What is The Difference Between Will And Estate Planning?
by Unbundled Legal HelpMay 27th, 2021
A will and estate plan both leave your loved ones with instructions about how your property should be distributed after you pass away. However, an estate plan takes it even further.
The key difference between a will and an estate plan is that an estate plan is much more detailed. It covers areas that a will does not such as trust funds, durable power of attorney, letter of intent, healthcare power of attorney, and guardianship designations. A will is a part of a comprehensive estate plan.
If you are considering your will and estate planning options, it can be beneficial to consult with an estate planning lawyer in your area.
Learn more about the differences between a will and estate planning below.
Why Do You Need Estate Planning?
The uncomfortable truth is that we will all eventually pass away. When that day comes or is near, you have a choice to leave your loved ones a clear plan of what to do with your property, healthcare, etc. or to leave them in chaos.
Estate planning allows you to ease the already burdened hearts of your loved ones by providing them clear instructions to enact upon your death. Without a clear estate plan in place, your loved ones may not receive the assets you intended for them, have a hard time understanding your wishes, and be faced with major tax burdens and other financial implications.
Estate planning is not only for the rich. It is for anyone that would like to leave their family a clear plan, peace of mind, and maximum financial benefits upon their death. Estate planning is also a powerful financial tool that can help your family to avoid probate fees as well as provide benefits while you are still living.
Proper estate planning helps to protect your beneficiaries (family members, loved ones, charities, etc.), protect children, relieve tax penalties, and potentially eliminate fighting amongst your family. Learn more about each below.
Protection For Your Beneficiaries: Whether you have a primary residence to leave behind to your heirs or you have a stock portfolio, an estate plan can offer beneficiaries protection and a clear mind. Without one, the courts how your property is distributed and who gets it.
Protects Children: When parenting young children, death is not a subject that most desire to discuss. However, estate planning helps you to choose a guardian and allocate assets to your children (with specific instructions).
Tax Relief: Estate planning can help to protect your beneficiaries from tax liabilities that they would have otherwise endured during the probate process. Effective estate planning helps you to transfer your assets to your beneficiaries with the smallest possible tax burdens attached.
Eliminates Family Fighting: Dealing with death can be difficult enough. That’s even truer if you do not leave a clear plan behind for them to follow. An estate plan can help to ease your family’s worries as well as offer them a plan of what to do with your assets.
What is a Will?
A will is a crucial part of estate planning. It is a legally binding document that gives specific instructions about what to do with your assets upon your death. You can also appoint guardians and/or caregivers for elderly relatives and children in a will. An updated will ensures that your property will be distributed to your beneficiaries when you pass away.
Unlike a trust, a will does not offer you or your beneficiaries any financial benefits, tax breaks, or reduced probate fees. A will is meant to offer guidance on certain financial matters, but does not go into much detail or offer many instructions for disbursements. The will is a foundational piece of any comprehensive estate plan.
Is it Better to Have a Will or a Trust?
Regardless of your circumstances, it is always advisable to draft and sign a will. In some cases, a trust may not be as necessary. In general, if you do not have many assets and/or your plan of distributing your assets upon your death is not complicated, a will may be your best option.
Additionally, if you wish to provide yourself as well as your beneficiaries the maximum financial benefit from your assets, then a trust may prove to be an excellent addition to your estate plan. It is recommended that you have a thorough discussion with your financial planner as well as an estate-planning attorney before creating a will or trust.
Will And Estate Planning Checklist
When developing a will and comprehensive estate plan, it is important to know what will be expected of you in the process as well as the benefits of estate planning.
A proper will and estate planning checklist will include a will/trust, durable power of attorney, letter of intent, healthcare power of attorney, and guardianship designations. Learn more about each below.
Letter of Intent
A letter of intent is a document left behind for the executor of your estate and/or your beneficiaries. While the letter is not legally binding, it can help a judge to gauge your intentions and distribute your assets accordingly. Some people draft letters of intent with funeral instructions and other types of requests.
A will offers broad instructions about what to do with your assets when you die, but a trust gives more specific guidance. If you have assets that you would like to leave to a charity or loved ones that include specific distribution instructions, then it can be beneficial to include a trust in your estate planning.
Additionally, a trust can be excellent tax-haven vehicles and tools to help your beneficiaries receive the maximum benefits from the assets you leave them.
Durable Power of Attorney
A durable power of attorney (POA) allows you to designate a person to act on your behalf if you are no longer able to do so. If you do not have an assigned POA, then decisions made about the distribution of your assets will be left up to a judge if you are found to be mentally incompetent.
The durable power of attorney document gives the agent you choose the authority to make decisions on your behalf (in the event of mental incapacitation) regarding real estate transactions, asset distribution, and other important legal decisions.
Healthcare Power of Attorney
A healthcare power of attorney (HCPA) identifies a person (usually a close family member or spouse) to make healthcare decisions for you in the event that you cannot make them yourself. When choosing an agent to execute your HCPA, it is important that you choose someone you trust and who shares your views.
Additionally, it is recommended to choose a backup HCPA agent in case your original agent is unable to execute their duty.
Most wills and/or trusts address guardianship designations. However, if you had children after you created your initial estate plan, it can be beneficial to incorporate a guardian designation document. If you do not give specific guidance on guardianship designations, a judge will determine who raises your children if you pass away, not you.
Advantages And Disadvantages of a Trust
Trusts offer your family and beneficiaries more clarity, specific instructions, and privacy to your family. Though they can be powerful financial tools, there are still some disadvantages to creating a trust.
The advantages of setting up a trust can include creditor protection, protection against certain property claims, asset protection for beneficiaries, tax benefits, and general protections against your estate.
A few disadvantages of setting up a trust can include losing ownership of your assets, cost of setting up a trust, maintenance of the trust, and the potential of future legislative changes. If you are undecided about adding a trust to your estate plan, it can be helpful to consult with a proven estate attorney in your area to learn about your options.
Should I Hire An Estate Planning Attorney?
Estate planning is serious and can carry with it major implications for your finances as well as the finances of those that you leave behind. An estate planning attorney can help you to:
Understand your state’s estate planning laws and how they apply to you
Sort out complex financial situations
Give clarity to your family
Provide many financial benefits for you and your family
Many choose to not hire an attorney for their estate planning needs due to the costs. Legal fees for estate planning will vary depending on the type and breadth of assets you have, the complexity of instructions, state laws, and the attorney you choose to hire. In general, fees for estate lawyers can be as high as $3k - $7k upfront with an additional hourly rate on top of that.
While it is understandable to consider other options to avoid potentially high legal fees, it is usually not a good idea to create an estate plan on your own. If your plan has one wrong word or misplaced phrase, it could have negative implications on your finances as well as your family’s.
Save Money With an Unbundled Lawyer Today
Estate planning lawyers typically charge so much because they handle every aspect of your estate planning needs when they agree to take you on as a client.
With unbundled legal help, you can hire an unbundled estate lawyer to take care of the more complicated parts of your estate planning, while you save money by handling the rest.
Fees for unbundled attorneys start as low as $500 - $1500. Not every estate plan is a good fit to be unbundled. If yours is more complex due to the amount or type of assets you have, our network of unbundled attorneys also offers full representation at affordable rates.
Before you spend thousands of dollars in upfront fees with a traditional estate planning lawyer, request a free consultation with one of our unbundled attorneys.