For over a century, Kiplinger has been dedicated to empowering our readers to manage their finances in order to better their lives. We're now on the brink of one of our biggest financial challenges yet, as an estimated $124 trillion is expected to be passed to heirs and other beneficiaries over the next 20 years in the U.S.

That's why we've been digging into Americans' feelings and preparedness around estate planning and inheritance. With Morning Consult, we surveyed over 5,000 older parents and adult children as part of our Trillion Dollar Talk campaign and found staggering differences between expectations and reality, as well as a deep reluctance for families to talk about inheritance and estates with each other.

Among the highlights of our research, we found that:

• Roughly two in five families have never discussed inheritance plans – and parents report having shared more than their children recall hearing.
• 60% of adult children would rather talk to their parents about politics than inheritance, while 80% of parents would rather talk to their kids about their physical health than the inheritance plan.
• Nearly twice as many parents expect to leave a meaningful experience (46%) as adult children who expect to receive one (23%)

The top reason parents say they are avoiding the conversation is that there are too many unknowns, including what their estate will be worth after covering healthcare costs and inflation.

It's this uncertainty that Kiplinger wants to conquer, to help our readers feel more confident in their finances and in talking about their finances. If families are not open with each other now, problems are brewing in the future (especially as a third of adult children reported they expect that an inheritance will create conflict with their siblings).

The largest wealth transfer in U.S. history is underway but many families are avoiding those awkward conversations about inheritance and estate management.

Take this 10-question quiz and discover your inheritance readiness profile: Are you a Wealth Steward, an Informed Strategist, or a Novice Navigator? We have tips for each profile to safeguard and make the most of your inheritance.

An inheritance can bring significant opportunities, but it also comes with complex financial and legal responsibilities. Whether you expect a windfall soon or simply want to be prepared for the future, identifying your strengths and blind spots is a good first step.

The ultra-wealthy don't just have more money than 62% of Americans. They have a handful of estate-planning secrets to help protect and pass on their wealth. From revocable trusts and Roth conversions to tax-efficient investments, these high-level tactics are designed to minimize taxes, shield assets, and create a lasting legacy.

And what a legacy. Baby boomers are expected to pass down $84.4 trillion to their heirs by 2045 as part of the "Great Wealth Transfer." Roughly half of that amount will come from high-net-worth and ultra-high-net-worth households. The good news? Many of the proven strategies used by these households can be adapted by retirees with modest incomes, without breaking the bank.

Matt Odgers, co-founder of Opelon LLP, says one of the biggest misconceptions is that estate planning is a tax strategy used only by the wealthy. "For most retirees, it has nothing to do with tax. What wealthy families are really buying is control and privacy; it's a clean handoff, and those things cost the same for everyone."

Here are 8 powerful estate planning secrets the rich actually use that you can realistically "steal."

1. The revocable living trust

The ultra-wealthy rarely let their assets go through probate. Instead, they place most of their major assets, including homes, investment accounts and other property, into a revocable living trust, Odgers says.

“The wealthy aren't leaning on a will. A will does not avoid probate, and probate is generally slow, public, and costly. A revocable living trust does the quiet work instead.”

How you steal it: Place major assets in a revocable living trust to avoid probate and allow a seamless transfer to your heirs. A living trust is flexible and can be set up easily with an attorney for about $400–$4,000. Then, “fund” the trust by transferring your house, bank accounts, and other assets into the trust’s name. Don't worry. The trust can be changed or revoked anytime during your lifetime, giving you full control while also protecting your family from the hassle of court delays and probate (and high fees) later.

2. The gift tax exclusion

The ultra-rich understand that making a gift or leaving their estate to their heirs doesn’t ordinarily affect their federal income tax, according to the IRS(pdf). With a bit of strategic planning, they avoid tax implications by using both the annual gift tax exclusion and the lifetime exemption, while shielding their wealth from future tax increases.

How you steal it: You don’t need to be rich to benefit from the annual gift tax exclusion. In 2026, you can gift up to $19,000 per recipient (child, grandchild or anyone else) completely tax-free. A retired couple can gift $38,000 per person annually. Over 10–15 years, this can move significant money out of your estate while helping your loved ones when they need it most.

3. Spousal Lifetime Access Trusts (SLATs)

A SLAT is an irrevocable trust that one spouse creates for the primary benefit of the other spouse. Ultra-wealthy couples use SLATs to remove assets from their estate while still allowing their spouse to receive income or even principal from the trust if needed during their lifetime.

How you steal it: Create an irrevocable trust for your spouse by transferring assets, such as cash, investments, or property, into the trust. That removes the assets from your taxable estate immediately. Your spouse can serve as a beneficiary and can access the funds if needed during their lifetime. This is particularly useful for retirees who want to shield their assets from the high costs of long-term care or future changes in tax law.

4. Life insurance

Permanent life insurance — either whole or universal life — is a favorite strategy among the wealthy because it passes money to heirs completely income tax-free. To maximize this benefit, high-net-worth families often avoid owning policies directly. Instead, they place them inside an Irrevocable Life Insurance Trust (ILIT). When structured properly, an ILIT keeps the death benefit out of the taxable estate, giving heirs tax-free cash to cover estate duties, debts or living expenses without forcing a fire sale of the family home or core assets.

How to steal it: Use permanent life insurance placed in an Irrevocable Life Insurance Trust (ILIT) to leave tax-free money to heirs while keeping it out of your taxable estate. You can often cover the premiums using your annual gift tax exclusion. In the end, you get to leave behind tax-free money for your family while protecting the assets you've worked so hard to build.

5. Family LLCs

By bundling assets — such as real estate or a family business — into a Family Limited Liability Company (Family LLC), the ultra-rich can transfer non-controlling shares to their heirs over time at a discounted valuation. This strategy lowers the gift's taxable value, preserving more of the owner's lifetime exemption and reducing future estate taxes.

How to steal it: Even with more modest assets, you can set up a Family LLC with the help of an estate planning attorney. But the main point is that anyone can benefit from holding assets in entities like trusts or family LLCs. “Heirs can secure access, enjoyment, and management without direct ownership,” says estate planning attorney Kevin Quinn, President at Legacy Counsellors, PC. “This structure shields wealth from creditors, divorces and lawsuits, while ensuring a structured legacy for future heirs.”

6. TOD and POD designations

Transfer-on-Death (TOD) and Payable-on-Death (POD) designations on brokerage accounts, bank accounts, certificates of deposit (CDs), and even some vehicles allow funds to be transferred directly to a beneficiary upon the account holder's death, bypassing probate. Many people overlook TOD and POD designations in estate planning — but not the wealthy.

How to steal it: Setting up TOD and POD designations on your accounts allows assets to transfer directly to beneficiaries upon your death, bypassing probate. Through your financial institution, you choose your assets, fill out a form and name your intended recipients.

However, because TOD and POD designations supersede instructions in a living trust, they must be carefully coordinated. For the best protection, complex assets like real estate are placed in the trust, while simpler accounts — such as checking, savings or CDs — can name the revocable trust as the TOD or POD beneficiary. This keeps your cash out of probate while ensuring every dollar is distributed according to your estate plan.

7. Roth IRA conversions

It's no surprise that the ultra-wealthy are obsessed with managing future taxes and carefully time their Roth conversions to pay taxes when the rate is lowest, giving their heirs tax-free money down the road.

How to steal it: Ryan Maynard, Managing Partner at Vaquero Private Wealth, offers this advice. “Convert traditional retirement money to a Roth during your low-income years — often the stretch after you stop working but before Social Security and required minimum distributions (RMDs) begin. In those years your taxable income can be unusually low, so you convert at a very low ordinary rate and move that money into a Roth, where it grows and comes out tax-free for the rest of your life and for your heirs.” This strategy works especially well for retirees with smaller nest eggs.

8. Long-term capital gains

The ultra-wealthy value long-term capital gains because they are taxed at much lower rates than ordinary income. By holding investments for more than one year, they can pay significantly less tax on their profits. Besides that, they can afford to hold assets for years or even decades because they don't have to rely on selling them to cover daily living expenses.

How to steal it: Try to hang onto your investments for at least a year before you sell them. You’ll often qualify for the lower long-term capital gains rates, which are usually 0%, 15%, or 20%, instead of getting hit with regular income tax rates. You don't need to be ultra-wealthy to take advantage of this. “It is one of the most valuable breaks in the tax code,” Odgers adds, “and it is not based on your estate size.”

Use the best strategies for you

You don't have to copy the ultra-wealthy exactly. Mixing and matching just a couple of these ideas can make a real difference and protect your savings, cut taxes, and leave more for the people you love.

Trent Von Ahsen, CFP®, and Managing Partner at Cedar Point Capital Partners, offers a final word. “There are clearly some differences, but I do think the biggest misconception about estate planning is that it's only for the ultra-wealthy. Affluent families may use some sophistication. But overall, I'd say the same underlying principles are available to basically anybody."

Related content

• 10 Things You Should Know About Estate Planning
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• What Does It Really Take to Retire Rich?
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If you’ve inherited a house, you’re not alone. Data show that 38% of people in the U.S. report real estate as part of their past or expected inheritance.

But once the deed is in your hands, you’re probably wondering what comes next. Beyond deciding whether to keep it, sell it, or rent it, there’s one almost universal question: What are the tax implications?

There's good news: Inheriting a house doesn’t automatically mean you’ll owe taxes to the IRS or your state. But what happens next depends on several factors, including whether you decide to sell the property and how the step-up in basis affects your tax bill.

Here’s more of what you need to know.

What happens with taxes if you inherit a house

Inheriting a house doesn’t automatically trigger federal taxes. Instead, you’ll need to decide what to do with the property. Whether you sell it, keep it, or turn it into a rental, each option can have different tax implications.

One of the most important tax rules for inherited property is the step-up in basis. A home’s basis is the amount the IRS uses as the starting point for calculating capital gains tax.

Think of the home’s basis like a car’s trip odometer. Resetting the trip odometer doesn’t erase the miles already driven. Instead, it creates a new starting point, tracking only the miles driven from that point forward.

• When you inherit a home, the IRS generally measures your gain from the home’s fair market value on the date of death instead of what the previous owner originally paid.
• The step-up in basis doesn’t change what the house is worth. It changes where the IRS starts measuring your gain.

For example, your parents bought a home decades ago for $150,000. By the time you inherit it, it’s worth $700,000. If you later sell the home for $750,000, your taxable gain would be $50,000, not $600,000.

That’s because your taxable gain is based on the appreciation that occurred after you inherited the home, not when your parents owned it.

Selling, keeping, or renting inherited property

Selling an inherited home is often one of the biggest financial decisions you’ll make after inheriting property. A Real Estate Inheritance Report from Trust & Will finds that 56% of heirs choose to sell an inherited home, making it the most common path forward.

• Fortunately, you won’t pay capital gains tax on the difference between what the original owner paid for the home and its fair market value when you inherited it. Instead, the IRS uses the home’s stepped-up basis as the starting point for calculating your taxable gain.
• That means when you sell, you’ll owe capital gains tax only on any appreciation that occurs after you inherit the home.
• If you sell the home soon after inheriting it for about its fair market value, your taxable gain may be minimal.

What if you decide to keep the house? Keeping an inherited home doesn’t create an immediate federal tax bill. You’ll still be responsible for ongoing costs like property taxes, homeowners insurance, and maintenance. If you eventually decide to sell the home, the stepped-up basis will determine how your capital gains are calculated.

