Estate Planning Basics

Estate planning is not about being wealthy or old — it is about making sure your family is not left with a legal and financial mess when something happens to you. More than half of American adults do not have a will, according to a 2024 Caring.com survey. That means if they die tomorrow, a court decides who gets their assets, who raises their children, and how long the process drags on. The cost of that neglect — in probate fees, family conflict, and lost assets — dwarfs the cost of setting up a basic estate plan.

This guide walks you through estate planning as a practical, non-lawyer exercise. We cover the four documents every adult needs, compare wills and trusts with real costs, explain the probate process most people want to avoid, and give you a clear framework for deciding between DIY tools and hiring an estate attorney. No legal jargon without explanation, no scare tactics — just the information you need to protect your family and assets.

The Four Essential Estate Planning Documents

A complete estate plan requires four documents. Each one serves a distinct purpose, and missing any one of them creates a gap that could cost your family thousands or leave critical decisions to a judge who does not know you.

1. Last Will and Testament: Your will names who receives your assets (beneficiaries), who manages the process of distributing them (executor), and who raises your minor children (guardian). Without a will, your state's intestacy laws determine all of this — and the outcome may not match your wishes. A will takes effect only after death and must go through probate court for validation.

2. Revocable Living Trust: A trust is a legal entity you create during your lifetime. You transfer assets into the trust (real estate, investment accounts, bank accounts), name yourself as trustee (maintaining full control), and designate a successor trustee who takes over if you become incapacitated or die. Assets held in the trust pass directly to beneficiaries without probate. The trust is "revocable" because you can change or dissolve it at any time while you are alive and competent.

3. Durable Financial Power of Attorney: This document authorizes an agent you choose to manage your financial affairs if you become incapacitated — paying bills, managing investments, filing taxes, handling real estate transactions, and accessing bank accounts. "Durable" means the power remains effective even if you become mentally incapacitated, which is precisely when you need it most. Without this document, your family must petition a court for conservatorship — a process that takes months and costs thousands.

4. Healthcare Power of Attorney and Living Will (Advance Directive): The healthcare POA designates someone to make medical decisions on your behalf if you cannot communicate. The living will specifies your wishes regarding life-sustaining treatment, resuscitation, ventilation, and organ donation. Together, these documents ensure your medical care reflects your values — not a hospital's default protocols or a family member's guess about what you would want.

Wills vs Trusts: Cost, Probate, and Privacy Compared

A critical point: even if you create a trust, you still need a will. The will serves as a safety net (called a "pour-over will") that catches any assets you forgot to transfer into the trust and directs them there. It is also the only document that can name a guardian for minor children — trusts cannot do this.

The Probate Process: Timeline, Costs, and How to Avoid It

Probate is the court-supervised process of validating a will, paying debts, and distributing assets. It is the primary reason people create trusts — not because probate is corrupt, but because it is slow, expensive, and public.

How long probate takes: Simple, uncontested estates typically clear probate in 6-12 months. Contested wills, estates with complex assets, or states with backlogged courts can stretch probate to 18 months or longer. During this time, beneficiaries generally cannot access inherited assets.

What probate costs: Court filing fees ($50-$400), executor compensation (typically 2-4% of estate value), attorney fees (2-4% of estate or hourly at $250-$500/hr), appraisal fees, and accounting fees. The total cost typically runs 3-7% of the gross estate value. On a $500,000 estate, that is $15,000-$35,000 in fees that your beneficiaries do not receive.

What makes your estate public: When a will enters probate, it becomes a public court document. Anyone can look up the will and see who inherited what, the total estate value, and the names and addresses of beneficiaries. This is why celebrities and high-net-worth individuals almost always use trusts — and why you should consider one if privacy matters to you.

Assets that avoid probate regardless of whether you have a trust: jointly titled property with right of survivorship, retirement accounts with named beneficiaries (401k, IRA), life insurance payouts to named beneficiaries, payable-on-death (POD) bank accounts, and transfer-on-death (TOD) brokerage accounts. Structuring your assets to pass outside probate is one of the simplest estate planning strategies. For more on life insurance as an estate planning tool, see our life insurance guides.

Beneficiary Designations: The Documents That Override Your Will

This is the estate planning detail that catches the most families off guard: beneficiary designations on financial accounts override your will. If your will says "everything goes to my spouse" but your 401(k) still names your ex-spouse as beneficiary from 10 years ago, your ex-spouse gets the 401(k). The will does not matter — the beneficiary form controls.

