Getting your affairs in order involves careful planning to ensure a smooth transition to your heirs.
The concept of estate planning can easily intimidate and overwhelm. As the name would suggest, this is where you create a plan on how your assets will be managed and/or distributed in the event of your death or when you’re unable to make decisions for yourself (e.g., due to an illness). It is a complex topic with several factors and legalities to consider.
However, without a sound estate plan, your loved ones may be caught off guard by the hefty taxes to pay in order to enjoy their inheritance. The outstanding loans and mortgages you failed to settle might eat up the estate you left behind. There may be resentment and court battles among family members over wealth you didn't disclose and allocate properly.
Crafting your estate plan can be less daunting with the guidance of your lawyer or an expert. When done right, it could save your heirs a considerable amount in taxes and fees, or they could have an insurance payout ready to cover the expenses immediately following a death. Before you consult one, it would be good to have a working idea for creating your estate plan.
Let us lay down the basic steps you need to know:
- Determine what comprises your estate. Make an inventory of all of your possessions, from real estate properties (house and lot, condominium units) to personal properties (vehicles, valuable pieces of jewelry or art), as well as bank accounts and various forms of investment instruments (i.e., assets that can be traded, such as stocks and bonds). Ensure that the paperwork for each one is clean and on file. Anything that needs to be registered must be updated, and any taxes due be paid on time.
Some important considerations regarding your assets are their nature and location (in case there are properties outside of the country), which will dictate the applicable laws governing them and how they must be transferred to your heirs.
Be sure to disclose everything to your lawyer, especially if your estate is diverse and enormous, so everything is accounted for. - Determine your heirs. Disputes and drama among heirs are popular themes in soap operas. These can also happen in real life, so be honest with your lawyer in taking stock of your assets and the heirs you plan to include in your will.
Note that there are compulsory heirs, such as the spouse and children, and their inheritance is mandated by law unless they were legally disinherited. Hence, in preparing your last will and testament, only specific portions of your estate can be allocated to heirs of your choosing, such as non-blood relatives and charitable institutions. - Work with an expert to ensure the validity of your will. Work with a lawyer or an expert in drafting your will to navigate the estate laws specific to your case. Remember it will be presented in court to test its legality and completeness. Consulting a professional would also allow you to choose the best options for maximizing the legacy you will leave behind to your heirs.
- Set up a seamless estate transfer plan. This is another reason why an expert’s guidance is necessary. They should be able to identify your options and recommend the best course of action in transferring your properties to your heirs.
Keep in mind, though, that there isn’t one solution that can cover your entire estate, since it may be composed of liquid (i.e. assets that can be easily converted to cash) and non-liquid assets (i.e. assets that may take longer to convert to cash).
When it comes to liquid assets, a life insurance plan can be a good option due to its tax advantages and the ease with which it can be converted to cash, which can help cover your family’s immediate expenses upon your demise. When choosing a life insurance plan, you may consider one with an investment component, as this will allow you to grow your wealth while providing you with insurance protection at the same time.
Meanwhile, as the estate owner, it is your responsibility to be upfront and disclose to your lawyer all information that may affect your will in any way, including outstanding liabilities and illegitimate offspring, if any, the exclusion of which can invalidate your will and put all careful planning to waste. - Identify the executor of your will. Think of a person in your life whom you trust the most and who has the capability to carry out your will with integrity. They must also be someone who can handle the pressure of enforcing your will.
- Continuously manage your properties. As long as you’re still alive, ensure your properties are in good condition and that any relevant taxes and paperwork are updated and paid up. Your will also needs to be updated as you acquire more assets.
With these basic steps in mind, planning an estate need not be a mysterious, alien concept to you. As with anything, informed and cautious planning is key.
Know you can game plan your loved ones’ future by protecting and growing your estate. Contact an AXA financial advisor today to explore insurance products that suit your needs.
