Ready to start estate planning but don’t know where to begin? This detailed guide and step-by-step checklist will help.
Written by: Laura Jackson, Esq Attorney Reviewer: Joe Kellman, JD Reviewed by: Genevieve Waterman, DSW, MASM, Director of Financial Security, NCOAOur Reviews Team consists of trained lawyers who have spent hundreds of hours researching estate planning and using the services we recommend. We only recommend services we find to be helpful and accurate. To develop our reviews and guidance, we:
Organizing your affairs in preparation for the end of your life is an important task, and estate planning is an ongoing process that includes much more than writing a will. This type of planning helps determine who can make decisions on your behalf, who takes care of your dependents, and how to avoid unnecessary taxes and waiting periods. Estate planning covers any decisions regarding money, property, medical care, dependent care, and other matters that can arise when a person dies. The biggest benefit of estate planning is peace of mind—you’ll know your wishes will be fulfilled for the benefit of your loved ones. At the very least, everyone should have a simple estate plan in place.
Most of this process consists of creating and finalizing estate planning documents, such as wills, trusts, powers of attorney, and living wills. You can be as detailed as you want. Some people even include a letter of instruction with their estate to walk their family members through the documents.
A will, formally called a “last will and testament,” is a legal document stating how you want your executor (the person legally obligated to administer your estate) to distribute your assets when you die. Dying without a will is known as dying “intestate,” which means state law will dictate what happens with your estate. Probate refers to the process of distributing your estate after you’ve died. Your estate will go through the probate process whether you die with or without a will, but having a will ensures your executor honors your wishes. Going through probate court without a will is more time consuming and expensive, with the money coming out of your estate first. If you already know where you want your assets to go, it’s easy to make a will without a lawyer. Online will services offer interactive questionnaires to help you create a legally binding will specific to your state.
A trust is a legal contract that allows another person (the “trustee”) to hold property for you (the “grantor”). This is typically so the beneficiaries (individuals or institutions who stand to inherit something) can use the property at some point in the future. You can place money, physical assets, or anything else of value in a trust. Trusts are also helpful to hold property when beneficiaries are minor children who are not yet fit to handle their full inheritance. In that situation, the property will stay in the trust until the beneficiaries reach a certain age. Property is also distributed faster in a trust because you avoid a lengthy probate court process, so it’s sometimes preferred for that reason.
You can create a living trust, also called an inter vivos trust, to hold property both before and after your death. A testamentary trust is a type of trust that a will creates, so it only becomes effective after the grantor’s death. The difference between these two kinds of trusts is that a living trust is effective while the grantor is alive, and a testamentary trust only becomes effective after the grantor’s death.
A revocable living trust is one where the grantor retains the right to modify, amend, revoke, or terminate the trust. In an irrevocable living trust, the grantor is not allowed to make changes to the trust, but some states may allow the trustee to transfer property in and out of an irrevocable trust with permission from the trust’s beneficiaries. A revocable trust becomes irrevocable when the grantor dies, since they can no longer make changes to it. Some people choose to place their assets in a revocable trust rather than only using a will. Upon the grantor’s death, the executor distributes assets in a trust faster because they don’t have to go through probate.
Helpful hint: Trusts are not just for wealthy people. Anyone who wants their property to go to their relatives in a quick and easy manner can create a trust. For example, parents of young children may put property in a trust specifically designated to fund a child’s education.
Power of attorney (POA) refers to the authority you give someone else to make legal, financial, or medical decisions on your behalf. These documents are commonly included in online estate planning service packages. The person to whom you grant power of attorney is called your “agent.” You identify this person in a document that only takes effect when you are considered unable to act on your own behalf, or you can grant someone POA for a specific purpose, such as purchasing a vehicle for you. If you become unable to manage your own legal or financial affairs and you have not designated an agent to act on your behalf, a court may appoint one for you. Each state has its own laws on POAs, but the general types to be aware of include (but are not limited to) durable, limited, and financial.
A durable power of attorney means your agent can continue to act on your behalf even when your situation changes, such as if you become ill and are unable to make decisions. It can grant broad authority or be restricted to a specific purpose.
Helpful hint: Some states allow “springing” durable POAs, which means the POA only takes effect when you are deemed incapacitated. This is useful if you don’t want to give someone else decision-making authority right away, but want protection if you ever need someone to advocate on your behalf.
