For many people, estate planning is a chore that can’t get done fast enough. However, a well-executed estate plan can provide peace of mind for you and the people you care most about. It helps you feel confident that your wishes will be followed, no matter what might happen regarding your health. For your loved ones, it protects them from legal fees and hassles after you’re gone. Finally, estate planning gives you a chance to think about the legacy you want to leave behind—whether it’s funding your grandchildren’s college educations, helping your children live comfortably, or donating to your favorite charity.
What's an estate plan?
Your “estate” refers to all of your assets—most commonly, the things you own, such as your car, your home, your savings account, and your belongings. An “estate plan” is a set of instructions detailing what your family and friends should do with your possessions if you become ill or after you pass on. It makes your wishes clear, outlining what belongings or assets go to which people and in what amounts. An estate plan can also help your loved ones avoid tax burdens, legal fees, or court costs.
Estate plans often include:
- A will or a trust: A legal document that meets the requirement of your state laws.
- A list of beneficiaries: The people who you want to inherit your assets.
- Letter of intent: A document that defines how to split up your assets.
- Power of attorney: A person you choose to make decisions on your behalf if you are unable.
- Healthcare power of attorney: A person you want to make decisions about your health if you cannot.
What happens if you don't have an estate plan?
If you die without a will or estate plan, your state courts decide how your assets will be handled based on the laws in your state in a process called probate. It can be messy, time-consuming, and expensive. Probate can take up to two years to fully complete. During that time, the whole estate is frozen—nothing can be sold or distributed without the court’s approval. Additionally, probate is a public process. This means people, regardless of their relationship with the deceased, may be able to petition for a distribution from the estate.
5 tips for leaving a meaningful—and easy-to-manage—legacy
If you want to ensure your wishes are honored, while making it easy for your loved ones to manage your estate after you pass, consider these five tips:
- Create a trust in addition to a will. A will needs to go through the probate process. Talk to an attorney or financial advisor about a “revocable living trust.” A trust avoids the probate process and prevents court control of your assets. When you put your assets in a revocable living trust you are transferring ownership of the assets to the trust. But, as the manager of the trust, you can buy, move, sell, or change assets however you want. You can even cancel the trust. Having a trust will make settling your estate quicker and easier for the people you care about.
- Prepare loved ones for what’s in the will. In movies, the reading of a will is often a dramatic scene where the characters discover unexpected secrets. In real life, it’s often better to let people know in advance about what’s in your estate plan. While you’re alive, you can explain your choices. You don’t have to share every detail, but setting expectations will help your loved ones prepare for their futures.
- Tell someone you trust where you store your documents. After someone dies, it is often difficult to find where they kept their important documents, deeds, safety deposit keys, titles, and other important items. Be sure that one or two people you trust know where things are kept in your home or office.
- Put your funeral preferences in your estate plan. Want to have a church funeral where they play your favorite hymns and read scripture? Want to be buried in a forest? Maybe you want to be shot up in fireworks or even into space? Or maybe you want no service at all. Give your friends and family an idea of what you want so they don’t have to guess what kind of send-off you’d prefer.
- Don’t put off your estate planning. Once you get started, estate planning is a fairly straightforward process. It generally takes just a few weeks to get everything set up. While there will be decisions to make along the way, you can always change the details in the future. Once your estate plan is in place, you can rest easy knowing that you and your loved ones will be taken care of.
We recommend consulting an attorney or financial advisor about what estate planning options make the most sense for your circumstances and goals. The AARP Foundation offers a free Personal Estate Planning Kit on its website, and the American College of Trust and Estate Counsel website hosts a variety of educational articles and videos.