Estate Planning vs A Will
We all have heard the terms "estate plan" and "will" thrown around in conversations. They may seem like they have similar meanings, but are they the same thing?
Find out the difference and similarities between planning a will and estate planning and how they ultimately compare and contrast.
An estate plan can be a simple list of instructions for your children, or it can be an extensive document that you and your legal counsel provide for the purpose of conveying specific instructions about where your belongings should go and how your assets should be managed.
By comprehensive estate planning, you can save money on taxes because it will reduce the amount of estate taxes owed to the government. The more detail you give in your estate plan, the lower the total tax owed will be.
Estate planning can also reduce the amount of time it takes for your legal affairs to be straightened out after you have died. Having a detailed estate plan can help your next-of-kin, and family members easily understand the specifics of how you want your property distributed to each individual and what the wishes are for managing certain pieces of property.
A will is simply a legal document that states who gets what you own when you pass away. If a person dies without a will, they're said to have died "intestate." In other words, the local or federal government determines how their assets will be distributed.
A will is typically created at the end of your life when you are in good physical health. A will is useful for those with minor children and those who do not want to leave their assets to their spouse. A will makes it clear who should get what you own, thus avoiding any legal complications after your death.
Since a will can be created and executed at any time during your life, it's important to see a good lawyer and have them review your will to ensure that it is clear, complete and legally valid. A lawyer can help you craft a will that meets all requirements.
Advantages of Estate Plans over Wills
There are a number of advantages to the use of estate planning over a will. For example, it can help save money on taxes since a detailed estate plan will reduce the amount of tax that is due in the future.
When you create an estate plan, you will have the ability to save on taxes. Your tax savings will be based on how much money you have saved within certain accounts and how much that money is worth.
And speaking of savings, another advantage of creating an estate plan is that it can help your family members better understand where their money should go after your death. This can make the process a lot easier for them, and it may avoid a lot of bitterness during a family dispute over the distribution of property.
Estate planning can also be useful for those with minor children who don't want them to inherit from an unfit parent. Having a detailed estate plan ensures that your minor children will be in the best position possible after your death.
Disadvantages of Estate Plans over Wills
Just like there are advantages to creating an estate plan over a will, there are also disadvantages. The biggest disadvantage of estate planning over a will is that you are gambling on the quality and nature of your loved ones. If the people close to you have opted to not have a detailed estate plan, then there's nothing you can do to force them to create one. An issue that can happen when your loved ones don't follow their instructions after your death is that they might not know what they should be doing.
While it's true that both estate planning and wills can simplify matters when it comes to your legal affairs after you die, both should be considered as part of a comprehensive plan. If you don't have a will, then it is wise to create an estate plan. The more detail you put into the estate plan, the lower the total tax owed will be. And if your loved ones are unable or unwilling to follow your instructions after you die, they might not know what they should be doing.