17 Estate Planning Basics Every Person Needs To Know


Are you thinking of taking the first steps toward protecting your financial future and that of your loved ones?

Whether setting up wills, assigning power of attorney, or considering trusts and tax strategies, everyone should ensure they have a comprehensive plan.

Estate planning isn’t just for the wealthy.

It’s a vital tool anyone can use to ensure their long-term security, create wealth and leave behind a legacy for future generations.

With careful attention to detail and knowledge about critical elements, even beginners can develop powerful estate plans.

In this post, we’ll go over the basics of estate planning and the documents you need to have.

By the end, you can start setting up your belongings, so your money goes to the intended heirs.


Estate planning is a way to ensure your protect your financial future for everyone, not just the wealthy
Various documents protect your finances and you health care wishes should you pass or become incapacitated
Working with an estate attorney and tax advisor will ensure you are properly protected

Estate Planning 101

What Is Estate Planning?

estate planning basics

An estate plan is a comprehensive process of planning and organizing the distribution of an individual’s assets and personal possessions after death or incapacitation.

It also involves creating legal documents such as a will, trust, and power of attorney.

The task also involves considering various financial, tax, and personal factors that may impact the distribution of your belongings.

Many people make the mistake of thinking estate planning is not just for the wealthy.

It’s essential for anyone, even those with modest assets, who want to set their financial affairs right and ensure that their wealth is protected and distributed according to their wishes.

The Purpose Of Estate Planning

The primary purpose of planning an estate is to ensure that an individual’s finances and property pass along to their heirs in accordance with their wishes after death or incapacitation.

Without the proper documents, your estate will go into probate, which is the court process of distributing your belongings based on your state laws.

This means that if you are married without a will, chances are all of your assets will go to your spouse, even if you want money to go to your children.

Planning the distribution of your wealth is personal and should be tailored to each individual’s unique circumstances and goals.

This includes considering family members’ needs, business interests, charitable goals, and more.

A qualified estate planning attorney can help advise on the best strategy for each individual’s situation.

Now that you have an idea of the purpose let’s look at a few benefits in more detail.

#1. Protecting Assets And Property

Estate planning can help ensure that your belongings are protected from potential legal challenges and creditors and preserved for future generations.

#2. Minimizing Taxes And Costs

Having the proper documents can help minimize the tax and legal burden on an individual’s heirs and beneficiaries, allowing more of your belongings to go to the intended recipients.

It also avoids the legal process of probate, which incurs court costs and other fees.

#3. Providing For Loved Ones

Estate planning can ensure that an individual’s loved ones are provided for in the event of death or incapacity.

This includes making arrangements for the care and support of minor children and the surviving spouse.

#4. Preserving Family Legacy

Having the correct estate planning documents can help an individual preserve their legacy by directing the distribution of wealth to reflect their values and goals.

#5. Avoiding Probate

The probate court can lengthen the process of your estate distribution and bring about ongoing court costs.

Estate planning helps you avoid the time-consuming and expensive probate process by providing clear instructions on the distribution of your belongings.

Overall, planning your estate is vital in meeting your wishes after death or incapacity and preparing for the future.

It provides peace of mind and helps to ensure that the legacy you leave behind is protected and preserved.

Estate Planning Tools

estate planning documents

Estate planning tools are legal documents and strategies used to manage and distribute an individual’s assets and property after death or incapacitation.

The following are some of the most common estate planning tools.

#1. Will

A will often referred to as a last will, is a legally binding document that outlines an individual’s wishes to transfer assets after death.

It can also appoint a guardian for minor children and name an executor to manage the distribution of finances.

Many times it will also outline the funeral arrangements that you want as well.

It is important to note that if you have accounts where you have beneficiary designations, these designations supersede or override your will.

#2. Trust

A trust is a legal arrangement where a trustee holds assets for the benefit of a beneficiary, such as minor children.

Trusts are for various purposes, including tax planning, asset protection, and providing for minors or individuals with special needs.

#3. Power Of Attorney

There are a few different types of this document, but the two most important ones are a financial power of attorney and a medical power of attorney.

