These two processes have been known to confuse many because they are quite similar and they take care of your affairs when you are alive and when you are no longer around to tend to your finances and assets. The basic difference is that one is more comprehensive than the other which makes some people go for the less comprehensive one. The complexity of estate planning sometimes discourages people from having one and choosing to have a Will instead. However, it all depends on your finances, assets and ultimately your preference. There are a lot of things to consider before choosing one over the other and going for the easy one is certainly not one of them. This article will discuss the difference between the two and the appropriate one to have depending on your financial and asset situation and your preference. You will also learn what to include in anyone you choose and the appropriate age for having either of the two.
Does Estate Planning Include Wills?
Estate planning in itself is described as the process of taking care of your finances while you are alive and also provides for how your finances will be handled according to your wishes when you are no longer alive. So, to answer the question of whether an estate plan includes a Will, the answer is yes, Wills are included in an estate plan.
A Will is a legal document that provides instructions on how a person wishes to share his assets with his/her loved ones and who takes custody of their minor children if any. So many people interchange an Estate Plan and a Will thinking that one can be substituted for the other. This is not the case. A Will is included in an Estate plan while an Estate plan cannot be included in a Will. Other things that can be included in an Estate plan include Trust, A living Will that gives healthcare and mental power of attorney to a person of your choice. It is always advisable to seek the help of a professional to help develop your estate plan to effectively take care of your estate while alive or dead.
At What Age Should You Do Estate Planning
Estate planning is not age-specific. Experts will tell you, the earlier the better. Given the comprehensive nature of estate plans, you will be able to take care of your finances while alive and prepare for your loved ones when you are no longer around. As long as you are earning, it is advisable to have an estate plan. However, your estate plan must be adaptable to your current financial situation.
Once you clock 18, your parents will no longer have authority over health and financial decisions. You can create an estate plan with a living Will to give healthcare and mental power of attorney to a person of your choosing who will take care of your financial and healthcare decisions in case you become incapacitated. Do not feel too young to have an estate plan, it is a smart way of putting your life in order and taking care of your welfare.
At this stage, you should be preparing to have a family or you may already have one. You naturally will have more responsibilities at this stage as well as a reasonable income. You may have assets you wish to bequeath or you may want to set up a Trust for your family. At this stage, your estate plan should include a Will and a Trust, together with a living Will that will give healthcare and mental power of attorney to anyone you wish for when you become incapacitated.
At What Age Should You Have A Will
Like an estate plan, there is no appropriate age for having a Will. As long as you attain the majority age of 18, you are eligible to have a Will to take care of your affairs. You can create a Living Will or a Last Will and Testament. A living Will take care of your affairs while you are alive but incapacitated to make key medical and financial decisions. It will ensure your wishes are carried out to the latter. A Last Will and Testament, on the other hand, takes care of your affairs when you are no longer around. It takes care of how you want whatever assets you may have to be distributed among your loved ones. Whatever Will you decide to have must be appropriate for your current financial situation.
What Is Estate Planning?
Estate planning is the process of creating a set of wishes and instructions that will detail how your assets are used and distributed in the event of incapacitation or demise. An estate plan seeks to distribute your assets according to your wishes and minimize tax liabilities. It will comprise of different legal documents that will assign different sets of authority on how your affairs should be managed and prevent your loved ones from guessing what your wishes will be.
After a well-spent lifetime with a lot of money earned and financial goals met, an estate plan will ensure that your wealth is not distributed at the discretion of the government which may be against your wishes and principles. Therefore, an estate plan ensures that you structure your finance when you are alive and also ensures your affairs are handled by the people of your choosing after your demise. It is a comprehensive way of taking care of your money and assets. From the moment it is created, an estate plan takes care of your current and future assets and money. In other words, it helps you structure your financial affairs while you are still alive and allow you to make good decisions about your finances.
