Estate Planning Articles

Key Elements of Estate Planning

by Alli Thomas

Mar 10, 2023

Most people agree that estate planning is a necessary personal finance task regardless of wealth (though it is particularly important for large estates). But the subject of estate planning tends to be uncomfortable for many people, as it involves confronting your own mortality – not to mention having some potentially difficult conversations with family members.

Estate planning is important for making sure your financial affairs are easy to settle for your heirs. It can also help reduce the amount of estate and inheritance taxes that are owed, leaving more money for your family. Estate planning should not be considered a one-time task but an ongoing process.

Many people also aren’t aware of the various estate planning tools that are available for protecting their wealth or the processes involved. These can be used to protect personal property, lower estate taxes, and ensuring your personal wishes are honored. Because of the potential tax implications, estate planning should be performed along with tax planning.

Key Legal Elements of an Estate Plan


A will is a legal document that outline how you would like your assets to be distributed after you die. Your will among the most important estate planning documents you can have when it comes to ensuring that your wishes are honored after you pass.

When you write your will, you also assign an executor. This person will be tasked with carrying out your wishes. Writing a will also allows you to direct exactly how your property, financial assets (such as bank accounts), and personal possessions are distributed.

Some estate assets, such as life insurance proceeds, retirement plan accounts, and some annuities, will simply pass to designated beneficiaries. Titled assets such as your home and other real estate, vehicles typically have to be probate court and a court order, however.

Protect you will from a potential contest

Emotions can run high after a loved one’s death and if one or more of your heirs believes they weren’t treated fairly, they may decide to contest your will. When writing you will, it’s important to take steps that help ensure that it will hold up in court if they do.

Who can contest a will? 

Only your spouse, children, and people named in your will are able to contest your will and they can only do so for legitimate reasons such as your incapacity or fraud. Heirs can’t contest a will simply because they don’t agree with your final wishes, or if their feelings are hurt about how you decided to distribute your assets.

How can a will be protected? 

Here are some tips to help your heirs avoid a will contest:

1. Set up your will properly.  As is the case with almost all legal matters, creating a will is NOT a DIY project. Here are some of the things to include in your will:

  • The full names of all your intended heirs.
  • The names of anyone you want to specifically exclude.
  • Your will should name both an executor and alternate executor
  • If you have minor children, your will should name their guardian(s).
  • In most cases, you must sign your will in the presence of two independent witnesses

2. Review your will often. As your life circumstances shift, your wishes may, too. Make sure that you look over your will at least annually and as your health conditions change.

3. Remember the in terrorem clause. Otherwise known as the “no-contest” clause, it is designed “scare” your heirs away from the idea of fighting over your final wishes. Under this clause, if an heir contests your will and loses, they will get nothing at all. Note, however, that there are different implications depending on the state you live. In some states, a no-contest clause isn’t enforceable if there is probable cause (for example, if you were under undue influence when you executed the will).

4. Talk to your family about your will. If you’re married, be aware that many states will not let you disinherit your surviving spouse (although you may do so with siblings, children, grandchildren, and other family members). While discussing your final wishes may be an uncomfortable topic, it can save a lot of drama for your family after you’re gone.

couple reviewing an estate planning document


If you die without a will, your assets will pass through probate court. This is a court-led legal process to administer your estate.

While laws vary by state, probate typically looks like this:

  • The case is initiated in court
  • The court determines that the decedent had no will and appoints an administrator (usually a family member of the decedent) who then must gather the assets the estate consists of, identify heirs, and notify the decedent’s creditors
  • The administrator liquidates assets to pay debts, estate taxes (and any other tax liability outstanding), and administrative costs. After these expenses are settled, the court will transfer assets remaining to the estate’s heirs.

The probate process tends to be lengthy (two years or more) and expensive, as the administrator must receive court approval before every action. Your estate plan should be designed in a way that helps your heirs avoid dealing with probate.


Trusts are legal documents that set forth rules and requirements for your beneficiaries to receive your assets, usually with some favorable tax treatment (certain types of trusts allow your estate to avoid inheritance taxes or gift taxes), to avoid the probate process.

There are many types of trusts that can be used for estate planning that fall under two main groups: revocable and irrevocable.

A revocable trust can be modified after creation by the trust owner or grantor while an irrevocable trust which cannot be modified without the permission of the named beneficiary or beneficiaries of the trust.

If you have minor children or grandchildren to whom you would like to bequeath money (or a beneficiary who may not have the best money-management skills), you may want to consider establishing a trust. You must assign a trustee to act as a fiduciary to administer the trust.

Read more: The Spendthrift Trust: An Estate Planning Tool That Protects Your Heirs from Excess Spending

Life Insurance

Life insurance proceeds can replace earnings, protect wealth, pay debts, cover education or daily living costs for your dependents.

The most straightforward policy pays proceeds in a single tax-free lump sum to your beneficiary; however, there are many other payment options available.

If you wish to ensure that the proceeds of your policy pass to beneficiaries without going through probate, you must ensure that at least one named beneficiary survives you. Otherwise, those proceeds will (in most cases) be used to pay your final bills.

This is another reason why it is important to regularly review your estate plan as circumstances change and update beneficiary designations as needed.

Power of Attorney

Power of attorney (POA) gives someone the authority to make certain financial decisions for you if you become incompetent or incapacitated and are unable to make such decisions yourself.

Power of attorney documents can be either durable or springing. Durable power of attorney documents are effective immediately and continue in effect if you become incapacitated. Springing POAs are only effective after you become incapacitated.

Specific language must be included in your documents to allow the person(s) named to carry out your wishes and manage your retirement accounts on your behalf if you become incapacitated. It is important to note that your plan beneficiaries do not have Power of Attorney unless your document explicitly states this.

