What is the difference between estate planning and a Will?

What is the difference between estate planning and a Will?

Posted on Nov 1st, 2021

During our annual review meetings, discussing the importance estate planning and Wills with our clients is always a priority. In a recent review meeting, two of our clients, Bob (62) and Amy (60), were keen to update their estate plan and Will. We explained to them that estate planning and Wills are in succession and are not interchangeable; they are two separate processes.

So, what is the difference?

We explained that a last Will and testament is a legal document that communicates your wishes clearly and precisely to coordinate the distribution of your assets after your death. In their case, if Bob and Amy were both to pass suddenly, the Will states how their assets would be split between their three kids. Would Sara (28), Jack (30), or Allison (25) gain possession of their house? Who would get which investments? And how would everything else be divided? Would they leave something for a charity of their choice?

On the other hand, an estate plan is a comprehensive planning process done by professionals during the person’s lifetime, which involves anticipating and arranging how an individual’s assets will be preserved, managed, and distributed after death, or the management of an individual’s assets and financial obligations in the event of incapacitation. This planning process facilitates the conversation for Bob and Amy to talk and make decisions about the division of assets.

A last Will and testament is essentially the result of careful estate planning. The estate planning and Will should be reviewed at least every decade.

There are several reasons why Bob and Amy need an estate plan. We explained to them that this included:

  • Preserving family wealth and legacies
  • Providing for beneficiaries
  • Funding children’s or grandchildren’s education
  • Leaving parts of their legacy behind to a charitable cause
  • Ensuring tax burdens are minimized

In addition to standard Will clauses, which include establishing a guardian for living underage dependents, naming an executor of the estate to oversee the terms of the Will, and nominating trustees and executors, a properly designed Will can:

  • Limit estate taxes by setting up trust accounts in the names of beneficiaries
  • Ensure enough liquidity in the estate
  • Create or update beneficiaries on plans such as life insurance and registered investments
  • Set up funeral arrangements
  • Establish gifting wishes

The recommendations of the estate plan would lead to the drawing up of documents such as the Will, Representation Agreement and Powers of Attorney. This can save Bob and Amy time and money when we help them arrange these documents with their lawyers. Certain recommendations would also facilitate sufficient liquidity inside the estate for the beneficiaries; in Bob and Amy’s case, the spouse or the three kids (this could include life or disability insurance, conversion of illiquid assets to liquid assets, or even recommendations on increasing investment savings.)

A well-designed estate plan provides Bob and Amy with peace of mind that all pitfalls and eventualities are ironed out beforehand, therefore, lessening the burden on their children and other loved ones for all life events.

Proper outcomes require proper planning – speak to us about how we can assist you with your estate planning in advance of a meeting with your lawyer, and further explain the benefits and process. We have a team of legal and tax experts behind us who we partner with in this essential planning process, saving you time and money.

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