The Basic Elements of Estate Planning

Elements of an Estate Plan

Trusts

Trusts are vehicles for holding your assets that can shield them from taxes, help them grow for future generations, and make your charitable giving more effective. They can be revocable or irrevocable, depending on your needs and your specific situation, and can be very useful for anyone seeking to protect their legacy. 

Last Will and Testament

A will is a legal declaration of how, when and to whom you want your assets to be distributed upon your death. If you die without a will, your assets could be distributed according to the laws of intestacy in the state you live in, which could run counter to your personal wishes.

Power of Attorney

A power of attorney is a legally binding document that appoints someone to act as your agent and manage your affairs – and they come in two general forms: "Springing" powers only take effect upon an event, such as a medical emergency, while "durable" powers are effective immediately. In either case, powers can be revoked at any time and automatically expire upon your death.

A power of attorney for health care, also known as a living will or health care directive, formally outlines your wishes for medical care and allows the agent to make medical decisions on your behalf. A financial power of attorney, on the other hand, can allow someone to manage your investments, pay bills, file taxes and more. In either case, you can specify exactly what the agent can and cannot do on your behalf, and how long the power is effective.

Provisions in Case of Incapacitation

While no one likes to think about the prospect of becoming incapacitated, it’s a real possibility at any point in our lives, and certainly as we near the end of our lives. An estate plan can help you build the structure that protects your assets and invest decision-making abilities in the people and financial institutions you trust – before the worst happens and you can’t make those decisions yourself.

Retirement and Life Insurance Designations

Proper beneficiary designations can help keep assets from retirement plans and life insurance policies from falling into probate, or going to outdated or deceased designees.  A beneficiary designation overrides anything set forth in a will, so this is a crucial phase in the proper distribution of your assets.

Charitable Giving

There are a variety of estate planning tools that can help with efficient and effective philanthropic giving, including various charitable trusts, charitable endowments and family foundations. Charitable giving comes with many tax implications, so this is an area in which an estate planner can provide significant benefit.

Benefits of an Estate Plan

Avoiding Probate

Probate court proceedings can be a cumbersome, time-consuming and often expensive process for distributing your assets after you’re deceased. Having a thoughtfully crafted will is no guarantee that your heirs can avoid the probate process. A detailed estate plan tailored specifically for you and your family’s preferences can help direct your assets where you want them to go while keeping your heirs from going through the probate process.

Protecting Assets

As your wealth grows, so does your need to protect it from lawsuits and creditors. When you include strategies like gifting techniques and irrevocable trusts in your estate plan, you add an extra layer of security that your assets will be distributed as you wish and be protected from unknown creditors.

Mitigating Taxation

If your estate value is in danger of bumping up against the federal estate tax exemption ($13.99 million in 2025), planning strategies can help ensure the amount of tax due is reduced or even eliminated so your assets remain as part of your legacy. Certain states also levy an estate or inheritance tax, which could further diminish your heirs’ inheritance without proper planning. Since state and federal tax laws can frequently change, you may need to make periodic updates to your estate plan.

Planning for Business Succession

Estate planning is vital for business owners, as it can ensure that the business stays within the family and is run by the people you designate with that responsibility. Estate planning can also minimize the tax bite your heirs will have.

Protecting Confidentiality

Some elements of asset transfers, such as probate court proceedings, are public and can expose your financial situation to anyone who chooses to learn about it. Estate planning strategies like funded revocable living trusts can help protect the privacy of your assets and your legacy plan.

Safeguarding Digital Assets

Digital assets include entities like a social media profile or page, along with an electronic commerce site in the name of the grantor, a company or a DBA (doing business as) designation. Some of these digital assets may have tangible value, but they’re not all transferable upon death. Make sure your estate plan addresses your most valuable digital assets.

Preserving Long-Term Family Legacies

And finally, the most important reason to make use of estate planning is to ensure that subsequent generations are able to enjoy the legacy you’ve worked so hard to provide.