While it may be a challenging subject to approach, we all know that our time is finite. What will happen to our house, cars, bank accounts, retirement savings, and other personal belongings when that occurs? What if some or all these items have outstanding debt? What if they don’t? Who gets what and is anything at risk of being taken by the state?
The questions can pile up quickly, leaving those left behind to deal with what can be a time-consuming and stressful process. That’s where an estate plan comes into play.
An estate plan helps you manage and preserve your assets while you’re alive and conserve and control their distribution after your death.
The estate planning process and need for advanced strategies will differ from person to person, but here’s what you need to do to start getting your plan in order.
What is Estate Planning?
Estate planning is the process of arranging how your assets—such as bank accounts, retirement plans, real estate, and life insurance policies—will be protected and managed during your lifetime and transferred after your death.
At its heart, an estate plan helps you:
- Protect your loved ones from undue burdens
- Ensure your financial affairs and healthcare decisions are handled the way you want
- Minimize the stress of the probate process for your family members
- Take advantage of opportunities for smart tax planning to maximize wealth transfer
Even if you already have a will or a few documents in place, a full estate plan brings everything together into one coordinated strategy to give you peace of mind.
Why Estate Planning Matters
Without a plan, your family may face unnecessary delays, costs, and stress:
- Probate: Assets without clear instructions may end up in probate court, where state laws determine how they’re distributed. This process can be lengthy and public.
- Incapacity: If you become unable to make decisions, your family may not have authority to handle your financial decisions or medical care without proper documents.
- Taxes: High-net-worth families in particular need to plan for estate, gift, or inheritance tax exposure.
- Family conflict: Without clear direction, disputes may arise among a surviving spouse, children, or other heirs.
Estate planning gives your family peace of mind and ensures your legacy is carried out on your terms.
Key Estate Planning Documents
A strong plan usually includes several legal documents that work together. Here are the core pieces of the estate planning basics:
1. Last Will and Testament
Your will outlines how your assets should be distributed after your death. It also allows you to name a guardian for minor children.
Keep in mind: assets that pass through a will generally go through the probate process.
2. Revocable Living Trust
A revocable living trust is a common way to avoid probate. Assets placed in the trust, like real estate or investment accounts, transfer directly to your beneficiaries.
Trusts can also provide more privacy than wills and give you flexibility to manage assets during your lifetime.
3. Durable Power of Attorney (POA)
A durable power of attorney authorizes someone you trust to handle your financial affairs if you’re unable. This could include managing bank accounts, paying bills, or overseeing investments.
Without a POA, your loved ones may need court approval to step in.
4. Health Care Power of Attorney & Advance Healthcare Directive
Planning for healthcare decisions is just as important as financial ones.
- A health care power of attorney (health care proxy) allows someone you designate to make medical choices on your behalf.
- An advance healthcare directive (sometimes called a living will) documents your preferences for end-of-life treatment.
These ensure your medical care aligns with your wishes and removes uncertainty for family members.
5. Beneficiary Designations
Some assets, such as retirement accounts (IRAs, 401(k)s), life insurance policies, or bank accounts with transfer on death instructions), transfer directly to named beneficiaries.
Because these designations override your will, it’s important to keep them up to date after major life events like marriage, divorce, or the birth of a child. It is not uncommon for conflicting TOD/beneficiary designations to result in assets being contested.
The Estate Planning Process
Estate planning doesn’t have to be overwhelming. Think of it as a simple step-by-step process:
Take inventory of your assets: List your real estate, retirement accounts, life insurance, and other financial holdings.
1. Define your goals: Do you want to provide for your surviving spouse? Minimize taxes? Support a charity? Ensure care for a family member with special needs?
2. Work with professionals: An estate planning attorney and financial advisor can guide you through state laws, IRS rules, and strategies for your net worth.
3. Draft your estate planning documents: Put your will, trust, POA, and healthcare directives in place. We also recommend an Estate Planning Memo that bring all of the information together in one place. Download a free one below.
4. Review regularly: Revisit your plan every few years or after life events to keep it current.
When to Update Your Estate Plan
Estate planning isn’t a one-time task. Review your plan when you experience:
- Marriage, divorce, or remarriage
- Birth or adoption of children or grandchildren
- The death of a spouse or other beneficiary
- Moving to a different state (since state laws vary)
- Changes in tax laws or IRS regulations
- Significant changes in net worth or assets
Regular updates ensure your plan continues to reflect your goals and current law.
Getting Started
The basics of estate planning come down to this: protect your loved ones, plan for incapacity, and make sure your wishes are respected.
With the right documents and professional guidance, you can reduce stress for your family, streamline the transfer of assets, and gain confidence in the future.
If you’re ready to begin, our team at Plancorp partners with families to align estate planning with broader financial goals, from retirement accounts to wealth transfer strategies.
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