While the terms are often conflated, estate planning and wills are not one and the same. Rather, a will is just one very important part of an estate plan.
Depending on where you’re at in your life, different elements of an estate plan will be more important than others. Regardless of your life stage or financial situation, a little estate planning goes a very long way in reducing stress for your family and making sure that your wishes are carried out when you aren’t able to speak for yourself.
This article will help explain the difference between a will and a complete estate plan, and what you need to have in place to protect your assets.
What is the difference between estate planning and making a will?
Essentially, making a will is just a piece of the estate planning puzzle. Your will is a key component of the estate plan, along with all of the other arrangements that need to be made regarding your estate when you die.
Is an estate the same as a will?
No. Your estate consists of all of your assets and property. Everything you own and all of your money, all of your retirement accounts, bank accounts, debts and other assets—they all amount to your estate. Your will, on the other hand, is the documentation that outlines what you want to happen to all of those things when you die.
What is estate planning?
Estate planning is the process of outlining a plan for your estate for when you die. It’s the master plan for your family. It usually includes a will, an asset list, and a power of attorney.
What is a will?
Your last will and testament is the legal document where you outline a lot of your estate plan. It’s basically your chance to designate the beneficiaries of your estate and name your executor: the person who will be responsible for following through on these wishes when you die.
Without a will, an executor is chosen for you and your estate will be allocated based on the intestacy laws of your province. If chosen for you, neither of those may be who you expect or align with your wishes.
What is an asset list?
An asset list is exactly that—a list of all of the assets to your name. It’s a document that works in tandem with your will. While it’s not a legal document, it does complement your will and helps your family members track down everything when they’re closing up your estate.
What is power of attorney?
Power of attorney is an often woefully overlooked part of estate planning. Good estate planning means preparing not only for death, but also for situations where you may be medically incapacitated and unable to manage your own affairs.
You can designate a person to be your power of attorney (not necessarily a lawyer) to act on your behalf if you ever become incapacitated. This person will act on your behalf to make decisions for you about your property, finances, and medical care.
How does your power of attorney know what you want?
Ideally, you’ve documented everything in your estate plan and given them a roadmap to your wishes.
Hopefully it won’t be necessary in your lifetime, but if you do become incapacitated, it’s not something you can do retroactively. With a power of attorney and a comprehensive estate plan, you have the power to designate a person to speak for you and your wishes when you’re unable to. Don’t give up that power; make a plan to cover your bases in the event of an emergency.
Who should have an estate plan?
Estate plans aren’t reserved for the upper echelons of society (although they’re incredibly important when it comes to establishing generational wealth!)
There are lots of reasons to have an estate plan, and ultimately, everyone needs some form of it, but what that plan looks like varies at different stages of your life.
The needs of a young single renter are going to be different from married octogenarian homeowners with second houses in cottage country. Similarly, parents of minor children will need to consider trusts and guardianship matters, while just a simple will might suffice for a childless twenty-something with a bit of cash in the bank.
No matter the circumstances, a complete estate plan can save a lot of people headaches when the rainy days come. For particularly complex estates, you may want to consider speaking with a financial planner or an estate planning lawyer.
When should you start estate planning?
In a perfect world, everyone over the age of majority would have an estate plan and a valid, legal will. If that were the case, lots of families would be saved from a lot of headaches and stress during their times of grief. No one expects to die or die young, so making a plan sooner rather than later is always best for you and your loved ones.
Ideally, at the very least, once you’re over the age of the majority, you have a will naming your executor and beneficiaries. Then, whenever you have a major life change you should revisit your estate plan. Getting married, having kids, divorce or separation, buying houses; these are all instances where your circumstances change drastically enough that it’s beneficial to revisit your final wishes and make sure everything is up to date and accounted for.
What does the estate planning process look like?
The estate planning process comes down to making a lot of decisions about your financial affairs and loved ones.
Identify key people and determine responsibilities
You must identify key people who you trust to execute your will, act as guardian for your children, witness your will, and make financial decisions for you if you become incapacitated.
Write a will and asset list
Then, consider who will get what when you pass away. Who do you want your beneficiaries to be? What assets would you like to allocate specifically? What assets do you even have in your estate? Can you put together an asset list to help your executor distribute things more easily?
Make your final wishes known
There are also decisions to be made about what kind of funeral you’d like and how you’d like your business to carry on in your absence. You can even make arrangements for your beloved pets as part of your estate plan.
Assign power of attorney
Another important part is your power of attorney, sometimes called a living will. You need to outline your wishes when it comes to life support, pain relief and palliative care.
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Your will, your choices
The most important thing you can do to get started with estate planning is write your will.
Writing your last will and testament is a crucial step to making sure that your wishes are upheld after your death. Estate planning makes it so you can relax knowing that one day, your family will know exactly what you wanted and won’t be stressed over administration and bureaucratic processes.
Without a plan, you leave your assets and decisions in the hands of the courts and the intestacy laws of your region, which may exclude your loved ones from your estate. Willful can help you create a legal, valid will for your estate plan without the need of expensive lawyers. It takes only 20 minutes and is free to get started.
Start for free and get peace of mind, knowing your estate plan will speak for you when you can’t.