What is planning?

Planning is a process that helps decide in advance about future activities and operations. Planning helps to draft the procedures by identifying, analyzing, and designing how to work, when to work, by whom should be done, and what has to be done. It is the primary step followed by a person, business organizations, institutions, companies, etc.

Estate planning

A planning procedure related to the assets or properties is known as estate planning. It deals with transferring the estate or property after the person's death. It includes planning the transfer of different assets such as cars, houses, buildings, plants, machinery, etc. It helps proper disposal of any purchase or property by transferring the ownership from one generation to another. An incapacitated person is not entitled to receive the right of the asset or the property from the deceased person. Due to their mental health condition, an incapacitated person cannot own the asset per the probate rule. Estate planning helps in retirement planning and drafting a financial plan.

Process of estate planning

The estate planning process starts with listing out the assets to be transferred to the legal heirs of the deceased and ends with hiring an estate planner to execute the entire transfer of assets as per the will.

The image shows that the process of estate planning starts with making a list of assets that will be transferred, followed by creating a plan for transfer, identifying the estate property and family members, expressing and documenting a wish and hiring an estate planner.
Process of Estate Planning

Making a list of assets

The first step is to create a list of all the assets and debts included in the estate plan. The list of assets, along with the contact details of the financial advisor, should be maintained. This list will act as a reference point for all the further steps.

Create a plan

Creating a plan means developing an estate plan for the assets required to be transferred. An estate plan is a contingency plan that helps transfer assets to the legal heirs without court. Furthermore, a proper estate plan helps the asset owner carry out the daily affairs if they become incapacitated.

Identify the estate property and family members

Identify all the estate property and assets for inheritance. This step requires identifying and collecting the contact number and information about the family members or beneficiaries.

Express and document the wish

A person who wants to transfer the estate's ownership should express their views and wishes and document the same in the estate plan.

Hire an estate planner

A person can hire an estate planner to create a proper and well-equipped estate plan. The estate planner would be the person who will execute all the transfer of assets to the inheriting party after the owner of the asset has been deceased.

Elements of estate planning

A proper estate plan is not ambiguous and lays out the transfer process to the legal heirs. The major components of estate planning are listed below.

The image shows the elements of estate planning. These are the will, a trust, power of attorney, designation of beneficiary, letter of intent. healthcare power of attorney and designation of a guardian.
Elements of Estate Planning


Before preparing any estate plan, an essential element is to have a will because it shows that a person will willingly transfer the asset ownership to the future generation. For immovable assets, probate is compulsory as per the law. Probate is the authority given by the court on the will. It is a type of legal document.


A trust is a corporate legal entity entrusted with holding the assets mentioned in the will on behalf of the legal heirs. The trust is vested with the responsibility of executing the will as per the terms mentioned in the will.

Power of attorney

A power of attorney is a written document where an asset or property owner provides authority to another person to carry out all the transactions after his death or in case of unavailability of the owner.

Designation of a beneficiary

A beneficiary can be any family member, spouse, daughter, father, mother, etc. A beneficiary is a person who is entitled to get the ownership of the asset or property after the asset owner's death.

Letter of intent

A document that describes the commitments and promises between the two parties regarding the estate agreement is known as a letter of intent.

Healthcare power of attorney

A healthcare power of attorney is a document that provides health-related information about the person and helps to take essential decisions before transferring any assets.

Designation of guardian

A document that describes the name of the person who will be the guardian of an estate after the death of the asset holder is known as the designation of the guardian.

Reasons for estate planning

There are several reasons for estate planning, the most important being the transfer of assets of the deceased owner to his legal heirs in an uncomplicated manner. The other reasons for estate planning are mentioned below:

The image shows the reasons for estate planning include providing an opportunity for proper transfer of property, asset discovery, closing sales faster, avoid complication, preparation for future contingencies, protecting family wealth, minimizing estate taxes and fulfilling the needs of the heirs.
Reasons for Estate Planning

Provides an opportunity for proper transfer of property

Estate planning provides the right to the estate planner to carry out the transfer of the estate's ownership. It provides an opportunity for the beneficiaries or legal heirs to receive the ownership of assets. It allows the heir to grab the opportunity and take advantage of it with the help of proper estate planning. In the absence of proper estate planning, the property might become disputed.

Asset discovery

Estate planning helps to identify the assets which are required to be transferred. It also helps to reduce the risk and inefficiency associated with the estate or assets. It helps to discover the need for transfer and assess the actual value of the asset or property.