Some beneficiaries—roughly 17%—decide to turn an inherited home into a rental property. If you do, rental income is typically taxable. You may also be able to deduct certain expenses related to the property.

Depending on your situation, you might qualify to claim depreciation, which can affect both your annual taxes and your capital gains calculation if you eventually sell.

Estate and inheritance tax considerations

If you’ve inherited a house, you may also be wondering whether you’ll owe inheritance tax or estate tax.

For most families, the answer is no.

The federal government doesn’t impose an inheritance tax, and only a handful of states do. Furthermore, the federal lifetime estate and gift tax threshold sits at $15 million per individual ($30 million for married couples), meaning it generally applies only to exceptionally large estates.

Whether either tax applies depends on factors like the overall size of the estate, where the deceased lived, and state law.

Where you live matters with inheritance

While federal tax rules dominate the conversation, state-level rules can create unexpected financial surprises. But the baseline rule is the same: Nearly all state tax codes conform to the federal step-up in basis, resetting the property's starting value to its fair market value on the date of death for state capital gains purposes.

However, state rules diverge from IRS rules in several key areas:

State Capital Gains Rates: If you hold the home and sell it after it appreciates further, any post-inheritance gain is subject to state income tax alongside federal capital gains tax.

In high-tax states like California, New York, or Minnesota, state capital gains tax rates can add 8% to 13%+ to your tax bill.

State Inheritance and Estate Taxes: Five states—Pennsylvania, New Jersey, Maryland, Kentucky, and Nebraska—levy a state inheritance tax on certain heirs.

Additionally, twelve states and Washington, D.C. enforce state estate taxes with exemptions far lower than the federal threshold—in places like Oregon or Rhode Island, kicking in on estates valued as low as $1 million or $1.8 million.

Local Property Tax Reassessments: In some jurisdictions, transferring title triggers a local property tax reassessment. The capped property tax rate the previous owner enjoyed could reset to current fair market value, significantly increasing annual holding costs.

Key questions to consider before making a decision

Before deciding whether to sell, keep, or rent an inherited home, take time to evaluate a few financial factors:

• What is the home’s official stepped-up valuation? Securing a professional, independent appraisal as of the date of death establishes your baseline basis and protects you if you sell later.
• Can you afford the ongoing carrying costs? If you plan to keep the home, calculate the true cost of holding it — including updated local property taxes, insurance premiums, utilities, and deferred maintenance.
• Are there co-heirs or sibling dynamics to navigate? If you inherit with siblings, clarify whether everyone agrees on selling or keeping the property, or if one party needs to buy out the others.
• What are the local property tax reassessment rules? Check with the local tax assessor to see if transferring title triggers an immediate tax reassessment that could increase annual property taxes.

Inheriting a home: Frequently asked questions

Tax laws are complex, and every beneficiary's tax situation is unique. The information provided here is for general educational and informational purposes only and does not constitute formal tax, financial, or legal advice. Be sure to consult a qualified tax professional, CPA, or estate planner to evaluate your specific circumstances before making any financial decisions.

Do you automatically pay taxes when you inherit a house?

No. Inheriting a house by itself won’t trigger federal taxes. Taxes may arise later depending on what you do with the property.

Can you sell an inherited house immediately?

Generally, yes. Many beneficiaries sell an inherited home shortly after probate or once they have the legal authority to do so. However, the timing depends on the estate administration process and state law, so consult a trusted professional to understand any timing restrictions that may apply to your situation.

How is capital gains tax calculated on an inherited house?

In many cases, capital gains are calculated using the stepped-up basis, meaning the home’s fair market value on the date of death becomes the starting point for measuring future gain.

What if I inherit a house with my siblings?

If you inherit a house with your siblings, you may become co-owners of the property. Together, you’ll need to decide whether to keep the home, sell it, or rent it out. If you sell the home, each beneficiary’s share of any capital gain is based on their ownership interest and the home’s stepped-up basis.

Can I live in an inherited house without paying taxes?

Usually, yes. Moving into an inherited home doesn’t automatically create a federal tax bill. However, you’ll likely become responsible for ongoing expenses like property taxes, homeowners insurance, and maintenance.

If you later sell the home, your taxes will depend on the selling price and your stepped-up basis.

What if the house was held in a trust?

It depends on the type of trust. Many homes held in a revocable living trust receive the same step-up in basis as homes passed through a will.

Some trusts, however, have different tax rules that can affect your tax situation. If you’re unsure how the trust is structured, consider consulting a tax professional before selling the property.

Do I have to pay property taxes on an inherited house?

Yes. Once you inherit a home, you’ll typically become responsible for ongoing property taxes, just as any other homeowner would be. Depending on where the property is located, you may also need to update or reapply for property tax exemptions after ownership changes.

Related Content

• Ask the Tax Editor: Tax Basis in Inherited Property
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Passing down your life savings shouldn't require surrendering thousands of dollars to court fees and probate lawyers. Yet every year, millions of families watch their inheritances chipped away by those costs.

To bypass the costly court process, some households turn to a trust.

It sounds simple enough — until you look at the price tag. With trust setup costs routinely running into the thousands, plus a dizzying choice between revocable and irrevocable options, it's easy to wonder:

Is a trust worth the headache, or is a basic will enough?

The short answer: it depends.

While an irrevocable trust can shield your wealth from taxes and nursing home costs, its legal complexity and ongoing maintenance fees might not suit your family.

On the other hand, a revocable trust can spare your kids the nightmare of probate court, but paying higher setup costs upfront doesn't always guarantee a net payoff for smaller inheritances.

We'll break down the differences between wills and trusts, what each really costs, why your state's laws change the math and how to choose the option that leaves the most money for your heirs.

Wills vs revocable and irrevocable trusts: Key differences

Before we dive into the numbers, let's start with the structural differences between a standard will, a revocable trust and an irrevocable trust.

Key differences are highlighted in the table below.

*Changes might be made easier by an independent trustee through a process of "decanting" — pouring assets from an old trust to a new one with approval — if your state allows.

**However, if you have a "grantor trust," the creator of the trust still pays the taxes on their personal return, thus potentially saving some money.

As you can see from the table, one of the general main advantages of a fully funded trust is skipping probate court.

• This can save your heirs time, keep legal filings private and prevent your personal estate details from entering public record.
• In addition to these benefits, an irrevocable trust removes assets from your taxable gross estate, shielding wealth from transfer taxes and potential creditors.
• If you anticipate needing long-term care (e.g., a nursing home), an irrevocable trust (such as a Medicaid Asset Protection Trust) can safeguard your savings while helping you qualify for government assistance, provided it's established well outside Medicaid's look-back window.

All those advantages come with one big disadvantage: Higher upfront costs.

You'll typically pay higher legal and accounting fees to set up your trust than you would for a standard will. The key question for most families is whether paying those higher fees today will save their heirs enough in court costs and taxes down the road to make the investment worthwhile.

How much do wills and trusts really cost you?

From a purely financial standpoint, the cost-benefit analysis of a trust hinges on location, estate complexity and overall asset value.

For instance, an estate that passes through a standard will might undergo probate for some or all its assets. Probate expenses (court and attorney fees and filing costs) generally run 3% to 8% of the probate estate's gross value, according to industry-wide averages.

But if your assets pass automatically through joint ownership or designated beneficiaries (such a 401(k) or IRA), probate might be minimal or bypassed entirely.

Below is a cost comparison showing what you might pay today vs what your heirs could pay later if you chose a will vs a trust. The data is compiled from nationwide legal surveys, consumer finance benchmarks and historical probate data.

Note: The table utilizes national averages for probate and administrative costs, not estate tax rates. Exact numbers vary depending on your geographic location, state laws, attorney rates and complexity of assets.

Households who opt for a revocable trust might do so to pay a larger amount upfront today to help save their kids from paying thousands in probate fees decades later.

But the savings aren't quite as high as you might think. Consider these facts, assuming a standard 2.5% to 3% long-term inflation rate, and an estate worth roughly $300,000 to $400,000.

• If a revocable trust saves your kids $15,000 in probate fees 30 years from now, those future savings might only be worth roughly $6,000 to $7,000 in today's dollars.
• If you paid $2,000 in setup costs today to save a net $5,000 in inflation-adjusted dollars down the road, it's still a win — but it's not the huge $13,000 windfall it would appear to be on paper.
• Whether those net savings of $5,000 justify the upfront effort and expense depends on your family’s priorities, estate complexity, and location.

Why where you live matters

Federal estate taxes typically only apply to very high-net-worth individuals ($15 million per person in 2026). However, individual state laws can dramatically alter the math for average-income families.

First, a handful of states impose their own estate or inheritance taxes with much lower thresholds. Second — and more commonly — probate fees, legal mandates, and court procedures vary widely from state to state.

That's why where you live (and die) matters to your heirs.

To see how this works, consider the following scenario.

A parent passes away, leaving $100,000 in non-real-estate probate assets to a child serving as an executor. In one scenario, the parent lived in Florida. In another, they lived in Missouri.

Note: The example provided represents averages and is not indicative of a particular taxpayer's financial situation.

In the table, the heir can save $3,355 more in Florida compared with Missouri. Why? There's a specific state rule about inherited personal property in the Show-Me State.

Under Missouri law, the threshold to file a simplified small estate return is capped at $40,000. That means the heir is forced into a standard, full court-supervised administration (the $3,300 in attorney fees).

Conversely, Florida allows a $100,000 estate to bypass the traditional court-supervised administration via Summary Administration (which applies to nonexempt personal assets up to $150,000 and exempt primary homestead property), meaning the heir can avoid formal executor appointments and ongoing court oversight entirely.

Meanwhile, in higher-cost states such as California or New York, statutory attorney fees and executor commissions can push probate expenses significantly higher, making revocable trusts far more attractive than standard wills in those states.

Do tax benefits outweigh the setup costs?

It depends entirely on your estate size and which type of trust you choose.

Revocable trusts vs wills.
A revocable trust or a standard will offers no direct income tax savings during your lifetime (beyond basic inheritance tax rules). Any income generated by assets inside either flows to your personal tax return (Form 1040) using your standard individual tax brackets.

From an annual tax perspective, a revocable trust and a standard will are treated almost identically. Don't expect to recoup your upfront setup costs through annual tax savings; they simply don't exist for wills and revocable trusts.

Irrevocable trusts.
An irrevocable trust offers structural estate tax savings by removing assets from your taxable personal estate. However, that benefit comes with two important annual tax trade-offs:

• Compressed tax brackets. If an irrevocable trust retains income rather than distributing it to beneficiaries, that income might be subject to the top federal tax bracket at much lower thresholds than an individual return. As a result, maintaining an irrevocable trust (non-grantor) can actually lead to higher annual taxes, even if it lowers the overall tax burden for your heirs when you pass away.
• Recurring maintenance costs. Because trust assets are legally separate from your estate, you must file a separate annual fiduciary tax return (Form 1041). This adds recurring accounting expenses every year.

Typically, irrevocable trusts make the most financial sense if your total net worth exceeds the federal estate exemption (over $15 million in 2026), if you live in a state with high death taxes, or if you need to protect assets from creditors or long-term care costs. In those specific scenarios, the long-term tax and asset protections can outweigh the setup and maintenance fees.

How to save your kids the most money

Ultimately, whether a trust or a will saves your kids the most money depends on high-end estate and gift taxes, as well as how you want to approach probate.

