What is Estate Planning?
Estate planning is the preparation of tasks that serve to manage an individual's asset base in the event of their incapacitation or death. The planning includes the bequest of assets to heirs and the settlement of estate taxes. Most estate plans are set up with the help of an attorney experienced in estate law.
Estate planning is a more intensive process that uses various types of documents to secure your assets after your death. In most cases, a last will and testament is one of these documents.
Your last will and testament basically carries out your final wishes and states who will receive your assets and who will obtain guardianship of your children. However, it’s not as simple as writing it all down and signing the legal document. There’s a process that must be followed to ensure your will is legal after death.
Establishing an estate plan and readjusting it as needed can not only help prepare for your future, but it can help your survivors in a variety of ways. Here are just a few advantages of estate planning:
- Protects beneficiaries
- Provides for your family
- Reduces tax burden on beneficiaries
- States how assets are distributed clearly
- Protects minors
- Ensure success for a business (if you’re a business owner)
- Saves on attorney and court fees
- Independence to have the last say
- Avoids family disputes after death
- Makes legal decisions after death easier
- Save family money
- Maintain control
- Expedite the process
The purpose of both wills and estate plans are to ensure that your survivors continue receiving financial support and care after you pass away.
Estate planning and drafting a will are two processes that people often think are interchangeable because they don’t know the key differences between the two.
- A will is simply a legally binding document.
- An estate plan, on the other hand, is a broader term. Estate planning is the process of arranging the distribution of assets in a way that results in maximum benefits to the beneficiaries. With an estate plan, you can give direction regarding additional matters that cannot be handled by a will — even if they are mentioned in a will.
- An estate plan includes documents that are effective during your lifetime and after your death. These contemplate who has the power to make financial and healthcare decision on your behalf during your life if you happen to become incapacitated, and who receives assets after death.
- A will, an important piece of the estate planning process, details where you want your assets to go after your death.
- A will also states who will serve as a guardian to your children and guardian of estate.
Unless you want the state to determine who gets your assets and money, or have survivors fighting over who inherits what, you need an estate plan that states the details for what happens when you’re gone.
Which is better, a will or an estate plan?
If you have children or a life insurance policy, an estate plan is worthwhile. You don’t have to own a lot of property or have a lot of money to have an estate plan. An estate plan will put into explicit detail how you want to distribute your assets, who will be the guardian of your children, and more.
A will also allows you to do these things, but it stops at that. It simply states where you want your assets to go after death and who will serve as the guardian of your children and estate.
Work with an attorney who specializes in estate planning to ensure you make the right decisions based on your unique situation. If your estate is significant, you own a business, you want to leave some of your estate to charity, or your family dynamics are complicated – consult with an experienced lawyer for extra help.