According to a recent survey, around 68% of Americans don’t have a legal will, and the number of Americans with a full estate plan is even lower. Why are so few Americans looking to the future and preparing for the inevitable? Part of the issue may be that financial planning can feel complicated and confusing. To remove some of that hesitation, let’s talk about 4 key differences between a legal will and an estate plan. They aren’t the same thing!
But first, let’s start with a couple of definitions.
What is a Legal Will?
A legal will is a signed and witnessed document that outlines your wishes on three main topics: your financial assets, your property, and your dependents. In a legal will, you will break down how you want your money distributed and to whom, what should be done with your property (house, car, furniture, clothing, etc.), and who will act as guardian to minor children or pets. Additionally, you will name an executor, who’s responsible for carrying out every detail of your legal will.
Without a legal will, the fate of your assets, property, and dependents is left up to your state of residency. In some cases, your surviving family members may spend a lot of time, money, and energy gaining access to your assets, if they ever do.
What is an Estate Plan?
An estate plan refers to a broader strategy regarding your end-of-life wishes. While a legal will is one piece of an estate plan, a full estate plan focuses on providing clarity in additional areas like healthcare and powers of attorney.
From outlining your medical care wishes to designating a trusted person to act financially on your behalf, each estate planning document plays a role in creating a clear plan to understanding your preferences. Because everyone’s situation is different, chat with an estate planning attorney to confirm which documents best fit your circumstances.
But what are the key differences between a legal will and an estate plan? Let’s dive in!
4 Differences Between a Legal Will and an Estate Plan
Difference #1: A legal will focuses only on your wishes after death, while an estate plan looks at your preferences while still living.
With a legal will, you are only recording instructions for what to do after your passing. These directions largely relate to designating a guardian for minor children and stating who gets how much money and which property items (car, collectibles, jewelry, etc.).
On the other hand, an estate plan also provides direction on what to do should you become incapacitated or unable to make decisions on your own. For example, if you were to develop dementia or go into a coma after a car accident, a healthcare power of attorney would allow your chosen representative to make medical decisions on your behalf based on your outlined preferences.
Takeaway: A legal will provides guidance on the distribution of assets and the care of children. An estate plan includes a legal will but also covers other financial and medical concerns.
Difference #2: An estate plan includes more official documents than a legal will.
Because an estate plan has a wider focus, it makes sense that there are more documents to complete. While you may not need all these documents, it’s wise to thoughtfully assess and determine which ones make the most sense for your circumstances.
To learn more about each of the five most important estate planning documents, check out the resources below:
- Financial power of attorney
- Healthcare power of attorney
- Living will
- Legal will
- Revocable living trust
Takeaway: There are several documents to consider when creating an estate plan. When you complete the ones that make the most sense for you, you give your family a clear path to understanding how to accurately follow your wishes when it matters.
Difference #3: A legal will does not provide guidance on medical concerns.
With its narrow focus, the legal will does not allow you to outline your wishes regarding standard or life-saving medical care. That’s where advance care directives like a living will and a healthcare power of attorney step in.
When you complete these documents, you give your family a clear understanding of your medical dos and don’ts. Having this clarity is particularly important when you can’t speak for yourself and your family needs to know what to do.
You will work with your primary care provider to complete a living will and discuss the medical treatments you may or may not want performed.
Takeaway: By providing guidance on both financial AND medical concerns, you empower your family to make decisions with confidence if the day comes when they must act on your behalf.
Difference #4: An estate plan with a living trust allows your family to avoid probate court while a legal will does not.
Probate is the legal process where the court oversees the distribution of a person’s property after death. When the legal will is presented to and validated by the court, the executor will work with the court to ensure all directives in the will are carried out.
However, in most cases with a living trust, you can avoid probate court entirely. Because of the way trusts are set up, they allow you to bypass the court system and rely on your designated trustee to distribute your assets after your passing. Many families save time and money by setting up a trust instead of relying on probate court.
Takeaway: Talk with your estate planning attorney about whether a living trust makes sense for your situation. While having a written legal will should make probate court easy for your family, a living trust may help them skip the court system altogether.
So, do you need both a legal will and an estate plan? Absolutely! While a legal will can stand alone, if you pair it with a thoughtful estate plan, you can provide your family members with greater insight into your financial and healthcare wishes. With that information in hand, they can make decisions with confidence and ensure that you and your assets are taken care of just the way you want.
Additional Estate Planning Resources
How to Make an Estate Planning Checklist
5 Steps to Getting Your Affairs in Order
11 Reasons Why You Should Start Estate Planning Now
Avoid These 6 Estate Planning Misconceptions
DISCLAIMER: Individual circumstances and state laws vary, so any estate planning should only be undertaken with the help and assistance of an attorney licensed in your state.
