Key Takeaways:

• Estate planning is essential for everyone—not just the wealthy—to ensure assets are distributed according to your wishes, minimize taxes, and protect your family from unnecessary stress or court involvement.
• Beyond asset distribution, estate planning also prepares for incapacity by ensuring trusted people can handle your finances and healthcare decisions if you cannot.
• Six core documents form the foundation of an estate plan: a will or living trust, beneficiary designations, durable financial power of attorney, advanced health care directives, letter of intent, and guardianship designations.

While estate planning is certainly not the most joyful part of the retirement planning process, planning for what might happen if you have an unexpected health event, become incapacitated, or die earlier than expected is very important.  We never know with certainty what the future holds, but having a plan to deal with whatever can happen will help to make you feel more secure and confident in retirement.

Without proper estate planning, your assets might end up getting distributed in ways that aren’t aligned with your wishes, your estate might be diminished by estate taxes, or the courts may even decide who cares for your minor children among other things.

While we are retirement planning specialists, not estate planning attorneys, there are several key documents we believe are an essential part of a strong financial and retirement plan. Here, we cover the estate planning basics that everyone should be aware of no matter how close they are to retirement.   

What is Estate Planning?

Estate planning is the process of anticipating and arranging what will happen at death or incapacitation, while still living.  Estate planning includes the bequest of assets to heirs and may include strategies to minimize estate tax, gift tax, income tax, and other taxes.  Estate planning also includes planning for incapacity.  

An estate plan can be as simple or complex as the owner’s wishes and needs dictate.  Once established, estate plans can be changed as tax laws change and your personal and financial situations change.

Contrary to popular opinion, estate planning is not just for the ultra wealthy or elderly. Whether you're 25 or 75, whether you have $50,000 or $5 million, having at least the basic estate planning documents in place can protect your family from unnecessary stress, confusion, and financial hardship during already difficult times.

Six Steps to Cover Your Estate Planning Basics

 If you’re looking for an estate planning checklist to cover your estate planning basics, use these six documents as a place to start. Much of the work listed in these six steps should be done with the help and guidance of an estate planning attorney that practices in your state of residence.  While online templates might seem convenient, they often miss important nuances that could invalidate your documents or create unintended consequences. An experienced estate planning attorney can help you determine if you’re on the proper path to plan and help maneuver the sometimes complicated implications.

1). Will/Revocable Living Trust

First is the establishment of a will or living trust drafted according to state law.  Wills and living trusts are both estate planning tools that can help ensure your assets are protected and bequeathed to your heirs, besides your spouse, which is generally not an issue.  

One of the most common questions in estate planning is about the difference between a will vs a living trust. A will is a document that states your final wishes.  In a will, you state who you want to inherit your property.   Your will is read by a county court after your death in a process known as probate.  During the probate process the court makes sure that your final wishes are carried out. Wills are simple and inexpensive ways to address many people’s needs, but this document does have limitations on what it can accomplish, thus the need for the other steps we will soon discuss.  In addition, probate is a public process which means that potentially anyone could see the details of your estate, including what you owned, what you owed, and who inherits—which is why many people choose a living trust to maintain privacy and streamline the transfer of assets.

For estates that are larger or more complex, the process of probate has some additional drawbacks.  The probate process averages six to nine months to complete but may take up to two years or more for some complex estates, especially if contentious family members contest the will.  This can be problematic if your family is in immediate need of the assets. Also, the cost may be as high as 5% of the estate’s value for a larger estate.

As an alternative to a will, some with larger or more complex estate may choose to establish a revocable living trust.  Living trusts are not required to go through the probate process and cannot be contested.   A trust is a legal entity that holds your assets. You act as the trustee and can add or remove property as you see fit. You can also terminate or amend the trust at any time. When you die, your successor trustee distributes the trust assets to the trust beneficiaries, according to the trust agreement. The downside to trusts is that they can be costly to create and maintain as they require a fair amount of paperwork that needs to be drawn up by an attorney.

2). Beneficiary and Transfer on Death Designations

 While this is surprising to many, when it comes to financial accounts such as 401k’s, IRAs, pensions, or insurance policies, the person listed as your beneficiary will end up receiving your assets or insurance benefit — regardless of what your will or trust says. In this case, a will or trust is a document of last resort to determine how to transfer your assets.

 For this reason, it is important to have beneficiary designations listed on all financial accounts and insurance policies and to update those beneficiary designations as needed.  If you have a financial advisor or a retirement planning specialist that handles your investment accounts, it’s best to double-check with them to ensure all of your accounts have beneficiaries listed. If not, ask them to provide you with the beneficiary forms to fill out and put on file and update these forms as needed.

