Contact PIQ
29 Sep 2020

The difference between Estate Planning & Wills

To many people, Wills and Estate Planning are one and the same thing: after all, both are designed to ensure the execution of financial or personal wishes into the future.

But while a Will is important, it is limited to dealing with the distribution of personally-owned assets and it only deals with these wishes on death.

Estate Planning is much broader: it covers the spectrum from how assets are owned, how personal relationships impact on that ownership, who assets get passed onto, who looks after children if their parents have deceased, who makes decisions about finances or about personal care and welfare if someone is mentally incapable, and many other things.

Read on for more on the difference between Estate Planning and Wills, and why it’s important for your clients to understand it.

Why have a Will?

A Will is a legal document that details how people’s personally-owned assets will be distributed after they pass away. It enables them to choose who they’d like to benefit from their Estate (their beneficiaries), and who will be responsible for executing their Will. If you have minor children, within a Will you can also nominate a guardian for your dependent children.

A basic Will may be an option for individuals or families with moderate assets and straight-forward personal circumstances.

However, with more complexity in their personal circumstances (ie blended families) or their financial situation (ie. offshore-owned assets), relying only on a Will may not be enough. And this is where a comprehensive Estate Plan is essential.

What does Estate Planning entail?

In addition to a Will, a comprehensive Estate Plan includes key documents that empower one or more people to make decisions and take actions about your client’s assets should they no longer be able to. Without an Estate Plan in place, it would be up to the Court to appoint someone or to make decisions on your client’s behalf.

Estate Planning (which is never static and needs regular reviewing) can include the following:

  • A Trust: With a Trust, your client (as the settlor) can appoint trustees (including themselves) to own assets (such as the family home or life insurance proceeds or investments) for the benefit of their beneficiaries. Your client may choose via Trust Deed to make funds available to a child after they turn 18 or to specify that funds are only to be used for secondary or tertiary education.
  • Enduring Power of Attorney (EPA): This legal document enables your clients to appoint someone they trust to make either financial or personal care and welfare decisions on their behalf if they’re mental incapacitated.
  • Contracting-out Agreement: A Contracting Out Agreement(also commonly known as a “pre-nuptial agreement” or “pre-nup”) is a written agreement setting out how a couple's property will be divided in the event of separation and/or death.
  • Buy/Sell Agreement: A buy and sell agreement is a legally binding contract that specifies how a partner's share of a business may be reassigned if that partner dies or otherwise leaves the business (perhaps through disability). Most often, the buy and sell agreement stipulates that the available share is sold to the remaining partners.

Will or Estate Plan?

Depending on your client’s circumstances, having a Will may be enough to ensure that their assets are distributed as they wish. However, it only deals with death. Your client might become mentally incapacitated and therefore completing their EPAs (two separate documents: one for property/finances and one for personal care & welfare) is important too. In other cases, comprehensive Estate Planning might be required for a secure future. In most instances a discussion with a lawyer or a referral to a lawyer with questions you’ve helped them form, is important.

Understanding the difference and how it relates to your clients’ financial picture can help you point them in the right direction.