What is estate planning, anyway?

The narrow definition of estate planning is the process of arranging for what happens to your assets after your death. (What you own at your death is called your “estate.”) But for most people, estate planning really means taking steps to make things easier for your family, by:

• Making your wishes about end-of-life medical care clear, so family members don’t need to make difficult decisions without guidance from you.
• Deciding who should inherit your assets and stating your directions in a will or trust.
• Owning your assets in a way that will allow them to be transferred, after your death, without probate, so that your family is spared the expense, delay, and hassle of a court proceeding.
• Providing for family members who depend on you for support—for example, by buying a life insurance policy.

How much estate planning do I need?

Most people could benefit from taking these simple steps:

1. Make a will.
2. Make sure you have named beneficiaries for your life insurance policies, retirement plan accounts, and bank and investment accounts.  
3. Make an advance health care directive (living will) that expresses your wishes about end-of-life treatment.
4. Make a “durable power of attorney,” a document in which you give a trusted person the authority to make medical decisions on your behalf, in case someday you can’t communicate your wishes. (In some states, the health care directive and power of attorney are combined into one document.)

What about making a living trust?

Making a “living trust,” in addition to taking the steps outlined above, can be a good idea if you’re concerned about the cost and hassle of probate after your death. You can avoid the need for a probate court proceeding by holding your assets in a living trust. You keep complete control over the assets, but at your death they can be transferred to the people who inherit them without probate court approval.

Trusts aren’t usually necessary for younger folks who aren’t likely to die for a long time. But if you’re older and own a lot of assets, and if you live in a state where probate is drawn-out and expensive, you will probably want to consider a living trust or other probate-avoidance strategies.

Do I need a lawyer to do my estate planning?

You can do a lot yourself: for example, make a simple will, name beneficiaries for retirement plan accounts, and add “payable-on-death” (POD) beneficiaries to your bank accounts. You can also make a healthcare directive, durable powers of attorney, and a simple living trust. You may need more estate planning in addition to these documents, but they will always provide a useful foundation.

That said, many people like to talk to a lawyer about the big picture of estate planning, even if they prepare some of their documents themselves. An experienced estate planning lawyer can also answer any questions you have about particular issues with your finances or family—for example, how to plan for a special needs child, what to do if you’re concerned about estate taxes or big debts, and how to think about a transition plan for a family business.