The Basics of Inheritance Planning

6 Apr 2017
Retreat by the sea,
Inheritance planning can be a distressing experience because it’s unnerving to think how your loved ones will cope after you pass. However, a small amount of time and effort spent on planning your estate now can make a huge difference to those you bequeath your wealth to. On a positive note, you can view it as an opportunity to reflect on your life and the people you love; and to make sure your most cherished family members and friends know how appreciated they are.

Everyone’s approach to inheritance planning is unique. Some want to leave their children a legacy or provide generously for a spouse or partner while others donate money to charity. Whether you've amassed savings over many years or prefer living ‘carpe diem’, it’s advisable to have a simple estate to guarantee your wishes are respected, and heirs don’t land up paying unnecessary taxes and court fees. Below are the  essential things you need to think about when planning your estate;


Decide on a Will or Trust


Do you know the main differences between a will or trust? A will is only valid at the time of your death whereas a trust takes effect immediately once it’s established. Having a trust enables you to distribute all kinds of assets while you’re alive and will only cover property that is in your name.


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All wills pass through a probate meaning the court will supervise the process of paying your debts and distributes your property to the rightful heirs. This can be a long and costly process. However, a trust remains private and doesn’t need to pass through the court. This saves your heirs the cost of legal fees and grants them access to their assets immediately.


Choose a Healthcare Directive


Have you thought about what to put in place if you ever land up being too ill to make your medical choices? Sound inheritance planning also includes drawing up the legal documents which specify what action should be taken if you’re unable to take care your health needs. There are two options; ‘health care proxies’ and living wills.


A living will is a written statement clarifying your healthcare preferences, while a ‘healthcare proxy’ or living power of attorney allows you to appoint someone to make health care choices on your behalf. It is possible to implement both. However, it’s important to realise a ‘healthcare proxy’ can make decisions that haven’t been stated in your will and should you only have a living will, you won’t suddenly be able to appoint a ‘healthcare proxy’ at your time of need.


Protect your Business Assets


If you’re a business owner, your inheritance planning needs to extend beyond your personal wealth and into your company as well. You can protect your assets by liquidating your company and distributing the remaining assets, but this probably won’t be your first choice, especially if you’ve devoted many years to building a successful brand. It can also be risky if market conditions aren’t favourable and your assets are sold for less than they’re worth.


A second option is to pass your business on to family, but this tends to work best if it’s family run and there’s someone with strong business acumen. Alternatively, you can opt for a buyout agreement, where your interest is automatically purchased by your partners when your life ends. This option is best if you don't want your family to be saddled with the responsibility of taking care of an enterprise they don’t have the skills to run.


Leave a Legacy


There are numerous ways to provide financial security for your children through your legacy. A combination of life insurance policies, savings accounts, stocks and bonds, material possessions and property is the sign of a strong financial portfolio and makes a sizable contribution towards your children’s financial stability.


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Life insurance will pay out a lump sum, stocks and bonds can be lucrative but are more volatile whereas property will most likely be the cornerstone of your net worth and your most valuable asset. Real estate also tends to appreciate in value and provide a significant amount of sentimental, and monetary return on a long-term basis because it can be rented generating a second income, used as a holiday home or sold at a later stage.


Now that you’re equipped with some general information, you can start thinking about planning your estate. Remember, financial stability is one of the most rewarding and enduring gifts you can leave your loved ones.


If acquiring real estate is part of your inheritance agenda, we’d suggest viewing our apartments in Calpe.  They’re situated on Spain’s picturesque coastline and can generate handsome profits from holidaymaker rentals.

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