When it comes to protecting the future of your loved ones, working hard and earning wealth isn’t enough. You need to make sure that your hard-earned wealth is inherited by those you love. And this is where will and estate planning comes in. Most people undermine the importance of creating these legal documents believing that their wealth will automatically be inherited by their heirs. It’s true that upon a person’s death, the assets of the deceased go to the legal heirs. But leaving things entirely in the hands of the court isn’t the best thing. You should have a say in how things are handled when you’re no more around. Now, you may wonder whether you need a Will or an estate plan. It is easy to get confused between these interchangeably used terms. However, estate plans and will aren’t the same things. So, let’s find out the difference between these two and help you understand their importance.
Will
In simple words, a Will is a legal document that includes a list of all your assets and details of how you want them to be distributed after your death. Besides the transfer of assets, it also includes your wishes about how children should be cared for after your death and funeral arrangements. You can name an executor of the will to carry out the actions in your will. Creating a last will and testament allows you to decide who should take over your business or act as the guardian of your children after your death. You can also make other property-related wishes and distribute assets to prevent family disputes over your property. Appointing an executor ensures that all the instructions are followed.
Estate Planning
The word estate is often associated with mansions, yachts, and multi-million properties. However, this isn’t the case. Most people have an estate that includes everything they own. An estate plan shouldn’t be confused with Will because both are different. An estate plan is a comprehensive document that includes multiple legal files such as Wills, trusts, and more. It means that a Will is a part of the complete estate plan. A person’s estate typically includes:
- Home and other real estates
- Cars
- Checking and savings accounts
- Investments
- Life insurance
- Personal possessions like precious paintings, fine jewelry, and more
Estate planning is for everyone who owns some assets. However, it is particularly beneficial for those who have a business or had more than one marriage. It is also important for those who want to specify wishes related to health and business matters in the event of incapacitation. It means that, unlike a will that becomes effective after death, an estate plan can help you during your life if you become incapacitated. A typical estate plan consists of documents like:
- Durable power of attorney to appoint an agent to handle your finances if you are unfit to make them yourself.
- Healthcare power of attorney for making medical decisions for you
- Advanced directive
So, estate planning is broader and more complex than writing a will. It includes trusts, power of attorney, and wills to make decisions about wealth distribution along with your finances and healthcare. It goes beyond transferring assets after death. You can decide who will make healthcare or financial decisions on your behalf while you’re alive. An estate plan can also include your wish to donate to charities to offset taxes on assets. Both a will and an estate plan are legal documents that should ideally be created by estate planning lawyers. Mistakes in your estate plan could have a serious impact that can jeopardize your future and those you love.