In these unprecedented times, one thing we know for sure is that life is very unpredictable. One might think that they have years left to worry about ‘what happens to family when I’m gone?’ but everything could change in just seconds. Hence, it is important to plan before and be ready for any uncertainties.

Estate refers to all kinds of assets one owns. It includes financial assets, tangible personal assets (vehicles, art, collectibles), immovable property and intellectual property.

Estate planning refers to the process of transferring wealth from one generation to another. The most common ways of doing this is through Nomination and Joint ownership. However, both these methods are legally disputable. Let’s look at some effective Estate Planning tools-

Will

Will is a legally accepted document and allows one to make decision to transfer wealth after their demise. However, Will is public and controlled by court. Changing or modifying will becomes difficult with time, in case the owner becomes mentally or physically challenged with age. It can lead to rivalry between the beneficiaries.

Trust

Trust can be used in place of Will. It forms a legal relationship where one party holds property for the other. However, it can effectively help in avoiding probate process (validation of Will) and expenses. Trust can be public or private and is controlled by the family only. However, this implies that the Trustee can misuse assets of Trust.

It can also be used as a firewall or shield to separate assets. It implies that if the owner becomes bankrupt, lender cannot seize assets under the Trust. Moreover, it reduces estate tax on transfer of assets.

It is recommended to have a combination of Will and Trust as they nullify each other’s demerits. Using Trust, one can avoid probate process and expenses and keep things private and out of court. It also allows you to modify the terms at any time and all assets under the Trust are protected. However, one can also use Will to avoid misuse of assets by the Trustee.

Lifetime Gifts

Lifetime gifts refers to the wealth transferred during life to near and dear ones. It is exempted from tax within a limit. For transfer of immovable property, a gift deed has to be made.

Power of Attorney

It is a legal arrangement where one party authorises the other to act on their behalf. This can include two types- Financial and Medical. Financial POA lets your agent make decisions about your money and property. For example, your agent could pay your bills, make bank deposits, collect your retirement benefits, and sell or rent your real estate.

A medical POA (also called a healthcare POA) lets your agent make important healthcare decisions on your behalf. These decisions could be about your treatment options, medication, surgery, end-of-life care, and more. Without a medical POA, your loved ones could be left trying to guess what kind of care you want to receive. There’s also a possibility you’d receive different care than you would’ve chosen for yourself.