Will vs estate planning: Understand the difference

It's tough to think of the time when you won't be around to take care of your kids anymore. But when you make solid financial decisions today, you can continue to provide for them long into the future. Here's what to know about making a will vs estate planning and how these essential financial and legal moves can protect your family.

Is estate planning the same as a will?

Estate planning is not the same thing as a will. Wills are legal documents that dictate your wishes in the event of your death. Estate planning is more encompassing and can include elements that apply while you are still living. A will can serve as one component of an estate plan.

What is a will and what are its key elements?

A will is a legal document where you stipulate what happens to your assets after you pass away. You can make provisions for minor children in this document. You may also name someone to carry out these wishes, known as an executor.

What types of assets can you include in your will? In your will planning you can include instructions for how to distribute your money, real estate property, and personal belongings that are not otherwise governed by distribution laws, such as ownership of a spousal home going directly to the surviving spouse.

Distribution of property and the executor

When you draft a will — on your own or with a lawyer — you dictate how you want your chosen executor to handle your assets after your death. You might want to leave 10% of your cash accounts to each of your children and grandchildren. Perhaps you'd like to designate a final gift to a charity. Specifying these choices now can give you peace of mind.

A major downside of only using a will is that your executor has to work with the probate court to finalize property transfers. While simple estates may pass through with relative ease, the complexity of the estate or the setup of a local probate court can lead to lengthy or frustrating distribution processes.  If a family member will depend on what you plan to leave them in your will, extensive time in probate can be a financial strain for them. High-value estates may also face inheritance taxes that can lessen the value of your gift.

Guardianship provisions in the case of minor children

You can include guardianship provisions for your minor children in your will as well. You may name a friend or family member who you wish to care for your child if both parents pass. It's important to choose someone who has the capacity to take on guardianship and who will get approved by the court system in reference to their finances, living situation, and potential parenting skills.

What is estate planning and what are its basic elements?

A comprehensive estate plan sets up financial and legal protections for yourself, your family, and your assets in the event you become incapacitated or pass away. This may include trusts, powers of attorney, and beneficiary designation.

Trusts and the letter of intent

Using trusts in estate planning is common. A trust is a legal designation that groups your assets under the control of a chosen trustee who takes responsibility for them if you no longer can. The difference between a will and a trust is that a will distributes your assets while a trust grants trustees and beneficiaries access to your assets as they are.

You may use two types of trust plans, revocable (changeable) or irrevocable (unchangeable), in your family estate planning depending on your needs. A main benefit of a trust over a will is the ability to grant a friend or family member access to your funds to help with end-of-life care. This can also reduce some inheritance taxes and simplify inheritance without the need of probate court.

Of course, you won't just sign away your estate to a trustee with no say in the matter. Drafting a letter of intent can include some guidelines for how you wish your estate and funds to be used, particularly in relation to the care of children.

Durable power of attorney and healthcare power of attorney

To ensure your survivors carry out your wishes as detailed in the trust, you may name someone to hold durable power of attorney and healthcare power of attorney. These legal designations can help a chosen friend or loved one take financial and medical action for you if you become incapacitated. 

These decisions may include things such as signing legal documents and making medical decisions you cannot make yourself. Choosing trusted representatives to hold power of attorney is an important part of the estate planning process.

Beneficiaries and guardianships

Estate planning also includes the designation of beneficiaries and guardianships. You may designate beneficiaries on accounts such as life insurance policies or bank accounts. The contents of these accounts may pass directly to your beneficiaries without a lengthy probate process. 

Guardianship designations are essential components of estates and wills if you are responsible for minor children. This can help ensure they go with caretakers whom you would choose if you are unable to care for them any longer or pass away.

How Greenlight can help you build a legacy for your family

Taking care of your family long into the future requires a solid financial plan today. As you build wealth through savings and investments, you can concentrate on meeting your estate planning goals. It may be hard to think of concepts like estates and wills or trust and inheritance when you look at your kids today, but let your love for them drive you to plan for their future in your estate planning process.

Greenlight can help get your family on target financially now so you can make a complete estate plan for later. See what kinds of tools your family's finances can benefit from today when you explore these plans.