes will be honored even if you are unable to communicate. That relieves your loved ones from having to make hard decisions at a time of stress and avoids draining your financial assets on extravagant medical treatment. The Supreme Court of India now allows ‘Living WILL’ for the terminally ill with guidelines laid out.
  2. Appoint guardians to take care of minor children and their property and also for adults who are unable to handle their own affairs.
  3. Power of Attorney to a reliable person to act on your behalf to manage your property while you are still living.
  4. Bequeath the Estate by way of WILL or provide its benefits through a Family Trust, enabling preservation of wealth for generations.
  5. Providing enough cash to meet your estate obligations (expenses of last illness, funeral, debts, taxes).
  6. Transfer of proprietary business or share in partnership firm.
  7. Provide support and financial stability for your surviving spouse.
  8. Provide support and financial stability to disabled dependents.
  9. Provide for the education and care of children.
  10. Operation of social media and other digital media.
  11. Bequest to a charity.

The most important objective of Estate Planning is to minimize the complexities for your family members in the management of your estate during your life in the event of any incapacity, and distribution of the estate to family members after your demise. Discussions with important family members will help in deciding the outline of the estate plan. It is also prudent to keep family members abreast of your estate plan.

Generally, wealth is created with the advice of professionals like Financial Planners and Chartered Accountants. These professionals have records of client wealth and rationale behind various investments made by their client. Hence, these professionals also play an important role in distribution of wealth to the intended beneficiaries in the process of executing the estate plan. Financial planners/advisors also can be of great support to family members in managing the bequeathed wealth as per the wishes of the deceased.

When the estate includes real estate, advice from real estate professionals like property valuer and legal professionals who deal with real estate assets helps in shaping up the effective estate plan. A property valuer may assist in the valuation of real estate and a legal professional about the compliance of various property documents for smooth transmission of title.

The old Latin saying, “Caveat Emptor,” or “Buyer Beware,” certainly applies to estate planning. The general view of the public is that, it is not necessary to spend money and take the support of professionals, and resort to ‘Do It Yourself’ for which many free tools are also available.  One wrong word or one missing signature can change the entire intent of estate planning deed.  A qualified and professional Estate Planner can make having an effective estate plan easy and save large sums on professional fees, transfer fees and court costs on your death.

All of us would hope that all our wealth would be available to be enjoyed for many years by our family and loved ones and for the generations beyond. Timely succession and estate planning is  key to hassle-free future for the person and family.

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A Suresh, Executive Director, PropSeva®

Chartered Trust and Estate Planner TM     CERTIFIED FINANCIAL PLANNER CM

This article is originally published in “FP Pulse Special Edition 2018”, a magazine by Council Of Financial Planners