Posted on: 27 December 2016Share
An estate is an individual net worth calculated as the cumulative sum of all assets, entitlements to various properties and interests minus the sum of all their liabilities. A will, also referred to as a testament, is a legal document through which an individual (testator) depicts his or her wishes on how their estate should get distributed after they die. The will provides the name(s) of the person(s) who will manage the estate until it finally gets allocated to the designated beneficiaries.
When a person dies, before the will gets executed, there are some costs involved. Firstly, all the deceased debts are paid off, then additional expenses, such as funeral costs, will administration fees and legal fees, get settled. Other estate costs include probate fees, tax on capital gains and also taxes on savings plans that are tax-sheltered. Below are four tips on how to manage costs associated with wills and estates.
A valid will
When a person dies without leaving a valid will, their estate gets settled per the laws of the land. In such a case, the legal fees for the distribution process are usually high due to the intricacy of the situation as well as potential disputes among the beneficiaries. So it is advisable to have a valid will expressing your personal wishes for your estate.
Provide the recipients of your insurance and other registered plans
When you apply for registered plans such as insurance, it is advisable to name the beneficiaries who will receive upon your death. Doing so minimises the applicable probate fees because the money is not listed as part of your estate and this it's not subject to the estate process, and thus it gets paid directly to the beneficiary.
Jointly owned property
Another strategy for reducing probate fees on an estate is to hold assets with another individual. Jointly owned assets are usually not listed as part of an estate because the ownership of such property passes directly to the surviving co-owner. However, there may be complications if the co-owner is not your spouse. For instance, if you co-own an asset with you adult child, the spouse of that child has a claim over the asset should they separate or divorce.
Apply for a permanent life insurance
Buying a permanent life insurance is an advantage in estate planning because its proceeds are tax exempted. Thus, the proceeds can be used to cover the estate costs or paid to the named beneficiaries as additional amounts of your estate.