Role of a Will in Family Financial Planning
A Will is a key element in a strong financial plan. When it comes to personal finance and financial planning people often forget a very important aspect -Will. Here are 5 reasons why making a will is so crucial.
Will – A Key Element in a Strong Financial Plan| 5 Reasons
What is a Will?
- A will is a legal document that outlines :
- How you wish to distribute your assets including your property or money
- What are the details for distribution of such assets after your death
- Who will be your executor (the person in charge of settling your affairs on your behalf)
- Here, distribution of asset means transferring the ownership of such properties to the mentioned persons, after your death.
- Thus, will is a written declaration made by the person who is looking forward to plan his estate distribution while he is alive.
- A will isn’t meant to benefit you, it’s about protecting your family after you. Thus, it is an important (yet often overlooked) part of your overall financial plan.
Why a will is a key element in a strong financial plan? Here are five reasons.
1. Distribute Your Wealth in the Manner You Wish
- If someone is not having made a will before he/she dies, he/she is said to be ‘intestate.’ If you die intestate, the succession law will be used in your province to distribute your assets. This process that can drag on for years and is often accompanied by a ton of stress for the loved ones you leave behind.
- Without a will, the wealth that you have accumulated throughout your life might not be distributed to the family and friends in the manner you would have wanted.
- Having a will in place is key to both save your loved ones from waiting and frustration and to ensure that your assets are distributed exactly how you choose.
2. Avoid Higher Legal Fees on Your Estate
- A will is the only way to ensure your beneficiaries are benefiting from your estate to the greatest extent possible.
- If you die without a will,
- It will likely take from your family members’ personal resources (if they have to take time off work, travel to court, etc.)
- It also subjects your estate to higher legal fees, leaving less money for your beneficiaries
3. Philanthropic Goals
- Small acts of kindness often have a greater impact to the world than your expectation. One of the easiest ways to give back is by including a legacy gift in your will for an organization or charity that you care about.
- It’s important to have your philanthropic goals outlined clearly in your will so that your family is aware of your intended donation. You can choose to donate a percentage of your estate to any charitable trust or organization.
- If you choose to leave a large portion of your estate to charity, it’s good to inform your loved ones so they can plan their own finances without expecting a large inheritance.
A detailed articles on Estate planning, methods of estate planning, succession acts in India are available on Finplan website.
4. Finance Your Children’s Future
- A will is an important tool for financially supporting the future of your dependent children. Having a will in place ensures there are guardians prepared to care for them and there will be funds available to support them.
- A will also allows you to choose the age when your children will receive their inheritance and whether they will receive it in increments or all at once.
- If you die without a will, your children receive equal shares of your estate and they receive it all at once when they reach the age of majority (18 years). If you fear your child might not be able to handle a large sum of money at such a young age, you can delay their inheritance until they’re older and better equipped to manage it.
- When you draft your will it is also a good time to start discussing financial independence with your children. The earlier you begin talking about it, the more prepared they will be to begin supporting themselves financially.
5. Plan for Your Own Needs
- Making of a will forces you to make important decisions that have a financial impact on your loved ones. The will should also encourage you to think about your own needs.
- A Power of Attorney allows you to designate a trusted family member or friend to make financial decisions on your behalf, if you become incapacitated and are unable to make them yourself. It is important to choose someone you truly feel is trustworthy to ensure that your money is used in your best interest.