A limited power of attorney gives the agent authority to make decisions for a specific purpose, or for a limited period of time. In contrast, a general POA gives the agent broad authority to act.
A financial power of attorney gives the agent authority to manage your financial affairs. You can make this effective immediately or at the time of an event, like a sudden incapacitating illness or death.
Health care is one of the most common aspects of estate planning. You want someone you trust to help ensure your wishes are respected if you become unable to advocate for yourself. Living wills, health care proxies, and advance health care directives are tools you can use to protect yourself in the future.
A living will states your preferences regarding health care planning, such as whether you want life-extending treatment, how you want to manage long-term care, what procedures you do or do not want, and other end-of-life matters.
A health care proxy is a durable POA specifically for medical treatment—you appoint someone to make decisions on your behalf when you are deemed unable to do so by a medical professional.
Advance directives is an umbrella term that can refer to any document regarding future medical decision-making. It can refer to a living will, health care proxy, or other legal document. One document to include with your advance directive is a HIPAA authorization. HIPAA stands for Health Insurance Portability and Accountability Act (1996). 1 This federal law protects your medical records by requiring a signed authorization form before you grant access to someone other than yourself. Having a signed authorization for your agent ensures they can access your medical records when the directive takes effect.
Taxes can take an alarming percentage of what you leave to your beneficiaries, but you can limit what taxes your estate pays in a few ways. Each state has its own tax laws, so your obligation will depend on where you live. While financial and tax planners are best equipped to advise you on these matters, you should consider a few types of taxes when organizing your affairs: estate, inheritance, and gift taxes.
If the estate value is above $13.61 million (as of 2024), the estate pays a tax to the federal government.
Only six states impose inheritance taxes:
While estate taxes are owed to the federal government, inheritance taxes are owed to the state government. Additionally, while estate taxes are paid directly from the estate itself, inheritance taxes are paid by the heir or beneficiaries based on what they received in probate.
These taxes do not apply to surviving spouses or to payouts from life insurance policies. Instead, inheritance taxes usually only apply to more distant relatives and heirs. It’s unlikely this tax affects you, but it’s good to be aware of it if you live in one of the six states that apply it.
Many people choose to make gifts during their lifetime to reduce the value of their estate when they die. According to the IRS, gifting can take different forms: selling something for less than its full value, transferring the right to use income from property, or transferring money or property without expecting to receive the full value in return. 3 Usually, the person giving the gift owes the tax, but other arrangements are possible with the advice of a tax professional.
The best way to approach estate planning for the first time is to make a checklist for yourself. Everyone has unique needs, and an estate planning attorney may be helpful if your needs are complex. Before making the choice whether to hire an attorney or do it yourself, these are general steps you can take to get started.
Write down everything you own of value that you can think of. This may seem overwhelming, but keeping a running list of assets is worth the time to make sure nothing important is left out. Make sure to consider both tangible and intangible assets. Tangible assets are:
Intangible assets are:
Listing liabilities, like mortgages, lines of credit, and other debt, is a good idea as well. That’s because certain debts must be paid—even after death. In that case, it will come out of your estate.
The purpose of listing your family members is to account for the needs of immediate family and dependents. Your will and life insurance policies are the primary ways to plan for the needs of your surviving spouse and make guardianship designations for children and other dependents. Many people also make arrangements for pets.
The more you plan ahead, the fewer decisions you’ll have to make during an already stressful time. The tools discussed in this article (such as living wills, powers of attorney, and trusts) make navigating illness and other end-of-life matters easier because you’ll have a plan for most scenarios. Decide which tools you want in place and how to set them up.
Once you know which directives you want to include in your life plan, talk to anyone you are considering naming as an agent. You’ll want to be sure they are willing to act if needed. You should also consider naming secondary agents if the first person is unavailable when the directive takes effect.
A beneficiary is a person or institution inheriting a piece of your estate, such as money, physical property, or control of or interest in a business.
You should name your beneficiaries on your bank accounts, retirement accounts, and life insurance policies. If you name beneficiaries to those accounts in your will, make sure the names match to avoid any confusion.
