If you’re thinking about writing your first will and putting your affairs in order to simplify things for your loved ones in the case of your passing, you might have heard about estate planning. It’s a term that pops up from time to time, but most people don’t really understand what it means.
It’s important to understand that estate planning is not the same thing as writing a will. If you’re interested in finding out more about it and whether or not it could work for you, you should speak to a financial planning specialist.
However, I’ve put together a quick guide to estate planning and when it should be used to help you get started.
What Is Estate Planning?
Put simply, estate planning involves putting together a detailed plan for your estate in the event of your passing. It’s designed to make sure that the right beneficiaries receive what’s intended for them, to reduce the amount of tax you pay as much as possible, and to make sure that any minor children are taken care of.
Your estate effectively includes everything that you own. This stretches through physical assets, digital assets, property, cash, and anything else with financial or monetary value.
As you can imagine, estate planning can be difficult if you’re wealthy or have a significant amount of assets, so it’s important to get it right.
What’s The Difference Between A Will & An Estate Plan?
Understanding the difference between a will and an estate plan is essential before you even begin to think about the distribution of your wealth. Ultimately, a will is just one small document that should form part of your larger estate plan.
A will outlines what will happen to your property when you die. It doesn’t really take into account things like taxes or efficient management of your funds, but it’s all you need if you don’t have a complicated estate.
On the other hand, an estate plan can include a lot more than just a will. At its simplest, a will should be the main document of an estate plan. However, things like trusts can also play a major part in estate plans. You can also outline information about what you want to happen to any minor children, and allocating power of attorney to someone can be a good idea.
Starting An Estate Plan
Starting your first estate plan can be a little complicated, especially if you’re not sure what you’re doing. It’s important to think about what you really need and whether or not it’s really worth going to the effort of putting together a complicated estate plan.
I’d always recommend speaking with a qualified lawyer or estate planning professional before you make too many large decisions. Make sure that you’re got a well-written will in place before you move on to the rest of your estate plan, and make sure that you think through each component of your plan carefully.