Here are a few sample scenarios outlining when a will vs a trust could be more beneficial for you or your heirs:

However, these scenarios don't cover every person's unique financial situation. Before deciding, review your state’s specific inheritance and probate rules, take inventory of how your accounts are titled, and consult a qualified estate planning attorney or tax professional.

This article does not cover state income tax and is for educational purposes only. The content does not constitute financial, legal, or tax advice.

Read More

• How Your Inheritance Gets Taxed: From Stepped-Up Basis to IRA Rules
• Avoiding the Widows' Penalty Tax Trap After a Spouse Passes
• States That Won't Tax Your Death
• Estate Tax vs Inheritance Tax: Who Actually Pays the Bill?

One of the first questions many people ask after learning they’ll receive an inheritance is: "Will I owe taxes?"

It’s an understandable worry. Taxes can be confusing, especially during an already emotional time when someone has passed away. But there is some good news — receiving an inheritance doesn’t automatically mean you’ll owe taxes to the IRS.

That's because for most people, the inheritance itself isn’t a taxable event. Whether you owe anything depends on what you inherit, where you live, and whether those assets later produce income or are sold.

Still, before you decide what to do next, it helps to understand which tax rules might apply to your situation and when. Here's more to know.

Do you owe taxes on an inheritance?

When you first inherit money or property, your instinct might be to prepare for a heavy tax bill on your next federal income tax return. It's a natural concern, but the IRS actually treats inheritances with a surprising amount of grace.

As a general rule, the federal government doesn't handle inherited assets as taxable income.

Simply receiving cash, a house, a stock portfolio, or other property won't trigger an automatic tax event or change your baseline tax situation for the year. In most cases, you aren't required to report the initial inheritance on your federal return.

Where tax responsibilities tend to enter the picture is not from the gift itself. The inheritance itself is generally a "clean slate," so to speak; what you choose to do with those assets is what determines which tax rules may apply.

Different inherited assets come with different tax rules

If you inherit cash: For most people, inheriting cash doesn’t create a federal income tax bill. That's because, as mentioned, the inheritance itself isn’t taxable. But any income it earns afterward might be.

For example, if you deposit inherited money into a high-yield savings account, any interest you earn is generally taxable. The same applies if you invest the money and later receive dividends or realize capital gains.

If you inherit a house: Inheriting a home generally isn’t a taxable event. If you later sell the property, however, capital gains tax rules may apply.

That’s where the tax picture can start to change.

• Most inherited homes receive a stepped-up basis, which adjusts the property’s value to its fair market value at the time of the owner’s death.
• That can reduce the amount of taxable gain if you later sell the home.

For example, if you inherit a home worth $400,000 and later sell it for about that amount, you may owe little or no capital gains tax. If the home’s value increases after you inherit it, you may owe tax only on the appreciation that occurs after the inheritance.*

*This is a simplified example solely for educational purposes. Consult a trusted financial professional to help determine possible capital gains tax liability if you plan to sell an inherited home.

If you inherit stocks or investments: Stocks, mutual funds, and other investments generally aren’t taxable when you inherit them.

Much like inherited real estate, inherited stocks, mutual funds and other investments generally receive a stepped-up cost basis. If you sell them later, you may owe capital gains tax only on the appreciation that occurs after you inherited the assets.

If you inherit an IRA or retirement account: Inherited retirement accounts follow different tax rules than most other inherited assets.

While inheriting the account itself usually isn’t taxable, withdrawals often are. The rules depend on your relationship to the original account owner, the type of retirement account, and other factors.

• For example, distributions from an inherited traditional IRA are generally taxable, while qualified withdrawals from an inherited Roth IRA are typically tax-free.
• However, even though inherited Roth IRA distributions aren't taxed, most non-spouse beneficiaries are required under the SECURE 2.0 Act to withdraw all funds from the account within 10 years.

Because inherited retirement account rules can be complex, it’s important to understand these distribution timelines before taking money out and to consult a trusted tax advisor who knows your individual circumstances.

Common inherited assets and when taxes may apply

State inheritance taxes

Although there is no federal inheritance tax, a handful of states impose an inheritance tax paid directly by the beneficiary.

(Note: This is separate from a state estate tax, which is paid from the deceased person’s estate before assets are distributed.)

Whether you’ll owe state inheritance tax depends on where the deceased lived or owned property and your relationship to them — spouses and close relatives are often exempt.

If you’re unsure whether your state imposes an inheritance tax, our guide might help, but also consult a trusted tax professional or financial planner since every beneficiary's situation is different.

Keep in mind: Whether you’ll owe an inheritance tax largely depends on the state involved and your relationship to the deceased.

Frequently asked questions about inheritance taxes

Even though most inheritances aren’t subject to federal income tax, there are a few situations that can confuse beneficiaries.

Can you owe taxes years after receiving an inheritance?

Yes. While the inheritance itself usually isn’t taxable, you may owe taxes later if inherited assets earn interest or dividends, appreciate before you sell them, or require taxable withdrawals from a retirement account.

Does every state tax inheritances?

No. Only a handful of states impose an inheritance tax, and many exempt spouses and other close relatives. In most states, beneficiaries don’t owe a state inheritance tax.

Should you talk to a tax professional?

If you inherit a retirement account, real estate, a business, or other high-value assets, a qualified tax professional can help you understand how federal and state tax rules apply to your situation.

You can also find additional guidance in IRS Publication 559, Survivors, Executors, and Administrators, which explains the tax responsibilities of beneficiaries, executors, and estates.

Related

• Inherited an IRA? Key Distribution Rules to Know
• States That Won’t Tax Your Death
• Estate Tax vs Inheritance Tax: Who Actually Pays the Bill?
• Filing a Deceased Person's Final Income Tax Return

If you’ve ever wondered whether your family could face a tax bill after inheriting money or property, you’re not alone.

While estate tax and inheritance tax both involve assets passed on after death, they differ in who pays them, when they’re paid, and when they apply. Understanding the distinction can help you better navigate estate planning and inheritance decisions.

The good news? According to the Center on Budget and Policy Priorities, fewer than 1 in 1,000 estates owe federal estate tax.

Inheritance taxes are even more limited.

So, what does this mean for you? Here’s more of what you need to know.

How an estate tax works

An estate tax is a tax on the transfer of a person’s assets after death.

Rather than taxing each beneficiary individually, the tax is calculated based on the total value of the deceased person’s estate before assets are distributed.

The estate’s executor or personal representative generally pays any estate tax owed before beneficiaries receive their inheritances.

According to the IRS, an estate may include:

• Cash and investment accounts
• Real estate
• Business interests
• Life insurance proceeds (in certain situations)
• Trust interests
• Retirement accounts
• Personal property and other assets

Because the federal estate tax exemption is $15 million per person in 2026 (indexed for inflation in future years), only a relatively small percentage of estates owe federal estate tax.

Some states impose their own estate taxes, often with exemption amounts much lower than the federal threshold. For example, Massachusetts has a $2 million estate tax exemption, so an estate could owe state estate tax even if it doesn’t owe federal estate tax.

How an inheritance tax impacts heirs

Unlike an estate tax, an inheritance tax is assessed after assets are distributed. If inheritance tax applies, the beneficiary, not the estate, is responsible for paying it.

Even then, many surviving spouses are exempt, and children and other close relatives may qualify for reduced tax rates or exemptions depending on state law.

Whether you owe inheritance tax largely depends on state law, your relationship to the deceased, and any available exemptions.

Who actually pays estate tax vs. inheritance tax?

The biggest differences are who pays the tax, when it’s paid, and when it applies.

Whether estate tax or inheritance tax applies depends on three primary factors:

• The size of the estate
• Where the deceased was domiciled at the time of death (and, in some cases, where certain property is located)
• The beneficiary’s relationship to the deceased (for inheritance tax purposes)

Estate vs Inheritance Tax

How it works

Note: This is a simplifed example. Keep in mind that everyone's financial situation is different and you should consult a trusted tax or estate planning advisor for guidance on your individual circumstances.

Imagine finding out you’ve inherited part of a loved one’s $5 million estate. Before mentally earmarking those assets to pay off debt, boost your retirement savings, or help fund a child’s college education, one question is likely to come to mind: "Will I owe taxes?"

For most families, the answer is no.

Federal estate tax applies only to very large estates, and only a handful of states impose an inheritance tax. If taxes do apply, who pays depends on whether it is an estate tax or an inheritance tax.

Why the difference matters

Estate tax and inheritance tax often get conflated, but the distinction matters. Understanding who pays each tax and when it applies can help you avoid costly misconceptions.

Although most families won’t owe either tax, understanding the rules can help you navigate an inheritance or plan your own estate with greater confidence.

If your estate could approach federal or state exemption thresholds, advanced planning strategies, like lifetime gifting, charitable giving, or trust planning, may help reduce future tax exposure.

Frequently asked questions

Can you owe both estate tax and inheritance tax?

Yes, although it’s relatively uncommon.

A large estate could owe estate tax, while a beneficiary in a state that imposes an inheritance tax could also owe inheritance tax on the same transfer.

Because different laws govern estate and inheritance taxes, both taxes can apply in certain situations.

Which states impose an inheritance tax?

As of 2026, only five states impose an inheritance tax:

• Kentucky
• Maryland
• Nebraska
• New Jersey
• Pennsylvania

Whether you owe inheritance tax largely depends on state law, your relationship to the deceased, and any available exemptions.

In many cases, surviving spouses are exempt, while children and other close relatives may qualify for reduced tax rates or exemptions.

Who pays estate tax?

Estate tax is generally paid by the estate before assets are distributed to beneficiaries.

The estate’s executor or personal representative is responsible for filing any required estate tax returns and paying any tax due from estate assets.

Who pays inheritance tax?

The beneficiary, not the estate, is responsible for paying any inheritance tax that applies.

How long do you have to pay estate or inheritance tax?

Estate tax: Federal estate tax is generally due nine months after the date of death. The IRS may grant an extension to file, although any tax owed may still need to be paid by the original due date to avoid interest and penalties.

Inheritance tax: Payment deadlines vary by state because inheritance taxes are imposed at the state level. Beneficiaries should check their state’s requirements, as filing and payment deadlines differ.

Do most people have to pay estate tax or inheritance tax?

No. Most Americans won’t owe either tax.

The federal estate tax applies only to estates that exceed the applicable federal estate tax exemption amount, and only a handful of states impose an inheritance tax.

Whether taxes are owed depends on the size of the estate, applicable state law, and, for inheritance tax purposes, the beneficiary’s relationship to the deceased.

Estate tax planning: Bottom line

Whether you’re planning your own estate or navigating an inheritance after the loss of a loved one, a qualified estate planning attorney or tax professional can help you understand how federal and state tax laws apply to your situation.

Though every individual's financial situation is different, if you're engaging in estate planning, you may want to assess whether your total net worth puts you close to any state-level tax thresholds. And if you think you're receiving an inheritance, you may want to consider how your relationship to the deceased impacts your state tax exemptions, or if the estate covers the bill.

Overall, remember this simple rule: If the estate writes the check, it’s an estate tax. If the beneficiary writes the check, it’s an inheritance tax.

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Expecting an inheritance and thinking that means you don't have to save for retirement? Think again. You don't know for sure the timing or size of your windfall, or whether you'll receive one at all.

The stock market is at record highs, and baby boomers hold $68 trillion to $84 trillion in wealth they intend to pass down in what is known as the Great Wealth Transfer. But they're also living longer and spending more, which reduces the amount left for heirs.

"It's taking longer before our clients are receiving an inheritance," says Sarah Wotherspoon, managing director at Wealthspire. "The reality is, people don't know how long they will have to wait, and they also don't know how much they will receive."

