Estate Planning Basics: What You Need Before Something Goes Wrong

Most people think estate planning is something you do when you're old and wealthy. This is a dangerous misconception. If you have children, a home, a retirement account, or any assets at all — you need basic estate planning documents in place. Without them, the state decides what happens to your assets, your minor children, and your medical care if you're incapacitated.

The good news: basic estate planning is neither complicated nor expensive. Here's what you need and how to get started.

Why This Can't Wait

Estate planning failure has real consequences:

No will = state decides everything: If you die without a will (intestate), your state's default inheritance laws determine who gets your assets. This may not match your wishes. A common surprise: some states give your surviving spouse only a fraction of your estate — the rest goes to your parents or siblings.

No guardian designation: If you have minor children and no will designating a guardian, a court will appoint one. This can lead to family conflict and a months-long legal process while your children are in limbo.

Probate: Assets without clear beneficiary designations go through probate — a court-supervised process that can take months or years, cost 3–7% of the estate in legal fees, and make your finances part of the public record.

No healthcare directive = family conflict: If you're incapacitated and haven't specified your medical wishes, family members may disagree about your care, leading to painful and costly legal disputes.

Document 1: Last Will and Testament

A will is the foundation of any estate plan. It specifies:

• Who receives your assets
• Who serves as guardian for your minor children (the most important provision for parents)
• Who serves as executor (the person who carries out your instructions)

What a will does NOT do: it doesn't avoid probate (most assets still go through it), and it doesn't control assets that have designated beneficiaries (retirement accounts, life insurance, jointly-held property).

You can create a valid will using online services like Trust & Will or LegalZoom for $100–$200, or work with an estate attorney for $300–$600 for a simple will. Requirements vary by state, but generally you need to be 18+, of sound mind, sign in front of witnesses, and have witnesses sign.

Handwritten (holographic) wills are valid in about half of US states but are more likely to be contested. If you go this route, follow your state's exact requirements.

Document 2: Beneficiary Designations

This is where most people make their biggest estate planning mistake. The following assets pass directly to named beneficiaries and completely bypass your will:

• 401(k) and IRA accounts
• Life insurance policies
• Payable-on-death (POD) bank accounts
• Transfer-on-death (TOD) brokerage accounts
• Jointly held property with right of survivorship

Review your beneficiary designations today. Log into every retirement account, life insurance policy, and bank account and verify who is listed. Common problems:

• Ex-spouse still listed: Divorce does not automatically remove a beneficiary designation. Your ex can receive your retirement account even if your will says otherwise.
• Deceased beneficiary: If a beneficiary predeceases you and no contingent beneficiary is named, the assets may go through probate.
• No beneficiary listed: Assets default to your estate (and go through probate).

Updating beneficiaries is free and takes 10 minutes per account. Do it today.

Document 3: Durable Power of Attorney (Financial)

A financial power of attorney designates someone to handle your finances if you're incapacitated — paying bills, managing investments, handling real estate. Without one, your family may need to go through a court process (conservatorship) to manage your affairs, which is expensive and time-consuming.

"Durable" means it remains effective even if you become mentally incapacitated. Make sure you specify "durable" — a regular power of attorney terminates upon incapacity, which defeats the purpose.

Choose someone you trust completely. This person will have significant legal authority over your finances.

Document 4: Healthcare Power of Attorney (Healthcare Proxy)

Similar to a financial POA, a healthcare POA designates someone to make medical decisions on your behalf if you can't. This is separate from your living will.

Without a healthcare POA, medical decisions may be made by family members in a legally ambiguous way — or by the hospital's default hierarchy (spouse, then adult children, then parents, etc.) which may not match your wishes.

Document 5: Living Will (Advance Healthcare Directive)

A living will specifies your wishes for end-of-life care — whether you want life-sustaining treatment in terminal situations, your preferences on resuscitation, artificial nutrition, and organ donation.

This is not a pleasant document to write. It is an immensely valuable gift to your family. Clear written instructions prevent family members from having to make impossible decisions under grief, and prevent conflict between family members who disagree about what you would have wanted.

Many states have their own advance directive forms. Your state's bar association website typically provides free templates.

When to Consider a Trust

A revocable living trust offers some advantages over a will:

• Avoids probate: Assets in a trust pass directly to beneficiaries without court involvement
• Privacy: Trusts are not public records; wills are
• Incapacity planning: A trust provides a smooth mechanism for managing your assets if you become incapacitated
• Multiple-state real estate: If you own property in more than one state, a trust avoids having to probate in each state

Trusts cost more to set up ($1,000–$3,000+ with an attorney) and require you to actually retitle your assets into the trust's name (people often forget this step).

For most people with straightforward situations, a well-crafted will with proper beneficiary designations accomplishes the essentials. Trusts become more valuable with significant assets, real estate in multiple states, or complex family situations (blended families, special needs dependents).

Getting It Done

The most common estate planning mistake is waiting. Here's the minimum viable starting point:

1. This week: Review and update all beneficiary designations on retirement accounts and insurance
2. This month: Use an online service or estate attorney to create a will and healthcare directive
3. Within 90 days: Add a financial power of attorney and healthcare power of attorney

Cost to do it all: $200–$1,500 depending on complexity and whether you use an attorney or online service. The cost of not doing it can be measured in family conflict, court fees, and years of delays.

Review your estate plan every 3–5 years or after major life events: marriage, divorce, birth of a child, death of a beneficiary, significant asset changes.

None of us like to think about these scenarios. Creating these documents is one of the most responsible things you can do for the people who depend on you.