Wills and estate plans: what’s the difference and which do I need?




 

We all know the saying, there are only two certainties in life - death and taxes. 

We know that (somehow) when we pass away, somebody inherits our property and deals with our financial affairs.

Without clear direction as to how you want your estate dealt with after passing away may lead to unnecessary claims and disputes about who gets what. This can cause family disputes that might add to your loved ones’ grief and take years to repair family relationships.

Remember no one has a right to an inheritance. Your property is your property. You can deal with it however you deem fit during your lifetime.

But if you do intend to leave something for your loved ones to inherit (and there may be circumstances where you really should make provisions), then it is important to plan ahead.

For many people – a standard Will might suffice. For others, more complex estate planning might be required.

In this article, we look at what Wills and estate plans involve – and which one might be the right option for you.

 

What is the difference?

Most people will say that they require a Will to deal with their estate. This is a good start.

A Will is a document that lets people know what you want to happen to your property after you pass away. It sets out who is to administer your estate, any specific gifts you want to make including charitable donations, to whom property should go to and in what portions and might plan for your children to be looked after. 

A Will should be clear so that the person having to administer the estate (called the Executor) can read the Will from start to finish and understand what the deceased is requesting to be done.

Problems come when the person making the Will wants the Will to do everything when some estate planning (and advice) may resolve problems before they arise. And in this respect a Will, like all legal documents, is never on its’ own.

Those requiring standard Wills may require basic estate planning. This could involve speaking with your beneficiaries about your funeral plans, pre-paying funeral expenses, signing binding death nominations with your retail superannuation fund, or even giving the items intended to be passed on during your lifetime. If you have minor children, then consideration should be given as to who will look after them and discuss it with those persons.

More complex estate plans are needed by those who have more complex personal, financial, legal interests, or a combination thereof. That might be because they own businesses, investments or assets held in a company or family trust. 

In some instances, if you have planned your estate carefully enough, a Will may not even be required (even if it is advised to catch anything that may have been missed).

Other situations that might need more careful planning include where there are blended families, dependents from previous relationship(s), or where you are involved in an ongoing dispute or litigation.

 

What goes into your estate plan?

Every person is different – with different financial arrangements, objectives and personal values. That’s why there’s no one-size-fits-all approach to estate planning. 

That said, there are some tools and strategies that people commonly use when implementing their estate plan.  

Powers of attorney 

A power of attorney is a formal legal document that appoints another person to make decisions for you, if you are unable to do so yourself. 

For example, if you were to lose mental capacity, you might not be able to manage your business or take care of your own finances. If you have appointed an attorney to deal with financial matters, they can sign documents and take care of your interests for you.

While powers of attorney are often requested at the time a person makes their Will, it if worth noting here that powers of attorney are documents for during your lifetime.

Once you pass away, then the power of attorney is no longer in effect.

 

Trusts and testamentary trusts

Trusts are a useful legal relationship used in estate planning.

A trust is where assets are held by a trustee on behalf of the beneficiaries. 

Any assets held subject to a trust will go with the trust deed.

Trusts are hard, but not impossible, to challenge unlike a Will.

A testamentary trust is a trust established by your Will. 

Instead of giving your estate, or parts thereof, straight to your beneficiaries, a testamentary trust gives the trustee a discretion as to what distributions are given to the intended beneficiary.

For example, if you pass leaving minor children or a dependent that has an intellectual disability, then having a testamentary trust makes provision for that beneficiary to receive a portion of your estate but in amounts and at times determined by the trustee and the trustee will manage the asset for the beneficiary.

But like anything in your Will it can be subject to challenge.

 

Superannuation and insurance

Your superannuation and any life insurance can add up to being a valuable asset. 

But the distribution of the benefits / proceeds is determined in accordance with either the superannuation fund deed, or the insurance policy and not by your Will.

This is so even if you have a self-managed superannuation fund.

 

Digital assets

For many people, digital assets are increasingly important. 

Failing to plan for these assets can risk them being lost.  

Assets might be financial (such as bitcoin or other cryptocurrency holdings), business related (such as a website, blog or social media account), or personal (such as photos and other data). 

A modern estate plan could provide an inventory of these assets and instructions on how they can be accessed or recovered.

 

Updating your Will and estate plan

As we go through life, our circumstances change. 

That means it is important to revisit your Will or estate plan to keep it up to date. 

Common scenarios when an update might be needed include:

  • A major change in your financial circumstances.
  • The birth or adoption of children or grandchildren.
  • When you start or end a long-term relationship, get married, or divorced.
  • If you change your mind about who should receive your property.
  • One of your intended beneficiaries dies.

Sometimes, it can be as simple as checking that your estate plan still works considering the new circumstances.

A quick change might be required, or you might wish to put in place new arrangements. 

It is best to have the peace of mind that comes from knowing your Will or estate plan is up-to-date.

 

How to get started with a Will or estate plan

An estate plan or Will is something you hope you will not need for a long time. 

But if something happens in your life, it will be a big relief for your family and loved ones that you planned ahead and prepared the necessary legal documents. 

After all, the last thing any of us want is for them to be caused any additional stress or conflict. 

To get started, spend some time thinking about what your wishes and priorities are after your death. 

Then consider what arrangements you might need. Most people benefit from getting some expert help here. 

Our expert team at Holcroft Lawyers can guide you through the different options and then help you draw up a Will or an estate plan that best fits your needs.

 
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