One afternoon, at one of my financial planning seminars, I asked my participants, “what is estate tax?”. A number of participants replied in unison, “it’s the tax we pay every year!” Although, many Filipinos nowadays are well aware of the fundamental concept of financial planning, many are still ill-educated when it comes to estate planning.
What is estate planning? It is the process of anticipating and arranging the disposal of a person’s estate while he or she is still alive.
Everybody dreams of becoming wealthy but challenges do not stop when you become rich. You need to put in mind too how to manage the wealth you accumulated—how to spend it and later distribute if you outlived it. Financial planning does not involve only about growing your wealth. If you want to be expert in this subject matter, you need to study too how you can manage your wealth once you have the amount of money you want in life.
Unfortunately, this subject matter does not concern only those who don’t know about the topic of estate planning but even the rich people. They need to be constantly reminded by their estate planner for most of them don’t know what their estate plan says.
Estate planning is not only about writing your will, although it is a huge part of a well-designed plan. Estate planning is about making sound decisions that lead to formulation of many legal documents so that your wishes, instructions, and goals for your estate will be strictly followed by your loved ones. Your estate plan can be a piece of paper that represents your peace of mind.
The following guide questions can help you in creating your own estate plan:
- WHY do you want to have this plan?
Why do some people die without estate plan and their families experience no problem? Well, estate plan is not for everybody. If you know and you are 100% sure that your family will not experience any problem both financially and emotionally, you don’t need to worry about it. But if you have some wishes and desires in mind that you are worried about, that if something happens to you, your family might not be able to continue your plans, then create your estate plan.
- HOW MUCH money do you want to save from taxes?
We all know that in life there are only two guaranteed things to happen, death and tax. Both can be addressed by a well designed estate tax. When it comes to estate planning there are three taxes involve: capital gain tax, donor’s tax, and estate tax. If you know how it can affect your estate, definitely you know too how you can avoid it. The key is avoidance, not evasion. Of course we want that as much as possible, all of our wealth can be transferred to our heirs, then plan your estate.
- WHAT are the essential documents I need to prepare?
The documents that form part of the basic estate planning are: last will and testament, Special Power of Attorney, titles of assets, investment documents, insurance policies, and trust agreement. Again these are just some of the basic documents that you might need to prepare.
- WHEN to create and review your plan?
As long as you have more than P200,000 worth of estate and you have specific wishes for that property, you need to create an estate plan. If you have significant amount of wealth, the more you need to invest time in protecting your assets. Once you have a well-designed plan then, a minimum annual review with your planner must be set.
Above all else, one key to a successful estate planning is finding the right person who can help you in formulating the plan that will really suit your need. Find a good estate planner that can educate you more about the subject matter and has a good relationship with your family. After all, this person will be the one to face your family to deliver your wishes. Another key to a successful estate plan it to let your family know what you really want if something should happen to you now. Don’t allow your material wealth to ruin your family. Let your wealth be divided, but not your family.