In the meantime, boomers are spending their money on luxury travel, longevity products, high-end retirements, healthcare and long-term care, says Wotherspoon.

They're also giving while living, paying for their adult children's homes, grandchildren's colleges and family vacations, she says.

That doesn't mean there won't be money left over if you're in line for an inheritance. It does mean you shouldn't bank on it. Here's what you should do instead.

Don't assume your inheritance amount

You might think you'll get $5 million because your mom and dad said so, but the reality could be vastly different when they pass. Even if the amount is accurate, taxes, legal fees and distributions can change your inheritance outlook.

That's why it's important to have a conversation with your parents and their financial advisers about your inheritance. Without an accurate understanding, it's hard to plan.

You might not need the money and want it passed on to your kids instead. Wotherspoon says she sees this more often.

If you can't find an exact amount, Wotherspoon says to cut your assumption by 50% or 60% and plan based on that. If your inheritance is more, you'll be happy; if it's less, you won't be caught off guard.

Don't treat your inheritance as your retirement plan

Just because you're getting an inheritance doesn't mean you won't need a retirement plan.

Taxes are a big part of estate planning, especially if the inheritance is large enough to push you into a higher income bracket. The goal should be to pay the least amount of taxes on your inheritance, and you can't do that without planning across all the generations that are in line to receive money.

Wotherspoon had one client who saved his money during his lifetime so his son and grandson could receive substantial wealth at his passing. While he was living, he converted a large retirement account into a Roth IRA and took a big tax hit so his heirs could avoid paying taxes later.

His own account might not have enough time to recover from the tax hit, but his son's and grandson's accounts do. "An important part of this is tax planning," says Wotherspoon.

Don't spend an inheritance you don't have yet

You might expect a nice windfall later in life, but that's not permission to spend now and worry later. Don't blow off saving for retirement or accumulate debt just because you know cash is coming someday.

"We have clients who were tempted to make major life decisions because of an inheritance," says Wotherspoon, who advises against that. She has clients who want to buy third homes, retire early, take luxurious trips, and take on home renovations in anticipation of future inheritances.

Before they proceed, Wotherspoon asks them: What would happen if the inheritance were delayed a year, two years, even five years? What would happen if they received less? Could they pay for whatever expense they wanted to incur?

Do build an independent retirement plan

Even if a financial windfall is a sure bet, it's important to build a retirement savings plan independent of it. That way, if things ever fall apart, you will be ok. Your independent retirement plan should include the following steps:

1. Contribute as much as possible to your 401(k), IRA, HSA and any other tax-advantaged retirement savings accounts. If you can't contribute the maximum, try to meet at least the match, if your employer offers it.

2. Run two scenarios for your retirement. One based on your monthly savings, retirement age, income and budget. The other includes about half of what your parents say you will receive as an inheritance. Once you have both numbers, you'll know exactly how much you need to save on your own and how much you can rely on your parents.

Use the zero-inheritance plan to set your mandatory monthly savings goal right now. Then, write out a simple rulebook for the second scenario so you know exactly what to do if money actually arrives later. For instance, you may use it later to pay off your mortgage early or fund your kids' college.

3. Consider hiring a tax professional if you will receive an inherited IRA. Thanks to the SECURE Act, non-spouse heirs have to withdraw all the funds within ten years of receiving the IRA. Additionally, if your parents had already started taking required minimum distributions (RMDs), you may be legally required to take annual withdrawals during years one through nine.

If you don't spread out your withdrawals or if your IRA balance is large enough, it could create sizable tax events. That's why a tax pro or CPA can come in handy when you receive an inheritance. They can help you spread the distributions out, lowering the amount you owe Uncle Sam.

4. Have an open and honest conversation with your family about your inheritance. It doesn't have to be the exact amount down to the penny, but you should discuss the general size of the estate, where all the documents are, and who the executor or trustee is. Confirming that your parents have an up-to-date will or living trust and ensuring account beneficiary designations are current is what prevents assets from getting tied up in costly probate court.

Consider it an enhancement

Nothing in life is a guarantee, which is why your inheritance should be treated as an enhancement.

Plan for the tax consequences of your potential inheritance, but don't assume it will be there. Save as if it doesn't exist. That will prevent you from making any bad decisions that could harm your financial independence and retirement.

"That inheritance has to travel through taxes, the legal process, family dynamics, and market movements," says Brigette Engstrom, CEO of Blue Monarch Financial Services. "The amount can change, the timing can change, the way the assets are distributed can change. You are not ignoring the inheritance; you are refusing to depend on it until it actually becomes available."

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Hey baby boomers, your kids are doing a good job saving for their own retirements and amassing their own wealth — which might have you thinking: Do they even need an inheritance?

They aren't going to turn it down, but you might be wondering whether it’s worthwhile to spread that wealth a little differently — maybe even back to yourself.

Should you? Here’s how to know, and what you can do with it instead.

Four questions to ask yourself

Many baby boomers are sitting on a small fortune, thanks to a decade-plus bull market, massive home appreciation and a lifetime of strong wage growth. All that success adds up to a lot to pass on.

How much? About $100 trillion is expected to transfer from boomers and older generations to their heirs through 2045.

At the same time, millennials and Generation Xers overall are doing a good job of building their own wealth and securing their own retirements.

But even though the kids are doing fine, inheritance plans rarely change. The money they stand to inherit stays the same (or increases depending on where it's housed) — even if they’ve already reached a point where they need it less.

If that sounds familiar and you are on the fence about scaling back an inheritance, ask yourself these four questions:

1. Do your adult children need your help now, or are they relying on a future windfall to meet their goals?

Why this matters: If your kids are already self-sufficient, they’re going to be fine without a massive inheritance later.

2. If you gave them a portion of their inheritance today, would it make a real difference, or would it sit in an account earning interest?

Why this matters: If a windfall wouldn’t change their lives now, it won't be a game changer when they're 60.

3. Are you sacrificing your own retirement experience to ensure they have a huge payout?

Why this matters: It’s natural to want to leave a legacy, but you have to live, too. You worked hard for the right to spend time and money on your loved ones — and that’s often more important than the number you leave behind.

4. Would you and your family get more joy out of putting that money to use while you’re still around to see it?

Why this matters: Life is about the memories you make. Whether it’s helping a grandchild with tuition, funding a new business or taking that big multi-generational trip, it’s usually better to spend the money while you’re alive to enjoy the impact.

What you can do with the money instead

You've decided you can keep some of the inheritance and now you're wondering what you can do instead. That's where the fun comes in, says Cassandra Rupp, a senior wealth adviser at Vanguard.

First, retirees have to get comfortable spending more in retirement, which is notoriously hard when the fear of outliving their money looms over them.

Once they're OK with that, Rupp says boomers can redirect those resources toward enhancing their own lives. That might mean boosting day-to-day spending, upgrading your travel experiences, investing in home improvements or prioritizing wellness.

If you are more charitably inclined, you can increase your giving or the financial support you provide to friends and family through vehicles such as 529 plans.

By shifting to a "giving while you’re living" mindset, you get to see the business they start, the home they buy or the education you funded, all while enjoying the retirement you worked for. Giving in this way turns your legacy into a living story that you get to take part in.

Plus, there are tax advantages. For 2026, you can give up to $19,000 per year, per recipient, or $38,000 for a married couple, without reporting it to the IRS. If you don't mind filling out the gift tax paperwork, an individual can gift up to $15 million (or a couple can gift $30 million) to a particular person over a lifetime. College tuition or medical bills paid directly to the institution don't count toward the annual gift limit.

Let them down easy

The biggest hurdle to spending more of your money in retirement is usually fear and misplaced guilt. You are so afraid of how your kids might react that you do nothing — leaving them to inherit a windfall they don't actually need, while you miss out on enjoying your own hard work.

An easy way to avoid that trap is to reframe the conversation. Don't tell them you're spending their money; tell them you are investing in memories now, rather than leaving a check later. If you are using the money to upgrade your own life, be transparent about it. Since your kids are already financially secure, they will likely be happy to see you actually enjoying your retirement rather than hoarding wealth for the future.

How to have the conversation

If you're concerned your adult kids will react negatively to news of a scaled-back inheritance, the key is to change the narrative. It isn't about them losing money; it's about investing in shared experiences while you're living. You can reframe the conversation in a few simple ways:

Focus on making memories. Tell them you're proud of what they’ve accomplished. Since they're in a good financial position, let them know you’d rather spend that money making memories with them now than passing down a check later. Whether that means planning a big family trip, buying a lake house, or funding a new tradition is up to you.

Be clear about your own goals. Sometimes all it takes to shift a conversation from awkward to amenable is a little transparency. Be open about your desire to spend some of your hard-earned savings on yourself. You’ve earned the right to enjoy your retirement.

Ask where you can make an impact today. Scaling back a future inheritance doesn't mean you can't give while you’re living. Asking your kids how a gift could help them or their own children right now turns a tough conversation into a meaningful gesture you get to appreciate together.

Making it work for you

Ultimately, whether you pass down every cent or decide to scale back the inheritance for your successful kids comes down to the legacy you want to leave and the life you want to live right now.

Everyone's approach is different, but it boils down to your view of wealth: Do you want it to be a static number in a will, or a living story that you get to take part in while you’re still here?

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Question: I'm a 63-year-old married man with two adult children, but I am also living a double life. I have a secret second family that my first family knows nothing about. I've worked hard over the years to amass a fortune — a sizable nest egg, two vacation properties, family heirlooms — and I love both families dearly.

I want to ensure everyone is taken care of after I'm gone, but I'm not ready to confess my secret. I know I need to update my will, but I'm terrified that the legal process will expose my second family to my first. What should I do?

Answer: Before we get into any estate planning advice, it's worth noting that a financial or estate plan that's based on secrecy, particularly beyond a person's death, can be tricky, complicated and potentially messy.

"Estate plans don’t operate in private. They’re carried out by people — executors, trustees, financial institutions — and examined by beneficiaries. Sometimes, if it’s after a death, it’s when emotions are high, and everything is questioned," says Pam Krueger, founder and CEO of Wealthramp. "The more complex the personal story, the more likely it is that questions get asked and documents get scrutinized."

Keep in mind:
- If your estate ends up in probate, your will becomes a public document in many states.

- Executors of wills are legally required to notify legal heirs and/or interested parties of what's in the estate.

Can you actually keep estate planning completely secret?

With that out of the way, now to the big question: Can you keep it secret?

Yes and no.

As far as updating your will goes, you are in the clear, for now. There is no automatic system that alerts family members or beneficiaries when your will is changed. It is generally an easy and private process while you're alive.

But after you die, your privacy may go out the window, especially if your legal family suspects something is amiss.

"Estate documents don’t stay hidden in a drawer. They get reviewed, interpreted, discussed and often openly shared as part of the settlement process," said Krueger. "So that’s typically when questions arise. Especially if distributions don’t match up with what people expected, or if beneficiaries compare notes."

An estate plan often gets public scrutiny when there are questions, which will likely be the case if you keep the second family secret upon your death. If there's suspicion that hidden funds were funneled to a secret partner, Krueger said beneficiaries can dig into financial records, potentially uncovering everything.

"The biggest blind spot in all of this is assuming the paperwork does the heavy lifting. It doesn’t," she said.

How to pass assets to a second family using trusts

You can have only one will leaving assets to your legal family, but you can have two revocable trusts, which is a way to leave assets to your second family.

