Many people dedicate more of their time in planning the best place to go for a vacation, choosing a car to buy, or even selecting the best place to eat dinner. They tend to put out estate planning because they are busy on something else. We all agree that it is not as fun as planning a trip or checking out restaurant reviews but come to think of it, without estate planning, you also don’t get to choose who gets what on everything you worked hard for during your fruitful days. We cannot predict how long we will live, so it’s better to have good estate planning before it’s too late.
Estate Planning is the systematic way of conserving an individual’s assets in the event of incapacitation or death. Distribution and disposal of such assets may help minimize tax, legal and other related costs and expenses. Estate planning also includes designation of who will inherit a particular asset and who will handle the settlement of estate taxes.
Benefits of Estate Planning
- Reduces or minimizes taxes on what you leave behind.
- Gives privilege to choose who will inherit your possessions and valuables.
- Affords you the chance to name your children’s guardian in the event of your early death.
- Minimizes the chances of conflict within the heirs.
What are the challenges your heirs may encounter if you ignore Estate Planning?
- The value of your assets will be greatly diminished once the estate tax is factored in.
We all recognize that estate tax is 6% of net estate of the decedent. If you fail to establish an estate tax plan, a good chunk of your estate will be reduced by the estate tax, other taxes, and/or penalties. - Conflict among your heirs who gets what, and how much.
We all have heard or have watched these kinds of stories. Someone wealthy and the conflict between family members begins. One sibling may think he/she deserves more than the other, or one sibling may think he/she should be in charge of the finances even though he/she is notorious for racking up debt. Such squabbling can get unpleasant and end up in court, with family members pitted against one another. - Your heirs may be unable to pay the estate tax and other related expenses required to transfer your assets to them.
You need to assist your heirs with enough cash to pay for the estate tax and other processing fees that will ensure the smooth transfer of your wealth and properties to them. Insufficiency of cash may result in difficulty of transferring your estate’s ownership. Proof of payment of estate tax is needed before the transfer of properties. Regardless of the gross value of the estate, where the said estate consists of registered or registrable property such as land, building, motor vehicle, share of stocks, or other similar property for which a clearance from Bureau of Internal Revenue (BIR) as a condition for the transfer of ownership.
Financial leverage through Life Insurance
This is a remedy that can give you a peace of mind and spare your heir from possible emotional and financial storm that may be inflicted to them by the process of inheriting your estate. A Life Insurance Policy will give your heirs instant cash when you pass away. They can use this readily-available cash to pay your estate tax within the prescribed 1 year period of the Philippine Law. Furthermore, this cash will be tax-free if you designate an irrevocable beneficiary.
Estate planning provides an opportunity to lessen the burden of your heirs from grief because of your death. It also minimizes their headaches and heartaches from the financial liability like estate tax your estate needs to pay in order to transfer your properties’ ownership. With that information laid, isn’t it prudent to make time and to exert effort to plan for something inevitable? Remember what Benjamin Franklin said once that taxes are also as certain as death.
References:
http://www.financial-planning-manila.com/estate-planning.html
