Are you wondering whether estate planning is the same as a will? If so, you're not alone—about half of Americans haven’t put down a will, and even fewer have drafted an estate plan.
What are the differences between estate planning and a will?
Both estate planning and a will outline a person’s wishes regarding the handling of their property after their death. Writing a will or putting down an estate plan can save your family from many inheritance-related troubles when you pass. But what are the differences between estate planning and a will?
To begin with, a will is a document that details your final wishes. It provides directions for distributing your wealth upon your demise. Most people wanting to direct this distribution will write a will, but this may not be enough in certain circumstances. That is where estate planning comes in.
An estate plan is more in-depth than a will. It spells out your requests when you’re still alive and upon your death. An estate plan will outline not only how your assets should be handled when you pass but also when you can't control them yourself while alive. Furthermore, estate planning lets you outline the type of medical care you would like should you become incapacitated.
Do you need both an estate plan and a will?
A will is a foundational document in the estate planning process. Whereas a will alone may be sufficient in certain circumstances, the inheritance of some assets is better addressed through estate planning. Examples of inheritances not handled by a will include savings accounts, life insurance proceeds, and retirement plans.
Do you need an estate plan or a will?
Regardless of your net worth or age, it helps to write a will if you'd like things to happen in a certain way when you pass. And for some, estate planning could be beneficial if wealth is being left to minors or there are concerns that property may not be distributed to the right people.
Specifically, estate planning can save your heirs from unnecessary disputes if you've had several marriages. You may also find estate planning useful if you intend to donate part of your fortune to charity.
It's never too early to start thinking about writing a will or estate planning, as both can be updated throughout your life. Consult a legal advisor to find out which approach is right for you. A well-managed estate plan can minimize fees, taxes, and other costs involved in the handling of your property.