Introduction: Why Estate Planning Matters
Here is a simple way to start your own estate planning checklist. Make a list of your assets and liabilities. Everything you own and everything you owe. This is your estate.
Next, make a list of all the assets in your estate and where you want those assets to go upon your death. Your plan for where your estate’s assets will go upon your death (or even in life) is your estate plan.
The following article will help you create your own estate planning checklist, which will in turn help you in taking the next steps to creating your estate plan.
The Cost of Poor Estate Planning
Although estate planning has become more popular over the years, there are still some basic steps that some people leave out which can lead to a nightmare for those left behind. When an estate hasn’t been planned sufficiently, it is often those left behindโfamily and friendsโthat have to deal with the mess. And what’s worse, money you earmarked to go to those you love now goes to lawyers, accountants and the state.
For this reason, we have compiled a comprehensive estate planning checklist of things that you need to consider when planning your estate. Of course, it will always be best to contact a professional since every situation is unique, but this is a basic checklist that can help you get on the right track.
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1. Create a Last Will and Testament
A last will and testament (“a will”) is a document that tells the executor of your estate how you wish him or her to distribute your assets. A will does not avoid court interaction. Instead, a will is a road map for the probate court.
Understanding Probate Costs and Timeline: It’s important to recognize that a will must go through probateโa court-supervised process that can be both costly and time-consuming. On average, probate costs between 3-7% of your estate’s total value in administrative fees, court costs, and attorney fees. In some states like California and Florida, these costs can climb even higher.
When people understand the process, most prefer to avoid probate entirely. The probate process typically takes 6-12 months to complete, but can extend to 2+ years for complex estates or when disputes arise. During this time, your assets remain frozen and inaccessible to your beneficiaries. Additionally, probate proceedings are public record, meaning anyone can access details about your estate’s assets, debts, and beneficiaries.
You can create your own will as long as you follow the basic formalities of creating a will, which vary from state to state. The most typical requirements are:
- The testator of the will must be 18 or older
- Possess the mental capacity to know what he or she is creating, what his possessions are, and his relationship to individuals named in the will
- Be signed by two witnesses that are not named in the will or not involved in the preparation of the will, i.e., no conflict of interest
- The two-witness rule does not apply if the will is a holographic will
- A holographic will must be completely written, signed, and dated in the testator’s handwriting
A note of caution: a will only takes effect upon the death of the testator. As a result, if the testator becomes incapacitated, another document, such as a living trust and living will (see below) should also be part of any good estate planning checklist.
According to recent data, only 33% of Americans have created a will, leaving the majority of families vulnerable to intestate succession laws that may not align with their wishes.
2. Prepare Advance Health Care Directives (Living Wills)
As mentioned previously, wills do not take effect when you are incapacitated, which is why a health care directive can be helpful. Essentially, this means that all health decisions are made by you ahead of time should you be incapacitated and unable to make important health care decisions. As well as this ‘living will’, you can also appoint an agent for your financial affairs via a durable power of attorney (DPOA).
A healthcare directive typically includes:
- Your preferences for medical treatments
- End-of-life care decisions
- Organ donation wishes
- Designated healthcare proxy
Statistics show that while 72% of Americans believe having an advance directive is important, only about 29% actually have one in place.
3. Establish a Durable Power of Attorney (DPOA)
Aside from your health, you may also need someone to make decisions regarding your finances if you find yourself incapacitated down the line. If you cannot handle your own affairs, this person that is trusted and chosen by you will become your agent and make important financial decisions for you.
When people think about estate planning, they often overlook incapacity planning. A durable power of attorney ensures that someone you trust remains in control of your property and finances if you are unable to do so yourself.
If you are to appoint a DPOA, it is best to ensure that your finances are kept up-to-date so that the process will be easier for them. For example, IRA and 401k accounts should be regularly assessed. Every so often, review the details and ensure that the beneficiaries are listed as you wish. Furthermore, keep all annuities and life insurance contracts informed as to your decisions and chosen beneficiaries.
Finally, you can ease the pressure on your financial DPOA by making sure that your assets are properly titled in the name of your living trust.
4. Set Up a Revocable Living Trust
Nowadays, one of the biggest concerns when estate planning is that the desired beneficiary not receive the assets as planned without having to go through an expensive probate. In order to avoid a costly and time-consuming probate, a revocable living trust, also known as an inter vivos trust, is an excellent solution.
By placing your assets in a revocable living trust, you will be able to manage your financial affairs throughout your life and have a management plan in place should you become incapacitated. Not only will a revocable living trust help to avoid probate, it will keep all personal information private and provide your successor trustee with the authority to manage your finances if you become incapacitated.
