When someone passes away or becomes incapable of managing their own affairs, an estate plan specifies who will inherit and manage their property. Estate planning is critical because it relieves the legal successors of paying the transfer taxes that would have been incurred if the estate had not been planned. If the beneficiary is under the age of 18, a guardian is appointed to act in their place until that age is reached.
What Parties Are Involved In Estate Planning?
- Grantor/Settlor
Setting up an estate and owning all of its assets is known as a settlor. They establish a trust to hold the assets on behalf of the beneficiary or legal heirs and then distribute them. A single person or a group of people can be the intended recipient.
- Trustee
The grantor appoints a trustee to oversee the trust’s assets. They are paid out of the trust funds for their time and effort. Any revenue-generating actions made by the trustee can be implemented in the trust’s growth.
- The heirs/beneficiaries
Beneficiaries are the intended recipients of the assets. Trustees manage the agreement, which specifies this. Legally, they have the power to change the trustee if they believe they are unfit to do so.
Importance Of A Well Thought out Estate Plan
Planning an individual’s assets after death or incapacity is integral to estate management. It is a tax-efficient and simple method of passing the wealth to the heirs. The following are some of the main reasons to make an estate plan:
- Plan the division of the assets
Unless an estate trust is in place, the government can decide how to distribute assets. It might indicate that a friend or non-family member could obtain the immediate family members’ assets. Hence, it is vital to plan the allocation of assets so that the right persons, the grantor of the estate planning judges to be the beneficiaries, are awarded the assets.
- Faster and proficient transfer of assets
With no plan, many estates take a long time to settle because of disagreements among family members about the distribution of the assets. As a result, it’s critical to devise a strategy ahead of time to transfer the estate to the intended beneficiaries efficiently.
- Make a plan for the long-term management of your assets
Estate planning can also assist an individual in determining who will manage and own the assets if the grantor is still alive but unable to do so due to an accident or illness.
- Reductions in taxes and fees
The transfer and division of assets can be costly and taxing without an estate plan. With an estate plan, the grantor can limit fees and taxes, reducing the amount of money that must be taken from the estate to pay these fees and taxes.
If you have questions about how taxes and Estate Planning work together, be sure to call our office and make an appointment. We’re happy to help in any way we can or direct you to the appropriate people who can answer your questions.
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