Life-changing Events

Financial planning is traditionally viewed at from the WIIFM perspective, meaning, “What's In It For Me?” The farthest one goes is to get a life insurance policy where the survivor gets a Sum Assured to cope with the loss of the family's breadwinner. But there is one more area that calls for serious attention. And this is about planning who will inherit your assets—financial and otherwise. There are several myths surrounding the subject of estate planning. Let us dispel some of these here.

The term 'estate' first brings to mind a large piece of land used for tea plantation or constructing buildings and tenements. Most people believe that they do not own any estate and so do not need to do any estate planning. But estate actually means any asset that you own. If you own an asset, you need to plan your estate so that it is distributed appropriately after the owner is no more. Planning one's estate can prevent disputes over who will inherit which asset after the owner has passed away.

Estate planning need not be related to your age. Several middle-aged people feel that they are too young to think of death and distributing their property. In fact, that is a great time to begin planning your estate because at that age you would have a fair idea of how your estate is building up. And starting the process at a ripe old age would not be easy as you may not be single-handedly managing your assets. Health could also be a concern. The complexities and challenges that estate planning may involve call for an early start and periodic review, to keep all your worries away.

Also if you're young, say in your thirties, but have accumulated several assets, you should begin planning your estate. The process is linked more to owning assets than to the owner's age.

Creating a will is an important part of planning one's estate. But estate planning does not end there. While a will clearly spells out the distribution of assets after the demise of the owner, estate planning also involves creating the right ownership structure and the correct method of transferring the assets. This helps the actual process of distribution of assets.

Estate planning using a will, a trust and even insurance policies, can meet specific objectives of the estate owner. For example, if funds are passed onto grandchildren for their marriage, and say the funds are invested in shares, if a loss is suffered for any reason, the objective may not be achieved. Efforts taken by the estate owner will have gone down the drain. But if the owner earmarks funds for the specific objective and ensures that they are locked up for a certain period, the money can be released only at the right time, when the grandchild is ready for marriage.

Above all, estate planning ensures that the efforts of a person continue to pay rich dividends long after the person himself has passed on.