Once you have created a living trust you must properly fund your trust. Correctly titling your assets in the name of your trust will ensure that your trustee will be able to administer your trust without any problems. However, many people have failed to properly place a valuable asset into the name of the trust, which can result in costly court proceedings to correct this oversight.
According to current data, revocable living trusts make up approximately 41% of all estate plans and are particularly popular in suburban areas, with setup costs typically ranging from $1,500-$3,000.
5. Create a Pour-Over Will
If you choose to go the route of a living trust, a pour-over will is a must. A pour-over will simply grabs any assets not titled in the name of the trust and “pours” those assets into the trust. Then the assets placed in the trust will be distributed by the trustee according to the terms of the trust.
A word of caution: One problem many people run into with a poor estate plan is that their assets are not placed into their trust. As a result, when the Trustor dies, these untitled or poorly titled assets become part of the decedent’s estate. This can lead to problems, such as the assets having to be probated. Therefore, make sure all your assets are properly titled.
Funding Your Trust Is Your Responsibility: Remember that creating a trust document is only the first stepโyou must actually transfer your assets into the trust for it to work as intended. This process, called “funding” your trust, is entirely your responsibility and not something your attorney typically handles completely. Many well-drafted trusts fail because the owner never followed through with transferring assets into the trust’s name.
This means you need to:
- Retitle real estate deeds to the name of your trust
- Change bank and investment account ownership to your trust
- Assign business interests to your trust
- Transfer vehicle titles when appropriate
- Update beneficiary designations on retirement accounts and life insurance policies
Studies show that approximately 70% of trust failures occur not because of poor drafting, but because of improper funding. Don’t make the common mistake of spending thousands on trust creation only to undermine it by neglecting this crucial step.
6. Protect Children and Dependents
If you have minor children under the age of 18, providing the name of a guardian in your will is a must. If you fail to provide who you want to become the legal guardian of your children, the court will make that decision for you. You will also want to consider naming a separate trustee to manage your children’s assets that you leave behind.
Sadly, many people leave assets to their children each year without realizing how dangerous this can be. If you plan to leave any money or property to your children, you should always name an adult as an executor or trustee who can manage the assets for them. For those with young children, consider naming someone different than the guardian in your will so that there are checks and balances in place between the trustee and the guardian. You can also give your child money in certain increments or at specific ages to make sure the money is not given to your children in one lump sum.
For families with special needs dependents, consider establishing a Special Needs Trust, which preserves government benefit eligibility while providing supplemental support. These trusts now account for about 18% of all trusts and are growing at approximately 7% annually.
7. Plan for Business Succession
If you own a business as a sole proprietor or as a partnership, then business continuity succession planning is a must. As a sole proprietor, you will need to consider:
- Who will take over your business due to incapacity, retirement, or death?
- Do you have a plan in place to sell the business if no competent suitor can take over?
- Will your successor have access to enough liquid assets to pay off existing debt obligations?
If you have a business with others you will need to consider the following:
- Do you have a business succession plan in place if your become disabled or incapacitated?
- Do you have a business succession plan in place if you or one of your partners dies?
- Do you have a family business succession plan if you’re in business with family members?
Studies show that only 34% of family businesses have a documented succession plan in place, despite the fact that proper planning can increase business valuation.
8. Address Estate Taxes
When planning your estate, it is really important that you understand federal estate taxes to avoid any unnecessary taxes against your estate. The 2025 estate tax exemption is $13.99 million per individual (or $27.98 million for a married couple). If your estate is valued above the exemption limit, advanced estate planning may be necessary, including the use of irrevocable trusts, such as irrevocable life insurance trusts, charitable remainder trusts, and charitable lead trusts.
It’s crucial to note that this high exemption amount is scheduled to sunset in 2026, potentially dropping to approximately $7 million per person.
9. Review Life Insurance Needs
Life insurance for estate planning should name a beneficiary and not list your estate as the beneficiary. Life insurance proceeds are typically tax-free. However, if your estate planning life insurance enriches your estate above the current federal estate tax exemption limit of $13.99 million, your life insurance may be taxed as part of your overall estate.
A great way to title your life insurance beneficiary designation is to name your spouse or children as the primary beneficiary and then name the trustee of your trust as the contingent beneficiary.
For high-net-worth individuals, consider using an Irrevocable Life Insurance Trust (ILIT) to keep the proceeds outside of your taxable estate. The trust must be irrevocable, and the trustee cannot be the insured person. In community property states, spousal consent is typically required.
