People spend nearly an entire lifetime trying to create their fortunes. They devise great strategies, wade through office politics, and expose themselves to risks by shouldering more responsibilities. Despite that, their error lies in improper estate planning. And at the end, their children are left fighting over inheritance claims or managing their debts.
As you acquire more assets, create a plan to distribute your wealth among surviving dependants. People often mistakenly use the terms will and estate planning interchangeably. But, in actuality, they are different!
Understanding Will & Estate Planning
A Will is an official document containing instructions from the deceased on how to distribute their property. Here, “Estate” refers to all your investments that add to your net worth as an individual. Estate Planning is a broader process that consists of multiple documents that safeguard your assets, including properties, after your demise.
Simply put, a will is the foundation of a strong estate plan. Collectively they dictate property distribution, guardianship of your minor children, and who will manage healthcare and financial matters on your behalf.
Whether you’re in your 20s or 30s, it’s never too early to write your will. It’s doubly beneficial for you and your dependants!
- Prevent Disputes Between Beneficiaries: Your final wishes will provide your legal heirs with clarity; preventing familial conflicts
- An Executor You Can Trust: The executor of your choice will follow your last wishes and execute them
- Financial Security for Dependants: Divert more resources toward financially vulnerable dependants like children and parents to safeguard their future
- A Guardian for Minor Children: Post your death, the legal guardian you choose will oversee their interests until they reach adulthood
- Disclosure of All Your Assets: It creates an inventory of all your assets, ensuring that your acquisitions are not left unclaimed by surviving dependants
Ways to Begin Estate Planning
People often mistake estate planning as an activity for the rich. However, it’s beneficial to everyone, regardless of class. Have you had multiple marriages? Or want a portion of your assets to be donated? Estate planning is the way to go!
Create an Inventory
Start by making an extensive list of all your assets and investments. You must include jewellery, expensive furniture, fancy cars or antiques in the list. With a list of your possessions, you can easily decide who you’d want to allocate those to.
Round-Up Your Debts
Don’t leave your dependants vulnerable to a barrage of debts and hungry creditors. Make a separate list of all the debts you owe. It includes outstanding credit card dues, auto or home loans, etc. Don’t forget to mention all the active credit cards you own, with the location of all the signed documents and folders.
Evaluate Your Dependants’ Needs
If your family survives on dual incomes, increase the insurance premium for a better sum assured. Are you appointing a legal guardian for minors? Pick a backup guardian, too! Write a detailed document on childrearing instructions with clear goals.
Your Healthcare Directives, aka “Living Will”
If a medical illness leaves you unable to care for yourself, entrust a person with medical power of attorney beforehand. It authorises them to act on your behalf, based on a document with instructions from you.
Manage Your Beneficiaries
While investments and insurances usually require a nominee, you must update this data throughout your lifetime. It could be due to divorces, deaths, or other changes in your relationships. Always appoint a contingent beneficiary as a backup for all your acquisitions.
With every stage of your life, re-evaluate and update your estate plan with each new investment.