The term estate planning refers to all the tasks that must be completed in preparation for transferring assets in the event of death. Some practitioners include measures in case the owner becomes incapacitated or otherwise incapable of managing their own assets. This includes the settlement of any tax that must be paid as well as the division of assets among beneficiaries.
Estate planning should include the services of a professional estate planner or attorney specialising in this area. Dr Edgar Paltzer counts estate planning among his preferred areas of practice at his law company in Switzerland. A definition of the estate can be found in the short video attachment to this post.
There are many different facets to estate planning, particularly when the testator has a large amount of wealth or the estate has a high unrealized monetary value.
Writing a Last Will and Testament
A large part of estate planning is the writing of a last will and testament. This legal document defines exactly what the testator wishes to happen with all their assets after their death. While the terms of a will can be challenged in certain cases, it usually follows that the wishes of the deceased are known and abided by. A will can also include details of what should happen to any dependant minors. A will goes through a legal process called probate to determine its authenticity and for the courts to officially appoint a named executor of the will or identify the heirs so they can begin the process of dividing assets.
The embedded PDF contains some tips for choosing who should be the executor of your will.
Heirs or Beneficiaries
Heirs or beneficiaries should be clearly designated within the will to ensure the person can be properly identified who receives assets as per the wishes of the testator. If there are no named beneficiaries for assets, the estate will devolve according to the statutory rules or, in case of dispute, a judge will have to decide how an estate gets divided.
Certain assets can pass to named heirs or beneficiaries outside of a will, such as an insurance policy or retirement account that have individually named recipients. It is therefore important on accounts such as these to name a beneficiary. It is also useful to name a contingent beneficiary.
Reducing the Tax Bill
When we die, we naturally want to ensure our heirs will benefit as much as possible from our assets. However, there are in many jurisdictions taxes that must be paid before assets can begin to be divided, which reduces the total value of the estate to be passed on. There are various ways in which such tax can be reduced with careful planning and professional advice, so having a comprehensive estate plan is essential.
One way to reduce inheritance tax is to donate a proportion of the estate to charity. You can learn more about this in the infographic attachment.
Assets can also be transferred in various ways before death to reduce taxes.
Guardianship Designations
No parent of young children wants to think about not being around for those children, but sometimes the tragic and unexpected does happen. Choosing a designated guardian for those children in the event of death is therefore an important part of estate planning. Without such a designation, it will become the responsibility of the child protection authorities or the courts to decide what is in the best interests of the children, which could mean them growing up with family members who have different values and priorities and seeing persons in control of the assets who pursue their self-interest.