Three Key Details About Power of Attorney

The person assigned becomes an agent who is legally required to act in the best interests of the person they have Power of Attorney for, including not using the money on themselves. Here are three key details to keep in mind:

1. POA can be granted in two scopes:

  • General, which provides control of all accounts to the extent legally possible.
  • Limited, which grants a more limited scope of authority.

Note that many financial institutions will not honor a generic Power of Attorney and will require completion of their own documents.

2. POA can come into force in three ways: 

  • “Springing,” which comes into force at the moment of incapacity.
  • Durable, which comes into force as soon at is authorized and lasts indefinitely.
  • Nondurable, which grants authority for a set period or for a specific transaction.

3. POA can be revoked or changed.

Living Will

Living wills are also known as advanced medical directives, healthcare power of attorney, or designation of healthcare surrogate. This document is an outline of your wishes regarding what medical care and procedures you do or do not want to receive if you become critically ill and are unable to speak for yourself.

A living will can cover palliative and end-of-life care, as well as whether you wish to donate your organs after death, but it does not appoint anyone to speak on your behalf, it simply allows you to state your wishes in advance.

Living Trust

Living trusts are legal entities in which the creator is typically the owner (grantor), the beneficiary, and the trustee (in the case of a revocable living trust) at the same time.

As the grantor, you create a living trust and transfer your assets into the trust’s ownership. As trustee, you manage, invest and spend the assets owned by the living trust for the benefit of the beneficiary. However, you may want to name a successor trustee in the event you become incapacitated. Depending on your assets, you may not need a living trust.

Benefits of living trusts

  • Putting accounts/assets in a trust helps ensure that they benefit the account holder for the duration of their lifetime.
  • The terms of the trust can be changed at any point, including termination of the trust.
  • The trust must be administered by a trustee, who has a fiduciary responsibility to act in the interest of the trust’s beneficiary.
  • Trusts are accepted by most financial institutions.
  • Trust can bypass probate or can be terminated upon the beneficiary’s death.
  • Trusts can have a successor trustee, who takes over the trust after the beneficiary’s death, or a co-trustee that can manage the trust immediately.

Potential downsides of living trusts

  • A co-trustee could potentially act irresponsibly. However, the creator can revoke the co-trustee and name a new co-trustee.
  • The trust must be funded in advance of the creator’s incapacity.
  • Trusts are more expensive to establish and administer.
  • Assets in the trust are not protected from creditors.

family discussing estate planning

Talking About Your Estate Plan with Your Family

While wanting to avoid discussing estate planning with your family is understandable, it’s an important part of estate planning. It may even be helpful to have it before you finalize the some elements of the plan that can’t be changed, like irrevocable trusts.

If you’re not sure how to talk about your estate plan with your family, here are some tips that can help:

Consider your family’s special circumstances before planning your meeting.

Perhaps you have a blended family, with stepchildren and biological children not receiving equal amounts of an inheritance. Or maybe one of your children has a problem with an addiction or is otherwise financially irresponsible. It’s not uncommon for families to deal with complex or sensitive situations, but it is important to have a plan for how you want to handle these discussions.

Set up a time and location that works for everyone.

If your kids have young children, they should arrange for childcare so that they have fewer distractions to contend with during the meeting.

It will also be helpful for everyone to have an idea of how long the meeting will run. For most people, two hours will be enough. Depending on how complex your financial and familial situations are, however, you may need more time or multiple meetings. If you’re working with an advisor to create your estate plan, they can help you determine how much time you need.

Most experts say that choosing a familiar, comfortable, and private place for the meeting is best. Many people wind up having the meeting at their homes. Having your meeting around a kitchen or dining room table might work.

Create an agenda

Make an outline of the topics you plan to cover during the meeting and decide if it makes sense to distribute it to everyone ahead of time. You know your family, so giving them a detailed agenda beforehand may not be in anyone’s best interest.

While creating an agenda may seem unnecessary or overly formal, having your ideas on paper will help accomplish a few things.

First, it will keep your meeting on track and ensure that you cover everything that you wish while you have all the important players in the same room. When some families get together, conversations can to easily go off track. A written agenda will help you stay focused.

Second, it may help your children or other beneficiaries to think of questions or concerns that you can then discuss with during the meeting.

Here are some topics, in no particular order, that you may want to include in your agenda:

  • Healthcare power of attorney/living wills
  • Life insurance policies
  • Wills
  • Real estate
  • Tangible assets, such as art, jewelry, cars, other collectibles
  • Trusts
  • Desired funeral arrangements

Consider including your advisor or attorney in the meeting.

There’s a good chance that someone will raise a technical question that you don’t know how to answer during your family meeting. Your estate attorney or financial advisor is a valuable resource, so you should think about having them join you, especially if your family already knows them.

Consider holding a similar family meeting every 2-3 years.

Lives can change a lot in that time. Marriages, divorces, births, and deaths may mean changes to your estate plan. You should keep your children and beneficiaries informed of these.

How to make an estate plan that protects your assets and wishes

Understanding how these different elements of estate planning work and making the best choices for your individual situation can be confusing and frustrating. Married couples have different estate planning needs than single people, for example. Making a plan that effectively protects your assets and wishes involves a variety of legal documents and will be challenging and time-consuming to do on your own.

This is why it is best to get professional help and work with an experienced financial professional that understands the various elements of estate planning and the legal requirements of each one. Our professional advisors are experienced in estate planning and would love to help you navigate these important decisions. Click here to request a no-cost, no-obligation consultation to get started.

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Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k) administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

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