Estate Planning Checklist: A 10-Step Guide

Estate planning is the process of organizing and arranging your assets to help ensure they’re transferred according to your wishes upon your death or incapacitation. Creating a comprehensive estate plan can help protect your loved ones and your assets.  

Estate plans are an essential part of your end-of-life plan, but the process can be complex — especially if you have a large number of assets. 

We created this estate planning basics guide to help make the process simpler. Read on for 10 tips on how to create an estate plan like a pro. 

Estate planning guide and tips 

There's no one-size-fits-all method for creating an estate plan. The specifics will depend on your individual circumstances. But these steps can help you get organized and begin the process with ease. 

1. Assemble a team

Prioritize assembling an experienced team to help you create your estate plan. Some of the professionals you may want to include on this team are a financial advisor, a tax professional, and an estate planning attorney to map out a complete, customized estate plan. 

Each person on the team plays a critical role in the process and can provide invaluable legal and financial advice. Most importantly, you and your team will create a plan that helps ensure your assets are distributed to the people and organizations you choose with as little confusion as possible.  

2. Outline your wishes in your estate planning documents

It’s important that your estate plan clearly outlines your wishes regarding your assets and dependents. Without an estate plan, a judge could make those decisions for you in probate court. 

To help reduce the risk of your assets going to probate - which can be slow, costly, and not aligned with your wishes – be sure to include the following estate planning documents in your end-of-life strategy:  

• Advanced healthcare directive: Also known as an advanced directive, this legal document offers guidance on your medical treatments and healthcare services, should you become incapacitated. An advance healthcare directive often contains two documents: a living will and healthcare power of attorney (POA).  
  
• A living will: Also called a medical care directive, a living will outlines the medical treatments you do and don’t want to accept at the end of your life. A healthcare Power of Attorney (POA) document — also known as a medical POA or healthcare proxy — assigns an individual of your choosing the power to make healthcare decisions for you if you can’t make them yourself.   
• Financial durable power of attorney: A financial durable power of attorney (DPOA) gives you the ability to make financial decisions in your name and on your behalf if you’re unable to do so yourself.  
• Last will and testament: A last will and testament is a legal document that includes your wishes for your possessions and dependents following your death. In this document, you can name beneficiaries, designate guardians for minor children, and identify an executor for your estate — this person will be responsible for carrying out your wishes according to your will. 
  

Pro tip: Don’t confuse will preparation with an estate plan. A will is an important part of your estate plan, but an estate plan provides an overarching strategy for your end-of-life healthcare directives and asset distribution.   

3. Establish guardianship for your dependents 

The next step on the estate planning checklist is to consider who you’d like to care for your dependents (if any) at the time of your death. These may include minor children, a loved one with special needs, or aging parents under your care. If no guardians are named in your estate plan, a probate court a may appoint guardianship for you.  

Before you name a guardian, make sure you talk to them ahead of time to get their consent. In addition, remember that they don’t have to be the person managing a child’s inheritance. You can name a third party, such as a trustee, to oversee money or assets until the child is old enough to manage their inheritance themselves.  Also, know that naming a couple as co-guardians could get tricky if they divorce. Discuss this situation with your estate attorney and consider naming a backup guardian for your dependents.  

4. Consider trusts

A trust is a legal container that’s designed to hold money and other assets for your heirs. When you create a trust, you decide what goes into it, who gets what, and how it’s distributed. A properly structured trust can help ensure your plan is executed exactly the way you intended. It may also protect your estate from entering probate.  

Working with an attorney who specializes in estate planning and trusts is critical to ensuring you’re choosing the right trust for your needs and that it’s structured according to your wishes.  

Some of the most common types of trusts are:  

• Revocable living trusts: A revocable living trust allows you to revise or end the trust at any point before your death. Once you pass away, your revocable trust will become irrevocable.
• Irrevocable trusts: An irrevocable trust can’t be changed or terminated once you’ve created it. While an irrevocable trust lacks the flexibility of a revocable trust, it offers an added layer of protection against lawsuits, creditors, and taxes. 
• Charitable trusts: A charitable trust lets you donate assets or money to a charitable organization. Assets included in a charitable trust are no longer considered your personal property, which means they may pass to your beneficiaries without being subject to taxes or lawsuits. 
  