Accounts that pass by beneficiary designation (not by your will):

• Retirement accounts: 401(k), 403(b), IRA, Roth IRA — beneficiary form filed with the plan custodian controls
• Life insurance: Death benefit pays to the named beneficiary, not to the estate (unless the estate is named as beneficiary, which is almost never advisable)
• Bank accounts: Payable-on-death (POD) designations transfer account balances directly to the named person
• Brokerage accounts: Transfer-on-death (TOD) designations work the same way for investment accounts
• Annuities: Beneficiary designations in the annuity contract control distribution

The action step is straightforward: review every beneficiary designation on every financial account at least annually. After any marriage, divorce, birth, or death, update them immediately. A 15-minute review of beneficiary forms can prevent years of legal disputes.

State Estate Taxes and Federal Exemption Thresholds

The federal estate tax exemption for 2024 is $13.61 million per person ($27.22 million for married couples using portability). This means fewer than 0.1% of estates owe federal estate tax. However, 12 states plus the District of Columbia impose their own estate taxes with much lower thresholds:

• Oregon: $1,000,000 threshold — the lowest in the nation. Estates above $1M owe 10-16%
• Massachusetts: $2,000,000 threshold with a cliff — the entire estate is taxed if it exceeds $2M, not just the amount over $2M
• Connecticut: $13.61M (mirrors federal exemption)
• New York: $6,940,000 with a cliff similar to Massachusetts
• Washington state: $2,193,000 threshold with rates of 10-20% (highest maximum rate in the country)
• Illinois: $4,000,000 threshold
• Maryland: $5,000,000 — also one of two states (with New Jersey grandfathered) that imposes both an estate tax and an inheritance tax

Important: the federal exemption is scheduled to drop to approximately $7 million per person in 2026 when the Tax Cuts and Jobs Act provisions sunset, unless Congress acts. If your estate is in the $7-$14 million range, this pending change makes estate tax planning especially urgent. Work with an estate attorney and a qualified financial advisor to structure your plan before the exemption decreases.

Guardianship Designations for Minor Children

If you have children under 18, naming a guardian in your will is arguably the most important thing your estate plan does. Without a guardian designation, a court decides who raises your children — and the process involves hearings, social worker evaluations, and potential disputes among family members. The court's choice may not be the person you would have chosen.

Practical guidance for choosing a guardian:

• Name the person, not the couple: If you name "John and Jane Smith" and they later divorce, the designation becomes ambiguous. Name one individual as primary guardian
• Name an alternate: If your first-choice guardian is unable or unwilling to serve, having a named alternate avoids a court appointment
• Separate financial responsibility: Consider naming a different person as trustee of your children's inheritance than the person raising them. This provides financial oversight and removes the temptation to mismanage funds
• Have the conversation: Always discuss guardianship with your chosen person before naming them. Ensure they are willing and able to take on the responsibility
• Consider logistics: A guardian who lives across the country means your children change schools, leave friends, and adjust to a new environment during their most vulnerable time

Digital Estate Planning: Passwords, Accounts, and Crypto

Your digital life represents real value and real access concerns that traditional estate documents do not adequately address. A complete estate plan in 2026 must account for digital assets:

• Password management: Use a password manager (1Password, Bitwarden, LastPass) and ensure your executor or trusted person has the master password or recovery key. Store this information securely — not in the will itself (which becomes public)
• Email and social media: Google's Inactive Account Manager and Facebook's Legacy Contact let you designate someone to access or memorialize your accounts. Set these up now
• Cryptocurrency: Crypto wallets require private keys or seed phrases for access. Without them, the assets are permanently lost. Store backup seed phrases in a fireproof safe or safety deposit box and include instructions in a separate letter to your executor
• Online financial accounts: Document all bank, brokerage, insurance, and retirement account logins. Your executor needs these to identify and manage every asset
• Subscriptions and recurring payments: List active subscriptions so your executor can cancel them and stop charges to your accounts
• Digital businesses: If you earn income from websites, apps, online stores, or content platforms, include these assets in your trust or will with clear instructions for management or sale

The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), adopted in most states, gives executors and trustees legal authority to access digital assets — but only if the account holder has authorized it. Set up legacy contacts and digital asset provisions now. For protecting your digital accounts during your lifetime, see our identity theft protection guide.

