I recently received an email from a reader who asked this great question: My family situation is pretty simple, and I just want to make a simple will. Do I have to make an estate plan? What’s the difference?
Lawyers don’t always make it easy to understand the subtle differences between these terms, so I understand why this is confusing. When we hear the word “estate,” we immediately think that means the person has a lot of money and assets. So you must first have an “estate” in order to need an “estate plan,” right?
Actually, no. In legal terms, your estate means everything that belongs to you. It’s all your possessions, tangible and intangible, that are in your name and that would be distributed when you die. These include but are not limited to bank accounts, property, vehicles, life insurance policies, sentimental or family items, and all that stuff in your attic or garage.
That’s why we call it an estate plan, because we plan for everything that’s in your estate. If you own a car or a home, or if you have bank accounts in your own name, you have an estate–at least, according to the law–and it needs to be planned for in advance, so your loved ones are clear on your intentions for these items.
An estate plan has several parts, and a will is one of those parts. A will is one of the essential documents, but it can’t work alone.
When I say “estate plan,” I’m talking about all the documents that work together to take care of you, your loved ones, and your belongings in many situations. This includes emergencies. Emergency documents include the durable power of attorney, healthcare power of attorney, and living will. These documents are designed to protect you and express your wishes if you were injured and could not speak for yourself.
When you work with a lawyer to make an estate plan, the lawyer should guide you to make all of these pieces work together. An experienced lawyer would see too many gaps if you just make a simple will because a will doesn’t work until after there is a death certificate. The truth is that life is messy, and it’s not always the case that one minute you’re alive and the next you’re not. You might be injured in an accident and require surgery. In the meantime, your loved ones need to know who is making medical decisions and who is making financial decisions. These aren’t covered by a will.
You might also have heard the term “intestate.” When someone dies intestate, it means they die without a will. When a person dies without a will, loved ones are left to guess at their intentions. This can be stressful for people who are already grieving the loss of a loved one. That’s why a will is so important: it clearly conveys the deceased’s wishes to the court, so the court can assign the Personal Representative and allow the family to have closure.
You absolutely need to prepare a will, but you prepare a will with a lawyer as part of an estate plan, which is a set of documents that prepares for both emergencies and death.
Questions about a living will and power of attorney are answered at length in the Side by Side Planner. Other questions? Leave them in the comments.