A will might be part of an estate plan, but it is not estate planning. All too often these terms are used synonymously, but in reality, they are quite different from one another. A will is a single drafted legal document, while estate planning dives deeper with multiple documents to protect your estate and your loved ones.
Wills and estate planning do seem interchangeable because they start the same, but once you get into the core functions of these processes, you quickly see how different they are from one another. A will and an estate plan are meant to protect your family and give relatives instructions on how your assets get distributed – but from there the differences begin. Estate plans dive deeper, focusing on your wishes regarding your health, finances, and even protect you and your assets while you are still alive – something a will cannot do.
It is best to meet with an estate planning attorney and see if a will is enough for your estate. In most cases, a will only scratch the surface. And if you think that you are completely set with only a will, you may leave yourself, your loved ones, and even your legacy in a bad position.
What Is a Will and What Does It Do?
A will, in comparison to estate planning, is relatively simple. Your will, officially known as the Last Will, dictates guardianship for minor children, who can take over your business, and what assets go to what beneficiaries.
In your will, you appoint an executor. Executors are responsible for handling all instructions in your will, locating assets, and distributing them. The executor also finalizes your estate, including paying any remaining debts on the estate, selling assets to handle those debts, and filing the final tax return.
A will does prevent family fights over which assets belong to which loved one, and it gives clear instructions for how to handle your property. It also makes it easier for loved ones to make those more difficult legal decisions as your wishes are outlined in the will itself.
Also, having a will saves your loved ones financially. Without a will, your estate must first go to probate court where a trustee is appointed. Family disputes may arise without a valid will in place, which can take funds away from the estate as well.
While the protections are limited, it is still best to have a will as a bare minimum.
What Is an Estate Plan, and What Does It Do?
An estate plan is much more in-depth than a will. It is an intensive process that can cost a lot more than a will, but it saves more in the long run. Your estate plan does include a will as well as various other legal documents that help protect your loved ones and assets upon your death. Also, an estate plan protects you while you are still alive but unable to manage your affairs.
The Addition of a Living Will
One of the key components of an estate plan is your living will. A living will is what protects you when you are still alive, but you are incapacitated and unable to make decisions on your behalf. With a living will, you pick a party who would be responsible for making medical decisions when you are incapacitated, including options for life-saving treatments, end-of-life care, extraordinary measures, and managing payments for your medical costs.
Having a living will clearly outline what you do and do not want if you become incapacitated, severely ill, or injured. Likewise, it appoints a single party (with an authorized backup in case your primary is unavailable) to carry out your wishes outlined in the living will. This saves your family frustration, time, and money by not fighting over who should make decisions for you while you are unable to do so.
The Addition of a Financial Power of Attorney
Another component added into an estate plan that you cannot do with an ordinary will is your financial power of attorney. Like your living will, your power of attorney gives a single party legal permission to make all financial choices on your behalf. They can perform financial transactions in your name and make business and other financial decisions based on what you have outlined in your power of attorney. You can place restrictions on which accounts your party has access to and what they can do with your assets and funds. Of course, appointing someone who is financially responsible is best – as they will have control over your assets.
Picking someone for your power of attorney is crucial. It protects your assets and keeps loved ones from experiencing any disruption in their financial stability while you are incapacitated.
Creating Beneficiary Designations
Another document you can use to protect your assets is beneficiary designations. These work outside of a trust, will, and other documents. Instead, they are directly associated with a specific account type (e.g., life insurance policies, bank accounts, or retirement accounts). On these accounts, you will fill out a form that lists your designated beneficiary, and these documents hold up well in court – ensuring no one disputes who receives your account funds or life insurance.
Extra Privacy with a Trust
Estates with only a will go through probate. Probate includes public records. This means your entire estate is something anyone can look up easily. If you decide to go with a trust, you place your assets in the trust, manage that trust, and appoint someone to administer it upon your death. Trusts skip over probate, and they keep your estate information secret.
Which Is Right for You? Meet with an Estate Planning Attorney
If you are not sure whether an estate plan or just a will is right for your family and assets, meet with an estate planning attorney to go over your options in detail.
Attorney Andrew M. Lamkin, P.C., can help you decide which method offers your family the security and protection they need long after you are gone. Get started with a free case evaluation by calling our office at 516-605-0625 or requesting more information online.