Post: The Difference Between an Estate Plan and a Will

Estate planning vs. a will

The difference between an estate plan and a will

by Christopher L. Kelly, Esq.

We may think all we need is a Last Will and Testament to take care of our final wishes. While a Will is certainly an integral part of documenting these wishes (and it’s great that you have a Will—almost half of Americans do not!), there’s usually much more that goes into this process than simply having a Will. 

What we actually need is a comprehensive strategy that thoughtfully lays out our final desires, a blueprint that we call our “Estate Plan.” It’s important to pause here and note that while we normally think of an estate plan as only covering the time after we die, it should also cover critical issues we may face during our lifetime, such as incapacity and our wishes as to end-of-life medical treatments. Thus, an estate plan is a custom plan-of-action that provides direction for issues you may face during your lifetime as well as for the distribution of your assets after you are gone.

Through your plan, you are going to identify those persons whom you wish to inherit from you as well as the assets you want them to have. You will name those persons whom you trust to assist in the execution of your plan when the time comes during your lifetime and after you are gone. And you also have the opportunity to leave tangible reminders that reflect the importance that faith played in your life.

Various legal documents provide the framework by which your estate plan will be carried out. Most plans are constructed utilizing a Last Will and Testament and/or a Revocable Trust, a Power of Attorney for Financial Matters, a Power of Attorney for Health Care, and advance health directives. Each of these documents plays a key role in providing direction for the various components of your plan. In its simplest sense, the Will names an executor, states who gets your property at your death, and provides a place where you can name the guardian of minor children, if applicable. A Trust serves a similar purpose in that it names someone who can manage your estate during and after your life in addition to naming those people who will inherit your assets. Through a Power of Attorney for Financial Matters, you identify the person (or persons) you trust to handle financial matters during your lifetime if you are not able to manage them yourself. In a Power of Attorney for Health Care, you are appointing someone who can make health care decisions for you if you are not able to make them yourself. Finally, advanced health directives refer collectively to a variety of documents in which you provide guidance to those making health care decisions as to what kinds of treatments you may or may not want at the end of your life. Documents like Living Wills or Do Not Resuscitate directives fall into this category.

While these documents are certainly important (and we all should have them), some types of commonly-owned assets are passed along by other means. This means we need to ensure that we are familiar with how these types of accounts or property will transfer to others when we die. For example, some accounts, such as retirement accounts, life insurance policies, annuities, etc., allow you to pass them along utilizing a beneficiary designation form. This allows these assets to go directly to a beneficiary without having to go through probate court. Additionally, property that you may own jointly with someone else (i.e. land, bank accounts, etc.) will not be controlled by your legal documents, such as a Will. In many cases, the surviving owner becomes the sole owner when a joint owner dies. Thus, when you are assessing the things you own in view of your estate plan, it is important to ensure that your beneficiary forms are in correct form and that you are clear on what property you may own jointly with someone else.

Many times, much of our estate plan can be accomplished through by establishing joint accounts and by properly designating beneficiaries for those assets that allow you to do so. You just need to be fully apprised of the outcomes when you plan with these types of assets.

Is developing an estate plan hard to do? Yes, it can be. Envisioning a time when you are no longer here is difficult to do. You have to take inventory of everything you own and consider the legal means required to transfer it when you die. You also have to deal honestly with critical matters within your family. It can take considerable effort to consider and implement an estate plan, but in the end, it’s time well spent as you consider the peace of mind for yourself and your family that comes with having a well thought-out plan in place.

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Please note that the advice offered in this article is not intended to be construed as tax, legal or accounting advice. This material has been prepared for general informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice for the reader. You should consult your own tax, legal and accounting advisors before engaging in any transaction.