The ultimate estate planning guide from Savology

While the majority of people agree that having an estate plan is important, it may be surprising to learn that less than 40% of individuals aged 35-44 have a will, and only 18% of those between the ages of 18 – 34 have one.

Those in the younger group may not feel they have significant assets to leave their heirs, but there are many other reasons why having an estate plan can be considered important.

Dying without a last will and testament (will) vs. dying with a will in place, as an example is an important consideration.

When a person dies intestate, meaning there was no valid will at the time of passing, their estate moves to probate court. In this process, the laws of the respective state will settle what happens to the estate upon death. Asset beneficiaries are designated by heir succession defined by state law and guardianship nominations for dependent children will go by court appointment, which may go against the unstated wishes of the deceased. An administrator will be assigned to see through the designations; this process can take several months or even a couple of years in complex circumstances. This time consuming and costly process is done without personal preferences or wealth preservation (e.g. taxes) considerations.

When a person dies with a will, an executor, who was appointed in the plan, can begin organizing and distributing the property of the estate in accordance with the directions in the will. The executor files the will in probate, which will assist in transferring legal titles. Probate can assist in translating a will and protecting an estate from contestation. The court will also use instructions in the will for nominating guardians. 

Even though this is a simplified version of the process, when done correctly, an estate plan will guard preferences, care for successors, and defend what you have worked hard to achieve. For this reason, it is also such an integral component of any investment or financial plan.

This estate planning guide will cover the basic elements of an estate plan, and provide answers to some of the common questions you might have such as: What is an estate and an estate plan? How can estate plan be utilized to protect your wealth? What are the key elements of an estate plan? How simple is it to create an estate plan? And more.

What is an Estate Plan? (Overview)

First, let’s take a quick look at what exactly an estate is. An estate is comprised of the money and property of an individual. This would include, for example, retirement accounts, land, personal property, life insurance, and family heirlooms.

Making a plan for what happens to an estate will be unique and dependent on complexities such as: legal jurisdiction of the assets and the owner, wealth amassed, and family composition. An effective estate plan will also cover key considerations for how and when the wealth is distributed, custody of dependents, and end-of-life health care.

Primary considerations of an estate plan may be:

  • State specific laws
  • Beneficiaries
  • Timing of distributions
  • Family dynamics
  • Investment strategy
  • Tax repercussions

There are four primary parts to an estate plan:

  1. Last Will and Testament 
  2. Power of Attorney
  3. Health Care Directives
  4. Trusts

Estate plans may also include separate documents for guardianship nominations or for final disposition instructions, but these could alternatively be incorporated into a comprehensive will.

Part 1. Last Will and Testament

The last will and testament, commonly known as a will, is the most fundamental component of any estate plan. On it will likely rest the majority of directions for passing on a financial and family legacy. A will has organized instructions for the court and heirs to follow after the passing of the creator of the will (also known as the testator). 

A will can be drafted in a number of different ways. They do not have to be complex, and even a simple will is better than not having one at all. A will, in its most basic form, is called a holographic will, in which inheritance wishes are briefly penned and signed by the testator. While a simple will can end up saving you time and money in the short-term, the drawbacks will usually outweigh the benefits in the end. What’s the problem here? Besides the fact that only about half of all states recognize holographic wills as a legal document, any ambiguous text or argument of authenticity may lead to a contest in court. For this reason, it’s recommended to use a professional service – such as an attorney – when drafting a will. 

A thorough will would generally have these same common elements: designation of an executor, naming of beneficiaries and instructions for the distribution of assets, and guardians for any dependent children.  

  • The Executor: The executor is assigned to carry-out, or execute, the instructions of the will. This might include things such as: locating and identifying assets, filing the will in probate court, contacting heirs, distributing any properties, and paying off outstanding debts. No particular expertise is required, though personal familiarity and financial understanding will help. An executor does not, by default, have power of attorney to make decisions that are not explicitly listed in the will – more on this later.
  • Beneficiaries & Distribution: Both people and organizations can be the recipients of an estate. Listing them in a will can guarantee who exactly will receive what. It’s important to be as thorough as possible, especially considering requirements vary frequently across states. Some states require that certain amounts be left to children and/or a spouse. Ensure that any financial accounts that allow selections for beneficiaries, such as life insurance and retirement accounts, are up-to-date and that they do not conflict with what’s written in your will.
  • Guardian Nominations: Surviving minor children after a death need to be provided for by someone that is carefully selected. Doing this through a will can ensure the preferred people take guardianship over them. A guardian takes full-ownership of the dependent (often called a ward in this context); additionally, a conservator can be assigned to manage the assets of the child. Do not let the courts decide either of these appointments without specific and detailed instructions from a will or other estate planning instrument – we all know someone who looks great on paper, but we wouldn’t necessarily want them raising our children. 

Having a will in any form is crucial, but remember that legal requirements vary state-by-state, and precision and clarity are vital.

If there are more intricate instructions, such as conditional inheritances, timing, and naming pets as heirs to property, they will likely fall outside the legal boundaries of a will. Conveying these instructions and other estate matters may face major obstacles without the creation of other key documents.

Part 2. Power of Attorney (POA)

During a legal discussion on end of life and what happens to your affairs after death, there is a significant question of who can legally act in your name. A power of attorney (POA) can be the solution to this problem.

A POA, in its many forms, will give another person (the agent) power to act on your (the principal) behalf, and not just after death. The range of decisions that the agent can make is selected based on circumstances and the type of POA.

