What You Need to Plan for Your Estate: A Step-by-Step Guide for Every Family

Introduction: Why Estate Planning Matters

Survey results show that 76% of Americans don’t have a will. Wills aren’t a priority for most, and many people find it overwhelming or expensive. Unfortunately, the lack of estate planning is causing unspoken devastation across the country. Surviving loved ones are left confused and conflicted.

But estate planning doesn’t have to be painful or expensive. Accessible tools like Ethos life insurance and LegalZoom estate planning let you achieve the estate plan you want, no matter your stage of life or income level. In this guide, we will go over step-by-step what you need to do for estate planning.

What Is Estate Planning?

Estate planning is the process of organizing your assets and legacy plans so that if you pass away or become incapacitated, your wishes can be carried out. Most of the time, people think estate planning is only for the wealthy, but anyone can (and should) estate plan. It’s not just leaving behind an inheritance. You can decide on your medical treatment, funeral preferences, charity donations, and far more.

Without a clear estate plan, your loved ones might have no idea (or legal authority) on what to do with your estate. What happens if you fall into a coma or die abruptly with no instructions on which one of your children or your spouse gets the house? Not answering these questions ahead of time means no one will know what to do. That’s too much potential doubt and distress. You can alleviate all of it through a good estate plan.

If you know the importance of an estate plan already, but don’t know where to start? Read on.

The Core Components of an Estate Plan

1. A Last Will and Testament

Your last will and testament (commonly referred to as “will”) dictates how your property is distributed. It also can go over who gets guardianship over any minor children you have.

Wills do not legally require a lawyer to be valid. However, most states require you to have notaries and/or witnesses. Online platforms like LegalZoom are excellent for helping you draft legally valid wills quickly and affordably.

Note that wills need to go through probate court. This process can be time-consuming and expensive. Because of this, you may want to use a trust for asset distribution instead.

Pro Tip: Revisit your will after major life events, such as marriage, divorce, new children, or a home purchase.

2. Trusts

A trust is a legal entity that can hold your assets. You can avoid the probate process, manage distribution for heirs with more options, and gain special tax or asset protection advantages.

Revocable trusts are the more flexible type–they protect the privacy of your asset distribution.

Irrevocable trusts provide more utility and possibilities. You can use an irrevocable trust to avoid estate tax burdens, protect your loved ones better, and more. However, irrevocable trusts cannot be easily modified. You would need beneficiary consent and/or a court order.

As with wills, LegalZoom also offers simple trust setups online for people who want extra control or asset protection.

3. Power of Attorney

By signing a power of attorney you can grant someone the legal authority to make decisions on your behalf if you cannot. The appointee may be given a duration limit, special instructions, or other conditions. Usually, people appoint power of attorney for financial and healthcare purposes.

Please choose someone trustworthy and financially/emotionally capable to take on this task. Your immediate family members may not be the best choice for power of attorney.

4. Advance Healthcare Directive or Living Will

You can create a living will (AKA advance healthcare directive) to clarify your medical treatment preferences. This is crucial in case of serious illnesses, accidents, and conditions that leave you incapacitated.

Living wills help avoid painful family disputes and emotional burdens. It also provides you with peace of mind so that if something happens to you, you can get the healthcare treatment you prefer.

5. Life Insurance to Protect Loved Ones

Life insurance can provide over a decade of financial support and income replacement. In case you pass away, life insurance death benefits can pay out the specified coverage amount (e.g. $50k or $1 million) depending on your chosen policy.

Life insurance is essential if you are the major breadwinner or sole income earner of your family. Regardless of your age, life can be cruel. Life insurance payouts can cover:

• Mortgage continuation
• College tuition
• Lost income
• Groceries and essentials

Pro Tip: Stressed about life insurance? Ethos simplifies the process of buying life insurance. Many people spend 5 minutes online to apply quickly and are able to skip medical exams.

6. Beneficiary Designations

Always update your beneficiaries on the official policies and accounts! These designations override wills. That means if you list your spouse as your life insurance beneficiary in your will, but give it to your sibling in the life insurance policy itself, the payout would go to your sibling.

Common accounts that require beneficiary updates include:

• 401(k)
• IRA
• Life insurance

Make sure you review and update your designations every few years or after major life events, such as marriage or childbirth.

7. A Digital Estate Plan

We live in a digital era. Traditional estate plan guidelines often forget that most people have social media accounts, digital passwords and subscriptions, wallets, bank accounts, and other valuable digital assets.

Don’t overlook your virtual accounts and digital assets. If you don’t make a formal legacy or inheritance choice, your accounts may be closed or lost if you pass away or become incapacitated. Your family may not automatically receive access to them if you didn’t give them permissions or the password.

