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How to Build an Estate Plan for You and Your Family


Building an estate plan for you and your family can help you ensure that your assets are managed according to your wishes and that your loved ones are taken care of. Family estate planning involves creating legal documents such as wills, trusts and healthcare directives to address your financial and healthcare decisions. By planning ahead, you can streamline the process for your heirs and reduce potential legal challenges.

A financial advisor with estate planning expertise can help you navigate this all-important process. Connect with a fiduciary financial advisor today.

Understanding Estate Planning

Estate planning involves organizing and managing your assets with the aim of distributing them according to your wishes after your death. It includes preparing documents that outline how your estate should be handled, who should receive your assets and who will be responsible for managing your affairs.

An estate plan typically includes several key components:

  • Will: A legal document that outlines how your assets should be distributed after your death.
  • Trusts: Arrangements that allow a third party, or trustee, to manage assets on behalf of beneficiaries.
  • Power of attorney: A document that grants someone the authority to make financial and legal decisions on your behalf if you become incapacitated.
  • Healthcare directives: Instructions regarding your medical care preferences in case you cannot make decisions yourself.
  • Beneficiary designations: Specifications on who should receive the benefits from life insurance policies, retirement accounts and other financial products.

Estate Planning Options: DIY vs. Hire a Professional

One option is to do it yourself using online tools and templates. This approach can be cost-effective but requires thorough research to make sure that all legal requirements are met.

A financial advisor can provide comprehensive advice on managing and distributing your assets. An estate planning attorney, on the other hand, can offer legal expertise to draft wills, trusts and other vital documents, ensuring they comply with state laws.

Additionally, some people choose to use online estate planning services, which combine professional guidance with digital convenience, offering a middle ground between DIY and full professional services.

How to Create an Estate Plan for You and Your Family

A man signs his last will and testament.

Follow these nine common steps to develop a comprehensive estate plan tailored to your needs. Consulting with a financial advisor or estate planning attorney can further enhance the planning process and provide expert guidance tailored to your unique situation.

1. Assess Your Assets

Start by taking an inventory of your assets, including property, investments, bank accounts and valuable personal items. Understanding what you own and its worth is the foundation of your estate plan, helping you make informed decisions about its distribution.

2. Define Your Goals

Clarify your objectives for the estate plan. Consider questions like who do you want to inherit your assets and who should be the guardian of your minor children. You’ll also want to ask yourself how you can minimize taxes and legal fees associated with your estate. Also, consider your preferences surrounding healthcare and end-of-life decisions.

3. Designate Beneficiaries

Clearly designate beneficiaries for your assets. This includes naming individuals or organizations to receive your property, financial accounts, and other possessions. Beneficiary designations should be updated regularly to reflect any changes in your circumstances or intentions.

4. Create a Will

Drafting a will is a crucial component of estate planning. A will outlines how you want your assets distributed, names guardians for minor children and specifies your final wishes. Without a will, state laws will determine the distribution of your estate, which may not align with your preferences.

5. Consider Establishing a Trust

Consider setting up a trust to manage and protect your assets. Trusts can provide benefits such as reducing estate taxes, avoiding probate, and ensuring that your assets are distributed according to your terms. Trusts can be particularly useful for complex estates or when you want to control the timing and conditions of asset distribution.

6. Appoint an Executor and Power of Attorney

Choose a reliable executor to manage your estate and respect your preferences. Additionally, appoint a power of attorney to handle your financial and legal matters if you become incapacitated. These roles require individuals you trust to act in your best interests.

7. Draft an Advance Healthcare Directive

An advance healthcare directive, or living will, specifies your medical care preferences if you become unable to communicate them. This document provides guidance to your family and healthcare providers, ensuring that your medical treatment aligns with your values and wishes.

8. Plan for Long-Term Care

Consider the potential need for long-term care and how it will be financed. Options may include purchasing long-term care insurance or setting money aside that will later be used to pay for your long-term care.

9. Review and Update Your Plan Regularly

Regularly review and update your estate plan to reflect changes in your life, such as marriage, divorce, the birth of children, or significant financial changes. Keeping your estate plan current will help you keep it aligned with your intentions.

Why Estate Planning Is So Important

A couple reviews their estate plan with their daughter.

Failing to establish an estate plan can lead to significant legal and financial complications for your family. Without a clear plan, your assets will be distributed according to state intestacy laws, which may contradict your intentions.

Additionally, without a will that appoints a guardian for any minor children, the court will do it for you, potentially placing them with someone you might not have chosen. This lack of control can create unnecessary stress and uncertainty for your loved ones during an already difficult time.

Moreover, without specific instructions, disputes among family members can arise, leading to prolonged legal battles and strained relationships. These conflicts not only deplete the estate’s value but also cause emotional distress.

Finally, an estate plan helps to minimize taxes and legal fees, ensuring that more of your assets go to your beneficiaries. Without it, your estate may face higher taxes and administrative costs, further diminishing the legacy you leave behind.

Bottom Line

By taking proactive steps such as drafting a will, establishing trusts and designating powers of attorney, you can minimize potential legal challenges and streamline the process for your heirs. Regularly reviewing and updating your plan to reflect life changes will keep it effective and aligned with your intentions.

Estate Planning Tips

  • As you plan your estate, it’s important to understand the various taxes that your estate or your heirs may end up paying. While the federal government levies a tax on estates larger than $13.61 million in 2024, six states also charge an inheritance tax on the beneficiaries of an estate.
  • A financial advisor with estate planning expertise can be a valuable resource as you decide how your assets should be managed and distributed when you die. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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