Estate planning can save your family alot of headache and heartache.
A great number of Kenyans don’t have a will and choose to leave things to chance. As a financial planner, I’ve seen my own share of sad and unfortunate things happen over the years. Not having proper estate documents can leave loved ones out of inheritances, paying hefty unnecessary tax bills or leaving the family to battle it out in probate. Worst case scenarios, they kill each other over it.
The process of estate planning essentially deals with the preparation of all tasks that serve to manage an individual’s assets in the event of his/her incapacitation or death. It is important to have an estate plan in order to avoid devastating consequences for heirs such as:
- Children being left helpless with no one to take on guardianship
- Wealth falling into the wrong hands
- Hefty tax bills rise as a result of the transfer of assets
- Division of families and endless squabbles, which may end up in endless court battles
Here are 5 things you need to know about estate planning, particularly beneficiary designations. Some of them you probably know but others you most probably never knew about estate planning.
1 – Naming A Beneficiary
Always name a contingent beneficiary on financial accounts, especially retirement and insurance policies. This is the best way to deal with your own mortality whether you are ready to face it or not.
Your personal estate has no life expectancy. Instead of leaving your family in ruins, give your family the comfort to stretch out wealth and maintain the family after your death. Naming a beneficiary and having a will cost you less than the ligation that will come after your demise. Having no beneficiary on your accounts, especially retirement, can leave your estate in endless probate, in the hands of creditors or in the hands of government at the unclaimed assets bureau.
2 – Naming A Guardian
Ensure you name a guardian for your children very early on. No one imagines they will die young but, as a parent, you need to be ready for the unthinkable.
In order to ensure that your children and well-taken care in the way you would like, ensure that you name a guardian. A guardian will not only take good care of your children and also manage the assets on behalf of your children until they are of age. Save your child’s/children’s future by having raised by someone you trust and the money managed by a responsible adult who has their best interest at heart.
3 – Handling Death of A Beneficiary
Always plan for the death of a beneficiary. If one of two beneficiaries dies, where will your money go?
Who you pick is very important because you could potentially disinherit your grandchildren by picking the wrong option and leaving everything to another beneficiary and their family. In short, are you leaving your assets per person named as beneficiaries or lawful children equally?
4 – Including A Residual Clause
A residual clause caters for everything you didn’t specifically name in your will or forgot to include.
This includes things you didn’t own at the time of writing the will or things you don’t know you might own. It is advisable to review your will every three to five years (or on a major life milestone) so as to always try to keep it as current as possible by catering for any new family members, divorces, sold and/or newly acquired assets.
5 – Planning For The Unexpected
Life is by definition very unpredictable.
It is wise to plan for the unexpected twists that may come your way like the decline of your spouse’s health, the divorce of your kids, kid’s creditors (children can waste away your wealth when they are not responsible) and other multitudes of unforeseen.
The most common way to address this is by having assets put in a trust where you can control how, to whom and when money is distributed to the heirs. Trusts are a great way to distribute wealth without an outright inheritance through a will. The last thing you want to do is to give children or grandchildren wealth they are incapable of looking after because they have a gambling addiction, drug addiction or are heavily in debt.
Simply Put
If you want your legacy to remain and stand the test of time, you will need to plan your estate. Protect your wealth and family with a last will and testament. Without one, your heirs may have large tax burdens, the courts may have the last say who gets what, especially when boils down to who takes on the role of guardian to your precious children.
Image credits: Top by Cytonn Photography via Pexels.
See Also:
- Do You Have a Plan for Your Digital Assets When You Die?
- How to Prepare Financially for a Baby
- Top 5 Ways To Begin Investing In Real Estate
- How to Calculate Your Financial Independence Number
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