It’s a common misconception that a will and an estate plan are the same thing. After all, everyday language is less precise than legal terminology, and many people believe they’re finished with their estate after making a will if they don’t own a business or have any assets to put in trust.
While a will is usually a central component of estate planning, however, there are a number of other documents you should create as part of your plan, even if all of your heirs and your property are covered in your will. This is because some parts of a full estate plan cover matters that don’t directly relate to your assets, and may even need to take effect during your lifetime.
If you’re looking for comprehensive assistance in starting or editing an effective estate plan in New Jersey, turn to the team at SGW Law. Our experienced estate attorneys are ready to optimize your will, trusts, power of attorney documents, and all other aspects for your financial wellness and peace of mind. Get in touch with us now or read more below on how to undertake estate planning beyond a will.
What Is a Will?
A will and testament, or will in the most common, shortened form, is the most basic and foundational estate planning document. This is a set of binding instructions for what is to be done with the assets of the testator (the person who created the will) after they are deceased. Wills have the longest legal history of all estate document types and exist around the world in both common and civil law systems. Because of this extensive history, there are a number of special words and phrases used in will terminology, but your attorney will be able to explain what each of them mean as you create a will.
All wills cover the distribution of personal and real property – homes, land, cash, valuable objects such as jewelry or art, and other assets – and name an executor to temporarily care for this property and hand it over to the appropriate heirs. If you have children who are minors, your will may also name guardians for them.
Although a will is limited in what it can do, the functions it does serve are essential. A will is a required step in estate planning, and if you have a trusted attorney, making one is fairly simple, fast, and affordable. But while you must have a will, your estate plan shouldn’t only contain a will. If you become incapacitated while you are alive, your will does not go into effect at that time, and your family members may not be able to carry out your wishes for your care and your property, or not know how to.
Furthermore, wills are subject to a process called probate, or proof of validity in court, before heirs can receive property – this takes up valuable time and effort. The length of probate can be significantly lessened using other estate planning documents.
What Is Estate Planning?
Estate planning consists of all the legal steps you take to ensure the proper management of your assets, businesses, and care both during your lifetime and after your death. A will is one key component of your estate plan, and likely the first one you will create, but there are many others, usually divided into five categories. The other four major document types are trusts, powers of attorney (both financial and medical), healthcare documentation (healthcare proxies/living wills), and beneficiary designations.
Depending on your situation, you may not use all of these document types, but most people should have several of them as part of an estate plan. In some cases, as with trusts, you may need or want to make several documents of different subtypes. All in all, the basic idea is for the parts of your estate plan to work together and be more effective than the sum of their parts.
Having sufficient estate planning documents that are in harmony has many advantages: reduced tax burden, protection for your assets, making sure your wishes are honored no matter what happens, and so on. The ultimate benefit is that your plan can emphasize what is important to you, personally, such as providing for your children or other heirs well into the future or making a powerful long-term contribution to a favorite charity.
Key Differences Between a Will and an Estate Plan
As discussed above, a will is one heading in the larger topic of estate plans. A will deals with your assets, and the care of your children if needed, after your death, and it is effective for these specific functions. However, other parts of an estate plan are necessary for other purposes.
For example, in the event that you are unable to make decisions due to a medical condition, you will need a durable power of attorney for your medical and business affairs – a will simply can’t provide for this situation. Wills are subject to probate, as noted, but trusts are not. Trusts may also be used for asset management during your lifetime, and they can do more complex things with your assets after you are deceased than a will can.
When Do You Need More Than a Will?
As a general rule, the busier you are, the more documents you may need in your estate plan. Of course, this presents the difficulty of having less time for estate planning when you need it more. However, an experienced attorney can help you determine what documents you should create and make the process as expedient as possible.
Just about everyone should at least have legal healthcare instructions in addition to a will. Creating an advance healthcare directive, also known as a living will, means that you’ll be cared for according to your wishes if you can no longer make your own health decisions. Relatedly, a healthcare proxy designation lets you select someone who will legally be able to oversee your medical care – this includes carrying out your living will as written, should you have one. Together, these two documents can assure your comfort if the worst happens regarding your health and spare your loved ones a great deal of anxiety and uncertainty.
In more specialized terms, many people will want to put some of their assets into one or more kinds of trust. The simplest reasons for setting up a trust are the tax advantages, avoiding the hassle of probate, and keeping certain holdings private. Business owners can utilize trusts to ensure the continuation of the enterprise they may have built or inherited from a beloved relative, and may also consider power of attorney documentation so that operations can run smoothly even if they are incapacitated. Trusts may also be used to provide for family members whose needs would not be met by a simple one-time transfer of property. These kinds of documents include pet trusts, special needs trusts, and trusts in which money is set aside for a child’s future education.
Any family or business situation that can be classified as having multiple parts could also require additional estate planning considerations beyond a will. These include blended families (in which both natural children and stepchildren are heirs) and real estate ownership in multiple states, among others. And people who have a high net worth usually hold classes of assets that should be covered by a document other than a will, such as a specific kind of trust.
Getting Started with Estate Planning
The first step in making an estate plan is determining what your estate actually consists of. In other words, make a written inventory of all of your assets. Once you know exactly what your holdings are, you can more clearly define the goals of your estate plan. Since these documents are very personal, they should protect what’s important to you – and if you’re not sure how to accomplish this, your attorney can guide you.
Your will, any trusts you set up, and all other parts of your estate plan can each focus on individual goals that all help to achieve the larger purpose of providing for your dependents, making sure your business continues to thrive, or whatever you see fit. Besides an attorney, you may want to consult a financial advisor specializing in estate planning, and with the help of such qualified professionals, you ought to regularly review your estate plan every 3 to 5 years if not more often.
Contact Our NJ Trust and Estate Planning Attorneys
SGW Law has long been trusted by New Jersey residents to carry out the most important legal matters, including the technical aspects of estate planning. Whether you are just beginning a new estate plan with a will or wish to add a complex document such as a business trust, we can assist you skillfully and courteously. Contact the team at SGW Law today for the most reliable New Jersey estate plan services.