Basic tips on creating an estate plan

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Death is definitely something we don’t plan but crafting a plan early on will make the lives if our family less painful and stressful in case the inevitable happens

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THEY say that death and taxes are two certain things to come in our lifetime. When a parent dies in the family, the surviving are not aware that transferring these properties to the surviving heirs can drain the funds of the family and sometimes, it costs a fortune to settle this.

The family of one of my closest relative was left as the surviving heirs of their father leaving them several assets situated in different locations in Metro Manila. While still in grief, the family has to deal with their father’s estate and they were blown away when they knew that the estate tax should be settled within six months after death. Estate, by the way, is defined as the real and personal properties owned by the descendent at the time of his death, while the Bureau of Internal Revenue (BIR) defines estate tax as a tax on the right of the deceased person to transmit his or her estate to his or her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition. It is not a tax on property but a tax imposed on the privilege of transmitting property upon death.

The mom decided to consult a lawyer to assist them with all the requirements of the BIR. While fixing a filing cabinet one day, the mom found a savings bank passbook under an and/or account. She totally forgot about the bank account which was meant as their safety net for the rainy days. She was informed by the bank manager that she is only allowed to withdraw half of the amount, while the other half forms part of the husband’s estate and cannot be withdrawn until the estate tax is settled.

The mom, being a retired government employee, has a limited source of income from pension while the siblings have their own respective growing casino pa natet families with big regular monthly expenses to take care of. Everybody being in a tight cash situation was not willing to give his share for the settlement of the estate-tax liability. The family settled it after two years, with big penalties and surcharges due to late payment.

The siblings found themselves in the same boat again, 10 years after, when their mom died. They found out that one property in a different location was missed out from their father’s estate-tax settlement. When the total estate-tax liability was presented to them, they were surprised to know the accumulation of huge penalties and surcharges for the past 10 years.

So much can be learned from this story.

Death is definitely something we don’t plan but crafting a plan early on will make the lives if our family less painful and stressful in case the inevitable happens:

Create a heritage box. This should include a complete inventory of assets/properties with their respective title, your will (in case you have one) or living will, certificate of bank deposits or passbooks, automated teeller machine pins/codes, insurance policies, list of debit and credit cards, summary of loans or indebtedness, if any and all the necessary documents/ information that you deem essential for the family to know. The spouse or a trusted family member of the family should have quick access to this in the event something happens.

Seek help from a trusted financial adviser. Engaging the services of a good financial adviser by consulting him or her about your personal financial plan is beneficial for you and the family. The scope of consultation service may include your estate plan. Regardless of your net worth, a summary or list of your assets is groundwork for a good estate plan. Increased level of awareness in this area can set clearer financial goals and directions. Estate tax can siphon so much of your estate and an advise from an expert can help you know your options and minimize your tax liability.

Involve the family in developing the estate plan. In case of minor kids, you can discuss this first with your spouse. While grown up kids are more mature to grasp the idea, they may initially find this gruesome. You can discuss it in a loving way and in a manner that they will appreciate the value of its objective and intention. Loving the family includes preparing them also for the inevitable.

Irma-LasquetyIrma Lasquety is a registered financial planner of RFP Philippines. She is the Owner and Senior Consultant of RIJ Management Consulting Services.
Source: http://www.businessmirror.com.ph/basic-tips-on-creating-an-estate-plan/

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