Estate Planning

AAA

DEFINITION of 'Estate Planning'

The collection of preparation tasks that serve to manage an individual's asset base in the event of their incapacitation or death, including the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.

Some of the major estate planning tasks include:

- Creating a will
- Limiting estate taxes by setting up trust accounts in the name of beneficiaries
- Establishing a guardian for living dependents
- Naming an executor of the estate to oversee the terms of the will
- Creating/updating beneficiaries on plans such as life insurance, IRAs and 401(k)s
- Setting up funeral arrangements
- Establishing annual gifting to reduce the taxable estate
- Setting up durable power of attorney (POA) to direct other assets and investments

INVESTOPEDIA EXPLAINS 'Estate Planning'

Estate planning is an ongoing process and should be started as soon as one has any measurable asset base. As life progresses and goals shift, the estate plan should move to be in line with new goals. Lack of adequate estate planning can cause undue financial burdens to loved ones (estate taxes can run higher than 40%), so at the very least a will should be set up even if the taxable estate is not large.

RELATED TERMS
  1. Dynasty Trust

    Long-term trusts created to pass wealth from generation to generation ...
  2. Generation-Skipping Transfer Tax ...

    A tax incurred when there is a transfer of property by gift or ...
  3. Bare Trust

    A basic trust in which the beneficiary has the absolute right ...
  4. Advanced Life Underwriting

    The process of integrating the complex insurance issues of estate ...
  5. Taxable Estate

    The total value of a deceased person's assets that are subject ...
  6. Family Limited Partnership - FLP

    A type of partnership designed to centralize family business ...
Related Articles
  1. Top 7 Estate Planning Mistakes
    Retirement

    Top 7 Estate Planning Mistakes

  2. Estate Planning Must-Haves For Unmarried ...
    Retirement

    Estate Planning Must-Haves For Unmarried ...

  3. Tax-Efficient Wealth Transfer
    Taxes

    Tax-Efficient Wealth Transfer

  4. Ethical Wills Share Final Thoughts With ...
    Retirement

    Ethical Wills Share Final Thoughts With ...

comments powered by Disqus
Hot Definitions
  1. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  2. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
Trading Center