Advantages Of Having An Estate Plan
There are a lot of benefits of having an estate plan to take care of your affairs. Some of the advantages of an estate plan include:
To Provide For Your Loved Ones
An estate plan allows you to leave enough money for your spouse and other loved ones of your choice to include in your estate plan. You can set up a trust for your loved ones and bequeath some other assets to them to take care of them for when you are no longer around. The double advantage of an estate plan is that it also allows you to make provisions for yourself and your loved ones while you are still alive. Having various investment portfolios and Trusts can take care of you and your family while you are alive.
To Minimize Expenses and Taxes
Having an estate plan takes care of the expenses that may be incurred during the transfer of properties to your named beneficiaries. You can use it to set up a Trust for your children and loved ones which has its tax advantages and ensure your beneficiaries keep more money.
Plan For Decision Making During Incapacitation
An estate plan will create room for healthcare and mental power of attorney that will appoint someone that will make medical and financial decisions on your behalf when you become incapable of making them yourself.
Plan For Your Needs
An estate plan gives you the opportunity to give healthcare and mental power of attorney to a person of your choosing to make medical and financial decisions on your behalf when you are incapacitated.
To Make Donations
If you have philanthropic wishes, an estate plan ensures that you fulfil this goal by putting the money in a trust and donating it when you are no longer around.
What Is A Will?
A Will is a legal document that describes how you want your assets and money to be used and distributed when you are no longer around. A Will takes care of both your assets and liabilities. An up-to-date Will allow your executor to carry out your wishes according to the laws of your Province. The absence of a Will means that the government will determine how your assets and money are used and distributed. You will name an estate representative who will handle your affairs as you have listed in your Will.
There are several options for writing your Will. You can engage the services of a Will and Estate lawyer, Will kits, Will preparation sites and DIY legal forms. You no longer have an excuse for not having a Will. Some of the things you should include in your Will are:
- Name of executor(s);
- How you want your assets and money to be distributed;
- Guardians for your children; and
- Provisions for your debts and taxes.
It is important to ensure that anyone you name as your executor is someone you trust and have confidence in to execute your estate according to your wishes. For a Will to be legal in Canada, it must be:
- In physical form;
- Made by someone who has attained the age of 18;
- Made by a testator of sound mind at the time of writing;
- Signed by the testator at the end of the Will and by 2 witnesses who are not beneficiaries in the Will;
Advantages Of Making A Will
Having a Will is not a death sentence or does not mean you will die soon. There are a lot of benefits you can get from creating your Will. Some of the advantages of having a Will include:
Allows Your Wishes To Be Carried Out
A Will allows you to list out your wishes as to how your affairs are handled when you are no longer around. It ensures you are in control of your assets in terms of usage and distribution.
It Protects Your Loved Ones
A Will protects your loved ones from the exploitation of unscrupulous elements in the family. Your Will provides how your children are taken care of and how your assets and monies are taken care of.
You can use your Will to give additional instructions on how you want your burial arrangements to be handled.
It Helps To Keep Peace Within The Family
If there is an outlined instruction on how your affairs should be handled it prevents rancour among family members who may want to take your properties for themselves.
It Prevents Statutory Devolution
Where a person does intestate, the law says that it is the province that takes charge of the assets of the deceased and they will be used and distributed at the discretion of the province. Most times, the state will use and distribute your assets differently from how you would have loved them to be distributed. Having a Will ensures you decide who gets what in your estate.
Differences Between Estate Planning and Wills
- Estate planning is the comprehensive process of distributing your estate which usually comprises your real estate, monies in banks, investments, cars and any other asset.
A Will is a legal document that provides instructions on how your assets and monies are used and distributed.
- Estate planning can be active while you are alive and at your demise.
A Will becomes active after your demise.
- An estate plan includes a Will.
A Will cannot include an estate plan.
- Documents that make up an estate plan include Will, Inter-Vivos Trusts, Testamentary Trusts, and Power of Attorney.
Documents that make up a Will include all documents showing legal ownership of your assets.