Estate Planning vs. Will: What's the Difference?

Many people think estate planning and writing a will are the same, but one is just a part of the other. An estate plan is a broader plan of action for your assets that may apply during your life as well as after your death. A will, on the other hand, dictates where your assets will go after you die, who will be the guardian of your children and more. So, while a will is often part of an estate plan, an estate plan covers much more ground.

If you’re thinking about writing your will or creating an estate plan, it can be a good idea to speak with a local financial advisor.

What Is a Will?

A will is a legal document that details how you want your assets to be distributed after your death. It can also outline your wishes for the care of your children in the event of your death. Wills also name an executor who’s in charge of carrying out the actions in your will.

You can work with an estate planning attorney to create a will. However, there are also a number of websites that can walk you through the will creation process. Some popular options include Quicken WillMaker & Trust and Trust & Will.

It’s often a good idea to have a will because of its clearly defined terms. Without a will, your heirs may end up having to spend a lot of time, money and energy figuring out how to divide up your assets through the estate court system in your state. And when you die intestate, or without a will, the succession laws in the state where you reside will determine the division of your property. This process can be drawn out, and your assets could end up with people you didn’t necessarily want them to go to.

What Is Estate Planning?

Estate planning is significantly broader and more complex than writing a will. While a will is a single tool, an estate plan involves multiple tools. Aside from wills, other common estate planning tools include powers of attorney, advance directives and trusts. Estate plans can involve both durable power of attorney for your finances and healthcare power of attorney for medical decisions in the event you become incapacitated.

Estate planning may include thinking through topics even beyond legal documents. This can include things like deciding who has the power to make healthcare decisions on your behalf while you’re alive, in addition to deciding how you’d like your assets distributed after your death.

Despite what estate planning typically entails, it may have as broad or as narrow a focus as one sees fit. Those with more complicated estates may wish to create complex wills, trusts and estate planning tools that dictate the handling of their assets both while they’re living and after they die. For simpler estates, using just a will might be enough.

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How Is Estate Planning Different From Will Planning?

Estate planning involves multiple legal tools beyond just a will.

In short, wills are part of an estate plan, but an estate plan is more than just a will. However, they both fall under the umbrella of estate planning.

A will is a legal document, whereas an estate plan is a collection of legal documents. More specifically, estate plans often include a will, trusts, an advance directive and various types of powers of attorney. An estate plan can handle other estate planning matters that a will cannot cover. In other words, while will is a good place to start, it’s important to create a broader estate plan to ensure your heirs are fully covered in the event of your death.

It’s common to hear people say that wills are for average people and estate plans are for the wealthy. In actuality, this couldn’t be further from the truth. No matter how large an estate you have, there are always important bases to cover. For example, you’ll want to plan your power of attorney, property transfers and beneficiary designations on your insurance policies and retirement accounts.

If you only choose to create a will, you could cause headaches for your loved ones down the road. Your estate could go into probate, which can often be a strenuous and expensive process for those involved. Plus, for those who are ultra wealthy, assets could end up being subject to hefty taxes. It’s also possible your assets may not end up with the people or organizations that you want to benefit from them.

How to Create an Estate Plan

Estate planning is a crucial step in ensuring your assets are distributed according to your wishes after your passing. It involves more than just drafting a will. Rather, it encompasses a variety of legal documents and strategies designed to manage your estate during your lifetime and beyond.

A will is the cornerstone of any estate plan. It outlines how your assets will be distributed and can also designate guardians for minor children. Without a will, state laws will determine the distribution of your estate, which may not align with your wishes. It’s essential to draft a will that clearly states your intentions and is legally binding.

Trusts are versatile tools in estate planning that can offer greater control over the management and distribution of your assets. Unlike a will, a trust can take effect during your lifetime. It also can help avoid probate, potentially saving time and money. There are various types of trusts, such as revocable and irrevocable trusts, each serving different purposes. Establishing a trust can provide tax benefits and protect your assets from creditors, making it a valuable component of a comprehensive estate plan.

Incorporating a power of attorney and healthcare directives into your estate plan is an essential step in managing your affairs if you become incapacitated. A power of attorney grants a trusted individual the authority to make financial decisions on your behalf. Meanwhile, healthcare directives outline your preferences for medical treatment. These documents ensure that your wishes are respected and that your affairs are handled by someone you trust. This can go a long way towards providing peace of mind for you and your family.

Common Estate Planning Mistakes to Avoid

An estate plan can look complete on paper and still fail because key details were never updated, coordinated or checked against how assets actually transfer.

Here are some of the most common missteps to steer clear of:

Failing to update beneficiary designations. Retirement accounts, life insurance policies and some bank or brokerage accounts usually pass according to the beneficiary form on file, not the will. After a divorce, remarriage, birth of a child or death of a named beneficiary, an outdated form can send assets to the wrong person. This can occur even if the rest of the estate plan says something else.

Misalignment of estate planning documents. The same problem can happen when wills, trusts and account titles do not line up. Many people assume a will controls everything they own, but it generally only directs probate assets. Assets with beneficiary designations, payable-on-death instructions, joint ownership or trust ownership may transfer outside the will. Avoiding probate usually requires separate planning tools, such as a living trust, payable-on-death designations or jointly held property with rights of survivorship.

Skipping successor designations. Executor and trustee choices also need a backup plan. Naming one person is not enough if that person dies, becomes incapacitated or cannot serve when the time comes. Without a successor, the court may need to appoint someone. This process can add delay and uncertainty during a time when your family needs clear instructions.

Not adapting over time. Estate plans also lose value when they sit untouched for years. Tax laws change, assets shift and family relationships evolve. Reviewing the plan every few years, and after major life events, can help keep documents, beneficiary forms and account ownership aligned with your current wishes.

Bottom Line

A will is one piece of a broader estate plan that includes multiple legal tools.

A will is an important legal document that specifies how you want your assets distributed after your death. An estate plan, in contrast, is broader and brings together multiple tools, including trusts, advance directives and powers of attorney. In other words, while a will is a foundational piece of an estate plan, it represents only one part of a more comprehensive approach to planning the management and eventual distribution of your assets.

Estate Planning Tips

Estate planning is a complex process involving many documents to create and track. A financial advisor could help you reach your estate goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. Then, you can have a free introductory call with your advisor matches to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you’re starting to think about estate planning on your own, it pays to be prepared. SmartAsset has you covered with a range of free estate planning resources.