Estate Planning

Someone asked me, "I have a friend who...

asked if she needs to do estate planning as suggested by her insurance agent? 

My answer is the purpose of Estate Planning is three fold:

1) To control disposition of asset inter-vivos or thru will, instead of leaving the heirs on a free for all.
2) To lessen the administrative burden of transferring assets to heirs.
3) Minimize tax payment to government in a legal manner

Whether a person needs estate planning depends on whether the friend has issues with any of the above.

- If a person has lots of assets, then planning may be needed.

- If a person has assets in real properties and has more than one heir, then planning may be needed.

- If a person is not happy with what the law provides as default succession or needs to make a special provision for certain heir, then planning maybe needed.
- If estate is more than twelve million pesos, then planning may be needed. 

- If a person has heirs who are not on friendly terms, then planning may be needed.
- If a person has no direct descendant, or unmarried, then planning may be needed. 


To some clients, part of estate planning also include the issue of having a living will that will contain instruction on how to handle health care in case of illness or the client cannot decide for himself.

Some estate planning tools commonly used to reduce tax liabilities include:

- Reducing net estate thru managing liabilities
- Incorporation of holding company to own and purchase assets
- Transfer of assets to a corporation by tax free exchange
- Insurance with irrevocable beneficiary
- Bequeath to Foundation
- Donation of assets
- Sale of real property

Buying insurance to pay for estate tax may sound good now, but since value of properties go up, then insurance amount should also be adjusted at regular intervals.