Many people use the terms estate plan and will interchangeably but these aren’t the same things. It is easy to get confused between will and estate planning because both go hand in hand. However, estate planning is a broader term as compared to a will which is a single legal document defining the distribution of your estate after you die. An estate plan, on the other hand, is a set of documents that may apply during your life as well as after your death. A will is only one document in a complete estate plan. It means that estate planning is much more than a simple distribution of your wealth after you passes away.
An estate plan and will are similar in the sense that both provide instructions to your family about how your property should be handled after your death. However, a will is simply about where your assets will go after you die or naming the guardian of your children while estate planning is more comprehensive and includes details of your health, finances, and other matters, even when you’re alive. To better understand the difference between estate planning and will, let’s dig a little deeper to find out more!
What is a Will?
Last wills and testaments are legal documents that mention details of your assets and who should inherit those assets after you die. It is a part of an estate plan that gives you the ability to distribute your estate among your loved ones. You can choose your heirs, as well as appoint guardians for your minor kids. A will comes into effect after your death. Besides choosing your heirs, it also allows you to appoint an executor of the will, as well as give directions for your funeral and burial. A will can also include directions for creating trust and appointing a trustee for the benefit of minor children until they reach a specified age. This document is signed, witnessed, and filed with the probate court. It becomes a public record and goes through probate after your death.
Creating a will ensures that your last wishes are fulfilled and your loved ones are protected. The process of drafting a will involves taking account of all assets, cash, bank accounts, investments, real estate, cars, artwork, jewelry, and more. You can also determine the custody of your children in the event both parents die and care for elderly parents. A will is different from a trust which has similar goals but is handled privately.
What Is Estate Planning?
Estate planning is a more detailed and comprehensive process that includes multiple documents. A will is a part of a complete estate plan which means that estate planning is much more than simply writing a will. This type of financial plan includes trusts, will, advance directives, and other types of powers of attorney. Estate planning is for anyone who owns an estate that typically includes saving accounts, investments, home and other real estate, life insurance, expensive paintings, precious jewelry, and other valuable possessions. Unlike a will which becomes effective after death, an estate plan stays effective during your lifetime, as well as after death.
A qualified estate planner can create a detailed estate plan that takes care of your wealth inheritance, as well as financial and health matters. It includes a living will that underlines the type of medical care you would like if you ever become incapacitated during life. Financial power of attorney is also a part of an estate plan that determines how and who will handle your finances if you are unable to control them. So, besides a will, an estate plan may include:
- Durable power of attorney for handling your finances
- Healthcare power of attorney to make medical decisions on your behalf
- Advanced directive
