Many individuals mistakenly believe that creating a will and an estate plan are the same. Still, they are only two parts of the same process. However, an estate plan represents a more comprehensive strategy for managing the assets you can use during and after your life. In contrast, a will defines how you will distribute your fortune, who will be the guardian of your young children, and other details. So, even though an estate plan frequently includes a will, the latter is far more comprehensive. Suppose you’re considering making your will or establishing an estate plan. In that case, consulting with a local financial advisor could be a great idea.
But in this article, we will be going through the difference between a will and estate planning.
A Will: What Is It?
A will specifies how you intend to distribute your property after death and can include instructions for your children’s upbringing. You write a legal document to ensure your ultimate desires are under your instructions. A Will also names an executor who will be in charge of carrying out your final wishes.
You can work with an estate planning attorney to draft a will. Yet, you may find a ton of information online that will help you through the will-writing process. Common options are Quicken WillMaker & Trust and Trust & Will.
Having a will is frequently advisable since it contains precisely specified phrases. Without your will, the heirs might spend significant time, money, and effort determining how to split the assets through the state’s estate court system.
If you pass away without a will, the state’s succession rules will decide how you divide the property. Your assets could go to individuals you did not intend to receive. Dividing your assets without a will can be drawn out and may not align with your final wishes. Creating a will to ensure that your dispersed property is according to your specific instructions and preferences is essential. By creating a will, you can control who will inherit your assets and avoid potential disputes among family members or loved ones.
What is involved in a Will?
By making a will, you can specify how your valuables, such as cash in the bank, real estate, or valuable items, should be dispersed. Your will can indicate who gets your business or investments and when you have either.
You can also designate a charity (and charities) to receive assets through a will. A will can also ensure your wishes come true if you want to leave assets to a business or organization.
While your will usually covers most of your assets, some aren’t. Payouts from the testator’s life insurance policies are among those omissions; the policy’s designated recipients will get the proceeds. The same is probably true for every investment account with a “transfer on death” designation.
There is one important exception: If a beneficiary of such assets outlives the testator, the policy as well as account reverts to estate and is distributed by the terms of a will or, in the absence of a will, by a probate court, a division of the legal system that deals primarily with wills, estates, and related issues.
Most states have optional or community property rules that forbid persons from excluding their spouses from their estates. A court may overturn a will when it leaves your surviving spouse with fewer of these assets than is required by the state’s laws, which is often between 30% and 50%.
A will specify your choices for who you want to be the guardian of your young children in the case of your death, in addition to allocating your assets.
Estate planning: What Is It?
Compared to estate planning, writing a will has a narrower focus and is simpler. A will is a single tool, while an estate plan uses several, including wills, advance directives, powers of attorney, trusts, and other legal documents. Estate plans may also include durable powers of attorney for financial and healthcare decisions in the event of incapacitation.
When planning an estate, you may need to consider issues beyond legal documentation, such as selecting who will have the authority to make healthcare choices on your behalf while you are alive. These decisions go beyond determining how we’ll distribute your assets after death.
Regardless of what estate planning typically comprises, it can be as broad or specific as the individual desires. Those with more intricate estates may desire complex wills, trusts, and estate planning instruments. They might even want to donate to charities to reduce taxes on assets that may later pass to heirs. That may be enough if your inheritance can be divided and your intentions can be carried out with just a will.
What is involved in estate planning?
The key components of estate planning would be these.
A will or trust
During the will, you should specify to whom you intend to leave your property and appoint a guardian for your children. You can name someone in trust to manage your children’s funds, whether it’s their guardian or another person you trust.
Names of beneficiaries
Most of your financial accounts, including your investment, retirement accounts, bank account, or specific life insurance policies, need you to name a beneficiary who will receive the payouts in the event of your passing. Many people must be aware that these forms’ provisions precede those in your will. To ensure that your assets get to the people you want to receive them, update them to match your current desires.
A durable power of attorney
In the event of your incapacitation, this paperwork specifies who you desire to handle your financial or medical affairs. You can assign the same individual to both tasks or designate distinct employees. If your main appointee cannot carry out the duties, ensure you have a backup person named.
Advance health care directive (AHCD)
Your AHCD will include a living will and medical power of attorney. Suppose you become incapacitated as a result of an illness or injury. In that case, a person living will outline her medical preferences for life support and resuscitation. Taking these difficult choices off your family’s shoulders during a trying moment is significant.
Letter of intent
This letter provides the estate executor with personal insight into your mindset, including directions for the style of burial and funeral you choose to any parting words you have towards your family concerning your beliefs and goals for their future. It is not a legally enforceable document.
Digital asset accessibility
Nowadays, you spend the majority of your time online. Therefore, your executor and heirs must know how and when to access everything, including your email on your social media accounts, to take care of any outstanding payments and other web-related accounts. Additionally, you can have priceless memories that you’d like to leave with loved ones within your digital assets.
As a result, compile a list of your accounts and passwords and attach an actual copy to the estate planning documents. Include the names of everybody you are granting access to your funds. So that your executor has the most recent information, remember that you should update this document whenever you update any online account information.
Who needs an estate plan?
Estate plans give your loved ones a roadmap of what you want to do after death. It is especially beneficial for individuals who:
- Have been in more than one marriage.
- runs a business
- Aspire to give a portion of its assets to charity.
- Have unique demands about their health and possessions because they are worried that their wishes will be disregarded or that the wrong individuals might receive their possessions.
What documents comprise your estate plan?
An estate plan includes the following:
- The healthcare power of attorney enables designated agents to make healthy choices on your behalf if you cannot do so yourself.
- A durable power of attorney permits a representative to manage your finances.
- Advanced directive – it describes your wishes for life-sustaining treatments.
What role does a Will play in an estate plan?
A will, a binding legal document, specifies what happens to your property after your death and names someone to care for your children. It doesn’t deal with jointly owned property, property held in a family trust, or property controlled by a private firm because it merely deals with assets that are part of your estate. Superannuation and insurance coverage might not be covered.
Some things you might want to think about when making your will include:
- Listing your assets and determining which ones are part of your estate.
- Deciding to leave certain assets to specific beneficiaries.
- Selecting the beneficiaries of your estate.
- Selecting a person to serve as your executor.
The difference between will and estate planning
A will is a legally binding document that expresses your final wishes, including information about your beneficiaries, how you desire your assets distributed, and all other appropriate post-mortem measures. A will could benefit those left behind since it can specify how your assets will distribute and who will receive them. In conclusion, the two main reasons people make their wills are beneficiary selection and transferring their assets after death.
In contrast, estate planning is a word used to describe the extensive procedures necessary to secure assets following your death, which are often carried out by your will. A thorough estate plan includes documents immediately after your death and others that take effect only after your passing. It doesn’t apply directly to a will since a will often takes effect after the person who drafted it has passed away.
You should now see why a will is only a small component of estate planning because a will or a living trust is what initiates estate planning. There is little distinction between estate planning and wills because they go together, and you need one to use the other.
You should seek clarification or consult with an expert lawyer before acting on any advice you give on anything related to estate planning and writing of your will. Refrain from jumping to conclusions since it’s crucial for everyone to properly plan for the future first to understand the distinction between a will and estate planning.
Consult an Estate Planning Attorney now.
A skilled estate planning attorney can help you draft legal instructions if you become ill and could provide you with the best solutions to meet your individual needs. To schedule an appointment with a lawyer from The Law Office of Roger A. Giuliani in Las Vegas, call (702) 388-9800.