Wills vs. Estate Plans: What Sets Them Apart

Planning for the future involves making decisions today that will ensure your assets and loved ones are protected throughout your life. While most people think they will only need a will to do this, an estate plan actually provides a wider array of asset protection for your legacy and your peace of mind. Working with an estate planning attorney can help you ensure you have all the necessary paperwork prepared to reflect your wishes and to protect your interests.

Although both wills and estate plans play an important role in how your property and affairs are managed, they have different capabilities and execution. Wills are the most important part of an estate plan; they guide the direction of your assets once you pass away. An estate plan contains your will as well as other tools used for complex life events (e.g. incapacity, health care, taxes) while you are alive and after.

Through a careful approach to legacy planning, a person can not only avoid a chaotic transfer of estate from one person to another, but they can also protect their loved ones from unnecessary stress and confusion. By understanding the differences between these two legal tools, a person may create a custom solution tailored to their individual needs and goals.

A will is at the heart of the legacy planning process. A will is a legal document that tells how you want your property to be divided up when you die. A will allows a person to select who will get his/her property, select an executor of the estate to manage the estate, and name guardians for minor children. These decisions are extremely important because they will help ensure that your loved ones are taken care of and that causes you support receive the support.

Determine who receives your assets, monetary funds, and property from your estate after your death. Choose an executor and make sure he/she is someone you trust to handle the process of administering your estate. Decide on a guardian to care for your minor children by selecting them as named guardians in your will.

Probate includes validating the Will and appraising the distributed assets (beneficiaries) after death. An experienced attorney for wills will provide the best benefit in preparing and structuring your Will and thus minimizing potential difficulties concerning your estate. The length of time from validating your Will to completing the probate process will vary significantly based on the complexity of the estate. Also, the entire probate process is public information, and many individuals want to protect their family’s financial privacy.

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Understanding an Estate Plan

Estate planning is a matter of preparing for what will happen to a person’s estate at the time of death and what will happen to the person’s assets (property, finances) during life (e.g., in case of incapacity) and even after death. Estate planning may include:

Trusts. A trust is an agreement in which a person conveys his property into a trust and appoints the trustee (the person who holds the property) to manage the property until the person revokes the trust. Trusts provide more privacy than probates and avoid the long and expensive process of transferring ownership through the probate process.
Powers of Attorney. A power of attorney gives another person (agent) the authority to act on behalf of a person in financial and/or medical decisions if the person is incapable of exercising his own authority.
Medical Directives. Medical directives allow a person to express to his physician how he wants to be treated when the physician and/or healthcare provider is unable to communicate with him about his end-of-life decisions.

Estate planning gives you the ability to control what happens to your estate after you die, as well as giving you control over who will be responsible for managing your healthcare and finances if you are unable to manage them yourself. Because estate planning offers more security than a simple will, it can provide a better way to protect yourself against the unfortunate situation of becoming incapacitated.

Key Differences Between Wills and Estate Plans

The two different tools each have their own set of objectives, but there are many ways that people benefit from creating a comprehensive estate plan.

Scope: A Will is only intended to give directions about how to distribute an individual’s assets after death, whereas Estate Planning includes all the elements of planning for the distribution of assets, as well as planning for how to manage those assets during the individual’s lifetime before those assets are passed on to heirs, and planning for how an individual wants his or her assets distributed upon death.

Probate: A Will must go through the probate court (a public process) before it can be distributed to heirs, which can often result in a lengthy delay in providing access to the assets to the heirs. In contrast, an Estate Plan may contain Trust(s) and other Instruments that help provide for the distribution of assets, without going through the probate process. This allows individuals to maintain privacy while also providing for an efficient transfer of assets.

Incapacity Planning: A Will does not provide for anything regarding incapacity or illness. An Estate Plan, however, includes Power of Attorney documents and Advance Directives so that there is a clearly defined method for making decisions regarding an individual’s care while he or she is incapacitated.

The difference between the flexibility and protection provided by a Comprehensive Estate Plan vs. using these two separate tools is significant and is one of the most important considerations for those who want an orderly and secure future.

Limitations of Relying Solely on a Will

Although it is essential to establish a will, the restrictions associated with relying solely on a will include limitations such as:

Court Proceedings Associated With Filing Probate: When filing a probate, individuals may encounter many direct and indirect costs, extended time periods, and a great deal of exposure regarding their estate’s information to the Public.

Establishment of Probate: If you die before creating a trust or creating a will for your living heirs, all that you owned at the time of death (except joint properties) will be subject to Establishment and detailed descriptions of everything else you owned according to the probated will.

Establishment of Authority for You in the Case of Incapacity: Wills only provide legal documentation and enforceable powers to executors or trustees once you pass away; once you are incapacitated due to illness or injury, a will is no longer valid.

Benefits of a Comprehensive Estate Plan

Benefits of a Comprehensive Estate Plan:

Minimize or Eliminate Probate. Trusts and other legal tools minimize the need for probate, saving time, money and privacy.
Protect Against Incapacity. Through powers of attorney and health care directives, you define your wishes for your end-of-life care, thus avoiding intervention by the courts, and help loved ones with decision-making during your time of incapacity.
Maximize Your Estate for Tax Benefit. Tax-efficient estate planning will allow you to minimize estate and inheritance taxes, thus increasing the amount of your estate passed to your beneficiaries.

Common Misconceptions

Many believe that estate planning is only necessary for high-net-worth individuals, but this is not true. Everyone who has any sort of assets (including money), children to care for or concerns about their medical care has a lot to gain by preparing an estate plan, regardless of their economic status. Additionally, while many assume a single document (a Will) is enough, that is far from being the case. Comprehensive planning helps make transitions easier and provides essential safeguards for the family and individual should they become unable to care for themselves or if there are other complications within the family.

Final Thoughts

While both wills and estate planning can play an important role in planning for the future, an effective, holistic estate plan is the only type of planning that enables individuals to efficiently coordinate, manage, and privately administer their estate and assets in accordance with their wishes during their lifetime and after. As such, working with qualified professionals to prevent common mistakes from occurring or to prevent family conflicts from arising will ensure that the individual will have peace of mind and that the individual’s loved ones will enjoy relative financial security in the future. See more!