The assets in a revocable trust avoid probate, are known only to the beneficiaries, and are controlled fully by you. You can change terms at any time while you are alive.

But a big reveal may come after you die, because of estate taxes, said David Handle, partner, trusts & estates at Kirkland & Ellis.

"Ultimately, the assets in that trust will need to be reported on an estate tax return if one is required, and some of the income in that trust will be reported on the person’s final income tax return, so the 'first family' is likely to learn of it at that time," said Handler.

Most married couples file jointly. To maintain secrecy, you can switch to "Married Filing Separately," but that may trigger a conversation you seem to want to avoid at present.

If you aren't married to the "second spouse," the assets passing won't qualify for the estate tax marital deduction and could trigger estate taxes. That means the taxes on the assets you are leaving to your second family could end up being paid by the first family.

While the federal estate tax limit is high ($13.99 million in 2026), don't assume that keeps you safe. First, 17 states levy an estate tax — often with a much lower threshold — which your estate would need to pay. Second, your final income tax return will still show income generated by your assets. If your legal wife is the one filing that return, she will see the income from that "secret" vacation property or bank account.

Why you should name an independent trustee instead of your spouse

It's extremely important when setting up the revocable trust that you name a professional or independent trustee as the executor rather than your legal wife. But depending on the state you live in, that might not be enough.

Some states, including California, Delaware, and New York, have "Notice to Heirs" requirements that legally require a trustee to notify all legal heirs. In this case, your first family would be notified when the revocable trust becomes irrevocable at death.

That's even if the heirs aren't getting anything. In other words, your first family will be notified about your second family's trust if you live in a state that has that requirement. To get around that, you can set up an Irrevocable Life Insurance Trust (ILIT) in which the assets bypass your estate and the notice requirements.

As for any heirlooms you want to leave to your second family, you can write a Letter of Instruction, but it's only as private as the person holding it.

To keep your legal family from finding it, you must name a professional executor (like a bank or attorney) for your entire estate. If your legal wife is your executor, she has access to everything, including that Letter of Instruction.

A trust isn't a sure thing

Creating a secret trust isn't a bulletproof way to give your second family a piece of your wealth once you're gone. If your legal family finds out you funneled assets away from the main estate, they could contest it in court.

Your legal heirs could claim you were manipulated into setting up the trust, or, in many states, sue to claw back assets gifted to someone else without a legal spouse's consent. As a result, your second family could end up dragged into a public courtroom battle, spending some of their inheritance to pay attorneys to defend what you left them.

Get professional help

Providing for both families financially is easier to do while you are alive. It is possible after you are gone, but the odds are against you.

The best advice is to get help from legal and estate planning professionals who can help you avoid estate planning mistakes and steer you in the right direction.

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Estate tax planning may be key for many retirees, yet it's anything but easy. Between the complexities of federal estate rules and the patchwork of states imposing their own inheritance and estate taxes, the colloquially named "death tax" continues to haunt wealth transfer strategies to this day.

But if you can master the IRS rules governing estate taxes, you may find powerful ways to save more money for your heirs. Use this quiz to test your knowledge of 2026 federal estate tax rules, with a bonus question at the end on estate taxes for states.

(Remember, always consult with a qualified tax professional or estate attorney when making final planning decisions.)

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Being named the executor of a family member's or friend's estate is often seen as a compliment. But the reality is that managing the final wishes of the deceased is a daunting task that comes with its fair share of headaches.

"It’s a thankless job," said Eric Bond, president of Octave Wealth Management in Long Beach, California. In addition to all the paperwork and interactions with the probate court, executors must also brace themselves for intense scrutiny from heirs and beneficiaries.

No doubt, people tasked with administering wills and estates are often put in a challenging position because most executors have no prior experience. "How many executors — moms, dads or adult children — have closed an estate before in their lives? Lots of times it's zero," said Bond.

Being an executor is not an easy job

The task involves a heavy workload. There are time-consuming block-and-tackling tasks, such as obtaining death certificates, locating and closing financial accounts, taking an inventory of assets and distributing bequests ranging from stocks and bonds to real estate and family heirlooms. There's also a steep legal learning curve. Not to mention crushing paperwork.

There are also heirs to contend with. It's not uncommon for executors to have to mediate family squabbles, especially when beneficiaries feel they've been short-changed, didn't get their fair share or weren't the recipients of dad's collectible cars or mom's valuable jewelry, antiques or artwork.

"You have to understand that this is going to be a lot of work," said Karen Altfest, executive vice president at Altfest Personal Wealth Management in New York City, who has spent the past four years as executor of a complicated will.

"It's never just clear sailing. There's always going to be an unexpected twist or some kind of surprise, like a disowned relative (getting part of an estate) or an argument over who gets the art collection," she said. "If the estate goes through probate court, there are going to be very strict rules and deadlines to meet."

But just because an executor's job can be challenging doesn't mean you can’t perform your duties with the strategic focus and efficiency of a CEO. There are steps to take throughout the process to turn an often difficult job into one that is manageable for you, the executor, and acceptable to the beneficiaries receiving the estate's proceeds.

The role of an executor

As executor, there are key tasks you must perform after the estate owner passes, according to a blog post from Seder Law, a full-service law firm headquartered in Worcester, Massachusetts. They include:

• Open the estate to probate. (Probate is the formal legal process that gives recognition to a will and appoints the executor who will administer the estate and distribute assets to the intended beneficiaries, according to the American Bar Association.)
• Collect information about the deceased's assets and debts.
• Defend the estate against false claims and fraudulent creditors.
• Protect assets until they can be distributed to heirs.
• Pay estate expenses and fees, including taxes.
• Distribute assets to heirs and close the estate.

But just as there are key qualities to look for in a spouse, there are certain traits that all good executors possess, according to Seder Law.

Once you've agreed to take on this important task, which can be extremely time-consuming, make sure you're willing to commit the time needed to deal with all affected parties, including heirs, creditors, lawyers and probate judges.

Being a good executor comes down to character. Dependability is a key quality. Carrying out your duties reliably and responsibly is a prerequisite for the job. Conducting yourself ethically is a must, too.

A good executor must also not be afraid to ask professionals, such as attorneys, accountants and investment professionals, for help if they're unclear about how to proceed on their own. The more organized an executor is, the better.

Executors must also be tough and be willing to deal with unscrupulous family members as well as dishonest creditors and estate claimants, according to Seder Law.

"A good executor is someone who is trustworthy, honest and organized," said Bond.

How to be a good executor: Seven steps to follow

1. Discuss the will with the writer and the beneficiaries

If possible, discuss the will with the will writer so you have a clear understanding of his or her wishes.

If there's something in the will that you think will anger one or more heirs, such as leaving money to an ex-wife or cutting one or more children out of the will entirely, ask the will writer to explain the reasoning.

If necessary, ask the will writer to explain his or her thinking in writing in an informal document known as a last letter of instruction.

Even better, have the will writer discuss their wishes in person with all family members before passing.

"I tell parents to give the kids the trust or will before they pass away," said Bond. “What that does is hopefully alleviate conflict. If there are two kids and it's a 60/40 split, not 50/50, the kid getting 40% is going to say, 'Wait, what do you mean? Why am I getting 40%?' Mom and Dad should have that discussion with them beforehand."

2. Start the paperwork

The first order of business is to obtain 10 to 15 copies of the death certificate, which banks, insurers and probate courts will require.

Next, locate the original will (not a copy) and other estate planning documents. Secure the home and other property. Gather key financial documents, such as bank statements, insurance policies and retirement account information, for use in probate and asset inventory later.

Then take care of the legal side. File the will with the probate court and apply to be formally recognized as the executor. Once appointed, you can begin inventorying assets, notifying creditors, and ultimately paying debts and distributing property according to the will.

Filing the will and the death certificate with the probate court will allow you to obtain a letter of testamentary, which recognizes you as the executor, a required step before you can take any actions on behalf of the estate.

3. Hire an attorney and other professionals

Most executors have day jobs and don't have law degrees. Navigating estate rules and probate laws, which are different in each state, on your own is likely too much of a heavy lift.

"Don’t think you can do it alone unless it’s a very, very simple will," said Altfest.

It's prudent to consult a lawyer specializing in wills and estates. "Get counsel," said Bond. "Hire an estate-planning attorney."

To ensure the entire process runs smoothly and is handled properly, hiring additional professionals is also a good idea, says Bond.

For example, an accountant or tax professional can file the deceased's tax returns and advise on how to reduce estate taxes. Connecting with the deceased's financial adviser or another financial professional might help identify and value assets, such as 401(k)s or insurance policies.

If the estate includes hard-to-value assets, hiring a professional appraiser to value items such as paintings and antiques is also advised. If any real estate needs to be sold, working with a trusted realtor is recommended.

"Rely on the CPAs and financial advisers," said Bond. "You don't want to be the one making the financial decisions."

4. Keep good records

If "location, location, location" is the key to success in real estate, "document, document, document" is the key to smoothly administering an estate, says Altfest.

"You have to keep very, very accurate records of all costs, all assets, any income, or any donations," said Altfest. "You have to document everything because people are going to ask questions."

Provide as much transparency as possible. Keeping heirs and beneficiaries updated on all aspects of closing the estate is critical, Altfest adds.

"You want to be forthright about every single thing and follow the will to the letter," said Altfest. "The best tip? Keep all heirs informed. Step by step. We're doing this. We're doing that. You don't ever veer from that. You must be very accurate."

5. Safeguard property

Scammers who track obituaries often target vacant homes. There are also plenty of examples of adult children or other relatives taking possession of things they perceive as their stuff that doesn't belong to them. As a result, it's a good idea to ensure the deceased's home is secure and take the time to photograph all the belongings.

6. Prepare for conflicts

It's not uncommon for siblings or other heirs to challenge a will or squabble about who gets what. There might also be times when beneficiaries mistrust you and the process. Prepare yourself for conflict, and be ready to manage the emotional side of settling estates.

One proven way to keep the peace is to regularly update heirs and beneficiaries on everything that's going on, whether that's keeping them abreast of the status of real estate transactions, the performance of assets, debt payments or anything else that will have a bearing on the size of their inheritance, says Altfest.

Getting input from beneficiaries can also ease some strain, adds Bond. For example, if there is a house to sell, you might ask whether there's a particular realtor they'd like to work with.

Once the house is sold, you don't want a beneficiary to complain, "We could have gotten more if we used this other realtor," said Bond. "Make the beneficiaries feel like they are part of the decision-making process."

Similarly, if the estate has a large position in a high-flying stock that has gone up a lot, you should discuss with the heirs and a financial adviser whether it makes sense to pare back the position to avoid the stock losing a big part of its value in a market selloff, adds Bond.

When it comes to heirs and beneficiaries, be firm about what the will states and what they're entitled to, Altfest advises. "They may have their own wishes and desires, and it's up to you to say, 'The will says this, I just can’t give everything to you,' " says Altfest. "You may find yourself saying no over and over again."

7. Distribute assets and personal items fairly

Check with your attorney and state law to ensure you follow the proper order of distribution. For example, you would typically pay any legal bills and your own fee first, while paying beneficiaries last.

While estate documents often clearly outline who's getting assets such as mutual funds or stocks and how much, that's not always the case with family possessions such as a set of antique china or a Steinway piano.

If needed, set up a process to fairly divide possessions among family members.

Read More

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The federal estate tax exemption has increased twice for 2026. But if you've been keeping an eye on the news over the last year, the final numbers might not come as a surprise.

