Estate plans are comprehensive strategies that allow an individual to determine how his or her estate will function in the event that the estate owner is no longer capable of making decisions regarding the management of assets associated with the estate. While many people assume that estate planning is all about the distribution of assets after the death of the estate owner, that is not always the case. A truly complete estate plan will also provide a strategy for estate management in the event that the owner is incapacitated by injury or illness and is no longer competent to manage his or her assets.
At the heart of a basic estate plan is the determination of how the assets and belongings of the owner will be distributed at the time of death. To this end, a will can be seen as the foundation of this segment of the planning, as that document usually lays the foundation for disbursements of cash and transfer of property and stock holdings to beneficiaries. However, a will may also make provisions for keeping the estate intact for the good of all beneficiaries, such as in the establishment of a family corporation.
Along with creating a framework for the distribution of assets, an estate plan will also address the issue of taxes. In order to minimize the amount of inheritance taxation incurred by beneficiaries of the estate, a well-constructed estate plan will make use of all legal means to create and distribute assets that carry a low tax burden. This approach ensures that all governing tax regulations are complied with, but that beneficiaries are not saddled with taxes they may or may not be in a position to pay.
The estate plan also focuses on the welfare of the estate and the estate owner in the event that illness or injury makes it impossible for the owner to administer the assets of the estate. This function within the planning sets in motion a logical and legal means of allowing the estate to remain intact, meet all obligations, and provide resources that can be used to care for the estate owner for the remainder of his or her life. Any remaining assets are then distributed to beneficiaries, according to instructions created by the estate owner while still in a mental and physical state to make decisions of this type.
While many people think of an estate plan as being a device that can only be utilized by the wealthy, that is not the case. Even people who have little more than some money in the bank, household furnishings, and one or two major assets such as a home or a vehicle, can create an estate plan that will provide support during illness as well as ensure the assets are distributed properly at the time of death. Professional estate planners as well as attorneys can provide information that is relevant to the type of assets that make up the estate and help the owner to draft an effective estate plan.