Will and Estate Planning
Sorting out how assets will be distributed after someone’s death is a chore many people put off, often until it’s too late.
No matter what your financial circumstances, determining what happens with your money and property after you die is an important part of your financial foundation, as well as your family’s.
Estate planning will bring peace of mind, avoid a lengthy probate process, and even save money on taxes. It will also help you get a strong handle on your finances and be a framework for decisions you might otherwise not think about. Reviewing your assets, and debts, and considering how they will live on after you are gone, will help you build better financial mobility and security for your family.
This page is a guide to wills and estate planning, answering frequently asked questions about wills, probate, trusts and the process. It also includes an estate planning checklist.
Let’s take a look at estate planning and what it means for people at any stage of life or income level.
What Is Estate Planning?
Estate planning may sound like something for wealthy people, but it’s actually for anyone who’s lived life as an adult, building up assets and debt. The purpose is to organize financial affairs, so that there’s a plan for your money after you die.
Dying without a will is called “intestate,” and means that the probate court will determine how your money and property are divided, how remaining bills are paid and who will make decisions. The process will take much longer, involve more fees, and may not turn out the way you’d like.
Estate planning also isn’t just about writing a will. It means that you decide who your executor, or personal representative, will be. That person makes sure your plan is followed and makes necessary decisions during the process.
You also decide, while you are still able, what will happen if you become incapacitated and can’t make financial, legal, or medical decisions.
A thorough estate plan will have a strategy for money, property, your medical care, end-of-life wishes, and even how your pets are cared for.
Who Has a Will and Estate Plan?
A Gallup poll found that less than half of Americans over 18 have a will. This statistic hasn’t budged for decades, the poll shows. The older someone is, and the more money they have, the more likely they are to have a will and estate plan. The poll shows percentage of people in an age group who have a will:
- 65 and older, 76%
- 50-64, 53%
- 30-49, 36%
- 18-29, 20%
Annual household income and percentage who have a will:
- $100,000 or more, 61%
- $40,000-$99,999, 49%
- Less than $40,000, 30%
Legal Documents Forming Part of the Estate Process
Every estate plan is different, depending on financial and personal circumstances and state laws. Despite these differences, there are legal documents involved in the process that everyone should understand as they plan.
Let’s take a look at wills, trusts and power of attorney.
Once known as a last will and testament, a will is a legal document that lays out how assets will be distributed upon death. It includes an executor, or personal representative, who will manage the distribution, and the beneficiaries, to whom the assets are distributed.
It’s not necessary to hire a lawyer to write a will if your estate is not complicated. You can buy a kit or find a form online. Almost every state requires that you be 18 or older for your will to be legally valid. Some states require that wills be notarized, and most that they be signed by at least one witness. Learning your state’s rules is part of the estate planning process. Googling “how do I write a will in [state]” should bring up this information. Be sure that the source is credible, and the information is up to date and covers all the bases.
Your estate will go to probate with or without a will, but the process will be faster and less expensive if there is one. A will also ensures your assets go where you want them to, instead of allowing a probate court to decide.
The probate judge determines if a will is valid, so be sure to follow all your state’s rules when creating it. Be sure that family members know where your will is, or that it’s easy to find when needed.
A trust is a legal contract that allows you to distribute your assets without your estate going through probate. A trustee holds your assets, which can include money, property, jewelry, or anything of value, and they are distributed according to your wishes. This could mean that if money or other property is going to children, it can be held until they reach a certain age.
A living trust is set up and in effect before you die; a testamentary trust goes into effect after. Either way, a trust becomes irrevocable upon death, which means it can’t be changed. It protects your assets from creditors, speeds the process of distributing them without probate and allows some assets to not be taxed.
There are some assets that can’t be put into an irrevocable trust. Aside from federal rules, each state also has rules. You don’t have to be wealthy or have a complicated estate to set up a trust, but it’s worthwhile to hire an attorney to help.
Power of Attorney (POA)
Giving power of attorney (POA) to another person means they can make legal, financial, or medical decisions for you. This is done with a legal document that is included in online estate planning kits, or through an attorney. POA can be limited to a specific purpose, such as for financial or medical decisions.
You identify a POA agent in the legal document, and their authority goes into effect when you are no longer able to act on your own behalf. A court may also give someone power of attorney if you can’t manage your legal or financial affairs but haven’t designated one.
Useful Documents to Gather Before Estate Planning
Before you begin estate planning, gather all the documents you will need. These are anything that has information about bank and retirement accounts, insurance, property, and other assets. It also includes what you owe. Before you plan your estate, you must find all your debts, so it’s clear who, besides your beneficiaries, may be entitled to your money after you die.
Documents you will need include those identifying:
- Life insurance policies
- Retirement accounts, such as 401(k), IRA
- Investment accounts
- Pension and Social Security accounts
- Health savings accounts
- Savings and checking accounts
- Mortgage and home equity accounts and property deeds
- Auto loans and titles
- Ownership documentation for any substantial property or asset
- Loans, credit cards, medical debt, and any other outstanding debt
Estate Planning Checklist
There is a lot involved in deciding what will happen to your money and property after you die, so it’s important to follow an estate planning checklist. While everyone’s situation is different, the checklist items listed cover most of what anyone needs.
1. Take Inventory of Your Assets and Possessions
Make a list of all your accounts (savings, checking, retirement, investment), property (including vehicles), and valuable possessions (collectibles, jewelry, artwork).
Be sure to include possessions that may not have monetary value, but do have sentimental value or are family keepsakes. You may have a dining room set that once belonged to your grandmother, for instance, that’s of little value but that family members will squabble over.