A financial power of attorney gives another individual the authority to act on an individual’s behalf regarding money and property.

This means the person can pay your bills, file taxes, or buy and sell real estate.

A medical power of attorney, also called health care directives, allows a person to act on your behalf regarding health care decisions.

Some, but not all, of the medical care decisions they can make for you include going into surgery or making the decision regarding end of life.

#4. Living Will

Also known as advanced healthcare directives or a healthcare proxy, outlines your wishes for medical treatment if you cannot make decisions on your own.

Some decisions include life-sustaining treatment, pain management, and other medical care.

#5. Life Insurance

A life insurance policy is a financial product that provides a death benefit to a designated beneficiary in the event of the policyholder’s passing.

It is an endowment that provides funds to cover estate taxes and other costs.

These are just a few examples of the many tools available for planning the distribution of your belongings.

It is important to consult with a qualified attorney to determine the best strategy for each individual’s unique circumstances and goals.

#6. HIPPA Authorization

A HIPAA authorization is a legal document that allows you to authorize individuals to access your protected health information.

Additionally, you have control over the types of information that you authorize them to access.

According to Michael Reynolds, CFP®️ of Elevation Financial, “It is important to have your HIPAA authorization document properly executed, which means that it must be signed and witnessed in accordance with the laws of your state.”

Basic Tips For Estate Planning

estate plan terms

Estate planning can be complex and overwhelming.

However, we have some simple tips to help ensure that your finances and personal property are managed and distributed according to your wishes after passing away or incapacity.

Here are 17 basic tips to help you plan your estate.

#1. Start Early

Estate planning is much more than just a financial exercise. It’s a way to protect your belongings and the people you care about most down the line by distributing your wealth to them.

Start early, so you can account for everything before a surprise comes your way.

Tying the knot or having kids are two times to put those estate plans in motion.

#2. Make A List Of Assets

Make a list of all your belongings, including real estate, bank accounts, stocks, and other investments.

This will help you understand the full extent of your estate and make informed decisions about its distribution.

Listing your belongings also helps you determine which assets should be grouped or left to a particular person.

Most estate plans overlook the importance of a master sheet with all the belongings owned, account names, and passwords.

This list will help your loved ones ensure they have access to the accounts and don’t forget about any of them.

#3. Determine Your Goals

Think about your goals and what you want to achieve with your estate plan.

Consider factors such as providing for your family, minimizing taxes and costs, and preserving your legacy.

Knowing what you want your estate, businesses, and legacy to be when you are no longer around will help you choose the right people to manage your estate.

#4. Create A Last Will

As seen above, a will is an important tool that helps your family distribute the wealth you left behind without struggle.

A last will outlines your plans for distributing your assets after death.

Make sure your will is up-to-date and reflects your current wishes and circumstances.

Working with an experienced attorney when writing your will, will help you create a comprehensive and clear document to communicate your goals.

#5. Consider A Trust

A trust can provide various benefits, such as tax planning, asset protection, and providing for minors or individuals with special needs.

Consult with an attorney to determine if a trust is right for you.

There are two main types of trusts, an irrevocable trust, which has tax benefits, and a revocable trust, which usually does not have tax benefits.

But taxes should not be the only reason to consider one or the other, as they both have features that could make sense for your finances.

The attorney will also guide you on how to set up the trust.

#6. Name Beneficiaries

Ensure you have named beneficiaries for all your accounts, including bank accounts, savings accounts, investment and retirement accounts, and life insurance policies.

This will help ensure that the funds in the accounts are transferred quickly and efficiently after passing.

It also clears misunderstandings about who should inherit what in your family, including minor children.

#7. Consider Durable Power Of Attorney

A power of attorney is a legal document that gives another individual the authority to act on your behalf in the event of incapacity.

Consider naming a trusted family member or friend as your power of attorney.

Choosing someone to name as your power of attorney requires careful consideration because it is important in managing your estate.

#8. Plan For Incapacity

Planning an estate should focus on death and the possibility of incapacity.

Consider creating an advance directive, also known as a living will to outline your desires for medical treatment in the event of incapacity.