For non-financial assets and bank accounts, assets can be owned as joint tenancy with rights of survivorship and will pass automatically to the surviving joint owner(s) at your death. If some assets are not already jointly owned, you can establish joint ownership by re-recording real estate deeds, titles for your car or RV, and other assets. Please note however that the joint owner has immediate access to your property, and your joint owner’s creditors may reach the jointly held property.   

For non-joint owned bank accounts, ask your bank to set up transfer-on-death provisions on the registration cards for your bank accounts.

3). A Durable Financial Power of Attorney

A durable financial power of attorney gives a trusted person the authority to manage your financial affairs on your behalf.  Because these powers go into effect immediately when signed, you may want to consider making the financial power of attorney a “springing” financial power of attorney, so the powers only become effective if you become unable to handle your own affairs.  The agent you designate can act on your behalf when handling financial and legal matters you cannot.

The person you grant financial power of attorney can perform several important functions: paying your bills, paying your taxes, paying medical expenses, managing real estate, investing on your behalf, collecting benefits you are owed, operating your business, and hiring a lawyer to represent you.  As principal, you can revoke a power of attorney at any time so long as you are deemed to be physically able and mentally competent.

Often, it makes sense for spouses to set up reciprocal powers of attorney. However, it might make more sense in some cases to have another family member, friend, or a trusted advisor who is more financially savvy act as the agent.  Absent a power of attorney, a court may be left to decide what happens to your assets if you are found to be mentally incompetent, and the court’s decision may not be what you wanted.

4). Advanced Health Care Directives

Advanced health care directives are a combination of two documents.  First is the medical care directive, which spells out your medical care wishes if you cannot make sound decisions yourself.  

While your medical care directive instructs medical personnel on what to do if you cannot make decisions regarding your medical care, even the most specific medical care directive cannot cover every possible scenario.   This is why a second document is needed: the medical power of attorney.  

You award medical power of attorney to a trusted person for your healthcare, which gives the person the authority to make decisions on your behalf.  This person would be called upon to make medical decisions not covered by your medical care directive, enforce your healthcare wishes in court, hire and change doctors, and review medical records.    

Typically a spouse or family member is selected, but you should pick someone you trust, who shares your views, and who would likely recommend a course of action you would agree with taking.

5). Letter of Intent

A letter of intent is simply a document left to your executor or a beneficiary. The purpose is to define what you want to be done with a particular asset after your death or incapacitation. Some letters of intent also provide funeral details or other special requests. 

While such a document may not be valid in the eyes of the law, it helps inform a probate judge of your intentions and may help in the distribution of your assets if the will is deemed invalid for some reason.

6). Guardianship Designations

While many wills or trusts incorporate this clause, some don’t. If you still have minor children or dependents, selecting a guardian is very important and can be overlooked. 

If there are no guardianship designations, a court could rule that your children live with someone you would not have selected. In extreme cases, the court could even mandate that your children become wards of the state.

When making your guardianship designations as part of your estate planning, try to select an individual or couple that shares your views, is financially sound, and is genuinely willing. As a backup, a contingent guardian should be named as well.

Organize and Store Your Documents

After going through all of these steps and creating all the necessary documentation, it is important to organize and store the documents in a place where your executor and/or family members can access any needed documents.  

Estate Tax Planning Strategies for Larger Estates

For families with substantial assets, estate tax planning strategies are important to preserve the value of the estate by eliminating or reducing estate taxes. With the recent passage of the One Big Beautiful Bill Act (OBBA), the federal estate tax exclusion will be $15 million per individual (indexed for inflation) starting in January 2026. This means that anyone with an estate over this amount may be subject to federal estate taxes.

Estate tax planning options range from simple annual gifting to more advanced trust structures, depending on your estate’s size and your family’s long-term goals. Each strategy has specific benefits and requirements, making the guidance of an estate planning attorney essential for proper implementation and for ensuring your estate plan is designed to withstand future tax law changes.

Estate Planning Leads to Peace of Mind

There’s far more to estate planning than deciding how to split up your assets when you pass. It’s also about ensuring your family members and other beneficiaries are provided for and have access to your assets upon your temporary or permanent incapacity.  

If you would like to learn more about your estate planning options as part of a solid financial plan that helps you achieve your goals and leave your legacy, schedule a call with our retirement planning specialists here.