Close sales faster

Estate planning facilitates easy and quick closing of the sales related to the estates, assets, or properties. It ensures that the complete procedures and estate sales regulations have been followed. It helps the legal heirs sell the assets fast and earn revenue. The sale of the property and assets takes place after completing legal procedures and requirements.

Avoids complications

Estate planning provides proper management and procedure to settle an agreement of the estate or property selling. It also reduces the chances of disagreements, frauds, and errors. It facilitates the smooth and efficient transfer of the ownership of assets or properties from one person to another. It does not create any confusion in the mind of both parties involved in the estate agreement. It also looks into the person's financial affairs and facilitates a proper inheritance process.

Preparation for future contingencies

Estate planning helps to predict the needs and requirements that can be fulfilled with the help of the assets or property. It helps the estate owner estimate the contingencies and set the target amount for the asset or property to be sold to meet future obligations. It also enables the buyer to decide whether to purchase the estate or not. It also provides various parameters for selecting a property to the person before accepting the ownership of the asset or property.

Protects family wealth

Estate planning also helps the person maximize wealth by transferring the ownership of the assets or properties. It helps protect the rights and interests of the family members of the parties involved in the agreement. It enables the person to transfer the asset or property for a particular amount which will help fulfill the needs and wants of the family members.

Minimizes estate tax expenses

Estate planning helps reduce estate taxes and additional expenses associated with the assets and properties. It provides estate tax benefits when the estate ownership is transferred as a gift to another person or any other family member. It also reduces the estate taxes related to the maintenance and repair services of the assets and properties.

Fulfills the needs

Estate planning fulfills the need of the person and the beneficiary family members by maximizing the revenue and transferring the ownership of the assets or properties. It helps to satisfy and address the wants of the close and loved ones in the family. It provides physical and financial support to the family member of the person.

Qualities of an estate planner

  • Estate planners should have complete knowledge and information about estate planning.
  • They should be able to comprehend the needs and wants of the person and their family members.
  • They should carry out a proper estate plan and procedure without any errors and mistakes.
  • They should protect the interest of family members by drafting the estate plan in such a way that it will benefit them.
  • They should provide proper and clear guidance and advice regarding property transfer and estate planning.
  • They should also deliver after-sales service to the person.

Probate process of estate planning

The probate process is a legal requirement and administration from the side of the court. When the ownership of the asset is transferred to the next generation, the support of the deceased person is analyzed and evaluated by the court before moving it. The court's probate process helps distribute the dead person's asset to their heir.

Context and applications

This topic is significant in the professional exams for both undergraduate courses & postgraduate courses and competitive exams, especially for:

  • Certified Estate and Trust Specialist Program
  • Certified Financial Planner
  • Accredited Estate Planner

Practice problems

Question 1: Identify the process used to transfer the ownership of an asset from one generation to another.

a. Management planning

b. Critical thinking

c. Estate planning

d. Natural planning

Answer: (c)

Explanation: Estate planning transfers the estate or ownership of assets from the estate owner to the legal heirs.

Question 2: Identify which of the following best describes an incapacitated person.

a. Strong person

b. Mental disorders

c. Tall and fair person

d. Capable person

Answer: (b)

Explanation: An incapacitated person refers to a person who is of unsound mind. So, option (b) is the correct answer.

Question 3: Identify which of the following is the reason behind estate planning.

a. Facilitates complex process

b. Avoids complication

c. Lack of progress

d. Family conflicts

Answer: (b)

Explanation: Estate planning helps avoid complications of property transfer from the deceased owner to the legal heirs.

Question 4: Identify which of the following is not a benefit of estate planning.

a. Facilitates opportunity

b. Eliminates errors and mistakes

c. Satisfy the needs and wants

d. Inappropriate transfer of ownership

Answer: (d)

Explanation: Estate planning helps smooth transfer the estate to the legal heirs. So, it does away with the inappropriate transfer.

Question 5: Identify a person who helps to draft the estate planning.

a. Estate planner

b. Financial advisor

c. Business manager

d. Employees

Answer: (a)

Explanation: An estate planner is a certified professional responsible for planning the estate transfer.

Common mistakes

Students make mistakes in understanding the process of estate planning. They combine the management planning process and the estate planning process. They create misconceptions regarding legal regulations and framework estate planning. They should have a clear understanding of estate planning and related terms.

While studying this topic, it is important to read the following topics to get a better knowledge:

  • Real estate
  • Estate taxes
  • Corporate succession planning
  • Property taxes

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