What exactly is estate planning, and who needs it? Estate planning is primarily the process of determining how, when, and to whom you want your property to pass upon your death. It also addresses how you want your estate to be handled when and if you lose the ability to manage it yourself (often referred to as “disability planning,” a subset of estate planning).
Good estate planning will, among other things: provide management and protection of family assets; control the management of your property and your personal financial needs when you are unable to manage your estate yourself; eliminate uncertainty regarding inheritance; ensure the continued financial health of your loved ones after you are gone; provide creditor protection to your heirs; simplify administration of your estate; avoid the high cost and time of probate; minimize applicable estate and/or inheritance taxes; define and accomplish your charitable wishes; minimize income taxes payable by your estate (which necessarily reduce the property passed on to your heirs), and; provide post-mortem control over your assets. Anyone with property (regardless of overall net worth) and heirs needs estate planning.
At its most basic, estate planning involves the creation of a will and/or a revocable living trust, each of which are discussed briefly below. However, estate planning may also involve several other tools, discussed briefly below. Moreover, it entails an analysis of your assets; defining your estate plan can help you determine what assets you should invest in to accomplish your long term goals. Assets such as life insurance and retirement benefits can be powerful tools in estate planning, due in large part to their tax favorable characteristics; real estate can provide a continuing flow of income for your kids and grandkids. Further, estate planning may involve the creation and management of family limited partnerships (FLPs) or other small businesses.