Estate Planning Is Not just for the Rich and the Famous
By Saghir Aslam
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
If you’re like most people, you think estate planning is only for the wealthy. The truth is that everyone — regardless of how much money they have — needs an estate plan. Here are a few frequently asked questions about estate planning, along with the answers that may help you better understand this subject:
What is an estate plan?
An estate plan is a program for the management and distribution of your assets upon your death, as well as instructions for handling your affairs should you become unable to do so while you are still alive. Your estate plan should include a will and/or a revocable living trust as well as updated beneficiary designations for your 401(k), Individual Retirement Account, savings bonds and life insurance policies. Both a durable power of attorney and a health care power of attorney should also be created. Your Financial Advisor can help you work out the details of your plan and can also help keep it up-to-date.
Why do you need an estate plan?
An estate plan can not only reduce the taxes your heirs must pay on assets they receive from your estate, but can also ensure that your accumulated wealth will go to the individuals that you intend to receive it. In addition, an estate plan can avoid probate proceedings, an often long and expensive process that can open your financial matters to the public.
What is the difference between a will and a revocable living trust?
Basically, a will is a legal document that directs how your assets will be distributed among family members, charities or others upon your death. It is important to update a will periodically to reflect any material or personal changes in your life.
A revocable living trust (RLT) is an entity, like a corporation, that holds and owns your assets, while you are alive and continues to hold your assets after your death. Like a will, the RLT directs how your assets will be distributed at your death, but because ownership does not change at your death, it can do so without the expense, delay or publicity of probate court. A revocable living trust gives a trustee the right to make decisions for you if you become incapacitated while a will has no effect until your death.
What is a durable power of attorney?
Whether you create a simple will or a revocable living trust, it is important to have a durable power of attorney. A durable power of attorney is a document that designates a person who can sign on your behalf and handle your financial matters in the event of your incapacity. A durable power of attorney becomes void at death.
Having a basic estate plan can help ease stresses on your family, especially during a difficult time. Your Financial Advisor, with the help of your tax and legal advisors, can help you take necessary steps today to ensure that your wishes are carried out and that you and your loved ones have the peace of mind you would want them to have.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr. Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, or does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr. Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr. Aslam does not have anything for sale.)