Will Planning and Estate Planning are related, but many people may not know they are two different things. It’s important to understand the difference because a Will is only one component of a proper Estate Plan.
Your Will is your “last will and testament” – your final word about your property and assets and who should receive them after you die. Your Will can only be executed (that is, acted upon and your wished carried out) after you die.
Your Estate Plan, on the other hand, describes how you want your property and assets divided up and distributed both before and after you die. It is usually executed straight away, rather than waiting for you to pass away.
Further, your Estate Plan has a much broader scope than your Will. It doesn’t just cover distribution of your assets – it can cover healthcare instructions for if you become incapacitated (via a “living will” or advanced healthcare directive), or it can delegate responsibility for handling all your affairs to another individual (via enduring power of attorney).
It’s important to understand the difference between a Will and an Estate Plan. While your Will can only come into effect after you die, an Estate Plan can cover situations involving your property, assets, and finances prior to your death. Your Estate Plan is a contingency plan for different scenarios leading up to your death as well as afterward.
A Will is commonly confused with an Estate Plan because a Will forms part of your Estate Plan. Also, any adult can tell you what a Will is, whereas Estate Plans are not as commonly known and understood. Therefore people conflate the two.
A Will contains instructions for actions required after you die. Your Will speaks about the people you want to:
An Estate Plan makes the distribution of your assets a bit easier by allowing for additional instructions. Your Estate Plan covers different scenarios in the case you are unable to handle your affairs but haven’t died yet. An Estate Plan can contain:
So, what is the actual difference between a Will and an Estate Plan? While your Will covers the event of your death and can only be activated after you die, an Estate Plan is more detailed, can be activated before you die, and offers better protection for your loved ones and intended beneficiaries. The two are related because a Will is a necessary part of an Estate Plan.
Once you have a Will, you might think the job is done. You may think “I don’t have that much to give away anyway, so an Estate Plan is probably overkill, right?”. In fact, your Estate is probably worth far more than you realise. Your car, your house, your savings, your investments or any businesses you own or have an interest in, your possessions and your valuables, even your digital music or game library – all of these count as Assets in your Estate, and you leave them all behind when you die. If you are survived by loved ones, especially children, you want to do as much as you can to make sure they are taken care of. Not to mention there are scenarios that can happen before you die in which you are unable to protect and take care of both your assets and your loved ones where they may be exposed to unnecessary risk. Having a Will is essential, but it may not be enough.
An Estate Plan gives you the opportunity to cover several contingencies and protect your assets and your beneficiaries, plus it gives you the chance to see your wishes fulfilled before you die. It gives you peace-of-mind that everyone you care about are well taken care of and adds a protective barrier against greedy hands that you haven’t foreseen.
While it’s not something any of us want to think about, we simply don’t know when our time will come, and you can’t assume you will have advance warning of your death. If you leave this world with your affairs in disarray, it is your family and loved ones who will be left with the mess.
The sad fact is that most people die without an Estate Plan, and many even without a Will. This opens the door to family disputes, state intervention, and taxes no-one told you about springing up without warning.
If you die without a Will or an Estate Plan, the State has to step in and resolve matters, which usually leaves no-one happy or satisfied with the outcome.
In Australia, if you die without a Will, the courts appoint a legal administrator whose job it is to collect your assets, handle your debt repayments, cover your funeral expenses, and distribute what’s left to your beneficiaries. The issue here is they will distribute your assets according to your country’s probate laws, not according to what you may have wanted, and probate laws are not renowned for being fair! If you leave a spouse and children behind, they will be entitled to a portion of your estate, not all of it. If your children are minors at the time of your death, the court will hold their inheritance until they come of age. This removes any ability to invest their inheritance in trust or protect it from fees. In the unfortunate event that both parents die, the court will appoint a guardian for them as well, and they will do so according to how they see fit, not you. Any verbal agreements you had with friends or family members will go out the window and you’ve lost all say in who gets your assets and who takes care of your family.
What about if you lose your ability to speak, make decisions, or move? Again, it will be up to the State to dictate how your assets are used for your care, not you or your loved ones. You will be put under the care of a state-appointed guardian in an expensive and drawn-out process that might not end for a long time, even if you recover. You and your assets will become someone’s job, and the people who care about you may have no say in the process at all.
So, the question becomes – who do you want handling your assets and affairs if you can’t, and do you want a say in it or not? If you want your wishes to have any bearing and you want your loved ones taken care of properly, a Will or an Estate Plan is not optional.
A Living Trust is considered a better option than a Will for one big reason – a Living Trust might make probate unnecessary.
Australian probate laws dictate that most of your assets need to go through the probate process before they can be distributed. Even your Will must be approved before probate is granted. It’s not a standard process as it varies from state to state. The probate process carries court costs, legal fees, and executor fees along with it which can really add up and take big chunks out of your Estate. It can take years after your death for the process to conclude, and to top it all off, it’s controlled by the State and not your family. A court can refuse to grant probate if it’s not satisfied with your Will or if there are disagreements over your assets.
A Living Trust, however, gives privacy to the process, is valid in all states of Australia, keeps the State and the probate process out of your affairs, and can be altered or amended as many times as you need. It puts the power back in the hands of your family for full control of your assets and eventual Estate. With a valid Living Trust in place, your family can avoid the need for probate altogether.
The only possible downside to a Living Will is it can be expensive to get sorted up-front. But on the flipside, a Living Will avoids court and probate interference and the associated expenses after your death. In a way, you are just pre-empting possible costs that need to come out of your Estate and keeping them under control now. Looking at it this way, the expenses of setting up a Living Will are a much wiser investment on behalf of your loved ones.
You can make the decisions now and you know that your wishes won’t be interfered with. You can plan the care of your family and loved ones and rest assured your plan will be carried out as intended. Whether your children are adults or minors, you know they will be covered and get the best you can offer them without the State or selfish third parties interfering in their lives. This is perhaps the biggest benefit of an Estate Plan – you can rest easy knowing that your legacy will remain intact.
If you only have a Will, probate is necessary to prove its validity and to give authority to your executor to carry out your wishes. It’s an expensive and painstaking process that chips away at your Estate and can take years to resolve, adding more stress and financial burden on your grieving loved ones.
Living Trusts can be executed with no need for probate. Your Estate stays whole, and no-one can interfere or put their “two-bobs-worth” into how your assets are distributed.
A Living Trust especially benefits your young children because you choose their guardian and you choose who holds onto their inheritance, not the State. You can also instruct how your beneficiaries use their inheritance to ensure it is used responsibly and for their maximum good. Going further, a Living Trust protects your beneficiaries in the event of a divorce, bankruptcy, of other unplanned or unforeseen events that might impact their inheritance.
You might be put off by the costs of developing an Estate Plan compared to those of drafting a Will. Don’t be! Yes, there are costs involved, but it doesn’t have to be expensive. With the right legal guidance, you can develop a watertight Estate Plan that covers every detail required without blowing past your budget.
An Estate Plan is the kindest thing you can do for your family because it’s a kindness that extends beyond the grave. With the right guidance, your Estate Plan can give crystal-clear instructions for how you want to see out your days and how you want your family supported when your life is over. And most of all, an Estate Plan ensures that all your wishes will be carried out exactly the way you intend with no outside interference.
If you’re convinced about the importance of an Estate Plan but aren’t sure where to begin, you’re already on the right website! Get in touch with us as soon as you can and we will get you started on the right track.
OneWill | Estate Planning Simplified is proudly powered by WordPress