With the passage of the 2025 Trump tax bill, permanent changes were locked in on several expiring federal tax provisions. Among these changes was an increase in the estate exemption amount to a higher base threshold.

Alongside this higher exemption amount, heirs might receive a potentially lower federal tax bill. Yet it might mean an increase in taxes for some high-income earners.

Here's more of what you need to know.

Estate tax exemption 2026

The federal estate tax doesn’t apply unless you hit a certain exemption amount. Under the 2025 Trump tax bill, the exemption remains high, and the IRS also increased the exemption to the amounts below for 2026:

• The exemption for people who pass away in 2026 is $15 million (up from $13.99 million for the 2025 tax year).
• Married couples can expect their exemption to be $30 million (up from the current $27.98 million for 2025 taxes).

Federal estate tax rates

Due to the higher 2026 exemption amount, only a certain percentage of estates are subject to the federal estate tax.

However, estates valued above the tax amount are taxed at a pretty hefty rate, with those exceeding more than $1 million ($16 million or $31 million combined for married couples) taxed at 40%.

Below is how much heirs expect to pay based on an estate’s value:

The estate tax exemption is also indexed for inflation.

State estate tax rates

Some states impose an estate tax of their own (and the exemption amounts aren’t always as generous as the federal estate tax exemption).

For instance, in Massachusetts, the state estate tax exemption is just $2 million and isn’t indexed for inflation.

A few states also impose an inheritance tax, which can leave a tax bill for your heirs on even small amounts of money.

Nebraska, for example, imposes an inheritance tax on adult children when their inheritances exceed $100,000. In Kentucky, nephews and nieces only receive a $1,000 exemption.

Individual AMT phaseout threshold lowers for 2026: Will you have to pay AMT?

Before the Tax Cuts and Jobs Act (TCJA), 5.2 million Americans paid the Alternative Minimum Tax (AMT), per Tax Policy Center (TPC) data. That "parallel tax system" was implemented to ensure that higher-income taxpayers pay a minimum amount of tax.

However, under the TCJA, the individual AMT threshold was raised in a couple of ways:

• Increasing the exemption amount from $84,500 to $137,000 for married couples filing jointly (single filers from $54,300 to $88,100).
• Raising the phase-out threshold from $160,900 to $1,252,700 for married, filing jointly couples (single filers from $120,700 to $626,350).

The result was that the number of taxpayers who paid AMT dropped from about 5 million to just 200,000 in 2018, according to the TPC. Under the 2025 Trump tax overhaul, the individual AMT exemption amounts were made permanent.

However, in 2026, the phaseout was lowered to $500,000 for singles and $1 million for married couples filing jointly. Once more, the phaseout rate for every dollar above this threshold increased from 25% to 50%.

This means more income from higher earners will be subject to AMT for tax year 2026.

In fact, 7.6 million taxpayers are expected to pay AMT in early 2027, according to the TPC. And that number is expected to climb to 9.7 million by 2032.

So even if you haven't paid AMT in recent years, you might start paying this alternative tax for the 2026 tax year if you're a high-income earner.

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The greatest generational wealth shift in history has already begun.

Baby Boomers, the largest retirement generation to date, will finish shifting up to $105 trillion to heirs by 2048. And according to a recent LegalZoom survey*, 62% of what will be left behind is anticipated to be real estate or property.

But rising home maintenance costs could pose a problem for younger generations.

For instance, property values have increased "almost 27% faster than inflation since 2020," per the Tax Foundation. And with higher home valuations, heftier property tax bills typically follow.

So will the inherited wealth be enough to support the higher costs of homeownership? Or will heirs need to sell priceless heirlooms to stay afloat?

Read on.

*Note: LegalZoom is an online legal technology company that surveyed 2,000 U.S. adults, including 1,000 Gen Z and millennials and 1,000 Gen X and baby boomers. Respondents were screened across various income levels.

Related: Could Tax Savings Make a 50-Year Mortgage Worth It?

Heirs may be unprepared for high property taxes and home costs

Per the LegalZoom survey, 42% of Young Americans don’t feel "financially prepared to keep and maintain" an inherited home left to them today. Among their top concerns when inheriting a house are:

• Property taxes. About 47% of potential heirs expect to inherit property, but 20% are concerned they won’t be able to afford the property taxes on the heirloom house.
• Maintenance costs. About 20% of young Americans are concerned about being able to maintain an inherited property after it’s passed down to them (which may include hidden home costs like home insurance and repairs).
• Property debt and legal complexities. Approximately 23% of future heirs are concerned about expensive surprises associated with a home. Mortgages, home equity loans, tax liens, and tricky legalities could intimidate heirs when inheriting a house.

So, while 62% of the older generation (aged 45 and above) surveyed by LegalZoom expect to leave behind real estate to their loved ones, only 18.6% of younger Americans in the survey actually feel "very prepared" to maintain an inherited property.

House-rich but cash poor?

Although inheriting a house may sound exciting, future generations may struggle to maintain a home left in the family will. And that’s not just because home costs are rising.

Other factors contributing to a "house-rich, cash-poor" mentality are generation-specific. For instance:

• According to a recent LendingTree study, Generation X may carry the highest median non-mortgage debt among other generations (including credit card debt, student loans, etc.).
• Millennials may struggle even more with outstanding loans. Over half have more debt than savings, according to a recent Bankrate report.
• Generation Z could face difficulty with overall financial stability. One Deloitte survey* found that 56% of Gen Zers live paycheck to paycheck.

Thus, instead of using an inherited home as a priceless heirloom, future generations may use that real estate to help them pay off debt, which may be disappointing news for those hoping to pass down a family home to be used by future generations.

*Note: Deloitte surveyed 14,468 Gen Zs from 44 different countries.

Start talking to your heirs now: Inheritance tax may be tricky

While talking about wills and estates with your heirs may be uncomfortable, it’s important to take the time now to discuss what the future looks like for your family.

Here are a few tips to get the sensitive wealth transfer talk started in your household:

• Ask your heirs questions about their financial situation. If you feel comfortable, you may want to broach topics like "What do you want your future to look like?" or "What are some of the biggest financial goals or challenges you have?" Creating a customized plan that works for all generations involved will help ensure you know how your assets will be handled after you’re gone.
• Be honest about your own financial situation. Do you still have any outstanding debts? How will taxes on your assets look for your heirs? According to the LegalZoom survey, over 50% of young Americans aren’t confident that they understand how inheritance taxes could affect their inherited wealth — you can help bridge that gap in understanding now.
• Discuss options. If your heirs aren’t very liquid, you may want to talk about the possibility of selling certain assets in the near future. You may also want to offer advice on which investments could be the best fit for their financial situation. Remember: some of the greatest wealth you can pass on to future generations is the wisdom you’ve learned through your own journey, and not just the assets themselves.

Overall, the most important component of family finance is ensuring that the plan works for everyone.

So if you haven’t had a conversation with future heirs about generational wealth, or are worried about taxes affecting your loved ones’ inheritance, make a plan to talk with your heirs and consult with a qualified estate planning or tax professional sooner rather than later.

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When it comes to estate planning, a will or a trust often receives the most attention. However, the simple act of naming a beneficiary to inherit assets in your 401(k), IRA, or savings account, or the proceeds of a life insurance policy or annuity, is a powerful estate planning tool.

"A beneficiary designation is going to trump anything else that you may have established to pass on assets," said Sarah Mouser, managing director of financial planning at Verdence Capital Advisors. Yet, many people mistakenly minimize their importance, assuming a will is enough.

Choosing and properly designating a beneficiary is a key step in ensuring your assets go to the person or people you want them to.

Seven pitfalls to avoid when designating a beneficiary

Here are the steps you can take — and seven mistakes you can avoid — to make sure your wishes are met.

1. Not naming a beneficiary

Choosing a beneficiary and making your designation official is easy. There’s no defensible reason not to do so. So, if you get a new job and open a new 401(k) or buy a life insurance policy, do the right thing and take the time to provide your beneficiary's (and contingent beneficiaries') correct legal name and date of birth, as well as any other requested identification such as mailing address, phone number, e-mail address, or Social Security number.

Don't assume that naming a beneficiary in your will is sufficient. If there are no named beneficiaries to, say, a 401(k) or life insurance policy, the proceeds will go to the deceased’s estate and through probate.

And that complicates things and adds uncertainty to how your estate will be settled.

"If there's not a beneficiary designation in place, and those assets do go through probate, that's where it opens up the doors right for those assets to be disputed," said Rachelle Tubongbanua, a private wealth advisor and managing director at U.S. Bank.

The legal cost of probate will likely reduce the dollar amount of assets that eventually go to your beneficiaries and will significantly slow the transfer of assets to your heirs.

2. Failing to update beneficiary forms after a life event

Big life changes, such as divorce, marriage, or adding a newborn to the family, are good times to ensure all your beneficiary designations are up to date, current, and clearly state your wishes as to who you want your assets to go to. Unless you experience a major life event, financial advisers recommend reviewing your beneficiary designations annually.

The risk of not updating your beneficiaries after a life event is money inadvertently falling into the wrong hands, says Mouser.

"A common pitfall I see is treating beneficiary designations as 'set and forget,'" said Mouser. "People often name a spouse, child, or parent and then never revisit it."

This snafu often occurs post-divorce. Mouser recalls a late client who had gotten a divorce but never changed or updated the beneficiary on an old life insurance policy that was still in effect at his death. That error cost his second wife, who got zero of the proceeds.

"The client’s beneficiary designation was never updated, and the beneficiary remained the ex-spouse," Mouser recalled. "All those assets went to her because a beneficiary designation trumps a will" and other estate planning documents.

If you think beneficiary designations are automatically updated after a life change, think again, says Mouser.

"A lot of people just don't think to go back through and update beneficiary designations, especially if they've gone through the efforts of working with an attorney to draft an estate plan," said Mouser. "They think it's automatically updated, but it’s not."

3. Naming a minor child as a primary or contingent behavior

The reason not to do this is simple: minors are not of legal age and, therefore, can’t inherit money. As a result, even though the child is named as a beneficiary, a court-appointed guardian will oversee the money until the child becomes an adult, which can be costly, says Tubongbanua.

The "age of majority," when young people are considered adults and can inherit, is 18 in most U.S. states. In Nebraska and Alabama, the age of majority is 19, and in Mississippi, it is 21. If your child is aged 18 to 20, you should also review your state's rules for delaying their inheritance until 21 or later.

It’s also prudent to inform any beneficiaries that they will receive assets upon your death, and to give them an idea of what to expect when attempting to claim the assets, says Tubongbanua.

"We tell our clients to make sure that they’re having family meetings where they can kind of guide the beneficiary through the process and what to expect," said Tubongbanua. "You don't have to share all the great details (such as dollar amounts), but at least give them some sense of preparation so when that triggering event does happen, they're not caught off-guard."

4. Failing to name a contingent beneficiary

In the event a primary beneficiary passes away, it’s important to name a contingent beneficiary, such as adult children, to ensure there’s a clear path to inherit, says Mouser. Say you’re married and have two adult children. You could name your spouse as the primary beneficiary, getting 100% of your assets, and designate both of your adult kids as contingent beneficiaries, noting that they will split assets 50/50.

"You should always list a contingent beneficiary," said Mouser. "You never know what could happen. Listing a contingent beneficiary is really important to avoid probate."

5. Forgetting to name grandchildren

Families often want to preserve wealth across multiple generations. However, if beneficiary designations go only to children, grandchildren may miss out on generation-skipping trust-tax-efficient structures, such as dynasty trusts, says Mouser.

