Benjamin Franklin once said, “By failing to prepare, you are preparing to fail…”. Estate planning is fine, but to make it flawless, you need to undertake certain preparation. However, before we embark on that subject, we must remember that in legal parlance, an estate is more than a landed property. It is actually a person’s net worth, the sum total of his assets. An estate may include all kind of legal rights, interests and entitlement on properties as well as bank accounts, shares, units, vehicles etc. etc.
Many people do not realize the importance of estate planning. Let me first remind you, in legal parlance, it is the process through which an individual’s assets are managed in case of his incapacitation or disposed in case of his death. Therefore, such a process involves:
1. Creation of Will
2. Taking steps to minimize taxes
3. Selection guardians, in case the dependents are minor
4. Selection of executors of the Will
5. Setting up durable Power of Attorney so that in case of your disability the assignee can act on your behalf
6. Creating and updating the list of beneficiaries of assets and investments not covered by the Will
Of course, this list is not at all all-inclusive. Making funeral arrangement or designating somebody to take all major health care decisions on your behalf in case of your inability also falls in the ambit of estate planning. In fact, estate planning is such a long drawn and complicated process, it is best left to people who know. Indeed, the best solution is to talk to an Estate Planner or Estate Attorney about it and then proceed.
However, it is always better to be equipped adequately before you go to meet the attorney (or his assistant) for the initial meeting. Meanwhile you can start making an inventory of all your physical and nonphysical assets. While the physical inventory should include every item you own above certain amount, such as your home, jewelries, collectibles, cars, laptops, television sets etc, the nonphysical inventory should contain your assets that you own on paper or other entitlements. Your bank accounts, shares, insurance policies (life and others), 401K plans, IRA etc fall under the later category.
Also, make a list of your debts and other liabilities. Often such debts are so scattered that we hardly have any clear idea about them. Running a free credit report once a year is not really a bad idea. It at least gives you an idea on where you stand. If you make regular donation to charitable institutions, it is important to make an inventory of that also. Once all such inventories are complete, it is time for you to proceed.
Of course, you still have one more list to make. Unless you want to bestow your entire estate to one single person such as your spouse, make a list of the persons and institutions you want to remember in your Will. Also, mention how much you want to leave with each of them. Keep in mind that life insurance policies or retirement accounts do not fall within its ambit. The proceeds generally go straight to the beneficiaries. Remember it while you are distributing your estate through the Will.
Another point to remember is that if by chance you want to deny any of your children or your spouse any legacy, do not ignore them all together. Leave $1 for them at least. Otherwise, they may contest the Will and the judge will take it as though you have forgotten to mention them. In fact, making a proper Will, which is consistent with the state laws, is one of the most important parts of estate planning. A Will ensures that your estate is disposed in the way you want. If there is no will or if it is not framed according to law, your estate will go under legal jurisdiction and the judge will divide it in accordance with state law, ignoring your wish.
A letter of intent may help. Although such a paper does not have any legal validity, it can give an idea of your wishes and inspirations in case of legal tussle. Such letters are often used to convey certain wishes. Word it carefully and leave it with your executor. One more point; choose the executors and witnesses of your will carefully. They must be able to present themselves at the right time. Out of state witnesses or executors may find that difficult. Lastly, keep updating your plans. Remember estate planning is an ongoing process. It is not something you can prepare than forget.
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