10. Plan for Funeral Costs
While some choose to go for a funeral prepayment plan, these can be unreliable. Instead, those with limited liquid funds should consider setting up a ‘payable-on-death’ (POD) account at your local bank. As long as you deposit funds into the account every now and then, these funds can go directly towards a family member who will take care of funeral costs. Since the cost of funerals can be significant for families with little money, this is a good way to ease the burden after you pass away.
With the average funeral now costing between $7,000 and $12,000, having a designated fund can prevent financial strain during an already difficult time for your loved ones.
11. Plan for Digital Assets
A newer development in estate planning is the need to account for digital assets. These may include:
- Cryptocurrency and NFTs
- Social media accounts
- Online banking and investment accounts
- Digital photos and videos
- Email accounts
- Subscription services
- Websites and domains
Digital asset trusts have seen a remarkable 68% growth since 2022. These specialized trusts typically include provisions for crypto wallet management, social media legacy clauses, NFT ownership transfers, digital executor designation, and encryption key management protocols.
For your digital estate plan, consider creating:
- An inventory of all digital assets
- A secure list of usernames and passwords
- Instructions for how each asset should be handled
- A designated digital executor
12. Consult with Professionals
As we said at the very beginning, these are some simple steps that you can take to ensure that you and your loved ones are in the best position should something happen to go wrong with your estate plan. After all, the best laid plans of mice and men often clash with Murphy’s Law (what can go wrong, will go wrong). Therefore, seeking out a professional estate planning service goes a long way to ensuring that your goals are met.
By having a professional service by your side, you can be sure that there will be no nasty surprises for your loved ones after you pass away. Although this estate planning checklist is an important step, it is obviously not specific to you and your situation. In order to get a tailored plan, you need to consult with a professional.
Organize and Store Your Documents
When you have all of your documents in order and the professional is happy that you are doing everything you can, you then need to have an organized filing system so that everything will be easy should the worst happen. When you die, people will need access to your will, real estate deeds, insurance policies, trusts, certificates for bonds, annuities, and stocks, bank accounts, mutual funds, IRA accounts, 401k accounts, mortgages, loans, and other important assets such as life insurance policies. In today’s age of digital assets, it is also critical to remember estate planning for digital accounts, and identifying passwords, etc.
Best practices for document storage include:
- Keeping original documents in a fireproof safe or safety deposit box
- Providing copies to your attorney and executor
- Using secure digital storage solutions with proper encryption
- Creating a “letter of instruction” that explains where everything can be found
When to Review Your Estate Plan
Estate planning is not a one-time event. Experts recommend reviewing your plan:
- After major life events (marriage, divorce, birth, death)
- When you move to a different state
- Every 3-5 years
- After significant changes in tax laws
- When your financial situation changes substantially
Frequently Asked Questions
What happens if I die without a will? If you die without a will, your assets will be distributed according to your state’s intestacy laws, which may not align with your wishes. The court will appoint an administrator, and the process is typically longer and more expensive than if you had a will in place.
How often should I update my estate plan? You should review your estate plan every 3-5 years and after major life events such as marriage, divorce, birth of a child, death of a beneficiary, or significant changes in your financial situation or applicable laws.
What’s the difference between a will and a trust? A will goes through probate and becomes public record, while a trust avoids probate and remains private. A will takes effect only at death, whereas a trust can be effective during your lifetime and can provide for management of assets if you become incapacitated.
Do I need an estate plan if I don’t have many assets? Yes. Estate planning isn’t just about distributing wealth, it’s also about making healthcare decisions, appointing guardians for minor children, and minimizing complications for your loved ones.
How do I choose an executor or trustee? Look for someone who is responsible, trustworthy, organized, and willing to take on the role. Consider their financial knowledge, proximity to your assets, and ability to remain impartial when dealing with beneficiaries.
What is probate and why should I try to avoid it? Probate is the court-supervised process of authenticating a will and distributing assets. Many people seek to avoid it because it can be time-consuming (6-12 months on average), expensive (typically 3-7% of estate value in fees), and public.
Taking the Next Step in Your Estate Planning Journey
Estate planning isn’t just for the wealthy or the elderly, it’s for anyone who wants to protect what they’ve worked for and the people they care about. A properly structured living trust can save your loved ones time, money, and stress during an already difficult time.
The key is getting started. Many people procrastinate on estate planning because it involves thinking about difficult topics. But having these documents in place provides tremendous peace of mind, knowing you’ve taken care of your loved ones’ future.
If you’re ready to learn more about how a living trust might fit into your personal situation, we offer educational resources and personalized guidance to help you create a plan that protects your nest egg and your family’s future.
