Wills vs. Estate Plans: What’s the Difference?
No one particularly likes to think about planning for what happens after they die, but the fact is that you should plan as much as possible so that your loved ones are not left with any uncertainty after you’re gone. While a will does lay out your intentions, it may not be enough. You may need an estate plan as well to secure your assets after you pass away.
Estate plans and wills may seem like interchangeable terms, but they are actually different processes. Learn about the difference between wills and estate plans so you can make the best choice for you and your family.
Wills vs. Estate Plans: What’s the Difference?
When you create a will, you’re putting together a document that determines who takes over the important aspects of your life. Items you may include in a will could be:
- Who retains legal custody of your children
- Who takes over any businesses you own
- Who keeps your financial assets
In a will, you also typically name someone to be an executor once you’ve gone, as they will be the ones to make sure that your final instructions are followed. This document helps to make legal decisions after your death easier for members of your family.
Making an estate plan, though, involves more steps than just creating a will. By definition, your estate is your net worth. That includes your things, your properties, artwork, stocks, bank accounts, and more. You may begin the process of estate planning with a will, but you also have to provide other details, which may include health care instructions, life insurance and a more detailed plan on who receives what asset.
Why Do I Need an Estate Plan?
After you die, even if you have a will, the probate process begins. This can take several months, or years in some cases. Probate is often a long process that includes proving the legality of your will, appraising your property, paying off any debts, and more. It can be a stressful process, especially if your loved ones need the financial assets that you’ve left for
them. Additionally, it may be possible for someone who was left out of your will to try and contest it during this time.
To avoid probate, it is best to make an estate plan so that no one can contest your plans. Also, details of a will are made public. You may not want every detail to be public and there are ways to avoid that in a well thought-out estate plan.
Another important element in an estate plan is determining who your beneficiaries will be. If you list out your beneficiaries, then it makes it easier to avoid probate as there will be distinct and clear guidance on where your assets will go. You’ll need beneficiaries for bank accounts, investment accounts, retirement plans, and life insurance policies.
There are other reasons you may need an estate plan. For example, if you’ve had more than one marriage, you may want to clearly outline who gets what. If you want to make a charitable donation after your death, then you can address that as well. It may also be a good reason to create a trust, especially if your children are not yet old enough to inherit your
assets. You can decide to make the funds available to them when they reach a certain age.
Do I Need an Attorney for Estate Planning?
Not everyone will need an attorney to create an estate plan; however, it is advised to have one if you have extensive assets and holdings, or more complicated situations. Some scenarios in which it may be best to have an estate planning attorney include:
- When you have substantial net worth that brings you within risk of
being taxed on your estate - When you own property in multiple states
- When you own a business and need to plan its succession
- When you have charitable donations
- When you want to ensure a legal professional has verified your plan
and vetted it for any potential loopholes
Need to Make an Estate Plan?
Along with an attorney, it can benefit you to sit down with a financial planner when you’re ready to make your estate plan, even if you do already have a will in place. Your financial planner can help you with making the best decisions for your financial assets and figure out smart investment strategies for you, especially if you’re creating a trust for your beneficiaries.
It isn’t easy to think about what happens after we’re gone, but it’s best to prepare. Create an estate plan today so that your family will be well taken care of and provided for once you pass away.