Organizing Your Estate Plan

A lot of people find the different components of an estate plan to be tricky to manage. If you use an online estate plan platform like LegalZoom, it becomes much easier to sort out all of your core documents and details. If that’s not your style, remember to store both digitally and physically, such as with a fireproof box and encrypted cloud storage.

Choose secure, reliable storage systems to avoid data leaks. If you don’t share access to your key documents and estate plan details with your executor, attorney, and/or other trusted persons, it can create delays and problems later on.

Check out our Estate Planning Checklist or read on for more information.

How to Get Started on a Budget

Estate Plan Checklist

• List all assets and debts
• Decide who inherits what
• Choose the key people in your estate plan (e.g. executor of the will)
• Gather essential documents
• Think about healthcare and legacy wishes

That’s the short list. Now let’s dive a bit deeper on how to begin an estate plan.

Step 1: Take inventory of debts and assets

What you own and owe are the two major parts of dealing with an estate. Taking inventory of your assets can help you see if you need to pay estate tax. Many families have greater asset size than they think due to real estate, stocks, and other assets adding up.

If you have any financial obligations, they may hurt the inheritances that your beneficiaries will receive. Knowing your debts in advance lets you better plan for them.

Step 2: Use online tools for foundational documents

Our favorite online estate planning tool is LegalZoom, which can be conveniently used for wills, trusts, and power of attorney templates. Doing them all in this one place lets you easily build up your estate plan and organize it for future reference and updates.

Ethos offers quick, affordable term life insurance that may allow you to skip the medical exam portion of life insurance applications. Fewer invasive procedures and time-consuming processes make Ethos the preferred life insurance company for many people.

Step 3: Meet with an estate attorney for review

This step is optional, and primarily recommended for those with sizable estates or complex situations. LegalZoom offers more affordable, convenient attorney meetings so you can get a consultation without breaking the bank.

Estate planning attorneys can help you establish trusts, outline healthcare directives, and deal with any problems that may arise as you plan your estate.

Step 4: Review and update the estate plan

Major life changes can bring significant shifts in your life goals and priorities. You may have new relationships, financial situations, and legacy goals. Your estate plan won’t magically change according to your new wishes: you need to update it yourself. We recommend reviewing your estate plan every 3 to 5 years so you can stay up-to-date and get into the habit of checking it.

Common Mistakes to Avoid

Forgetting to name contingent beneficiaries

The main beneficiary is the person or organization who gets the asset, payout, or inheritance first. However, they may not always be able to receive the asset. If you do not have a contingency plan, the probate process can be lengthened, becoming stressful and expensive. The court would have to decide where the asset goes, which may not align with your desires.

Choose a contingent beneficiary for each inheritance.

Not updating documents

It’s so easy to think it unnecessary or unimportant to update your estate plan. Understandable. People are busy with life and responsibilities. However, keeping your estate plan up-to-date is crucial. You can set a calendar reminder to check your estate plan every 3 to 5 years or ask your attorney to remind you.

Forgetting about digital assets

In addition, don’t forget about social media accounts. Facebook, Instagram, and other social media platforms usually offer legacy options. You may even make a significant amount of money from digital platforms, like Youtube, Twitch, or TikTok.

Keeping loved ones in the dark

Oftentimes, we keep our loved ones away from our estate planning details. Perhaps it feels stressful or morbid or unnecessary. Perhaps we are protecting them from difficult emotions. However, the benefits can far outweigh the cons when it comes to estate planning. By sharing details with your loved ones, especially ones who will be appointed the executor/trustee/agent of power, they will be better prepared if the time comes.

The Emotional and Practical Benefits

Peace of mind knowing your wishes will be fulfilled

The moment you finish your estate plan, you can rest assured your wishes are documented. Your trusted appointees can help you carry them out in case you pass away or become incapacitated. This peace of mind is gained the earlier you get to planning your estate, taking the stress off your shoulders.

Reduces burden and conflict for family members

Your loved ones may be getting along great today, but grief and financial choices can force people to react differently. If there is no clear estate plan, your family and friends may disagree on what should be done.

Leaves the legacy you want

Your legacy can be out of your control if you do not properly plan for it. From charitable trusts to business funding life insurance policies, there is a lot you can do to ensure your legacy is the one you want to leave behind. Estate planning enables you to plant and take care of the trees you care about.

Planning Today to Protect Tomorrow

Don’t leave your estate plan for later–it may be too late. A well-structured estate plan is an act of love that can prevent a lot of grief and conflict for your loved ones. And estate plans aren’t only for passing on money. They also let you control your medical care and legacy.

Take your first step in estate planning) using tools like affordable Ethos life insurance and LegalZoom’s online will creation platform today.