2. Make a List of Your Debts
Your debts will also have to be dealt with in your estate, so an inventory of what you owe is also necessary. Gather information about:
- Auto loans
- Credit card debt
- Personal or other loans
- Home equity line of credit (HELOC)
- Any other type of debt or credit line
3. Gather Your Memberships
Some organizations – unions, professional associations, social membership organizations – offer accidental life insurance or a death benefit to members’ beneficiaries. Check with any organizations you’re a member of to see if you have this benefit. If you do, add it to the list. Be sure any beneficiary form you’ve filled out is consistent with beneficiary information on your will.
4. Review Your Retirement Accounts
Balances in 401(k)s, IRAs and other retirement accounts go to beneficiaries listed with the account when the account-holder dies. Check to make sure the beneficiaries you have listed are up to date.
Some pensions may also have this benefit. If you are eligible for a pension, check to see if it applies to you, and what you have to do to allow your spouse or children to receive benefits.
5. Consult With an Estate Attorney and/or Financial Planner
The Internal Revenue Service sets taxes on estates, with the amounts adjusted every year. Each state also has rules, with some charging an additional inheritance tax. There may also be issues regarding your property, accounts or other aspects of your estate that you aren’t aware of. It’s always a good idea to talk to an estate attorney or financial planner when making estate decisions. Many charge a flat fee to do specific work, and they can save you and your heirs money in taxes and fees, as well as avoid possible legal issues or probate delays.
6. List Family Members and Choose Beneficiaries
List all immediate family members, as well as friends and associates who you plan to leave money or property to. Be specific as possible about how property will be divided. If your children or siblings will squabble over certain possessions, don’t leave vague instructions like “household possessions will be divided equally among my children.” While being specific may seem like a lot of work, not doing so can leave a legacy of bad feelings and family division. Be honest with yourself and realistic about family dynamics when you plan bequests.
In most cases, it’s a good idea to be transparent with beneficiaries when you’re planning your estate about your plans regarding bequests.
7. Choose an Executor for Your Estate
Choose an executor, also called a personal representative, who is impartial and won’t be affected by the emotions of the situation.
Your executor will have a lot of duties, including dealing with probate court, managing your wishes, paying your debts, collecting assets, and distributing your bequests to beneficiaries. They don’t have to be an accountant or lawyer, but they should be detail-oriented, honest, and responsible. They will spend a lot of time on the telephone, the computer, and even in court or county offices dealing with forms and information.
You can hire a professional executor if you don’t have a family member or friend who is appropriate.
Most states have laws regarding who can be an executor, including a minimum age, and some require they live in the same state. Check state law for executor rules when making your will.
8. Grant Power of Attorney
You may want to consider granting power of attorney (POA) to someone, called an agent, who can act as a legal and financial decision-maker. You can use POA if you are not incapacitated, but they are often used for those who are no longer able to make their own decisions. If you don’t designate a POA agent, but become incapacitated, a judge may designate one for you.
A POA can be general, or it can be specific to financial matters or health care decisions. If you have a POA for health care, be sure your wishes are clear from the start.
The types of POA are:
- Nondurable: Goes into effect immediately, but ends when you become incapacitated.
- Durable (or immediate): Goes into effect immediately, and continues after you become incapacitated.
- Springing: “Springs” into effect when you are declared incapacitated.
9. Create a Last Will and Testament
A last will and testament, now most often simply called a will in legal references, is the legal document that specifies how your property will be divided. Having one is vital to making the distribution of your property a smooth and fast process.
A will includes:
- How assets will be distributed among family members, friends, charitable or nonprofit organizations, etc.
- Guardians for minor children and pets
- The executor, or personal representative
Many states have rules about how you distribute your money. For example, in some states you can’t disinherit a spouse. Be sure to check your state’s laws to make sure you are distributing property legally.
Be sure, too, that if you are leaving a death benefit or other insurance or retirement benefit to someone in your will, it matches the beneficiary information with the account.
10. Periodically Review Your Estate Planning
One of the most important guidelines for estate planning is that you update it when necessary. As your life, jobs and family change, your estate and the options for distributing it will change as well.
Update your estate plan whenever there’s a significant change in your circumstances (marriage, divorce, child, job change, death of a family member).
Also, set a reminder to review it even when there aren’t life changes. For instance, review it on your birthday every year, or on New Year’s Day. If your children are in their 30s, but your will designates guardians for them upon your death, it means you’ve gone too long without an update.
Additional Tips for Passing Generational Wealth and Retirement Planning
It’s never too soon to plan an estate, or for retirement. InCharge Debt Solutions has resources that can help, no matter what your financial standing may be.
Adding an Adult Child to Your Home Title. Many parents are tempted to add their children to their home’s title before they pass on. This article explains why that may not be a good idea.
Bequeathing or gifting your home? Is it better for parents to bequeath a home to their children, rather than gift it? Financial expert Liz Westin explains the pros and cons.
How to Avoid Mistakes in Deeding Property to Children. When it comes to transferring property to children, do it without giving the tax man a big piece.
What Happens to Debt After You Die. The goal should be to leave the next generation property and assets they can build on, not a mountain of debt. Learn how to pay down or eliminate credit card debt, medical debt, and other bills.
About The Author
Maureen Milliken writes about personal finance and debt relief topics for InCharge Debt Solutions. She started as the “Business Beat” columnist for the now-defunct Haverhill (Mass.) Gazette and has been writing about finance, real estate and business for more than 30 years. She also is is the author of three mystery novels and two nonfiction books.
- Jackson, L. (2023, August 21) Estate Planning Guide and Checklist for 2023. Retrieved from https://www.ncoa.org/adviser/estate-planning/estate-planning-guide-checklist/
- Jones, J. (2021, June 23) How Many Americans Have a Will? Retrieved from https://news.gallup.com/poll/351500/how-many-americans-have-will.aspx
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