What estate planning is and why it is essential?
There are many advantages to having a solid estate plan in place. It will leave your loved ones with more money by avoiding probate court fees and legal costs at the time of passing on (which can easily add up to £10,000’s or more). If you have property in another country that needs to transfer, those types of transfers can get very expensive as well! An estate plan also allows you to appoint guardians for your minor children should something happen to you.
Make sure they receive a proper education and the people you choose to look after them. Estate planning is important to the well-being of your estate and your loved ones. Most estate plans aim to distribute property upon death. But estate planning can help you manage wealth in living, too.
Dying in testate means that you die without having created either a will or a trust, which will provide instructions for passing your estate onto your heirs. Dying in testate means the government will decide what happens to your estate not you.. Plus it leaves your estate wide open to probate, creditors, lawsuits, judgments, lawyers, and various taxes, which can cause damage to the value of your estate. Whether they are aware of it or not, without proper estate planning for the distribution of your estate you lose control over where and how that is distributed.
Without a will or a trust the government will determine how your property will pass to your the people they choose to inherit your estate. If they determine you have no one to pass your estate on to, the estate will be taken by the crown. Often the governments rules will mean that will not be what you would have chosen if you had taken the time to do some planning. The best way to distribute your estate is using trusts. Trusts provide protection for the estate to be distributed safely by helping avoid the financial risks posed by probate, creditors, and taxes.
Here are these financial risks so that you can understand what they are and how you can avoid them. If you die with any property titled in your personal name, there must be a probate process for that property. Probate is the legal procedure for handling two major functions for your estate: identifying the rightful heirs to the estate and the share size that each will receive, and getting legal title of the property out of your name and into the name of the heirs. Having a will drawn up prior to your death takes care of the first function, identifying the rightful heirs and their share. If you have no valid will for your estate, the government then uses its own formula determine who the heirs are and what their shares will be. But even with a will the re-titling of your property sometimes still has to be handled through a court administered probate procedure. When someone dies the only way that their property can be legally re-titled in the heirs’ names is by a court order. Avoiding probate is desirable because it is time consuming and expensive. It can be anything from 1-5% percent of the estates value. These costs are based on the property’s fair market value, not on just the net worth or equity. In some cases probate ends up in court and can drag on for months or even years. It frequently leads to family fueds and often causes the decedent’s wishes to be ignored. In addition, probate procedures are made public, which can cause the loss of family privacy. A good way to avoid probate is by using proper estate planning, by utilising living trusts and proper death planning too.
Think of the trust as a bridge, which allows a trustee to carry your assets safely across the intestacy river to your beneficiaries on the other side. The way a trust avoids probate is by titling your property in the name of the trust prior your death.
During your lifetime, you have complete control of the property, however the trust is considered to be the property’s legal for title transfer purposes. Upon your death a trustee preselected by you simply handles the transfers or payments to your specified heirs named in the trust. You also have greater flexibility in specifying the details of these payments and transfers. After you pass on the trustee can handle everything quickly and simply without lawyers, court supervision, excessive costs or delays.