What is estate planning?
Deciding and documenting how you would like your assets to be distributed can be encompassed by the broader term “estate planning“. An estate plan covers all aspects of the administration of your estate and associated matters. Whilst this is not a nice topic to think about, creating a plan is vital to ensure that your wishes are honoured and to prevent disagreements between your relatives. Making a will, valuing your estate, planning who will take over your business (if you own one) and creating a lasting power of attorney are all important parts of your estate plan. If executed correctly, you can rest assured that all your wishes will be respected.
Why make a will?
44% of those who are married or in a civil partnership and 70% of cohabiting couples do not have a will. If you do not make a will the intestacy rules will govern how your estate is distributed. This means if you are not married or in a civil partnership, your surviving partner will not inherit anything. To avoid this and other complications which may arise, create a will with Rocket Lawyer for free.
Creating a will is an important part of your estate plan. A will sets out what will happen to your possessions, wealth, businesses and other aspects of your life when you pass.
What is my estate?
Your estate includes everything you own in terms of money, property and possessions, eg cash, shares, real estate and cars. Anything you owe, eg on a credit card, must come out of your estate when you pass.
Who should handle my estate?
This will usually be a surviving family member or close friend and is normally named in your will as an ‘executor’. If there is no will, the person who handles your estate will be appointed by the court (called an ‘administrator’).
What is a trust?
A trust is also a helpful tool in managing your estate and allows you to set aside assets for your relatives or friends. For example, you could appoint a trustee to hold some money for your daughter until she turns 25.
What are the main differences between a trust and a will?
The main difference is that a trust is immediately effective. A will won’t come into effect until your passing (unless you create a ‘will trust’ as part of your will, to become effective upon your death). A trust doesn’t have to go through probate and is overseen by your appointed trustees. A will has to go through probate and its administration is overseen by the court (which gives rise to time and cost issues).
How do I go about setting up a trust?
You will need to appoint a reliable trustee (at least two is preferable) and create a trust deed. This is a legally binding document containing all the information relating to the trust, eg the purpose of the trust, its conditions, who the beneficiaries are and the trustee’s powers. It is usually drawn up with the help of a solicitor.