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It's not only how those assets should be divvied up, but closing all gaps that could create future wrangles. Or liabilities that need courts to do the fixing up. Image Credit: Shutterstock

Estate planning is not just a collection of legal documents, but provides clarity on how exactly those assets would be given to the family.

Have you ever thought about how your healthcare and financial decisions will be handled if, for some reason, you are unable to do so for yourself? Planning not only allows you to exercise control over almost everything, but also saves family and beneficiaries from a financial mess in a time of distress.

The pandemic has revealed just how fragile everyday life can be. Your money and assets and your instructions can all get lost. It is important that we spend time looking at estate planning because it is the best way to give your family peace of mind knowing everything has been carefully crafted.

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Reaching the intended

Firstly, it helps you choose who inherits your assets. If you don’t decide this while you are alive, the court of the land will when the time comes - and it may not be what you probably would have wished for.

Secondly, an estate plan greatly helps protect the family, especially if there are young children. A well thought out plan helps save family members from themselves and thus dramatically reduces the chances of any disputes and claims.

Thirdly, a good plan can save the heirs from paying taxes using money from the estate and rather use something like an insurance policy, which could pay the tax for them when the inheritance does occur.

Snowed under obligations

It can save the estate from unforeseen creditors. We have realised that most families we have worked with are caught off-guard at the time of inheritance with the amount of debt owed by the family business.

Think about the following scenario: If you are incapacitated and someone needs to make decisions for your healthcare, who would it be? While nobody likes to think about dying young or being incapacitated, it’s always better to have a plan in place so that things can go according to how you would have made those decisions if you were doing so yourself.

Outsmart the Ds

It may sound a bit insensitive, but it may be wise to understand that it is what it is. The value of your assets can significantly get affected due to one of the three Ds – death, divorce, or desperation. In the event of a person’s death, family members often find themselves in disputes over their assets or the urgency for liquidity which would affect their value.

Similarly, in the case of a divorce, partners get stuck in ugly situations where they’re fighting for the things they owned together when they were together, which would again result in depreciation. If it’s neither of these two, the third most common reason behind a financial loss is someone’s desperation.

Building the right estate plan is not as tricky or as challenging as it sounds. It can actually be broken down into seven parts – legal, taxation, inheritance, charity, retirement, income, and asset transfer. Most people only focus only on legal and the, not realizing they’re just two parts of an estate plan.

Ready documents

The estate plan needs to have all legal documents in place to ensure no beneficiary gets stuck in a legal battle while trying to make a claim. It also needs to protect your beneficiaries from the massive tax liability that could fall on them when they inherit your estate.

Tools like life insurance can help you prepare for beneficiaries’ liabilities and provide liquidity during inheritance. An ideal estate plan, is not only about what happens when you die, but also when you retire and stop actively earning.

One of the things this pandemic has taught us is building a consistent stream of income from your estate plan is the key. Over the last 12 months we have seen a 200 per cent increase in families enquiring about how to do proper estate planning because it is not just about buying a product, but rather it is the plan itself that matters.

Everyone lives two lives, the first one ends with our last breath, the second one ends when our name is mentioned for the last time. The first death we have no control over, but our second death is in our hands.

As you finish reading this article, think about how you would like to be remembered? You will be a memory for your family and friends. Just what type of memory do you want it to be?