Estate Planning: What is it?

By Feby Francois


Providing for the distribution of your assets involves setting up an estate plan. You can also specify how you would like your affairs to be handled in the event you are unable to do so yourself. There are a lot of steps involved, and it can feel overwhelming. Estate Planning has many facets, and while there's a common misconception that it's just about your finances, the truth is there's a lot more to it. 

Even though Estate Planning seems like a daunting task, it's something each of us must do. Our process is broken down into a number of easily understandable sections. We've created this Estate Planning 101 guide to help you plan for the future of your loved ones. By following this guide, you'll be in the position to feel secure.   

Estate Planning: What is it?

Simply put, Estate Planning is the process of making it clear how you want your estate to be handled after you pass away or if you become incapacitated. Traditionally, Estate Planning was defined as "the process of making plans to manage and transfer your estate after death using a Will, a Trust, insurance policies, and other devices." Estate Planning has been around for many years, but it has become increasingly more and more common as the years go on.

It is important to conduct a comprehensive review of your estate assets as part of Estate Planning. Your estate consists of everything you own, including the following:

  • Cash

  • Cars

  • Clothes

  • Jewelry

  • Houses

  • Investments

  • Savings

  • Retirement accounts

  • Land

  • And more

Having a clear idea of what your estate consists of will enable you to begin planning. 

Estate Planning: The Basics

There are many reasons why estate planning is important. If you don't prepare properly for what might happen in the future while you're still sound and capable, you won't have any say in how your estate is handled or what your loved ones receive. By planning today, you can achieve the future you want. 

When you have an Estate Plan prepared, your wishes will be outlined exactly, in the most tax-advantageous way, so that there will be no misunderstandings or misconceptions about what you want.  

Documents Most Commonly Used in Estate Planning

Your Estate Plan will include several documents. They are all important in their own way, but together, they form a powerful representation of your final wishes. 


Provides instructions for what you want to happen to your children or any other heirs you're responsible for after your death or in the event you are no longer able to do so. A section of your Will will usually include instructions for guardianship. 


A document that expresses your last wishes regarding the distribution of your property or assets.


Describes a legal arrangement in which the first party (the Settlor, also known as a Trustor or Grantor) gives the second party (the Trustee), the right to hold assets and property on behalf of and for the benefit of the third party (the Beneficiary). 

Financial Power of Attorney (POA)

A document authorizing someone to handle your finances.

Durable Power of Attorney (POA)

The financial power of attorney, also known as a durable power of attorney, is a legal document that gives another person legal authority to handle non-health or non-medical affairs on your behalf. In simple terms, "durable" indicates that the POA remains in effect even when you become incapacitated. 

Advance Healthcare Directive (AHCD)

Also known as a Living Will or a Medical Power of Attorney. In an Advance Healthcare Directive, you can state what medical actions should be taken if you are incapacitated and unable to make your own decisions. 

There are legal distinctions between Living Wills, Medical Powers of Attorney, and Advance Healthcare Directives, although they are commonly used interchangeably. 

  • Having a Living Will specifies your medical preferences (typically for decisions regarding life support at the end of life).

  • You can designate someone else to make healthcare decisions on your behalf if you are unable to do so yourself.

  • An AHCD combines a Living Will and Medical Power of Attorney so that you can give instructions but also designate another to make decisions on your behalf if necessary.

HIPAA Authorization

Permission you give to a third party to share your medical records. 

Estate Planning & Taxes

Taxes are a major consideration in Estate Planning. Leaving as much as possible to your heirs is the ultimate goal. In order to achieve your goal, you need to take action to minimize assets lost to taxes. You can use some tools within your Estate Plan, such as ways to avoid probate and transfer assets while avoiding hefty taxes. It is important to recognize potential tax types. 

  • Estate tax: A tax imposed on estates worth more than a set value. The tax is only assessed on the amount that exceeds the maximum, not the entire value of the estate. 

  • Inheritance tax: A tax paid by someone who inherits either property or money from someone who has died.

  • Gift tax: A tax that’s applied on gifts exceeding a certain dollar amount. Note the giver, not the receiver, is responsible for any tax. 

Who Needs an Estate Plan?

The short answer is everyone. You can easily convince yourself that you don't need an estate plan. Nevertheless, we would all benefit from planning a little more for our future. An Estate Plan does not require you to be wealthy, elderly, or even to have a specific amount in your bank account. As soon as you turn 18, you should begin thinking about creating a plan.

Even if you don't have a lot of assets, your Estate Plan ensures that your wishes will be known to everyone. Healthcare directives and long-term care wishes are perfect examples - should you become incapacitated and unable to communicate your wishes, your Estate Plan will speak for you, so your loved ones won't have to wonder what you would want.