Living wills ensure that your family has directives on handling your health care and medical needs in case anything happens.

It also provides the financial means to take care of things in the family in case you cannot act on your own behalf.

#9. Review Your Estate Plan Regularly

Estate planning is not a one-time event but an ongoing process.

It is important to review your plan regularly and make updates as necessary to reflect changes over time.

You could have a different perspective later as you age and decide to change how you want to redistribute your wealth once you are gone.

Reviewing the plan regularly allows you to make the best decisions on your estate management and legacy.

#10. Consult With An Attorney

Planning your estate can be complex, and it is important to consult a qualified attorney to ensure your plan is effective and compliant with the law.

An attorney can help advise on the best strategy for your unique circumstances and goals, as each individual’s estate is different.

Some people might want to create these documents for free online or even write out their wishes on the back of a napkin.

But all states have specific laws on how to handle the death of a person, and each has its own probate process.

As interesting as it was on television to see someone write their will on a mirror with lipstick, this might not be legally binding in some states.

#11. Plan For Long-Term Care

Consider the potential costs of long-term care and how you would like to cover these expenses if needed.

Options include long-term care insurance, Medicaid planning, and using your assets to pay for care.

With the cost of health care increasing rapidly, having long-term care is essential.

#12. Consider Digital Assets

If your estate consists of digital assets, such as online accounts, email, and social media profiles, you need to have a plan for these.

Most people overlook these and only focus on real property like their homes and investment accounts.

Make sure you have a plan for managing and distributing these after death or incapacity.

#13. Plan For Business Succession

If you own a business, it is vital to have a plan for its succession in the event of your death or incapacitation.

This can include the transfer of ownership, management, and control to a trusted family member or employee.

#14. Minimize Estate And Inheritance Taxes

Taxes can significantly reduce the value of your estate.

Consider strategies to minimize these taxes, such as using a living trust.

Be sure to know your state laws because, in some states, a living trust will not reduce the tax liability.

Another option is to make annual gifts to your loved ones.

Gift taxes are involved if you gift over a certain amount. Otherwise, the transfer of assets is tax-free.

Using the help of an attorney or a tax advisor could help you move things around to minimize taxes.

#15. Plan For Special Needs

If you have a loved one with special needs, it is important to consider their long-term care and financial security in your estate plan.

This may involve creating a special needs trust or working with a financial planner to meet their needs.

#16. Choose An Executor Carefully

The executor of your will is responsible for managing the distribution of your assets and ensuring that your desires are carried out.

Choose someone trustworthy, responsible, and capable of handling this critical role.

#17. Update Your Plan And Financial Affairs After Life Changes

Significant life changes, such as marriage, divorce, the birth of a child, or the death of a beneficiary, can impact your estate plan.

Review and update your plan as necessary when circumstances change.

With the above tips, you can create a comprehensive and effective estate plan that protects your belongings and provides for your loved ones.

Good planning also ensures that your intentions are fulfilled after death or incapacity.

Most Common Estate Planning Mistakes

Because of the complexity of transferring your belonging when you pass, there are some mistakes that professionals see time and time again, according to Spenser Liszt, CFP®, CCFC, an advisor with Paradigm Advisors, LLC.

The most common include:

  • Not signing documents
  • Not having a safe place to store the documents
  • Failing to notify executors and powers of attorneys of their appointment and provide copies of the documents
  • Failing to draft funeral instructions
  • Not reviewing documents regularly

Final Thoughts

Estate planning is a necessary procedure that helps you manage your financial affairs and distribute your assets and property by following your wishes after death or incapacity.

It also helps to avoid the probate process, which can be time-consuming and expensive, especially for large estates.

Following the above basic tips can ensure that your estate plan is effective and meets your unique needs and circumstances.

Additionally, considering digital assets, business succession, estate taxes, and executor selection can further strengthen and protect your estate plan.

It may seem overwhelming, but by planning and seeking advice from professional advisors like an attorney or tax advisor, you can ensure that your assets and property are well-managed.

Don’t make the same mistake as most people and delay ensuring your financial affairs are taken care of.

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