The Basics of Estate Planning

For the many of us who still feel far from established in terms of career, wealth and/or family, the concept of an “estate” might seem pretty abstract and irrelevant. I find it automatically conjures the image of a grand country mansion, like something out of Downton Abbey or Gone With The Wind. It sounds wealthy, maybe a little old-fashioned, and definitely complicated. 

“Estate planning,” by association, can seem similarly esoteric. That’s special rich-person business, right? 

Actually no, not at all. An estate is, quite simply, the sum total of a person’s stuff, and an estate plan determines what happens to all that stuff after they die. Unless you’re either a hermit or the unconverted Ebenezer Scrooge, you almost certainly have a) stuff, and b) people you care about who could benefit from that stuff when you no longer need it.

Hence, the importance of estate planning for everyone. But how do you do it? When should you start thinking about it? What hazards should you look out for? What rules and regulations are there to navigate? The answers to these questions are different for each individual and can quickly get complicated, but let’s sketch out some basic principles anyway.

Why have an estate plan?

Like so many other big life events, death involves a lot of paperwork. If nothing else, estate planning helps to preemptively streamline the process and ensures that things happen the way you want them to happen, rather than leaving it up to the courts. It accomplishes ahead of time a lot of the tasks that would otherwise have to be done (without your input) after your death. 

When someone dies, their money and belongings often go through a legal process called probate wherein the court 1) makes an account of the decedent’s estate, 2) assigns someone as its caretaker, or “executor,” and 3) determines the rightful heirs to whom the executor will dole everything out. Practically speaking, probate usually just amounts to an examination of the decedent’s will and ensuring its terms are carried out. 

But if the will is unclear, deemed invalid, or doesn’t exist in the first place, then the court will take over and call the shots on whatever points are ambiguous. Worst-case scenario, the estate is deemed “intestate,” or without a binding will and therefore fully under the court’s control.  In that event, the court appoints an executor and distributes the decedent’s assets according to defaults specified by state law. Each state has its own probate laws, with some of them being more complicated and impactful than others.

Basically, a messy probate process or outright intestacy will almost certainly give your loved ones a lot of additional paperwork, government interference and tough choices to deal with. It can take a long time as well – we’re talking years, in many cases. Grieving is hard enough without all that extra hassle, and a solid estate plan will minimize or eliminate it altogether. 

Inheritance, Bequests and the Rest: what happens to your stuff?

So the moral of the story so far is that, if nothing else, you at least need a well-drawn will to help ensure your stuff goes where you want it to, and to spare your survivors extra work. But estate planning goes beyond that, because your estate can, in fact, include things that may not be covered in a will. And, although this may sound confusing, your heirs can in a sense inherit assets from you that aren’t technically part of your estate. 

Non-Probate and Jointly-Owned Assets

There are many types of assets that, while considered part of your estate, will already specify their own beneficiaries and thereby make a will redundant. These are sometimes referred to as “non-probate” assets.” If you have, say, an IRA or even just a bank account with its own beneficiaries, the money in those accounts will go directly to those beneficiaries without needing to go through the probate at all.

Assets that are governed by joint ownership agreements will also bypass the will. A joint bank account with your spouse is probably the most obvious example, but you will also see joint ownership in some business partnerships. While such assets are yours, they also… aren’t. That is, they also belong to the other party, and so their management in the event of your death falls under the terms of the joint ownership agreement, not your individual will. 

Naming specific beneficiaries on your accounts can be a good way to steer at least some of your estate around probate, which can be a major help in some situations. For others, however, it just makes things needlessly complicated. While probate can be a major pain, it’s not like it’s intrinsically bad; for many people, a clear, concise will is all they really need, and it goes through probate without a hitch. 

Either way, it’s important to remember that all your assets count as part of your estate, legally speaking – which can make a big difference if you have to deal with estate tax (more on that in a separate post). There is, however, a second type of financial structure that isn’t technically considered part of your estate, but is nonetheless pivotal in many people’s estate plans.


Trusts can be extremely powerful estate planning tools if used well – but I have a bit of a chip on my shoulder about them, because I frequently see them set up for no good reason. That said, they can be really useful in two general situations: First, if you want to put specific restrictions on what happens to your assets after your death, other than having them just go to your heirs or charity of choice. And second, if you need to move assets outside your estate before you die (estate tax, again, is one potential reason for this).

You can think of a trust as a safe where you stash part of your wealth. The catch, though, is that you don’t have the key to it, and neither do your heirs or other beneficiaries. Instead, a third party keeps that wealth safe until certain conditions kick in – like your death, if nothing else. The coming-of-age of your heirs is another common one.   