The preparation of the types of documents that go into an Estate Plan used to cost thousands of dollars. Now, there are alternatives. You can create a legal, effective, valid Estate Plan that ensures your wishes will be known should the need ever arise. It is still a wise idea to have an Estate Plan, even if you do not have many assets.

How to Create an Estate Plan in 12 Steps

Yes, there are a lot of steps that go into creating a complete Estate Plan, but we’ve made it as easy as possible for you by listing each out. 

  1. Gather your assets. Inventory everything you own, from cars to collectibles.

  2. Protect your family. Think about if you have adequate life insurance to leave your family in a position where they could maintain the life you currently lead. 

  3. Determine the plan that’s best for you. Decide what type of Estate Plan you need.

  4. Choose who you would like to be guardian of your children/pets/self. If you have children or pets, or if you care for another loved one who cannot care for themselves, you want to choose a guardian. You can also name the person you would want to make medical and/or financial decisions on your behalf should you ever become unable to do so for yourself.

  5. Determine and establish the necessary directives. There are several directives you should include in your Estate Plan, including but not limited to: 

    • Durable Power of Attorney 

    • Medical care directive

    • Limited Power of Attorney – LPOAs are less commonly used (Durable POAs are more frequently the norm), though an LPOA can be appropriate in some instances.

  6. Name your Beneficiaries. Some documents and accounts will have Beneficiaries already designated. These could include retirement plans and life insurance policies, to name a few. But there are other assets you should note in your Will or Trust if you’d like to leave them to a specific person. If there is an opportunity, you should name contingent Beneficiaries. Keep in mind that Beneficiary designations will only go into effect after you pass, so if you become incapacitated and unable to make decisions, you need to have prepared for more than simply naming Beneficiaries.

  7. Find a trusted partner. Explore your options for creating your Estate Plan. This can be face-to-face with an attorney or you may choose to use another service provider. You have options, but some are going to be much more expensive than others. If you don’t have an overly-complicated estate, working with a partner like Trust & Will could be the perfect solution to starting on the path of Estate Planning.

  8. Create your plan. If you’re using an online program to create your Estate Plan, be sure to go through all the steps and finalize everything.

  9. Sign and notarize your Estate Plan. Don’t forget to check how many witnesses your state requires.

  10. Notify your Executor. It’s a good idea to let the person you chose to be your Executor know of your intentions.

  11. Store your Estate Planning documents. Put your Estate Plan in a safe place where your loved ones can easily find it. A fireproof safe is a good idea.

  12. Update as needed over time. There isn’t a hard rule about when you should update your Estate Plan, but a good rule of thumb is try to update it whenever you have a major life event (birth of a child, death of someone important to your plan, marriage, divorce, etc.). And if you find you haven’t had any life events in recent years, try to review and update as needed every 3 - 5 years. 

Avoid these common estate planning mistakes

Plan your estate with caution. Errors can cause delays, inaccuracies, or other misunderstandings. Here are a few common mistakes people make along the way: 

  • Not having an official plan

  • Not updating a plan over time (at major lifetime events)

  • Not making arrangements for if they become incapacitated (disability or long-term care)

  • Improper ownership of assets (how easy will it be to pass assets on)

  • Not including charitable gifts

  • Not appointing a guardian for children or others who would need their care

  • Underestimating the implication of taxes

  • Not having liquidity of assets

  • Not making gifts during their lifetime to reduce the value of the estate after passing (tax advantages)

  • Putting their child’s name on the deed to property (potentially huge tax implications)

Difference between an Estate Plan and a Will

Some people think having a Will is enough, but you need more than that. A Will is a great place to start. A Will by itself, however, is only a small part of Estate Planning. For your loved ones to be fully protected after you pass, you must include all the documents, nominations, and appointments to ensure you are doing all you can to ease the process on them.

Other Common Questions about Estate Planning

What Are Beneficiary Designations?

A Beneficiary designation is a way to designate where your assets go after you pass. 

What Does a Trustee Do?

A Trustee handles and is responsible for managing all assets or property in a Trust. In essence, he or she is the legal owner of said assets.

How Much Does an Estate Plan Cost?

Creating an Estate Plan can cost a great deal, depending on a number of factors. You will pay more if you go the traditional route and work with an attorney face-to-face. There are innovative and creative Estate Planning platforms, where you can get a legal Estate Plan at a fraction of the price. 

Do I Need an Attorney to Create an Estate Plan?

In some cases, you do not need an attorney to create your Estate Plan. If you have a very complicated estate, you may opt to go the traditional face-to-face route. But many people have simple, straight-forward needs. They may find a service that is ideal for their Estate Planning needs. It can save time and money while still offering a superior product that touches on all the important things you want to take care of with your Estate Plan. 

Though there are many parts to a complete Estate Plan, tackling them one at a time is the best way to draft a plan that’s conclusive, comprehensive, thorough and that protects everyone in your life you love.