Estate Planning is simply the process of preparing the distribution of oneís wealth after death. This entails outlining documents such as wills or trusts which will be the basis of wealth distribution. Without these documents, an estate plan is created out of default by oneís state, and each state has their own laws that govern the distribution of assets after a personís death.
There are several reasons why estate planning is important. For one, estate planning gives one the chance to decide who receives a share of the assets, how and when they receive their inheritance, and who will manage the estate. Also, having an estate plan may reduce estate taxes and administrative expenses and may provide for an orderly sale of a family business. Finally, estate planning also allows one to select a guardian for his child.
Among the methods of estate planning include: the creation of wills, the drafting of trusts and the granting of power of attorney.
Wills are the most basic estate planning documents that allows one to specify who he is and what right he has to give away a property, a description of the property and to whom will the property be given to. Though wills may be easy to outline, it is recommended that an estate planning attorney be hired to guide in the creation of wills.
A Trust, meanwhile, is useful to individuals who are subject to estate taxes. It also avoids a lengthy court process simply because trusts allows the trustee, which is the person named to control the Trustís assets, to name beneficiaries without the courtís involvement.
In situations where a person cannot be present, then a power of attorney is used. This means that a person has entrusted someone else to negotiate and settle matters on their behalf.
Estate planning is also a critical part of retirement planning.
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