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Estate Planning Basics: Comprehensive Overview

Written by: FindLaw Staff , Contributing Author
Reviewed by: Catherine Hodder, Esq. , Senior Legal Writer
Last updated March 06, 2024

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Learning estate planning basics gives you a better idea of what to expect when planning to protect yourself and your dependents now and in the future. This article discusses the most critical estate planning documents: a last will and testament, powers of attorney, health care directives, living will and trusts.

Table of Contents

What Is Estate Planning?

Most people think of estate planning as drafting a will that is only useful after death. However, a proper estate plan encompasses many life events, from planning for incapacity and ensuring you have the correct beneficiary designation on bank accounts, investments, and life insurance policies to planning for long-term care. You may have prior experience with some form of estate planning, such as being a beneficiary of an estate or handling your parent’s estate as an executor (or, unfortunately, if your parent died without a will, sorting out the probate estate in court).

The Importance of Estate Planning

Estate planning is critical to protect yourself if faced with an incapacity during your lifetime and to protect your loved ones when you die. Estate planning may encompass one or more of the following:

  • Choosing someone to make medical decisions for you when you can’t, a health care agent
  • Choosing someone to make financial decisions for you when you can’t, a financial power of attorney
  • Outlining your wishes for end-of-life care, such as withholding life-sustaining treatments, a living will, or an advance health care directive
  • Naming guardians for minor children
  • Setting up revocable trusts for dependents with special needs.
  • Giving certain money or property (such as personal items or real estate) to beneficiaries
  • Reviewing retirement accounts, IRAs, life insurance policies, and annuities for correct beneficiary designations
  • Reviewing assets and liabilities
  • Following state and federal estate tax laws and understanding estate tax exemptions for tax planning
  • Reducing your estate for end-of-life medical care and Medicaid eligibility
  • Reducing tax obligations and avoiding probate.
  • Making funeral plans

Estate planning is essential to prepare for future incapacity, distribute your property, and clarify your wishes, No one wants to think about these choices, but it is best if you do it and do not leave the burden on your loved ones.

Last Will and Testament

After your death, your last will and testament make the probate process as painless as possible for your loved ones. Your will should provide all of your intentions and desires for the distribution of your assets.

A will is a legal document that typically:

  • Describes the estate assets to transfer upon death, including real estate
  • Names of family members and others who will receive specific property
  • Nominates a guardian for any minor children
  • Spells out any special instructions you may have
  • Appoints an executor or personal representative to oversee the estate’s administration.

A will can be simple. Depending on your wishes and the size of your estate, it could range from a few pages to several pages.

Power of Attorney

You can choose someone to act in your financial interests with a power of attorney. You can create a durable power of attorney that lasts during incapacity or specify when a power of attorney starts and ends. You name an agent, someone you trust to manage your financial affairs. Your agent can pay your bills, access your bank accounts, and file taxes, which is a huge responsibility. However, your agent has a fiduciary duty to act in your best interests.

Health Care Directives and Living Wills

A living will, or health care directive, expresses your health care preferences while you’re still alive.

With a living will or health care directive, you can explain the medical treatment you want in the event of incapacity or incompetency.

In addition, a health care power of attorney allows you to designate a person who can make medical or end-of-life decisions on your behalf, according to the instructions in your health care directive or living will.

You may have one document which encompasses all these decisions:

  • Nominating your health care agent
  • Listing your health care instructions
  • Leaving your end-of-life care wishes for life-sustaining treatment

Trusts and Revocable Living Trusts

Trusts are another estate planning tool you can use to manage your property and avoid tax burdens. A trust can either be created during a person’s lifetime or after death by a will. There are a number of different types of trusts serving a wide range of functions. An asset protection trust, for example, is designed to protect a person’s assets from future creditors. On the other hand, a charitable trust is used to benefit a particular charity or cause. A special needs trust can financially protect someone needing additional care throughout their lives. However, since trusts must be set up and funded properly, it may be a good idea to consult an estate planning attorney.

Probate and Taxes

Probate is the court-supervised process of sorting out a deceased person’s affairs. It may be important for you to find professional help during this process. An estate planning attorney will be able to guide you through the probate process and represent your interests in court. They can also discuss tax law, gift tax, and other considerations for handling your finances and property.

Ready to Start Your Estate Plan?

FindLaw has partnered with experienced attorneys to create do-it-yourself estate planning forms to complete from the comfort of your home. Don’t delay in protecting your assets, children, pets, and healthcare wishes with these estate planning documents:

For complex estates, you may need to consider finding and speaking with a local attorney.

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