It is not uncommon for people to confuse an estate plan with a will. After all, a will is a legal document, dictating how you want the possessions that make your estate to be distributed after the unexpected happens.
On the contrary, an estate plan does not only distribute assets after death. It tells your dear ones how you prefer your financial dealings and medical treatment managed if you get incapacitated or die.
So, are you unsure of why updating your will or estate plan is crucial? You are reading the right piece! This article comprehensively explains the two terms. Here are the differences between them; the role a will plays in estate planning, and why it is vital to update your will or estate plan. Without further ado, let’s get started by exploring the terms in the next session.
What are Wills?
A will is a legal document that details how your assets are to be distributed after your death. Also, it lays out your wishes when it comes to how your children will be catered for after death. It is always important to have a will, as it allows you to communicate your wishes clearly and precisely.
Expert estate planning lawyers in Orange County advised working closely with an estate planning lawyer to create and update your will. Only then will you get the assistance you need in the creation and implementation of legal documents such as wills and trusts.
Without estate planning lawyers to draft your will, the state you reside in will determine how to distribute your assets to your beneficiaries according to its laws. This is referred to as dying intestate, and the resulting settlement process may not result in what you would prefer for your survivors.
To prevent this from happening, ensure to have documents that reflect your wishes drafted. Some of the important contents of a will include, designation of an executor, beneficiaries, instructions, and guardians – for any minor children.
Having understood what wills are, let’s discuss the reasons for having a will.
Top 4 Reasons You Need Wills
1. Facilitate the Probate Process
Probate is a legal process to prove the validity of wills. Contrary to popular perception, probate is always precise and inexpensive. It only depends greatly on the size and value of your estate. That being said, a draft will minimize the delay.
2. Decide Who Manages Your Estate
As mentioned above, determining who handles your estate is enough reason to have a will. A person who writes a will is called a “testator” and has the opportunity to nominate an “executor.” If you die without a will, your estate is distributed according to your state’s intestacy laws. Often there is usually no guarantee that these laws will align with your wishes. An easy way of avoiding this is by drafting a will.
3. Lower the Potential for Family Conflicts
If you have a complicated family dynamic, it is crucial to have a will. Not having a will can create fiction, and even disputes, which sometimes last a lifetime. Creating a will solves the problem by eliminating the guesswork and fights.
4. Minimize Estate Plans
Drafting a will early provides an opportunity to explore various estate planning tools to minimize your estate taxes. This is particularly useful if you have valuable estates, exceeding the federal estate tax exemptions.
What are Estate Plans?
As previously stated in the introductory part of this article, estate plans are documents that determine how an individual’s assets and other financial affairs are managed and distributed when they become incapacitated or die.
An estate plan usually includes bank accounts, investments, personal property, real estate, life insurance, debt, artwork, and many more.
A trust fund is one of the important estate planning tools that allow a legal entity to hold property or assets for a person or organization. Trust funds can hold a variety of assets such as money, stocks and bonds, real property, a combination of many types of assets or properties, and many more.
Top 4 Reasons You Need Estate Plans
1. Prepare for the Future of Your Businesses
If you are a business owner, you would like to make preparations for the future of your company. Should you pass away; an estate plan can take care of all the arrangements. It’ll ensure you have placed the future of the company you worked hard to build into the hands of a trusted heir.
2. Arrange Guardianship for Minors
If your children are underage, an estate plan can help prepare them for their future. Without an appropriate estate plan, your children may be placed in the foster care system should you and your spouse pass away. Furthermore, an estate plan ensures your children are cared for by family members or a designated guardian.
3. Allow Your Assets to go to the Right Beneficiaries
Without an appropriate estate plan, your assets may be funneled through the probate process, meaning you won’t be sure of the distribution of your assets. An estate plan helps you structure the distribution of assets however you want.
4. Avoid High Taxes
An estate plan can help you avoid taxes that can negatively impact your estate legally. With professional legal help, you may be able to reduce the taxes on your estate after your death.
Importance of Updating Your Wills or Estate Plans
Some common reasons and importance of updating your wills or documents include:
- It is important to revise your documents if one or more of your beneficiaries predecease you. Doing this makes it easy to provide for new beneficiaries or to redistribute your property among beneficiaries.
- It is important to update your documents when you receive an inheritance or additional asset. Discuss this with your estate planning lawyers or financial partner.
- It is crucial to revisit your wills and estate plans if you have a blended family and want to provide for stepchildren.
- Updating your wills and documents makes it easy to add or change beneficiaries, including a charity. Likewise, if you want to remove a beneficiary, you will need to revisit your documents.
- In cases of a new marriage, you may want to update your plans to ensure that your estate includes your new spouse.
The reasons for having and updating your wills and estate plans cannot be overemphasized. Updated estate plans and will make asset protection and distribution easy. Thus, contact the nearest estate planning lawyer to help you.
Frequently Asked Questions on Wills and Estate Plans
1. How Do I Make Sure My Wishes are Carried Out?
When making a will, you should appoint an executor who will handle your affairs after you die. You can choose to have one or more executors.
2. Can I Change a Will?
Yes, you can. However, you should only alter your Will if your circumstances change in any way.
3. What Documents are Included in an Estate Plan?
Some of the important documents of an estate plan include the last will, a Substitute decision-maker, enduring power of attorney, and many more.
4. What is a Power of Attorney?
This is a legal document that appoints a person, the attorney, to act on behalf of another person, regarding managing the person’s property.
5. What Happens if I Don’t Have a Will?
When you die without a will, half of your estate goes to your spouse and children. However, if your children are not of age, the court appoints someone to look after their interests