What’s the Difference Between an Estate Plan and a Will?
A will is just one important part of your overall estate plan
on October 7, 2022
When people think about plans for what will happen to their property when they die, they typically think of a will.
While having a will is essential for ensuring your wishes are followed, there is more to estate planning.
“A will is part of an estate plan,” says Ohio estate planning and probate attorney Jay E. Michael.
Your estate plan may also include a living trust, healthcare directives, and appointing a durable power of attorney in case you become incapable of making medical decisions in the future.
So, a will is a key estate planning document, but there are other important documents as well. This article will explain what makes a comprehensive estate plan.
For help planning your estate, consider speaking with an estate planning attorney.
What’s Included in an Estate Plan?
“When you do estate planning, you’re doing probably four or five documents,” says Michael.
“First, a last will and testament. Second, an inter vivos [living] trust. Third, a review of the individual’s assets—for example, in a bank account or a stock portfolio, and how we can name beneficiaries of those accounts.”
“But also included are other documents that need to be used while you’re still alive,” says Michael. This includes “a general durable power of attorney [and] a living will or healthcare power of attorney, also known as advance directives.”
The ultimate benefit of having a comprehensive estate plan is the peace of mind that your wishes will be followed and your loved ones provided for.
Let’s look at the key estate planning documents in more detail.
Drafting a Will
A last will and testament (or “will” for short) is a legal document that says how you want your assets to be distributed when you die.
There are a few key things you want to include in your will:
- Inventory of assets. You get to control the distribution of your assets through your will. Be sure to make a list of “any and all” property, says Michael. Creating a complete list will take time and involve collecting various documents and information. An experienced lawyer can be very helpful in making an inventory. For example:
- Real estate (house, land)
- Financial assets, including cash and bank accounts
- Stocks, bonds, brokerage accounts
- Retirement accounts such as IRAs
- Life insurance policies
- Digital assets
- Other real property (cars, jewelry, art, books, etc.)
- Beneficiary designations. A central part of any will is naming your beneficiaries. These are the people you will leave your assets to.
- Taxes and debts. If you have any unsettled debts, you can state how these debts should be settled in your will. If your estate is large enough to require estate taxes, you can also specify how these taxes will be paid.
- Appoint an executor. An executor is a person you appoint to oversee the distribution of your assets according to your will. An executor has a fiduciary duty to act in the best interests of your estate and beneficiaries. They represent your estate in probate court and make sure your wishes are followed. The executor’s role is complete when probate is finished, and your estate settled. It’s a good idea to appoint an alternate or “successor executor” as a backup in case your first pick for executor is unable or unwilling to play the role.
One of the main benefits of having a will is it prevents your estate from going through intestate succession. Without a will, your state’s intestate laws kick in to determine how your assets are distributed.
Intestate succession generally goes from your closest family members (such as your spouse or children) to family members who are considered furthest from you (uncles, aunts, etc.). Intestate succession is essentially a default if you haven’t made your wishes known.
How your state distributes assets may not be how you would like your assets to be distributed. So, it’s essential to have a will specifying your wishes.
Keep in mind that state laws vary on the requirements for making a valid will. For example, some states recognize holographic wills (handwritten wills that weren’t witnessed or notarized), while others do not.
States also have different probate court procedures. Probate is the court-administered process of distributing a person’s assets when they die. Every will must pass through probate for the estate to be settled when the individual dies.
Because laws differ and can be complex, it’s a good idea to speak with an estate planning lawyer about your estate.
Assets you put into a living trust are handed over to a successor trustee when you die. The successor trustee distributes the trust assets to your named beneficiaries.
A significant benefit of a trust is that it avoids probate. This has a few advantages, including:
- Assets are immediately available to your beneficiaries through a trust, whereas beneficiaries have to wait for probate to be completed to receive assets
- A trust helps keep your estate private, whereas your estate becomes a matter of public record in probate court
There are different types of trusts—for example, real estate and marital trusts. You also have the option of creating a:
- Revocable living trust, which allows you to retain control of the trust as grantor until you die and the trust passes to the successor trustee, or
- Irrevocable trust, which means once you create it, you can’t change it
There are different advantages to each type of trust. An estate planning lawyer will be able to help you assess your estate and come up with the best plan.
Healthcare and Financial Decisions
Wills and trusts are oriented toward what happens when you die. What about taking care of things while you’re still alive?
Suppose you become incapacitated or unable to make decisions regarding your finances or the medical care you receive. Who will make these decisions?
This is where directives and a durable power of attorney become relevant.
In a healthcare directive (also called a living will), you can specify what kinds of medical care you will receive (or not receive) in specific situations if you become incapable of making such decisions.
You can also appoint a healthcare power of attorney. This person is authorized to make healthcare decisions on your behalf if you become incapacitated.
A financial directive does basically the same thing but for your financial affairs. You can appoint someone as your financial power of attorney to make finance-related decisions in case you cannot.
Estate planning not only gives you peace of mind about what happens when you pass away. It also gives you confidence that things are taken care of while you’re alive.
Questions for an Estate Planning Lawyer
As emphasized throughout this article, it’s wise to speak with an estate planning lawyer.
Estate law can be complicated, and you want to make sure your estate plans are legally sound and complete. If they aren’t, it could create issues down the road for your surviving loved ones.
An estate planning attorney can assist you through the entire process. Many attorneys provide free consultations for potential clients. These meetings let you get legal advice and decide if the attorney meets your needs.
To get the most out of a consultation, ask informed questions such as:
- What are your attorney’s fees and billing options?
- What are your legal services?
- What estate planning documents do I need?
- How do I make a list of my assets?
- What should I consider in naming an executor, trustee, or power of attorney?
Look for an estate planning attorney in the Super Lawyers directory for legal help.