Estate Planning Checklist by Age Group

In Your 20s: The Foundation

• Healthcare power of attorney — essential the moment you turn 18, because your parents can no longer make medical decisions for you
• Durable financial power of attorney — designates someone to handle bills and accounts if you are incapacitated
• Basic will — names beneficiaries for any assets you own and addresses personal property
• Review beneficiary designations on any employer retirement accounts or life insurance

In Your 30s-40s: Building the Structure

• Update will to include guardian designations for minor children
• Consider a revocable living trust if you own a home, have assets exceeding $200,000, or want to avoid probate
• Review and update all beneficiary designations after marriage, divorce, or birth of children
• Ensure adequate life insurance to protect dependents — typically 10-15x annual income
• Create a digital asset inventory with access instructions
• Address guardianship for children and separate financial trustee if appropriate

At 50 and Beyond: Optimizing and Protecting

• Review estate tax exposure — especially if your estate approaches state thresholds (Oregon $1M, Massachusetts $2M, New York $6.94M)
• Update powers of attorney — your agents may have changed in suitability over the decades
• Consider long-term care planning and how it interacts with your estate
• Evaluate irrevocable trusts for Medicaid planning or estate tax reduction if applicable
• Ensure retirement account beneficiaries reflect current wishes, especially after the SECURE Act's 10-year distribution rule
• Review and update every 3-5 years, or after any major life event

DIY Estate Planning vs Hiring an Attorney

When DIY works: You are single or married with straightforward finances, have no minor children or have already decided on guardianship, own property in only one state, have an estate well below state estate tax thresholds, and are comfortable following detailed instructions without legal guidance.

When you need an attorney: You have a blended family, own a business, have property in multiple states, have an estate approaching state or federal tax thresholds, need special needs trust planning, want an irrevocable trust for Medicaid or tax planning, or have complex beneficiary situations. The cost of an attorney is a fraction of what probate, tax penalties, or family litigation would cost if the plan is done incorrectly. For finding a qualified professional, see our guide to choosing a financial advisor who can coordinate with your estate attorney.

When to Update Your Estate Plan

An estate plan is not a one-time project. It requires updates every 3-5 years on a routine basis, and immediately after any of these events:

• Marriage or divorce: Update your will, trust, beneficiary designations, and powers of attorney. In many states, divorce automatically revokes provisions for an ex-spouse in a will — but not beneficiary designations on retirement accounts or life insurance
• Birth or adoption of a child: Add guardianship designations, create or update a children's trust, adjust life insurance coverage
• Death of a beneficiary, executor, or agent: Replace the named person immediately to avoid a gap in your plan
• Significant change in assets: Receiving an inheritance, selling a business, buying real estate, or a major increase or decrease in net worth
• Moving to a different state: Estate and trust laws vary significantly by state. A plan valid in California may not work as intended in Texas. Have your plan reviewed by an attorney licensed in your new state
• Changes in tax law: The federal estate tax exemption changes, state estate tax thresholds adjust, and new rules like the SECURE Act alter retirement account distribution requirements
• Change in relationships: If your named executor, trustee, guardian, or power of attorney agent is no longer someone you trust or is no longer capable, update immediately

For broader financial planning strategies, see our personal finance guides and insurance resources for protecting your assets during your lifetime.

Frequently Asked Questions About Estate Planning

Do I need a will or a trust?

Most people need at least a will. You may also need a revocable living trust if you want to avoid probate (3-7% of estate, 6-18 months), keep your estate private, own property in multiple states, or have a complex family situation. A will costs $300-$1,000; a trust costs $1,500-$3,000. If your estate is under $500,000 with straightforward beneficiaries, a will alone is usually sufficient.

How much does estate planning cost?

DIY tools cost $35-$599 (Nolo, LegalZoom, Trust & Will). An estate attorney charges $1,500-$5,000 for a complete plan including will, trust, and powers of attorney. Simple wills alone cost $300-$1,000 with an attorney. The cost of not planning is far higher — probate alone costs 3-7% of estate value.

What happens if I die without a will?

Your state's intestacy laws determine who inherits. Typically your spouse receives 50-100% depending on the state and whether you have children. Without relatives, the state takes everything. A court also appoints your children's guardian, and the probate process is longer and more expensive without a will to guide it.

What is the difference between a will and a trust?

A will takes effect after death and must go through probate court. A revocable living trust is created during your lifetime, holds your assets, and passes them directly to beneficiaries without probate. Wills are public, trusts are private. Wills cost less upfront but lead to probate expenses. Trusts cost more but avoid probate entirely.

What is a power of attorney?

A power of attorney authorizes someone you choose to make decisions on your behalf if you become incapacitated. A durable financial POA lets your agent manage finances — pay bills, handle investments, file taxes. A healthcare POA lets your agent make medical decisions. Both should be "durable" so they remain effective if you become mentally incapacitated.

At what age should I do estate planning?

Every adult 18+ should have powers of attorney and a basic will. In your 20s, focus on healthcare and financial POAs. In your 30s-40s, add guardianship for children and consider a trust. At 50+, address estate tax planning and retirement beneficiaries. Update every 3-5 years or after major life events like marriage, divorce, births, or significant asset changes.