What Is Estate Planning? A Practical Will and Estate Planning Checklist

Quick Answer: What Is Estate Planning?

Estate planning is the process of arranging your possessions, legal papers, and financial and medical decisions in such a way that they can be handled per your wishes. Estate planning typically consists of a will, trusts, designation of beneficiaries, power of attorney, and healthcare proxy. The components may vary subject to the situation of the individual and the jurisdiction.

Estate planning protects your family from financial uncertainty. It manages your property and personal decisions during your lifetime and after death.

A comprehensive estate plan includes more than a basic will. It utilizes trusts, power of attorney documents, healthcare proxies, and beneficiary designations.

The American Bar Association emphasizes reviewing your asset ownership alongside your will. Joint titles and trusts bypass probate court completely.

Estate and probate laws vary by state and jurisdiction. Therefore, you should always secure local legal counsel to protect your assets.

What Is Estate Planning?

So, what is estate planning beyond writing a will?

It is a coordinated process for organizing your affairs and deciding what should happen to your assets and certain decision-making responsibilities.

A basic estate plan may address:

• Who should receive your property after your death
• Who should manage your estate
• How certain assets should be transferred
• Who should make financial decisions if you cannot
• Who should make healthcare decisions when you cannot communicate
• Whether a trust is appropriate
• Who should care for minor children, where applicable
• How beneficiary designations should align with the overall plan

The exact documents you need depend on your family, assets, goals, and local law.

Estate Planning Checklist

Use this checklist as a starting point:

• List your assets and debts
• Identify your beneficiaries
• Understand what your will does
• Choose an executor or personal representative
• Consider guardianship provisions
• Review beneficiary designations
• Consider whether a trust is appropriate
• Plan for financial incapacity
• Plan for healthcare decisions
• Account for business and digital assets
• Execute documents correctly
• Store documents securely
• Tell appropriate people where documents are located
• Review your plan after major life events
• Seek legal advice when circumstances require it

1. Make An Inventory Of Your Assets And Debts

The first step in understanding what is estate planning is understanding what you actually own and owe.

Create an inventory of your:

• Real estate
• Bank accounts
• Investment accounts
• Retirement accounts
• Life insurance policies
• Vehicles
• Valuable personal property
• Business interests
• Digital assets
• Cryptocurrency, where applicable
• Loans and other significant debts

Record where important documents are held. You do not necessarily need to include sensitive account credentials in your estate documents. Instead, establish a secure way for the appropriate person to locate essential information when needed.

This inventory gives your lawyer a clearer picture of your estate and can reveal issues that a will alone may not address.

2. Identify Your Beneficiaries

Next, decide who you want to benefit from your estate.

Beneficiaries may include:

• A spouse or partner
• Children
• Other relatives
• Friends
• Charitable organizations
• A trust

Do not assume that naming someone in your will controls every asset you own.

Certain life insurance policies, retirement accounts, and financial accounts can transfer according to beneficiary designations rather than the terms of your will.

The ABA specifically warns that outdated or inconsistent beneficiary designations can undermine an otherwise carefully prepared estate plan. [Source: American Bar Association]

Review both primary and contingent beneficiaries where applicable.

3. Understand What Your Will Does

Third, it is important to understand what your will is about. A will generally explains how property covered by the will should be distributed after death. It can also name an executor and, where permitted, address guardianship of minor children.

However, what is estate planning if a will does not control everything?

This is where many people misunderstand the process.

A will generally does not control assets that pass through certain beneficiary designations or ownership arrangements. Jointly owned property with survivorship rights, for example, may pass according to the ownership arrangement rather than the will.

Your jurisdiction also determines the formal requirements for creating and signing a valid will. These may include specific witnessing or other execution requirements.

The ABA recommends following applicable formalities carefully because mistakes can create expensive disputes. 

4. Choose An Executor Or Personal Representative

Your executor, sometimes called a personal representative, may have significant responsibilities after your death.

Depending on local law and the circumstances of the estate, those duties can include:

• Locating and securing assets
• Identifying debts and expenses
• Handling estate administration
• Communicating with beneficiaries
• Completing required filings
• Distributing estate property

Choose someone trustworthy, organized, and willing to take on the responsibility. Also, consider naming an alternate in case your first choice cannot or does not want to serve.

5. Consider Guardianship Provisions

If you have minor children, discuss guardianship planning with a wills and estates lawyer.

A will may allow you to nominate a guardian, depending on local law. That nomination does not necessarily mean the person automatically assumes guardianship. Courts and applicable laws may govern the final appointment.

Basically, the important point is to address the issue rather than leave your family guessing about your preferences.

6. Review Your Beneficiary Designations

This step deserves separate attention because it is frequently overlooked.

Review the beneficiary designations on applicable:

• Life insurance policies
• Retirement accounts
• Annuities
• Payable-on-death accounts
• Transfer-on-death accounts
• Other accounts with beneficiary arrangements

Make sure the designations match your current estate plan. For instance, the ABA explains that these assets may pass outside probate and outside the terms of a will.

7. Consider Whether You Need A Trust

A trust authorizes a trustee to manage property for beneficiaries. A revocable living trust handles your assets during your lifetime. It then passes those assets on after your death.

