You go through life doing your best to save, invest, and build wealth. At some point, you may wonder, what will happen to everything you own after you die?
The answer depends on your wishes if you’ll do estate planning. Here’s why it matters regardless of your age and status:
1. You’ll take care of your loved ones
A proper estate plan helps ease the emotional and financial burden on your family. It also serves as assurance that they’ll be taken care of after your passing.
Additionally, estate planning offers strategies to minimize estate tax, so your family doesn’t have to worry about paying a hefty amount.
2. You’re able to express your wishes
In your will, you can state how your assets will be distributed and who will receive them. You’ll be able to leave a legacy the way you want instead of letting the law dictate what happens next.
Expressing your wishes doesn’t apply solely to inheritance. You can also include instructions for end-of-life care, guardianship of minor children, funeral arrangements, and even how your digital footprint will be handled.
3. You can minimize conflict and disputes
With your wishes documented and the proper paperwork prepared, you can eliminate conflict among heirs and minimize the need for court involvement.
4. It can bring peace of mind
Getting your affairs in order brings a sense of relief. You won't have to worry about what might happen to your family or your possessions if something unexpected occurs.
Your loved ones also benefit from this peace of mind. During a difficult and emotional time, they won’t have to guess what you wanted or scramble to make tough decisions.
Common elements of an estate plan
Every estate plan is a little different depending on a person's situation and preferences. However, most include a few key documents and decisions:
- Will
This states who should receive your assets after you pass away. You can name an executor to carry out your wishes and assign a guardian for minor children or other dependents.
In the Philippines, the law identifies compulsory heirs who are entitled to a certain portion of your estate. Consult experts to account for inheritance laws when drafting your will.
- Trust
This allows you to place assets under the management of a 3rd party, called a trustee, who distributes them according to your instructions.
- Power of attorney
This gives a trusted person the authority to make financial, medical, or legal decisions on your behalf if you become unable to do so.
- Advance directive or living will
This document outlines your wishes for medical treatment if you become unable to communicate them yourself.
- Beneficiary designations
Life insurance policies and retirement funds let you assign beneficiaries. Keeping these up to date ensures the right people will receive the benefits after your passing.
Your overall estate plan should be reviewed and updated regularly to reflect life changes such as marriage or the addition of dependents.
The amount of work involved with estate planning can seem overwhelming, but you can start small and build it little by little.
Small steps could include tracking your assets, settling debts, and organizing important documents like insurance policies and deeds.