The 2026 federal estate and generation-skipping transfer (GST) tax exemption is $15 million per individual ($30 million for married couples). Grandparents have enormous leeway to pass assets to grandchildren tax-free if they structure them correctly.

6. Overlooking charitable intentions

Tax-deferred IRAs and retirement accounts are highly tax-inefficient to leave to individuals. "But they are ideal (to leave) for charities, since charities don’t pay income tax," said Mouser. "Many wealthy families miss this opportunity and leave after-tax assets to charity instead, reducing tax efficiency."

7. Ignoring the ten-year tax bomb

Before the SECURE Act changed the rules on inherited IRAs and 401(k)s, heirs could "stretch" distributions throughout their lifetime to enjoy tax-deferred growth. New rules require non-spouse beneficiaries (such as adult children or grandchildren) to drain the account within 10 years. Furthermore, under IRS final regulations that took effect in 2025, many of those heirs must also take annual required minimum distributions (RMDs) during years one through nine.

If you leave a massive IRA to an adult child in their peak earning years, the forced withdrawals may bump them into higher tax brackets, significantly reducing the benefit. If this is a concern, you could consider Roth IRA conversion. They would still have to empty the account in 10 years, but the distributions — and the growth — would be tax-free.

These rules are complex, so we recommend reading our tax editor's article, The 10-Year Rule for Inherited IRAs, for details.

Make a graceful exit

When it comes to your estate, making sure you get your beneficiary designations right is just as important as constructing the proper investment portfolio during the accumulation stage of your nest egg, says Mouser.

It’s also important to make sure that beneficiary designations align with your carefully crafted estate plan, adds Mouser.

"You can go through the process of drafting all these documents, and if you don't go through the exercise of updating those beneficiaries where those assets are held, then they're not going to align with the trust (or other estate-planning documents," said Mouser.

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Whenever I meet someone new, one of the first questions I'm asked is: "What do you do for a living?" After telling them I'm an estate planning attorney, the response I get 95% of the time, after a deep sigh, is: "I really need to start looking into that."

Unfortunately, life gets in the way, and other things take priority.

But what people fail to realize is that your estate plan is more than just distributing your assets after you pass away.

In today's world, a comprehensive estate plan includes documents that protect your interests and wishes while you are still alive.

Two documents specifically, the healthcare proxy and the durable power of attorney, are vital in any good estate plan.

Not only can these documents ensure your interests are protected, but they can save your loved ones time, money and unnecessary complications in the form of legal and medical bureaucracy in the event you become incapacitated.

Here's what you need to know.

The healthcare proxy

What is it? A healthcare proxy lets you appoint a trusted person as your healthcare agent to receive information about your medical care and make medical decisions if you are incapacitated.

Your physician determines whether you are incapacitated and then invokes your healthcare proxy.

Once you are no longer incapacitated, the healthcare agent can no longer get information about your medical care, unless you become incapacitated again.

Why do you need it? The healthcare proxy allows you to express your wishes through your healthcare agent when you are unable to do so due to incapacity.

Incapacity could simply be that you are under anesthesia for a scheduled surgery, during which time you cannot communicate your wishes.

Alternatively, it could be for a longer period during an extended medical event, such as a coma.

It allows you to choose who your healthcare agent will be, in lieu of that person being chosen by a court or a committee.

A healthcare proxy may also include living will provisions, which could specify types of medicines and/or treatments you would elect, or not elect, to receive if you were not incapacitated.

It can also include any sort of religious considerations that individuals consider important. This will often include how invasive medical providers can be when trying to resuscitate you or prolong your life.

Who should serve? Who serves as your healthcare agent often depends on where you are in your life. Younger individuals typically name a parent, spouse or another close relative or friend. Older individuals will typically name a spouse, child or sibling.

The important thing is that you are comfortable enough with whomever you choose to have a conversation regarding very difficult choices, and that you trust those individuals to carry out those wishes.

What happens if I do not have a healthcare proxy?

Unexpected medical event. A medical emergency can strike without warning, resulting in a person being incapacitated for an extended period. The individual could be married.

However, simply being married to someone does not automatically give them the right to make decisions for you.

The case that generally comes to mind in this situation is the Terri Schiavo matter, where Schiavo suffered a medical event that left her in a persistent vegetative state. She did not have a healthcare proxy or living will in place, so her husband and family spent 15 years fighting about her wishes in court.

The case was extensively covered in the media, making a deeply personal matter very public. In addition to the personal toll this takes on a family, there can also be a significant financial cost, especially if, as in the case of Schiavo, family members do not agree on a person's wishes.

Becoming an adult. Generally, once a child turns 18, they are considered an adult. As such, their parents are no longer their default guardians.

In this situation, if something were to happen to the young adult and they did not have a healthcare proxy in place, a formal process would need to be initiated to appoint someone (likely a parent) as their legal guardian.

This can be further complicated if the young adult goes to a college or university in another state, or if the parents are divorced.

Mental decline. It's possible to wait too long to execute your estate planning documents, including your healthcare proxy. When someone has already been declared incompetent, they cannot execute a healthcare proxy.

The end result is that someone will have to undergo a formal court proceeding to be appointed as your legal guardian, which is a time-consuming and expensive process.

Unfortunately, this is generally the most common scenario, and it places a substantial amount of stress on an individual who is shouldering a considerable burden.

The durable power of attorney

What is it? A durable power of attorney appoints an "attorney-in-fact" who is responsible for making financial and business decisions on your behalf.

Contrary to the name, an individual does not have to be an "attorney at law" to serve as your attorney-in-fact.

Generally speaking, a durable power of attorney goes into effect when executed. The most common durable power of attorney goes into effect when it is signed.

However, there are rare situations where individuals prefer to have a "springing" durable power of attorney.

This requires a medical doctor to declare you to be incompetent prior to the power of attorney taking effect, which can often complicate matters in an already complicated and tense situation.

It can be difficult for a doctor to agree to state you are incompetent, especially if you can have good days and bad days or just need help with your finances.

Typically, an attorney-in-fact acts as your agent and manages your financial affairs if you become incapacitated.

However, an attorney-in-fact can occasionally help you manage your affairs on a regular basis, whether you are incapacitated or not.

Regardless of when they act on your behalf, they are required to act in your best interest.

Why do you need it? Simply being absent or incapacitated does not relieve you of your financial obligations, such as paying your mortgage, rent, utilities, car and credit card payments, dealing with financial institutions and filing tax returns.

Having a comprehensive and well-drafted durable power of attorney allows your attorney-in-fact to handle your financial affairs in a timely and efficient manner, in the event you are unable to do so.

Similar to your healthcare proxy, your durable power of attorney allows you to choose your attorney-in-fact, in lieu of having that person appointed by a court or a committee.

It also saves you time and money, and protects your privacy, as court hearings to appoint individuals are often public and expensive.

Who should serve? Choosing your attorney-in-fact often depends on where you are in your life. You can name one or more people to serve as your attorney-in-fact, including multiple people acting at the same time.

You may require multiple people always to act jointly (together), or you can allow them to act jointly and severally (meaning that they need to agree on actions and decisions, but can separately carry them out).

You should name at least one primary attorney-in-fact and one successor attorney-in-fact.

Working with an estate planning attorney

While some individuals elect to have these documents created through an online provider, as with any legal document, it is always best to hire an attorney who handles these matters on a day-to-day basis and who is licensed in your state of residence.

While you do not need to compile a list of assets before meeting with an estate planning attorney to discuss these documents, you should come prepared with questions, as well as your wishes.

Your questions can cover topics such as:

• The specific powers of the individuals acting on your behalf
• How broad or narrow you want those powers to be
• How detailed your wishes can be for your healthcare decisions
• What limits can be put in place to ensure your wishes are carried out

You should also bring any prior documents you may have that may conflict with any new documents going forward and that may need to be revoked.

Starting your estate planning process with the healthcare proxy and durable power of attorney is a relatively easy way to break the ice, while also providing you with incredible value.

These documents prevent conflicts among family members, keep your matters private, save significant amounts of money and time that would otherwise be spent on legal fees and, most importantly, outline your wishes so that your affairs are handled in the way you want.

Related Content

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• 5 Key Components of an Estate Plan — and 7 Others to Consider
• 5 Estate Planning Things You Need to Do Now, From a Financial Planner
• An Expert's Guide to the Estate Planning Documents Everyone Needs
• The Life-or-Death Answers We Owe Our Loved Ones

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Creating a will or estate plan is a good way to help ensure your wishes are carried out after you pass away. But in the course of writing your will, trust, or whatever tool you use to dictate the terms of an inheritance, you don’t want to only think about the assets you have and how you’re splitting them up among your heirs. You also need to look at the big picture.

An estimated 40% of U.S. adults say they worry about potential conflict among their heirs, according to a 2026 Vanilla survey. This concern is especially apt for blended families, where parents must navigate dividing assets among their own children and step-children. Regardless of your family structure, taking extra care to ensure your plan is as fair as possible is the best way to prevent lasting friction.

When heirs have different levels of need

For the purpose of this discussion, we’ll assume you’re looking to split your assets across multiple children, as opposed to sharing the wealth between children, nieces, nephews, and distant cousins. In the former scenario, you may find that an even split is your best course of action. If you have a $1.2 million estate and three children, each beneficiary gets $400,000. Simple.

But things aren’t always so cut and dry, warns Steve Lockshin, financial advisor and co-founder of Vanilla, an estate-planning software company.

“An oft-repeated adage in estate planning is that what’s equal is not always fair, and what’s fair is not always equal,” says Lockshin.

As Lockshin explains, you may have a fixed number of assets to split across three children with different needs. One might be a successful lawyer with a $500,000 annual salary and no children, and the others might be struggling teachers with two kids apiece. An equal split might seem fair mathematically, but it’s not necessarily “fair” in practice.

To be clear, Lockshin says there's a compelling reason to split assets equally among children when possible — love.

"Whether explicitly stated or quietly internalized, children often equate the financial decisions their parents make with how much they are loved," Lockshin explains. "When the distributions are unequal, it’s difficult to avoid comparisons. And money, being so easily measured, becomes a surrogate for perceived affection."

However, Lockshin recognizes that while equality is a good default option, it can't always be done.

"There are circumstances where an unequal division is appropriate, or even necessary. A child with special needs, serious health conditions, or mental health challenges may require more support. In such cases, fairness may demand a different kind of equality — one that aligns with each child’s unique needs," he says.

Consider your heirs' emotional attachment to items you pass down

In the course of deciding how your assets will be distributed upon your passing, you can’t only look at money. It’s also important to consider the sentimental value of different assets you may want to pass on.

Say you have a lovely piano in your home worth $8,000 that your children all have fond memories playing. Unlike a sum of money, a piano can’t be split into three.

You could gift the piano to one child and leave your remaining children other assets worth $8,000 to make them whole financially. But that may not make them whole emotionally, and it’s important to note that distinction.

When you want to be fair, but assets have unequal value

Let's go back to the original example of dividing a $1.2 million estate among three children. Several factors can keep their inheritances from being equal.

Taxes: If one child inherits a traditional IRA (which will increase their taxable income) and another receives a $400,000 life insurance benefit (which is tax-free), the final benefit to each child may be starkly different. Moreover, the child inheriting the IRA must withdraw the funds within ten years.

Lack of clarity: A will may not be enough to ensure each child inherits equally. To ensure your wishes are understood and carried out, put a secure distribution system in place. For example, you might consider a revocable or irrevocable trust and a Letter of Instruction for family items.