The Consumer Financial Protection Bureau provides clear guidance on these arrangements. Funded trusts can eliminate the need for probate court.

However, you must exercise caution when setting up these entities. Do not set up a trust merely based on advertisements. Avoid companies that promise easy tax evasion or quick probate bypasses.

Trust taxation can be complicated. The IRS recognizes different types of trusts and different tax treatments. A trust does not automatically create a tax benefit. 

8. Plan For Financial Incapacity

Estate planning covers more than just your final wishes. It also includes vital choices for your daily life.

Specifically, a financial power of attorney (POA) is a crucial legal document. This designation grants a person you trust the authority to manage your financial matters. They step in if you can no longer handle these decisions yourself.

However, the exact scope and effect vary significantly between different documents. These parameters also depend directly on your local jurisdiction’s laws.

Consequently, you must ensure you select a responsible and trustworthy agent. To protect yourself, the Consumer Financial Protection Bureau suggests implementing security safeguards against potential fraud.

Therefore, you should only appoint a person you trust completely and with whom you feel entirely comfortable.

9. Plan For Healthcare Decisions

Consider the documents available in your jurisdiction for expressing healthcare preferences and appointing someone to make healthcare decisions when you cannot communicate.

The terminology varies. Some jurisdictions use terms such as healthcare directive, advance directive, healthcare power of attorney, or living will.

Do not assume that a document valid in one state or country will have the same effect elsewhere.

10. Account For Business And Digital Assets

Business owners may need additional succession planning for ownership interests, partnerships, corporations, or other business structures.

Digital assets also deserve attention.

Consider whether your estate plan should address:

• Online businesses
• Digital financial assets
• Cryptocurrency
• Domain names
• Digital files
• Intellectual property
• Social media accounts

The legal rules surrounding access and transfer can vary, so professional advice may be appropriate for significant digital or business interests.

11. Execute And Store Your Documents Correctly

A well-drafted document can still create problems if it is not properly executed.

Follow the signing, witnessing, notarization, and other formalities required by applicable law.

After signing, store the original documents securely. Make sure your executor or another appropriate person knows where they are located.

Avoid a storage arrangement that makes the original documents impossible to locate when they are needed.

12. Review Your Estate Plan Regularly

A major part of what is estate planning is keeping the plan current.

Review your documents after major events such as:

• Marriage
• Divorce
• Birth or adoption
• Death of a beneficiary
• Death or incapacity of an executor
• Significant changes in wealth
• Sale or purchase of a business
• Changes in your family relationships
• Moving to another jurisdiction
• Changes in relevant law
• Changes in your wishes

The ABA has highlighted beneficiary designations as an important part of estate-plan reviews, particularly after major events such as divorce.

Who Needs An Estate Plan?

Estate planning goes well beyond the rich and the elderly. Adults may find it beneficial to review their estate-planning agreements anytime they receive substantial property, get a wedding ring, have children, decide to start their own business, or simply want to prepare for possible disability.

• Parents of minor children
• Homeowners
• Business owners
• Married couples
• Unmarried partners
• People with substantial financial assets
• People with family members who need additional support
• Anyone who wants to nominate decision-makers for incapacity

Common Estate Planning Mistakes to Avoid

Even a straightforward estate can become complicated when different parts of the plan conflict.

Common mistakes include:

• Relying on an outdated will
• Forgetting to update beneficiary designations
• Assuming a will controls every asset
• Choosing an executor without discussing the role
• Failing to plan for incapacity
• Ignoring digital or business assets
• Creating a trust without understanding its administration
• Assuming a trust automatically eliminates taxes
• Storing documents where nobody can find them
• Using documents without checking applicable local requirements

What Happens If You Die Without A Will?

If you die without a valid will, you are generally described as dying intestate. Applicable intestacy laws then determine how the estate is distributed.

The outcome may not match your personal wishes.

The exact rules differ by jurisdiction. They may also depend on factors such as whether you have a spouse, children, parents, or other surviving relatives.

This is one reason what is estate planning is a more useful question than simply “Do I need a will?” Estate planning looks at the wider picture.

When Should You Speak With An Estate Planning Lawyer?

Legal advice can be particularly valuable when your circumstances involve:

• A complex or substantial estate
• A blended family
• Minor children
• A family member with a disability
• Business ownership
• Multiple properties
• Assets in different jurisdictions
• Trusts
• Significant tax considerations
• Family conflict
• Concerns about capacity or undue influence

A lawyer can assess how the different pieces of your plan work together rather than treating the will as an isolated document.

Why Understanding Estate Planning Matters

An effective strategy begins with a clear understanding of estate planning. You must learn its definition, benefits, and ultimate purpose.

A valid will is a crucial piece of this process. However, it does not represent the complete picture.

A comprehensive estate plan must account for your diverse real estate properties and beneficiaries.

It must also handle sudden medical incapacitation and establish trusts when necessary. Finally, you must understand the specific local laws where you reside.

Your unique life situation dictates your legal strategy. You might feel unsure about which legal documents you need.

Your estate might contain complex family situations or special property. In these cases, you should consult an estate planning lawyer or a certified planner.