Many people don’t know the difference between a will and estate planning. And some even use the terms interchangeably. Both legal documents are made to divide the estate between the family members. But it is important to understand that both documents play a very different role in deciding your family’s future.
Simply put, an estate plan is more than a piece of paper that tells your family how to divide the state. It is a comprehensive plan of action that guides your family in the direction of how to divide the assets and take important decisions when you are alive and after it. And a will is a legal document whose only purpose is to dictate the division of your assets after you are not with your family. So, if you are planning to create an estate plan for your family, you should hire an estate planning attorney. Let’s see what is the difference between will and estate planning and what role they play.
What Is A Will?
A will is a legal document that features all the instructions on how you want all your assets to be distributed to your family members after you are gone. It can also include instructions on how you want your minors to be taken care of after you. It also details the executor’s name, who will be responsible for implementing all the wishes and actions.
Creating a will is an easy process that requires you to create a last will and testament. To create this document, you can work with an estate planning lawyer or try an online website to create your will or estate plan.
Creating a will is a good idea because it clearly states all your terms and decisions. If you don’t have a will, your heir and family members may end up having to spend much of their energy and time dealing with the probate court, taxes, and estate division. And probate court takes a lot of money and time to divide all the assets between the family members.
Furthermore, if you create a will, you can add all your wishes, like charity contributions, burial, funeral, and end-of-life decisions. Will is not only for old people. If you are an adult with the responsibilities of a spouse and children, you should always create a will. You can always change your will over time, but creating one is better than not having one.
What Happens When You Die Without A Will?
When you don’t create a will by yourself, there are several problems that your family will face. All your assets will directly go into the hands of the state to take care of all your debts, distribution of your assets, and custody of your minor children. And in most cases, the largest part of your estate will go to your spouse, and the rest will be divided equally between all your children. The state does not focus on properly distributing your estate based on each individual’s requirements.
The court will also randomly pick an individual from your family, close relatives, and friends to be appointed to look after all the work. Furthermore, if you do not create a will, your family will have to go through the long, tiring, and costly probate process.
What Is Estate Planning?
Estate planning takes care of all the things that will help you secure your family’s future. It is a comprehensive collection of important documents that include not just will but several other legal documents. The documents in an estate plan can come into effect when you are alive and when you are not here. These documents ensure that there are people who can take care of things when you are alive but not able enough to make decisions. These documents give your chosen individual the power to make important healthcare and financial decisions on your behalf.
You can create an estate plan that suits your needs. It can be extensive or very narrow based on your requirements. Estate plans ensure that all your tasks and duties are executed with efficiency and also avoid high taxes. Creating a proper estate plan can help your family avoid probate court and long legal processes before asset distribution. Also, it will protect your minor children as you can appoint a trusted guardian of your choice. The list of documents that an estate plan includes are
Last Will And Testament
A will is a legal document stating who inherits what part of your estate. Your estate includes properties, vehicles, jewelry, and other things that hold monetary or personal value. You can name an individual as the guardian for your minor children or pet.
Healthcare Directive
A healthcare directive ensures that there is somebody who can take care of all the important healthcare decisions in case you are declared incapacitated to do so yourself. Or you can write down your healthcare preferences like treatment options, end-of-life care, medication, etc.
Financial Power Of Attorney
Through Financial Power Of Attorney, you can give an individual the right to make all the important financial decisions on your behalf. It includes taking decisions for your company, paying bills, handling all your property, etc. It also includes paying for your medical bills (if necessary).
Revocable Living Trust
A revocable living trust is a legal piece of paper that helps you distribute the assets but with the help of a trust. After you, all your assets included in the trust will be divided between all the beneficiaries you have named. A revocable trust will also save your family’s time and money by avoiding probate court.
Beneficiary Designation
A beneficiary designation will allow you to transfer all your assets to the beneficiaries on time, irrespective of what the will says. It is generally used for deciding who will get money from your life insurance policies, savings in the bank, retirement account, and more.
What Is The Difference Between An Estate Plan And a Will?
A will is one component of an estate plan, but an estate plan contains a lot more important documents. Estate planning is important, but both have some limitations and benefits. The differences between both documents are:
- A will is one legal piece of paper. However, an estate plan is a collection of legal documents like the last will, trust, living trust, beneficiary designation, power of attorney, and more.
- A will can cause your estate to go to probate court. On the other hand, creating an estate plan can save your family from going through the long and expensive probate process and save hefty taxes.
- A will is only for distributing your estate. And an estate plan covers a range of things, from the division of the estate, important financial and healthcare directives, retirement documents, last wishes, and more.
- An estate plan that your family is completely covered and protected after you are not with them.
Read Also: The Best Estate Planning Attorney Packages To Invest In
Tip On How You Can Start Your Estate Planning
Estate planning is a complex task as there are so many documents you need to create and keep a record of at all times. You should contact an estate planning attorney to make a perfect estate plan that will fulfill all your requirements and save you from all the loopholes. So, to make it easy for you to create an estate plan, here are some tips that will assist you in getting started.
- Make an inventory of all your stuff. It includes listing down all your assets, so it becomes easier for you to divide them properly.
- Take into account what your family’s needs are. If there are minors, ensure that you are appointing a trusted guardian for them and how you want them to be raised.
- Create all the necessary directives. It includes health and financial directive and power of attorney for taking all the important decisions in case you are declared incapacitated or unable to make decisions on your own.
- Review all your beneficiaries. Keep track of all your retirement and life insurance accounts so you can add beneficiaries to them.
- Consider making trusts so you can avoid your estates from ending up in the probate court.
- Create an outline of the wishes you want people to follow in case you are declared incapacitated or after you pass away.
Conclusion
A will cover the estate distribution part. And an estate plan takes care of more than just your estate distribution. It helps your family avoid probate, get access to your estate faster, and someone to make all the important decisions. But creating an estate plan is a complex task. You must ensure that your plan adheres to all the laws and protects your family from probate court and taxes. To create a perfect estate plan at cost-effective prices, you can reach us at 844-995-8155.
Frequently Asked Questions
Estate planning, in easier terms, means a collection of legal papers that will help you pass down your investments and assets to future generations. Your estate includes cars, properties, investments, and anything that holds monetary value. It also includes directions you would like your family to follow after you are not with them or are declared incapacitated. Whereas a will only dictate the division of property to the loved ones.
Will is a component of an estate plan, among many other legal documents. A will comes into effect after the individual who created it passes away. For a will to be legitimate, it needs to be signed by two witnesses.
In an estate plan, there are five major components you need to make it effective, and those are:
- Wills and trust
- A durable power of attorney
- Beneficiary designation
- Medical and financial power of attorney
- A directives document with instructions if declared incapacitated and living wills
In easy terms, estate planning means making important financial plans for your family and to whom you want your assets to go. An advocate or an estate planning lawyer can help you create one. They can also help your family avoid the probate process.
Other than distributing the assets, a will can also help you keep a record of all the assets that your family members or relatives are not aware of. Furthermore, it gives you the ability to appoint a guardian for your minor kids, limiting the taxes on your estates after you are no more. Also, it features important guidance details for medical care (if required).