Wills and Estate Planning Basics

Why Estate Planning Matters

Estate planning is the process of arranging for the management and distribution of your assets after you die or become incapacitated. Many people assume estate planning is only for the wealthy, but that could not be further from the truth. Anyone who owns property, has children, or cares about what happens to their money and possessions needs at least a basic estate plan.

Without an estate plan, your state's intestacy laws decide who inherits your assets. These laws distribute property according to a rigid formula — typically to a spouse first, then children, then other relatives — regardless of your actual wishes. If you have no living relatives, your assets could pass to the state entirely. Estate planning puts you in control.

What Is a Will?

A will (formally called a last will and testament) is a legal document that specifies how you want your assets distributed after death. It names beneficiaries — the people or organizations who will receive your property — and can also designate a guardian for minor children, name an executor to manage the process, and specify funeral or burial wishes.

Wills must go through a court process called probate before assets can be distributed. Probate validates the will and supervises the distribution of the estate. The process can take months to over a year and may involve court costs and attorney fees, which is one reason people use other estate planning tools alongside a will.

Key Estate Planning Documents

A comprehensive estate plan typically includes more than just a will. The key documents are:

• Last will and testament: Directs distribution of assets, names guardians for children, designates an executor.
• Revocable living trust: Allows assets placed in the trust to pass directly to beneficiaries without probate. More complex and expensive to set up but offers significant advantages for larger estates.
• Durable power of attorney: Designates someone to manage your financial affairs if you become incapacitated.
• Healthcare power of attorney / healthcare proxy: Designates someone to make medical decisions on your behalf if you cannot.
• Living will / advance directive: Documents your wishes regarding life-sustaining treatment, resuscitation, and end-of-life care.
• Beneficiary designations: Though not a document you draft separately, beneficiary designations on accounts like 401(k)s, IRAs, and life insurance policies supersede your will. Keeping these updated is critical.

Understanding Probate

Probate is the legal process through which a deceased person's will is validated and their estate is administered. Assets subject to probate can include solely owned bank accounts, investment accounts without a beneficiary designation, real estate held in your name alone, and personal property.

Assets that typically avoid probate include:

• Accounts with designated beneficiaries (retirement accounts, life insurance, POD bank accounts)
• Joint tenancy property (passes directly to the surviving owner)
• Assets held in a living trust

Avoiding probate can save your heirs time, money, and the public disclosure of your estate's contents. A key estate planning goal for many people is structuring assets to minimize what goes through probate.

Who Needs a Will?

Almost every adult should have at least a basic will. You especially need one if:

• You have minor children and need to designate a guardian
• You own a home, vehicle, or other significant property
• You have preferences about who should receive your belongings
• You want to leave money to a charity or non-family member
• You have a blended family or are in a long-term partnership without being married

How to Create a Basic Will

You have several options for creating a will, ranging from DIY tools to working with an estate planning attorney:

• Online will services: Platforms like Trust & Will, LegalZoom, and Nolo offer guided will-creation for $100 to $200. Appropriate for straightforward situations.
• Estate planning attorney: A local attorney can draft a customized will and full estate plan. Costs range from $300 to $1,500 or more for a simple will, and higher for comprehensive plans. Best for complex situations involving significant assets, blended families, or business ownership.
• Holographic will: A handwritten will, valid in about half of U.S. states. Generally not recommended without legal guidance, as errors can render it invalid.

Keeping Your Estate Plan Current

An estate plan is not a one-time document. Review and update it after major life events, including marriage, divorce, the birth of a child, the death of a named beneficiary or executor, significant changes in your financial situation, or a move to a different state. Outdated wills can cause just as many problems as having no will at all — for instance, an ex-spouse remaining listed as a beneficiary on a life insurance policy.