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The building blocks of financial planning: 1
The building blocks of financial planning: 2
The building blocks of financial planning: 3
The building block of financial planning: 4
Welcome to the final stage of financial planning. Individuals who have followed the series till now will at least have a basic plan in place. So without much ado let us begin with the process of completion of financial planning.
What is estate planning?
Frequently many individuals confuse estate planning with real estate or property planning. An estate is the total property, real and personal, owned by an individual. Estate planning is the process of disposing this estate whereby an individual or family arranges the transfer of assets in anticipation of death.
Why the need for estate planning
I would say the biggest example is Dhirubhai Ambani. Unexpected death of Dhirubhai Ambani without any will led to the fight between brothers for the estate in public eyes. Death is unpredictable. No one is prepared for it. But one must always be geared up to face it.
In the event of unexpected and untimely death the disposal of the estate falls into the hands of individuals who may not have your best wishes in their hearts. This may lead to differences and unpleasant acrimony between various beneficiaries.
Estate planning during your lifetime enables you to make sure that the distribution is fair and according to your wishes. This also reduces unnecessary costs that may be charged by arbitrators and also prevents delay in distribution of the estate.
How to go about writing a will and trust
There are certain tools which will help you to go about planning. Wills and trust are common ways in which individuals can arrange transfer of assets. A will is a legal document that states how your assets will be distributed after your death as per your wishes.
A valid will helps the administrators to process it without any undue delays and obtaining a probate (probate is the legal process of administrating the estate of a deceased person by resolving all claims and distributing the deceased person's property under valid will. Source: Wikipedia) becomes easier.
Please note that a legally valid will has these following essentials:
Also do note that your wishes should be precise and without any ambiguities.
It is important that the will of a spouse is prepared at the same time as yours as premature demise of either of the spouse is not uncommon.
A will can be changed as many times as one's wish. It can be prepared at any age after attaining becoming a major, that is, after completing 18 years. A will made by a bachelor becomes invalid after marriage.
In the absence of a will the law of succession comes into effect.
Trusts
A trust is an arrangement whereby one person for the benefit of the other manages property. Unlike a will a trust can be created during one's lifetime or as an inclusion in one's will. Trust can be for the family or charity or both.
In case of a mentally challenged child it is important that a trust is created specifically for the benefit of this child.
While this article gives a fair overview about making a will and trust legal advice is always beneficial.
Irrespective of the value of your estate it is important that a will is made from the beginning of your earning life. In event of untimely death it will save your beloved unnecessary delays and legal hassles.
This completes our financial plan. The importance of financial planning is that it helps you to draw a path which you follow to achieve your goals. A quick look at the five phases of financial planning:
5. Estate planning
It always helps to have a strong foundation if you want to build a strong structure atop it.
The building blocks of financial planning: 1
The building blocks of financial planning: 2
The building blocks of financial planning: 3
The building block of financial planning: 4
The author is a certified financial planner and can be reached at dhanplanner@rediffmail.com.