Objectives of estate planning:

1. Asset transfer to beneficiaries: Every individual wishes that his/her accumulated wealth should reach the hands of the beneficiary of his/her choice. Beneficiary can be his/her children, parents, friends or any other person.

    

    

2. Tax-effective transfer: To ensure least tax deduction on such transfer of wealth

    

    

3. Planning incase of disabilities: It ensures smooth functioning of asset management within the family incase an individual gets disabled.

    

    

4. Time of distribution can be pre-decided: Individuals having minor children may wish to transfer the assets only after the children attain a certain age, to avoid misuse that may happen due to lack of maturity and discretion.

    

    

5. Business succession: Organized succession or winding up can be defined incase of an individual handling business

    

    

6. Selection of trustee or guardian or the executor: An individual needs to be appointed to carry out the functions like –

    

   • Distribution of assets to the beneficiaries as per the individual's wish

   • To pay testamentary and funeral expenses

   • Applying for a probate

   • Paying all the expenses and outstanding debts

   • Ensuring all the benefits due to the deceased, such as life insurance, pension, and other benefits are received

   • Arranging for filing of tax returns

Steps in the estate planning process:

A financial planner performs the following steps in estate planning -

• Relationship establishment

• Information gathering

• Determining the client's financial status

• Draw out a plan of transfer

• Implementing the plan

• Regular reviewing of the plan

Tools of estate planning:

There are various tools that a financial planner can adopt for getting an estate plan in place. Some tools are effective during the lifetime of an individual while some after his/her death.

The following figure shows the tools used for estate planning by transferring the assets to the beneficiary, with or without restrictions, during the lifetime of an individual –

The following figure shows the tools used for estate planning where the transfer of assets to the beneficiary becomes effective after the death of an individual –

Risks and drawbacks involved in estate planning:

• An individual's goals or wishes on how his assets are to be distributed may not be fulfilled

• Huge costs of transfer and taxes

• An individual's family may be in financial distress if the process id not properly planned

• There may be insufficient liquidity to meet client's debts an taxes

• Time consuming legal procedures 

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