Will planning and estate planning might seem indistinguishable to most, but in truth, the two processes are quite different. A will can be described as the last testament, a person’s last wishes about how their property (estate) should be distributed following their death. Therefore, a will can only be executed after death.
An estate plan, on the other hand, can be described as a document that details how you want to distribute your estate to your beneficiaries both before and after you die. As such, it is executed immediately after it is created.
The key similarity between estate planning and a will is that they both specify how you want your estate handled and distributed among your beneficiaries.
A closer look, however, reveals that estate plans not only convey more instructions but can also be executed before death. Wills are only set in motion after death.
Furthermore, unlike wills, they touch on more than just the distribution of assets and appointment of guardians. A living will, for instance, can have instructions on how you want to be cared for should you lose the ability to do so yourself. In a way, it is a contingency plan for the worst-case scenario.
The Relationship between a Will and an Estate Plan
The reason why it’s easy to confuse between the two is that a will can be part of an estate plan. In a will, you can convey instructions to be executed following your death. These instructions usually are, who you want to:
- Raise your children following your demise;
- Inherit your assets after you die; and
- Execute your will.
An estate plan seeks to make the distribution of assets a little easier by conveying additional instructions. As such, it may contain:
- A living will. This is like a last will and testament, but instead of activating after your death, it dictates how you want to be taken care of/ treated should you become unable to care for yourself or make the decision. This includes being hooked up to a life support machine, signing up for geriatric care et. Cetera. It takes the pressure off your family members when they don’t have to decide what happens to you when you are incapable of making decisions.
- A living trust. This assists in the distribution of your assets to your inheritors. Not only does it specify how you want it to be distributed, but also when the trust should be activated. A living trust can be executed long before you’re dead, so you can make changes as you see fit.
The key difference between an estate plan and a will is that an estate plan is more detailed, can be executed before death, and generally provides more protection for your loved ones.
Do I Need An Estate Plan?
Contrary to what some might think, you don’t have to own a lot of assets to need an estate plan. Everyone needs an estate plan. Your car, your house, your savings, your checking account(s), any businesses you own, any valuable items (jewellery, paintings, artifacts, etc.) – all of these count as assets. When you die, these assets remain, and if you leave behind loved ones, you’d want them to be cared for after you are gone. Not having an estate plan won’t help you achieve this, and while useful, a last will and testament may not be enough.
An estate plan will not only allow you to allocate your assets to your beneficiaries, but it will also give you the chance to see your instructions executed before you die. This way, you can rest easy assured that all your loved ones are well taken care of.
What Happens If I Don’t Plan?
It is said that most people die without leaving behind an estate plan or even a will. What follows is family disputes, state intervention, and taxes no one really tells you about until it’s too late.
Estate planning is not reserved for the rich, the sick, and the dying. Anything can happen at any moment, and if you leave your affairs in disarray, it is your family that is going to suffer.
What is most likely to happen if you don’t leave a plan? In such cases, the state has to step in and do the planning for you, and usually, no one is left happy or satisfied.
If you lose your ability to speak, make decisions, or move, the state moves in and dictates how your assets are used to care for you. Not you, not your family members, but the state. You will most likely be placed under the care of a state-issued guardian in what is an expensive and lengthy process, and the worst part is, it might go on for a long time after your recovery.
In Australia, if you die without leaving a will, an administrator is appointed by law. The administrator is tasked with collecting assets, debt repayments, covering your funeral expenses, and distributing your remaining assets to your beneficiaries.
Unfortunately, your assets will now be distributed under your country’s probate laws. The probate process is not known for its fairness. If you leave behind a spouse and children, they will each be entitled to a portion of your estate, not all of it. If your children are minors, then the court holds on to their inheritance until they come of age.
In the unfortunate event that both parents die, the court is also at liberty to appoint a guardian for any children left behind as well as hold on to their inheritance until they’re old enough.
What Is Included in a Living Trust vs. What Goes on a Will?
Here’s why a living trust is generally considered better than the last Will: when you die, it might not have to go through a probate process.
Australian probate laws dictate that most of the assets titled in your name must go through the process before they are distributed to your beneficiaries. This is not a standard process as it varies based on each state’s laws. However, it is a lengthy and expensive process.
Probate attracts court costs, legal fees, and executor fees as well. It can take well over two years after your death for the process to end. Furthermore, the process is controlled by the court system, not your family.
In contrast, a living trust affords maximum privacy, is valid in all states, avoids state intervention and probate, and can be altered multiple times as per your wishes. It gives your family members full control of all your assets, thereby avoiding lengthy and expensive probate processes.
Is there a downside? Just one: a living trust can be expensive at first. However, when you consider the fact that it helps you avoid the court’s involvement in the distribution of your assets after you die, it might seem like a welcome expense.
What Are The Perks of Having An Estate Plan?
Peace of Mind
The knowledge that your family will be taken care of exactly how you want after you die is without a doubt, the best benefit of having an estate plan.
An estate plan is thoughtful and considerate to your family’s needs, and it offers maximum protection to all your beneficiaries, whether they’re children or adults. They will not have to worry about state intervention, and you can rest easy knowing that you have protected your legacy.
Doesn’t Go Through the Probate Process
The probate process, though lengthy and expensive, is necessary to prove the validity of your last will and testament. This is a process your family will be better off not going through because it is painstaking and can take years to end.
Luckily, with an estate plan, it is an avoidable process. Living trusts can be executed without going through the probate process.
Protects All Your Beneficiaries
Your young ones will especially benefit from a living trust because you can assign a guardian to take care of them as well as hold on to their inheritance until they come of age. You get to make that choice, not the state, and you’ll be able to control how your heirs use your inheritance to make sure it is used responsibly. This way, you can ensure protection for all your beneficiaries in anticipation of events like divorce and bankruptcy.
Estate Planning is Not Always Expensive
Don’t be thrown off by talk of expensive initial costs; estate planning doesn’t have to be an expensive process. With the right legal guidance, you can tailor an estate plan that you can afford without leaving out anything important.
The importance of knowing the right course of action cannot be overstated. The right guidance will help you know how to prepare your documents so that they include your will, your life insurance, a suitable executor, and your preferred course of action should you become physically or mentally incapacitated.
Having an estate plan is a great kindness to your family. It keeps them clear of lengthy and expensive court processes after your death and gives clear instructions on how you want to spend your final days so that your family knows exactly what to do.