While there are many situations in which a POA may be useful, in the context of estate planning there is one primary type to focus on – a Durable Power of Attorney. Without one of these, a court would have to appoint a conservator or guardian to represent you should you become incapacitated. What makes this type of POA unique is wording within the document stating that the POA will remain in effect past incapacitation. The POA may also be made “springing”, meaning that it takes effect only in the event of a disability. What constitutes a disability for this to take effect should also be clearly outlined.

The POA can be customized to fulfill specific needs and wishes outlined in the will. Creating a financially centric POA will grant permission for someone to address items such as: handling of legal matters, filing taxes, managing retirement or life insurance benefits, and entering contracts for services. In contrast, a medical POA grants permission to the agent to oversee health-care arrangements. Combining a medical POA with a living will is often referred to as an advance health care directive.

Part 3. Health Care Directives

An advance directive for health care is a written legal document that outlines health care considerations once incapacitated. This generally includes a few components: a medical power of attorney, a living will, and a health care authorization. 

A living will is unique in that it is used only before death and it does not distribute property; rather, it dictates medical treatments when someone becomes incapacitated. A living will is necessary in the event of a serious injury, terminal illness, or permanent unconsciousness. Creating this legal document specifies personal decisions as to how emergency and end-of-life treatments are to be administered, if at all.

Other state-specific decisions such as a DNR (do not resuscitate) directive or a POLST (physicians order for life-sustaining treatment) can be made here as well. A POLST form elaborates instructions on health care preferences and provides medical orders for what treatments to use or not to use during an emergency.

Without establishing a living will, doctors may be legally obligated to perform certain treatments without patient consent or refusal. If the responsibility to make decisions beyond the living will is placed on a relative through a medical power of attorney, it is helpful if they have this information available beforehand in the form of a health care directive. Otherwise, they may not know your exact stance when it comes to medical issues.  

Finally, a health care directive or medical power of attorney may also include a medical records release, sometimes known as a HIPAA authorization. This release serves to identify which individuals may have access to some or all of your protected health information (PHI). Any person named as a medical power of attorney should be able to access all of your medical records to be able to make the best health decisions for you.

Part 4. Trusts

Through utilizing the above legal documents, the majority of considerations for estate planning are covered. With that being said, a trust may need to be created in other complex circumstances or to use other financial strategies. Trusts come in several variations, which deserve an article strictly for themselves, but here’s a brief outline below. 

With any variation of a trust, there will be:

  1. Beneficiaries, to receive benefit or property from the trust
  2. A trustee, who will typically be selected to oversee the trust
  3. A trustor (or grantor), who establishes and contributes property to the trust

A trust can either be revocable or irrevocable, each having significant financial impacts and advantages.

There can be several advantages to creating a trust: 

  1. The process of transferring property to heirs can be expedited.
  2. Since probate is public information, a trust can provide confidentiality if it is used to bypass probate.
  3. Wealth can be preserved by calculated and timed distributions.
  4. Inheritances can be made conditional, (e.g. Sam doesn’t receive inheritance ‘xyz’ until she graduates college, gets married, or buys a home). 

There are many other uses and advantages to a trust, some of which can be powerful tools to round out an estate plan. For a trust to be effective, it needs to be tailored to specific needs. For more information on a trusts, check out these other helpful articles:

Where can I get an Estate Plan?

Traditionally, many estate plans are created with the help of an estate planning attorney or advanced financial planning professional.

The process of going to an attorney to create a personal estate plan may seem prohibitively expensive and time consuming. This can dissuade many, especially those with relatively straight forward estates, from creating an estate plan at all. For that reason, there are a few alternatives that you can consider to get a starter plan in place one step at a time.

There are several affordable services now available online like Trust & Will, Make It Official, LegalZoom, and Willing, among many others. Despite their simplicity, these platforms can still be much more effective than creating your own without the help of planning software.

To get you started with your estate plan, Savology has recently partnered with Make It Official to help you build guardianship nominations quickly within the Savology platform after creating your free financial plan.

Additionally, some companies also offer a corporate benefit like an employee assistance program (EAP) that includes estate planning for free or at a discounted rate. If you have an EAP through your employer, contact them to see if this is an included benefit.

If, however, you have a more advanced estate, which may include significant assets or non-traditional family dynamics, it’s likely in your best interest to be working with estate planning professionals. You can use directory services like Nolo, Avvo, or LegalMatch, or other search engines, to find several estate planning professionals in your area.

Many financial planners offer estate planning services, although they are not licensed in all states to provide estate planning preparation services the same way that attorneys are. So, in many cases, a financial planner can be used in conjunction with an estate planning attorney to meet your individual needs.

Moving forward with your Estate Plan

While estate planning can be complicated, it doesn’t have to be difficult to put a basic plan in place. An estate plan should be part of every household’s comprehensive financial plan.

When it comes to creating your plan, you do not have to create a full estate plan all at once. If you have children, start by nominating guardians for your children. Add a basic will when you can. Then, create a Power of Attorney and Health Care Directive. Finally, you can consider adding a trust to avoid probate and provide additional control when your financial situation allows for it.

When used correctly, estate planning can be an effective tool to mitigate risks, avoid headaches, save on taxes, and avoid family conflict. Understanding and acting on the basics of estate planning as prescribed here can help you take advantage of these benefits for your family.


Starting your financial future today

Savology is a free planning platform where you can build a free, unbiased, personalized financial plan in about 5 minutes. Your Savology plan will give you action items to start working on as well as an overview of your current financial situation. After you have made some progress, Savology can connect you with some of the world’s top providers to help you accomplish your financial goals.

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