5. Plan for federal and/or state estate taxes

Estate taxes are federal taxes on assets, such as cash, real estate, stocks, and other valuable belongings. Your beneficiaries pay estate taxes after they receive their inheritance, which are typically due within nine months of your death.  

There are preventative measures you can take to plan for or minimize estate taxes, such as placing assets in an irrevocable trust or giving gifts to family members. Talk to a tax professional who can work with your attorney and financial advisor to determine which estate tax planning strategies may be best for your situation. 

6. Avoid probate     

Probate is the legal process of verifying your will through the courts. It can be a slow, costly, and extremely public process — since probate cases are a matter of public record. In addition, a probate judge may make decisions you would disagree with if you haven’t outlined them in your estate plan. 

Fortunately, you may be able to prevent your estate from going through the probate process. Tactics like writing and maintaining a will, designating an executor for your estate, and establishing a trustee to manage assets in a trust can reduce the risk of probate.  

For more information, discuss probate laws with your attorney and develop a plan to protect your loved ones from undergoing public court proceedings. In the event probate can’t be avoided, consider hiring a probate lawyer to help navigate the process. 

7. Prepare for long-term care

Work with your financial advisor to prepare for potential long-term care needs. You may also want to consider options like long-term care insurance, a type of insurance that helps pay for care while preserving your assets. 

Be sure to discuss your options and come up with several plans in case your health needs change.        

8. Consider income in respect of a decedent (IRD) taxes 

Federal Estate Tax is not the only tax you need to be aware of. A little-known tax that hits people who inherit certain types of money is called Income in Respect of a Decedent, or IRD. If you die and you have income that hasn’t been taxed, your estate or your beneficiaries will have to pay income taxes on that money.

Examples of IRD-taxable income include: 

• Savings bond income
• Individual retirement account payouts
• Sales commissions 
• Other types of income you would have received had you lived
  

Consult with your tax professional to ensure you have a complete estate plan that covers all tax scenarios.

9. Keep your beneficiaries up to date

During the estate planning and will preparation process, you’ll have the opportunity to name your beneficiaries. It’s important to look out for a major loophole, though. Any money you have in accounts with named beneficiaries will go to those individuals, even if your estate plan says otherwise.

These accounts include but aren’t limited to:

• Retirement plans (401ks, IRAs)
• Life insurance policies
• Bank accounts
• Payable-on-death and transfer-on-death accounts   
  

Keep your beneficiary designations aligned with your estate plan to help ensure there are no conflicts.

10. Don’t forget about digital assets

More than likely, you’ve thought of your physical belongings and money during the estate planning process. But don’t forget about your digital assets.  

You may have treasured photos and important documents saved in social media accounts and/or digital file storage services. And if your accounts are password-protected, they may be inaccessible to others.  

Service providers often won’t disclose a deceased person’s passwords, and there are few laws to help in this situation. To reduce the risk of loved ones losing access to treasured memories or important documents, designate a “digital fiduciary” in your estate plan. This person will have the right to access your digital information, including login names and passwords. You can also work with an attorney to shut down your online presence — if that’s your preference. 

A simple checklist for estate planning 

Your estate plan helps protect your loved ones — mentally, emotionally, and financially. Rather than putting off estate planning, reference the estate planning checklist below to help prepare for each step of the process.

How legal insurance can help you create an estate plan 

Legal insurance gives you access to a network of qualified lawyers who specialize in estate planning and other legal matters. These legal experts can help you set up a will, trust, and POA. They can also help you review and revise your estate plan as your needs and circumstances change. 

A legal plan may be a cost-efficient alternative to hiring a lawyer. With legal insurance, you pay a monthly premium that’s typically a fraction of the cost you’d pay in attorney fees. Additionally, legal insurance doesn't have claim forms, retainer fees, deductibles, or copays. So your out-of-pocket expenses are typically lower.

Talk with your employer to learn if they offer legal insurance as part of their employee benefits, and then sign up during open enrollment.