For example, my wife and I have 3 (almost 4 as I write this!) young children. We also have about $2M of life insurance coverage, just in case my wife and I get unexpectedly taken out by, say, a freak capybara stampede. But if that were to happen, I most definitely do NOT want to destroy my kids’ lives by turning them into teenage millionaires. 

So… I set up a trust! In this case, the trust won’t technically exist until my wife and I die and it subsequently gets funded with my $2M life insurance proceeds. But the kids will not receive “their” money until they each reach their respective ages of 25. In the meantime, our will designates a trusted family member to watch over and invest the money. An individual serving this role for a trust is known as its “trustee.” 

And that, incidentally, brings us to the topic of other important roles that you should think about in the course of estate planning. 

Power of Attorney vs Executor: who calls the shots?

At this point, you may be relieved to get some concrete understanding of how estate planning works and how you can approach it. On the other hand, though, you might be feeling overwhelmed with the sense of a big to-do list. Depending on your particular situation, the prospect of creating an estate plan that covers all the bases might be very intimidating. 

Don’t feel bad if this is you. At the end of the day, it’s true: you can’t plan for everything, and there will inevitably be unforeseen questions, challenges and problems left in someone else’s hands. That “someone else” is the other essential piece of your estate plan. 

Well, technically it’s two “someone else’s” who can – but do not have to – be the same person. These are your “attorney-in-fact” and your “executor.” Although your will is a good place to specify who will fill these roles, the responsibilities of both may cover ground that your will does not. 


You’ve probably heard of power of attorney (or just POA), which is a document that appoints someone to make decisions about healthcare, finances and other personal matters on your behalf if you’re incapacitated. This person, known as your “attorney-in-fact” or perhaps “agent,” can be anyone whom you trust to carry out the responsibilities that POA entails. 

The POA is usually part of a more wide-reaching document or agreement known variously as an “advance directive,” “healthcare directive,” “medical directive,” etc. All different names for the same thing: your expression of your wishes for what should happen to you, and who should make decisions on your behalf, if you fall victim to some kind of condition where you’re still alive but unable to make or communicate decisions for yourself. 

All these terms can easily get confusing, especially since you’ll sometimes hear the term “power of attorney” used to refer to the attorney-in-fact. Not to be a stickler here, but technically power of attorney is something they have, not something they are. Kind of like the whole “Frankenstein” vs. “Frankenstein’s monster” thing. Which perhaps is a lost cause anyway…


The powers and responsibilities of your attorney-in-fact only apply when you’re still alive and otherwise unable to make important decisions for yourself (it’s also worth noting that they’re separate from any other advance directives you may include). Once you have actually passed away, a whole new series of decisions and responsibilities come up, and these fall to another person. 

When someone dies, there will always be someone else who assumes responsibility for whatever loose ends the decedent left behind: outstanding debts, taxes, investments, property, bequests, etc. etc. etc. If the decedent didn’t already specify who that should be, the state will assign someone to do it. But most of us would like to make that decision for ourselves – hence the importance of establishing an executor ahead of time. 

Despite the differing responsibilities between the two roles, in many cases the executor and attorney-in-fact can be the same person, e.g. a spouse. But, again, this will vary depending on your circumstances. Technically it is even possible to have multiple people in either role, but I personally don’t recommend that. I also strongly suggest that you notify and meet with your future executor and attorney-in-fact before your death. 

Wait… shouldn’t I be talking to a lawyer about all this?

People are often surprised to hear me, a financial planner, going over topics like probate and wills and advance directives. And it’s true that a lot of this counts as “lawyer territory.” Many legal considerations go into estate planning, and the guidance of a good attorney can often prove invaluable. So much so, in fact, that you can find plenty of attorneys who specialize in estate planning or even do it exclusively. 

That being said, while a lawyer can be a major help in steering through the rules and regulations – and understanding how they apply to your particular circumstances – a financial planner will often have a closer eye on the long-term, real-world consequences of estate planning decisions. He or she will also be in charge of actually titling and/or moving your assets to match the intentions of your estate plan. Not to be crass, but a lot of estate planning does come down to money, because so many aspects of our lives overall are impacted by money. 

All of which is to say, both legal advice and financial management can make a huge difference to whatever preparations you want to make for handing on your estate. Typically, an attorney will charge somewhere between $1500-3000 in total to draw up a will, POA and medical directive. I’m exceptionally frugal myself, but even I would consider that a worthwhile price to get a professional’s opinion on something this impactful.

But everyone’s budget is different. While perhaps a bit riskier in terms of accuracy, there are also online programs (such as this one) that can get you started on the legal end of things much more quickly and affordably. As for the financial side… well, giving me a call is free, and if nothing else I can point you in the right direction.