Estate Planning: What is it and why is it important?
For starters, let’s take a look at what Estate Planning is. Estate planning is the process by which an individual plans to pass on his or her wealth, including investments and life insurance, upon death to a chosen person (investorsgroup.com). The main goals of estate planning are as follows:
- To preserve / enhance / maximize the estate’s value;
- To ensure that the intended amounts are delivered to the appropriate persons; and
- To minimize taxes (where legally possible).
Of course, it will depend on the individual on what his or her purpose is for estate planning. As mentioned, for some, preserving the family wealth is the main goal. For others, it could be to ensure that the surviving family members are provided for after death. It could also be ensuring that the family business is transferred in a manner preferred by the individual.
There are many other “goals” that an individual’s estate plan may want to achieve. Which brings us to our next point/question: why is estate planning important?
From the many goals mentioned, we will already see why estate planning is important. Individuals want to control the manner that his or her assets are distributed. Nobody would want the wealth they have worked hard for go to somebody else’s pockets instead of the ones he intended to leave a legacy to.
It is important to note that you estate plan must align with your whole financial picture to ensure that your wealth is not passed on in a manner you did not anticipate when you pass away.
Source: investorsgroup.com, https://www.theglobeandmail.com/globe-investor/personal-finance/taxes/a-simple-guide-to-estate-planning/article35143710/