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Will Planning vs. Estate Planning - What’s the Difference?

Posted On Friday, 27 May 2022 18:01
Will Planning vs. Estate Planning - What’s the Difference?

A Will is an important part of taking care of your assets and ensuring they are distributed to the right people after your death. However, there comes a time when you want legal protection beyond your children's well-being and property allocation, and this is where estate planning comes in. 

An Estate Plan takes into account the broader aspects of your financial, mental and physical well-being in the event you lack the capacity to make crucial decisions. If you're wondering which legal arrangement is suitable for your current situation, carry on reading about the differences between a will and estate planning.

1. What is a Will?

A Will, also referred to as a last will and testament, is a legally binding document instructing your family and loved ones how to allocate your assets when you die. It is set up to give you peace of mind in knowing important entities are legally protected and your wishes will be fulfilled when you die.

2. What is Included in a Will

A Will usually includes:

  • Personal details (including immediate family).
  • The name of your executor (person responsible for handling your affairs when you die).
  • Beneficiaries.
  • Property and Assets, and how you want them distributed.
  • Guardianship.
  • Signatures (including two valid witnesses).

3. How Much Does a Will Cost

According to Money Helper, a Will can cost between £100 and £600 depending on the complexity of your estate.

4. Who Needs a Will

You need a Will if:

  • You have assets such as property, investments, life insurance policies and trusts.
  • You have minor children and want to ensure they are well taken care of.
  • You want to allocate funds to a charity you support.
  • You're unmarried and want to leave something behind for your partner.

5. What is Estate Planning?

Estate Planning is the process of arranging for the distribution of your assets after your death. It involves a broader aspect than Will Planning by including powers of attorney and trusts. A well-drafted Estate Plan helps avoid stressful, time-consuming and costly probate proceedings.

6. Why Estate Planning Is Important

Without an Estate Plan, you can't guarantee your wishes will be fulfilled. Here’s what an Estate Plan allows you to do.

  • Leave Your Assets to the Right People - An Estate Plan gives you control over how much each beneficiary receives from your estate. It further ensures any debt is paid off before any assets get distributed.

  • Protect Your Assets if you Become Incapacitated - If you become incapacitated due to an illness or injury, an Estate Plan ensures someone takes care of your financial affairs.

  • Protect Your Children - If your children are minors, you won't run the risk of having them lose any money as a result of someone taking control of their finances until they reach the legal age of 18. 

  • Protect Your Business - With an Estate Plan in place, you don't run the risk of your business being sold at an auction or taken over by court-appointed trustees.

  • Plan For Your Healthcare - Healthcare is a priority when you have an Estate Plan in place. Family members might have differing views when it comes to your well-being when you become incapacitated, so writing your wishes down ensures you receive the benefits and the type of care you deem fit.

  • Avoid Disputes Amongst Family Members - Conflicts are a reality amongst family members, and the last thing you want is your family fighting over who gets what when you're dead. Specifying what goes where prevents any disputes arising due to others feeling entitled over your assets.

7. Who Needs Estate Planning?

Anyone over the age of 18 years with assets in their name needs to have an Estate Plan in place. While other people feel they don't need an Estate Plan until they retire, death is unpredictable. It's best to have an estate in place for unforeseen circumstances.

If you have minor children, an Estate Plan is even more important because it allows you to appoint a guardian until they reach adulthood.

8. Documents Included in an Estate Plan

To give you an idea of what goes in your Estate Plan, here's an outline of the documents that should be included. Every situation is different, so you should consult your attorney for an Estate Plan suited for your needs.

  • Last Will and Testament - A legal document stating who receives your assets after you die.

  • Durable Power of Attorney - A legal document that gives someone authority over financial matters if you are unable to handle them yourself.

  • Healthcare Power of Attorney - A legal document that empowers an individual to make decisions regarding your medical care needs.

  • Living Will - A Living Will tells your family what kind of medical treatment you want if you become terminally ill. You can specifically disclose what steps they should take if you end up in a coma.

  • Trust - A Trust is a legal arrangement for controlling how assets are distributed to your beneficiaries over time or once-off. The three main types of trusts are revocable, irrevocable and testamentary trusts.

    • Revocable Trust - A Revocable Trust is a document where the person who created the trust (the grantor) has the right to change its terms, such as adding or removing beneficiaries and how assets are distributed.

    • Irrevocable Trust - An Irrevocable Trust cannot be changed once it's signed by the grantor, which means the grantor has no control over the assets in the trust. However, the benefit is that it protects your assets from future creditors.

    • Testamentary Trust - A Testamentary Trust allows you to transfer assets to your beneficiaries after death. And because it's set up as part of the Will, it only takes effect after your death. It's especially useful if your children are minors, therefore, preserving your estate for generations to come.

Conclusion

Though Estate Planning and Will Planning differ, these documents should not be left to the last minute. Life is unpredictable. Just as you would plan your vacation, you need to put in time and effort to plan your Estate or Will to ensure your wishes are fulfilled even after you die.

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