Differences between wills and estate planning

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So many persons may happen to have estates across countries with families and loved ones elsewhere or in some situations where some get married to a foreigner or invest in foreign countries and all these could make estate planning quite challenging. However, synchronizing your international estates will require legal experts with vast knowledge, understanding and wealth of experience in such issues as estate succession and tax laws in the relevant countries that will affect the effectiveness of a will in the event of death. Difficulties In Estate Planning For Expatriates And Multinational Families In spite of the different estate tax laws in different states in America, however, these differences are barely noticeable because they all are founded on the same foundation in legal matters. But the contrary is the case across nations or internationally. While the Americans use the common law, the Europeans and Africans use the civil law. The common law is a legal system developed by judges through decisions of courts and similar tribunals (also called case law), as distinguished from legislative statutes or regulations promulgated by the executive branch. Whereas civil law is Roman law based on the Corpus Juris Civilis; it is the body of law dealing with the private relations between members of a community; it contrasts with common law. It contrasts with criminal law, military law and ecclesiastical law as well. Common Law Offers Significant Planning Pliability As regards estate planning, common law allows or gives an individual (the trustor) the freedom to decide who and who to receive what and what, he or she has the liberty to decide how his or her properties or estates should be distributed when he or she dies. Hence, a will is very vital as it determines how the estate of the decendent is to be distributed via the probate process. However, a trust can help avoid the probate process and the taxation of the estate likewise. Also based on common law, the estate is normally taxed before it is transferred to the beneficiary or named heir. Meanwhile, in a situation where there's no will, the estate becomes intestate and it is distributed based on the state laws. Civil Law Operates Based On Succession This is similar to the intestate laws followed in common law in the absence of a will when an individual dies. This implies that even while alive an individual cannot determine how his or her estate should be distributed in the event of his or her death. So, a will is almost of no use in civil law unlike in common law. Again, taxation of the estate takes place during distribution unlike in common law where the estates are taxed before distribution. That is, the heirs or beneficiaries of the estate are being taxed in civil law. Meanwhile, a trust is of no relevance when civil law is in operation. Citizenship and Residency An expatriate should have a good understanding of the laws and requirements concerning citizenship and residency in any country he lives and in which he possess properties. The estate plans of an expatriate will not only be altered by relocating to a new place with different laws, but also how long he or she intends to stay in the new location is another contributing factor and likewise how much of his riches he invests in the new location. International Transfer of Tax Credits The transfer tax for an expatriate is determined by the following factors; 1. The type of assets 2. The location of the assets 3. The accessiblity of tax credits in significant areas where there is an overlap of levied taxes 4. The relevance of an estate tax agreement or protocol between the US and the country of residence Usful techniques for international tax estate planning includes; Wills, Trusts, Life insurance, Gifting, personal investment companies, college savings etc. Estate Planning In The Case Of A Non-citizen People live, work and own properties overseas and happen to marry from their country of residence or a foreigner altogether. Sadly, the difficulties in taxation faced by American expatriates also occurs in a situation where they marry foreigners. In spite of having a permanent resident in the US, spouse who are foreigners do not enjoy the unlimited marital deduction on gifts and inheritance transferred to them by their spouse. Although they enjoy the 2019 $11.4 million lifetime exclusion.

After the death of a loved one, the relatives or close friends may find it very hard to settle the estate of that particular deceased individual especially if their estate wasn’t planned well. It may sound a little bit weird to some people but it is often advisable for people to plan for what is going to happen after their death. This planning is mostly centered around what people should be done to the properties, assets and other things the deceased owned before passing away.

Just before we go deep into any difference that can actually exist between a will and the actual estate planning, let’s talk about some important terminologies related to will and estate planning.

What is an Estate?

Everything that has to do with the possessions, cash, financial securities and other things that belonged to a deceased individual before his or her death, is what we refer to as estate. Other notable things that are under the roof of what an estate entails are as follows:

  • Total networth of the deceased
  • Economic valuation of all the investments
  • Both physical and intangible assests
  • Land and real estate
  • Collectibles and even furnishings

After the death has been registered, the estate of the deceased can’t just be lying around without use or without someone else claiming them. Before one can actually handle someone else’s estate, he or she has to go through a legal process which is another terminology we refer to as probate.

What is a probate?

A probate is a legal document issued by an official court that grants you the permission to settle the affairs related to the estate of a deceased and without it, you won’t have the authority to deal with anything related to that estate. Most people feel the probate process is too stressful but if the deceased actually had a proper estate planning, this wouldn’t be a hard task at all.

Now that we already have an idea on some of the important terminologies, let us now go into notable differences between a will and estate planning.

The difference between a will and estate planning

A will is a legal document that clearly states your final wishes together with details about who your beneficiaries are, how you want your assets to be handled and every other legitimate actions that you want to be done after your death. A will can be very helpful to the people left behind as it would be able to determine how to go about the distribution of your assets and who gets them. In summary, beneficiary designation and distribution of one’s assets after he or she has passed away, are the two major reasons why people write their wills.

Estate planning on the other hand, is a term for generalizing the intensive processes used in securing assets after your death, which is mostly done in accordance with a will. An estate plan is very comprehensive and it includes documents that are effective during your lifetime as well as other documents that aren’t in effect until your death. This actually doesn’t apply to a will because a will mostly becomes effective after the individual who wrote the will has passed away.

A will or a living trust is actually what starts an estate planning and this should be able to explain to you why a will is just a little part out of estate planning. As you can see there isn’t much of a difference between wills and estate planning because the two of them work hand in hand and you would need one for another.

Conclusion:

Before you heed unto any recommendations to you concerning anything that has to do with estate planning or the preparation of your will, you either ask questions or see an experienced law attorney. Don’t jump into conclusions because understanding the difference between estate planning and wills first, is important for anyone to prepare correctly for the future.

DISCLAIMER: The information provided in this blog is for informational purposes only and should not be considered legal advice. The content of this blog may not reflect the most current legal developments. No attorney-client relationship is formed by reading this blog or contacting Morgan Legal Group.

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