Choose backup beneficiaries for your assets if a person is unavailable or dies before your estate distribution. You can also name a beneficiary in a “residuary” clause in your will. This person will inherit anything left over after your estate distribution.
Helpful hint: This is a good time to check the named beneficiaries on all of your accounts to make sure they are updated. For example, if you are married for the second time, and your first spouse is still named as a beneficiary of a bank account, you can change it to your current spouse to avoid conflict in the future.
States have different laws regarding what happens when a person dies. To ensure you have optimal asset protection, check your state’s probate and estate or inheritance tax laws. If you believe an estate or inheritance tax may apply in your state, contact a professional to help you reduce your tax burden as much as possible.
Now that you have a clear picture of your estate and who should receive it, you can decide whether an online estate planning service is right for you.
If you aren’t leaving behind any dependents and you have a good idea of how you want to distribute your estate, you can easily find an online legal service to get you started with estate planning documents and help you create a will online. Many services include living wills and POAs, as well as the option for attorney advice.
If you have dependents who will need care after you’ve died, you want to disinherit a family member, or you’re generally having trouble deciding how to divide your estate, you have two options. The first is to use an online estate planning service and opt for the package that includes attorney assistance. Services will typically charge an annual fee to have access to an attorney. Still, this fee is likely to be less than paying for a private attorney.
Our top choices for estate planning services offer basic will packages starting at $39.99. But you can get a package that includes attorney assistance, as well as additional estate planning documents, for around $249. Estate planning attorneys will either offer services for a flat fee or charge several hundred dollars per hour to work with you.
If you have more complex needs, you may want to contact a law firm specializing in estate administration and planning. Many attorneys offer free consultations to help you find the best fit.
Once you’ve finalized all the necessary documents and the originals are in one safe space, remember to keep them updated.
We spoke with Tim Hurban, Esq., an estate planning attorney licensed in Georgia and Michigan with more than 12 years of experience, about how often and when you should update your estate planning documents. He advised “updating your will and other estate planning documents . . . based on individual circumstances and life events.” Specifically, Hurban told us you should review and update these documents in situations such as changes in:
Typically you should revisit your estate plans every three to five years—even without major life changes. If you create your documents using an online will maker service, many services offer free, unlimited changes for at least the first 30 days after purchase. With services that offer a membership, you’ll generally be able to make unlimited updates to your estate documents, so long as you pay the monthly or annual subscription. The Reviews Team chose Trust & Will as the “Editor’s Pick” in our roundup of the best online will makers of 2024 because of their helpful guidance and ongoing updates, a service that costs $199.99.
You can supplement the benefits of estate planning by using other tools to plan for your future. NCOA’s Age Well Planner gives personalized guidance on financial, health, and other decisions.
Estate planning is not only about your peace of mind—it gives your loved ones guidance on how to move forward after you’re gone. It also plans for the care of individuals or animals who depend on you. Effective estate planning can also minimize the tax burden and probate costs that would typically deplete your estate.
What are common estate planning mistakes?The biggest mistake you can make in estate planning is failing to have a plan at all. A simple will is better than no plan—even if your situation is complicated. Other common mistakes are not properly executing estate planning documents, not providing for future care of dependents, and not expressing wishes for end-of-life care.
Do I need an estate planning attorney?Not necessarily. Many small or straightforward estates can be managed using a low-cost online service. These services sometimes provide the option of consulting with an attorney for an additional fee. For very large or complex estates, consulting a specialized attorney or tax professional is a good idea.
Is estate planning only for the wealthy?Absolutely not! Everyone benefits from estate planning. In fact, failing to plan can lead to lengthy court processes and high probate fees, which affect small estates to a greater degree than large ones. Planning ahead allows your loved ones to keep as much of your estate as possible by avoiding unnecessary costs or taxes.
Have questions about this review? Email us at reviewsteam@ncoa.org.
Laura Jackson is a lawyer who, after several years in private practice, left to fulfill her dream of serving a larger audience through freelance writing. She graduated from Emory University School of Law and is an active member of the Georgia Bar Association. She is passionate about making complex legal topics understandable for all audiences.
Joe Kellman is a writer and lawyer whose goal is to help others navigate common legal processes with confidence. He has written and edited legal content on topics such as LLC formation, business law, tax law, family law, divorce law, estate planning, and asset protection.
