When it comes to estate planning, there are a lot of misconceptions about what exactly it is. A lot of people think that estate planning and creating a will are the same thing but there are key differences. Estate planning is the process of arranging for the management and disposal of a person’s estate during their lifetime and after death. It can be done through a will, trust, or other estate planning documents. In other words, a will is part of an estate plan but not the same thing as an estate plan.
In this blog post, we will discuss the differences between estate planning and wills so that you can make an informed decision about which option is right for you.
What Is Estate Planning?
Estate planning is a complete term to define. It’s a process that takes into account all of your assets and liabilities in order to create a plan that will ensure your estate is distributed according to your wishes after you die. This includes things like choosing an executor, setting up trusts, and making arrangements for your children or pets. Estate planning goes beyond legal documents, and also considers healthcare decisions or assets distributions.
The goal of estate planning is to ensure that your assets are distributed in the way you want them to be, that your loved ones are taken care of financially after you die, and that estate taxes are minimized. If you don’t have an estate plan in place, the state will make decisions about how your assets are distributed, which may not be what you would have wanted.
There are a number of different estate planning tools available, each with its own benefits and drawbacks. The most common estate planning tools are wills, revocable trusts and irrevocable trusts. Let’s take a closer look at each one.
What Is A Will?
Wills are a common estate planning tool because they are relatively simple to create and they offer a number of benefits. Wills allow you to name an executor who will be responsible for carrying out your wishes after you pass away. They can also be used to appoint guardians for your children and to set aside money for their care. Estate planning wills are typically less expensive than trusts and they are valid in all states. It is also one of the most common estate planning tools.
A will has various disadvantages compared with an estate plan. Wills do not take effect until after you die. This means that it won’t help you take care of your loved ones during your lifetime or manage your estate while you’re still alive. In addition, a will can be challenged in court by family members who feel they should have received more inheritance than they did. For these reasons, it’s important to have other estate planning structures like trusts.
Wills are an important part of estate planning, but they don’t address everything. They are useful for stating who should receive your assets after you die and setting out funeral arrangements, but they don’t help you take care of your loved ones during your lifetime or manage your estate while you’re still alive. But let’s compare and contrast them in-depth:
Estate Planning vs. Will Differences
There are various differences to highlight between a will vs. estate planning when arranging the management and disposal. Here are the ones we considered crucial to help you know what’s best to your situation:
- An estate plan is more comprehensive than a will. This means that it includes more information about what you want to happen to your estate after you die. For example, an estate plan might name an executor, create trusts, and make arrangements for your children or pets.
- An estate plan can help you avoid probate, while wills cannot. This means that your estate will be distributed according to your wishes after you die, without having to go through a long and expensive process.
- An estate plan can help you protect your assets from creditors. If you have money or things that you want to keep away from people who might try to take them from you, through your estate plan, you can put them in a trust or give them to someone else. Estate plans make sure that they are safe after you die. This is where the its name comes from, because you are planning for what will happen to your estate after you die.
- An estate plan can help you provide for your children or pets. This means that they will be taken care of and will have a place to live, and you will know that they are safe. A will could also help you provide for your children or pets after you die, but an estate plan is a more comprehensive way to express whoβll take care of them, avoid probation and protect your assets from creditors.
- A will can be challenged in court if itβs not executed properly. This can be because of mistakes in the will or because someone challenged it in court. Therefore, it can mean that when the person dies, their estate might not be given to the people they wanted it to go to.
Conclusion
So, itβs clear that estate planning vs will should be interpreted as two different concepts. Estate planning is an important process that everyone should go through. While wills are a common and important part of estate planning, they are just one part of estate planning.
Everyone should be looking to setup a will or revocable trust but if you are looking to focus on some of the other aspects of your estate plan such as estate tax savings and asset protection, check out our overview on an estate tax savings trust structure called a Grantor Retained Annuity Trust or GRAT or set up a call here to chat with our team.
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