What is estate planning?
Estate planning is the process of organizing your legal, financial, and personal affairs so your assets are distributed according to your wishes after your death or incapacity. It typically includes wills, trusts, powers of attorney, and healthcare directives.
Why is estate planning important even if I’m not wealthy?
Estate planning ensures that your wishes are honored, your loved ones are protected, and unnecessary legal costs or family disputes are avoided, regardless of the size of your estate.
When should I start estate planning?
As soon as you have assets or dependents. Major life events—marriage, children, buying property—are good times to start or update your plan.
How often should I update my estate plan?
Review it every 3–5 years, or after significant life events such as marriage, divorce, birth of a child, death in the family, or a major financial change.
What’s the difference between a will and a trust?
A will is a legal document that outlines how your assets should be distributed after death, and it goes through probate. A trust is a legal entity that holds assets and can avoid probate, providing privacy and sometimes tax benefits.
Do I need a trust if I have a will?
Not always, but a trust can help avoid probate and manage assets if you become incapacitated. It’s often recommended if you have significant assets, minor children, or specific privacy concerns.
What happens if I die without a will?
Your estate will be distributed according to state laws of intestacy, which may not align with your wishes. This often leads to delays, higher costs, and possible family disputes.
Can I write my own will?
Yes, but using a lawyer is safer to ensure it’s legally valid and covers all necessary details. Mistakes in DIY wills can lead to challenges in probate.
What is a healthcare directive or living will?
It’s a document that outlines your medical preferences if you’re unable to make decisions. It often includes a Do Not Resuscitate (DNR) order and directions for life support.
What is a power of attorney (POA)?
A POA allows someone to act on your behalf for financial or legal matters. A durable POA remains in effect if you become incapacitated.
Can I name different people for medical and financial decisions?
Yes, and it’s often a good idea to choose people with the appropriate skills for each role.
How do I name or change beneficiaries?
You can name beneficiaries in your will, trust, or directly on financial accounts. Changes must be made in writing and in accordance with account or legal procedures.
What happens if a beneficiary dies before me?
Your estate plan should include contingent beneficiaries. If not, their share may go to their descendants or back into your estate.
Can I disinherit someone?
Yes, but it must be clearly stated in your will or trust. Some states protect spouses or minor children from disinheritance.
Will my heirs owe taxes on their inheritance?
It depends on your state and the size of your estate. Federal estate tax only applies to estates over a certain threshold (e.g., $13.61 million in 2024). Some states have inheritance or estate taxes.
What is probate?
Probate is the legal process of validating your will, paying debts, and distributing assets. It can take months or even years and may be costly.
How can I avoid probate?
Use tools like revocable living trusts, joint ownership, payable-on-death (POD) accounts, or transfer-on-death (TOD) deeds.
How can I keep my estate plan private?
Trusts are not public documents, unlike wills that go through probate. Using a trust keeps your estate details private.
What happens to my digital accounts and passwords?
Include a digital estate plan that lists accounts, passwords, and instructions for how they should be handled. Some states have laws governing access to digital assets.
Should I include my pets in my estate plan?
Yes. You can name a caregiver or create a pet trust to ensure they’re cared for after your death.
How do I plan for my business in my estate?
Establish a succession plan or place the business in a trust. Define who will manage or inherit it to avoid disruptions.