Estate planning sounds like something only wealthy people need. It is not. Anyone with assets, children, or a preference about what happens when they die should have an estate plan. Without one, the state decides who gets your money, who raises your kids, and who makes medical decisions for you if you cannot. Here is what you actually need.
What Is Estate Planning?
Estate planning is the process of deciding what happens to your money, property, and responsibilities after you die or become incapacitated. It involves creating legal documents that express your wishes. Without these documents, your estate goes through a court process called probate, which can be slow, expensive, and public.
An estate plan is not just for after you die. It also covers what happens if you become seriously ill or injured and cannot make decisions for yourself.
The Four Core Estate Planning Documents
1. Will (Last Will and Testament)
A will is a legal document that states who receives your property when you die. It can also name a guardian for minor children — which is one of the most critical reasons for parents to have a will.
In your will, you name an executor: the person responsible for carrying out your wishes, managing the estate, paying debts, and distributing assets. Without a will, a court appoints an administrator (often a family member) and distributes your assets according to your state’s intestacy laws, which may not match your wishes.
A will does not avoid probate. Assets that pass through a will still go through the probate court process, which takes months to years and involves fees.
2. Revocable Living Trust
A revocable living trust holds your assets during your lifetime and distributes them after your death — without going through probate. You are typically the trustee while you are alive, meaning you maintain complete control of the assets. You name a successor trustee who takes over when you die or become incapacitated.
The main advantage of a trust is avoiding probate. Assets held in a trust transfer to beneficiaries quickly, privately, and without court involvement. The main disadvantages are cost (a trust costs more to set up than a will) and the need to “fund” the trust by retitling assets into the trust’s name.
A trust is most valuable if you own real estate, have assets in multiple states, or want to avoid the delays and public nature of probate.
3. Durable Power of Attorney
A durable power of attorney (POA) names a person to manage your financial affairs if you become incapacitated. “Durable” means it remains valid even if you become mentally or physically unable to act. Without one, your family may need to go to court to get a conservatorship to manage your finances — a slow and expensive process.
Your agent under a financial POA can pay bills, manage investments, file taxes, and handle financial transactions on your behalf. This is a document with significant power, so choose someone you trust completely.
4. Healthcare Directive (Advance Directive)
A healthcare directive has two components. First, a healthcare proxy (or healthcare power of attorney) names someone to make medical decisions for you if you cannot. Second, a living will states your wishes about specific medical treatments, such as life support, resuscitation, and organ donation.
Without a healthcare directive, medical providers may be required to take extraordinary measures to keep you alive regardless of your wishes, and your family may disagree about what you would have wanted.
Beneficiary Designations
Many assets pass outside of a will or trust through beneficiary designations. These include life insurance policies, 401(k) accounts, IRAs, and bank accounts with payable-on-death (POD) designations.
Beneficiary designations override anything written in your will. If your will says your estate goes to your children but your 401(k) still lists an ex-spouse as beneficiary, the ex-spouse gets the 401(k). Review and update beneficiary designations after every major life event: marriage, divorce, death of a beneficiary, or birth of a child.
Do You Need a Will or a Trust?
Most people need a will at minimum. A will ensures your wishes are documented, names a guardian for minor children, and provides legal direction for distributing your assets.
You should consider a trust if:
- You own real estate, especially in multiple states.
- You want to keep your affairs private (probate is public record).
- You want to provide for beneficiaries who cannot manage money themselves (children, people with disabilities).
- You have a blended family with complex inheritance wishes.
- You want to avoid the time and cost of probate for your heirs.
What Happens Without an Estate Plan?
If you die without a will (called dying “intestate”), your state’s laws determine who inherits your assets. In most states, this means your spouse and children, but the division may not match what you would have chosen. If you are unmarried and have no children, assets may go to parents or siblings rather than a partner or close friend.
If you have minor children and no will naming a guardian, a court will appoint one — and it may not be who you would have chosen.
How to Get Started
For a basic estate plan, you have two main options:
- Online legal services: Sites like Trust & Will, LegalZoom, and Fabric allow you to create a will, healthcare directive, and POA online for a few hundred dollars. This is appropriate for straightforward situations.
- Estate planning attorney: For complex situations — trusts, business ownership, blended families, large estates — hire an attorney. A basic will and healthcare directive from an attorney typically costs $300 to $500. A revocable living trust package usually costs $1,000 to $3,000.
The cost of not planning is always greater than the cost of planning. Start with a will and healthcare directive even if you do nothing else.