Beneficiary designations: Even if your will is crystal clear on how you want your estate to be divided, failing to update your beneficiary designations on life insurance policies could upend your instructions. For example, you might have named only your oldest child on a life insurance policy without updating your designation to include all three children. The oldest child will then inherit all of the policy's proceeds.

Have open conversations

Ultimately, fairness in a will or estate plan isn’t just about doing division. It means looking at the big picture and considering the non-financial value of certain assets your beneficiaries may want once you’re no longer around.

It’s also crucial to have open, honest conversations with your heirs and, if possible, allow them to be a part of the estate planning process. This way, any concerns that arise can be answered by you directly, as opposed to leaving your children to question your motives or intentions once you’re no longer around to shed light.

Also, it may be that your heirs feel differently about inheriting specific assets than you think. Going back to our piano example, wouldn’t you rather leave it to the child who truly wants it most, rather than the child you think wants it?

Having those conversations could also be crucial to avoiding conflict once you’re no longer around, Lockshin says.

That said, sometimes you need professional help, especially when one child is estranged, for blended families or when siblings don't get along. You may also want to bring in an estate plan or probate mediator, especially for high-net-worth estates.

"Most parents share a common, deeply rooted hope for their children — that they will be happy, healthy, and love each other," he says. "Few things can fracture sibling relationships more quickly or permanently than an inheritance perceived as unfair. Treating children differently at death, even with good intentions, can dismantle that final wish almost instantly."

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Having a financial plan in place during your lifetime is an important step in achieving peace of mind. But what would happen to your finances if you were to die suddenly, or if you were no longer able to manage your affairs due to incapacity?

There are important estate planning documents everyone should have so they can be ready for life’s uncertainties. These include a will, revocable trust (if appropriate), financial and healthcare powers of attorney, a living will and up-to-date beneficiary designations for retirement plans and life insurance.

An estate plan ensures that the people you want to pass your wealth to receive the right assets in the right way. The directions you provide now in your estate planning documents can always be changed.

But if you have no estate plan in place, the aftermath can be costly and time-consuming for your family.

Planning for incapacity

It is difficult to imagine a future where you are unable to manage your affairs due to serious injury or incapacity. But there are basic documents you can put in place now to help plan for that possibility.

Financial power of attorney. A power of attorney is a legal document in which an individual (the principal) designates another individual, such as a spouse, child or close family member (the agent), to act on his or her behalf.

A power of attorney is usually “durable,” meaning that the powers granted to the agent continue to be effective even if the principal loses capacity. The power of attorney allows your agent to take care of financial matters for you in a variety of situations.

For example, your agent can manage banking and investment transactions, sign legal documents or apply for benefits on your behalf.

However, the power of attorney is no longer valid after your death. At that point, the terms of your will or revocable trust control the disposition of your assets.

While a power of attorney is important for those facing illness or old age, parents should also encourage their young adult children to put a power of attorney in place, since parents can no longer make decisions for their children once they reach the age of majority.

Healthcare power of attorney/living will. In a healthcare power of attorney, you name an agent to make healthcare decisions for you when you are no longer able to do so.

Your agent can also obtain access to medical information and records and authorize admission to a long-term care or rehabilitation facility.

You should also have a living will (also referred to as an advance directive), which can be part of your healthcare power of attorney or a separate document.

In a living will, you express your preference for end-of-life measures, such as pain management, nutrition and hydration, and name a surrogate to carry out your wishes.

Planning for wealth transfer

It is equally important to plan for the transfer of your wealth and ensure you have the right team in place to carry out your wishes. Here are the documents that you may need:

A will. A will is a key document in all estate plans. In your will, you set the rules for the distribution of assets held in your individual name and designate an executor to oversee the administration and distribution of those assets.

You can also name guardians for your minor children in your will, making it an especially important document for young families.

A will must be admitted to probate, and the cost and complexity of probate proceedings vary by state.

Revocable trust. In many states, a revocable or “living” trust is the central document of an estate plan. A revocable trust can avoid the need for a probate proceeding after your death.

It can also facilitate the handling of your property during your lifetime in the event of incapacity.

With a revocable trust, you transfer title to your assets into the name of the trust. You can serve as sole trustee during your lifetime or name a co-trustee.

During your lifetime, you are the beneficiary of the trust and can typically access the trust property in the same manner as an account in your own name. You can revoke or amend the terms of the trust at any time.

If you have a revocable trust, your will is usually a “pour-over” will, directing that any assets you may not have titled in the name of the trust during your lifetime should be added to the trust at your death.

If you lose capacity, the successor trustee you name in the trust instrument can take immediate control of the trust property to meet your needs. Upon your death, the trust property is distributed to the people and organizations you name in the trust instrument.

Trusts. If you have a large estate or a more complicated family picture, you may want to leave assets in a trust.

Trusts can be used for lifetime gifting or the transfer of assets at your death and are often used to take advantage of the federal estate tax exemption, for marital and charitable deductions and for income tax planning.

Beneficiary designations. For many individuals, retirement accounts and life insurance policies make up a substantial portion of their wealth. Remember that these assets are not controlled by the terms of your will or revocable trust.

Instead, their distribution is governed by the beneficiary designation forms you have filled out with the plan administrator or life insurance company.

Your insurance company or retirement account administrator should be able to provide you with a copy of your current beneficiary designations as well as the forms necessary to make any changes.

Naming the right team to carry out your wishes

One of the most important things to consider when putting an estate plan in place is naming a team you can trust to carry out your wishes.

The executor of your will, the trustees of any trusts and agents under powers of attorney all play key roles. They act as a fiduciary with duties of loyalty and prudence.

Depending on the circumstances, these individuals may be responsible for gathering and valuing your assets, assessing and paying debts and liabilities, filing and paying taxes, arranging for funeral expenses and distributing your assets according to the terms of your documents.

For an executor, this job can last for many years. For a trustee of continuing trusts, it could be decades. It is important that the individuals you name have the organizational and financial skills to carry out these duties. Of course, they also can hire professionals to assist as needed.

At the end of the day, you need to know that your affairs will be handled in the way you planned. Talk to the individuals you are considering to ensure they understand and accept their potential roles and responsibilities.

Depending on the complexity of your plan and family situation, you might also consider naming a corporate trustee to provide expertise, experience and objectivity.

Review and update

Your estate planning documents are most effective if they are up to date and reflect your goals. It is important to review and update your documents whenever you have a significant life change, such as marriage, divorce, the birth of a child, the death of a beneficiary or relocation.

But there may be other reasons, such as a change in your financial status, changes in federal or state tax laws or changes in your relationships with named beneficiaries, executors, trustees or agents.

Regularly reviewing and updating your documents helps ensure that your assets will be distributed to the right people in the right way.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Choosing the right trust can mean the difference between a legacy that's protected and a legacy that's vulnerable. Whether you're looking to minimize estate taxes through an irrevocable trust or support both an individual and a cause through a charitable remainder trust, the goal is wealth preservation.

The passage of Trump's tax package in the OBBB has created a measure of certainty and opportunities to fine-tune your estate plan. The estate tax exemption was not only made permanent, but was also increased. Favorable changes to the Alternative Minimum Tax (AMT) will give you more income, which may allow you to increase the size of the trusts you leave to your beneficiaries.

Before making any decisions, consult with an estate planning professional to determine the best type of trust for your specific needs.

Here is a look at the five most common trusts and the specific goals each one helps you achieve.

Trust #1: Qualified Terminable Interest Property (QTIP)

Who for? Blended families

A Qualified Terminable Interest Property (QTIP) trust can help you provide for your children from a previous relationship, even if you have remarried. This type of irrevocable trust can be used to cover the living expenses of your surviving spouse until their death, with any remaining funds going to other beneficiaries after their passing.

The grantor (a person or entity that creates and funds the trust), and not the surviving spouse, determines how the remainder of the trust will be distributed after the surviving spouse's death. To ensure the money lasts, these trusts often include provisions that prevent the trust from being excessively drawn down during the surviving spouse's lifetime.

QTIP trusts are a specific type of trust that allows for the deferral of estate taxes until the death of the surviving spouse. This can be a significant advantage for estate planning, as the trust's assets can potentially grow tax-free during the surviving spouse's lifetime. After your spouse passes away, the remaining assets in the QTIP trust will be distributed to your children from the earlier relationship or another designated beneficiary.

However, it's important to note that the QTIP election must be made by the executor of the estate and that the surviving spouse must be entitled to all the income from the trust for life.

Trust #2: Special-needs trusts

Who for? Heirs with a disability

One downside to inheritances for individuals with disabilities is the potential reduction or complete loss of government benefits to which they would otherwise be entitled. This unintended consequence can arise because inheritances are often considered assets that disqualify individuals from receiving needs-based government assistance.

Special-needs trusts (SNTs) offer a solution to this problem. These trusts are designed to pay for qualified disability-related expenses — such as education, specialized equipment, insurance premiums, and medical costs — that are not covered by federal or state benefits.

The key feature of an SNT is that the trustee, who manages the trust, pays these expenses directly to the service providers. This ensures that no money from the trust goes directly to the beneficiary, thus preserving their eligibility for government assistance programs.

Trust #3: Spendthrift trust

Who for: The irresponsible beneficiary

If a loved one lacks financial know-how or struggles with alcohol, drug, or gambling problems, leaving a lump sum might not be wise.

A spendthrift trust, which can be either revocable or irrevocable, allows the grantor to appoint a trustee who has the discretion to distribute trust assets to the heir based on predetermined guidelines. This prevents the heir from having direct access to the trust. The trustee can also pay creditors and service providers directly. Creditors may not be able to claim a right to the trust's assets because the beneficiary does not control the trust.

An independent trustee may be the best option to administer a spendthrift trust, to help avoid bad feelings and family conflicts. A good trustee might be able to help educate your beneficiaries about budgeting and financial planning.

Trust #4: Irrevocable life insurance trust (ILIT)

Purpose: Maximize your life insurance payouts

An irrevocable life insurance trust (ILIT) may be a good option for families with substantial assets who own or are considering purchasing life insurance. Proceeds from life insurance are included in your estate and subject to estate taxes when you die, but an ILIT can reduce this estate tax burden.

If an ILIT owns your life insurance policy, it would be considered separate from the main estate and, therefore, not subject to estate taxes. Either the grantor funds the trust with cash, which the trust uses to acquire one or more life insurance policies on the grantor’s life, or existing policies can be gifted to an ILIT and the insured must live at least three years beyond the gift date.

ILITs are adept at sheltering large gifts because they are estate-tax efficient, and gifts to ILITs are generally generation-skipping transfer tax (GSTT) exempt, which means that they can make distributions to grandchildren or great-grandchildren without the distributions triggering any GSTT tax.

Trust #5: Charitable Lead Trust (CLT) and Charitable Remainder Trust (CRT)

Purpose: Charitable goals with an income component

Charitable trusts are a strategic way to support philanthropic causes while aligning with personal financial and estate planning goals. These trusts fall into two primary categories, that differ by the timing of the charitable distributions:

• Charitable Lead Trust (CLT): This type of trust prioritizes the immediate needs of the charity. It provides a stream of income to one or more designated charities for a predetermined period, often a set number of years. Once this period elapses, the remaining assets in the trust are transferred to the donor's heirs or other named beneficiaries. CLTs can be structured as either an annuity trust (CLAT), which provides a fixed annual payment, or a unitrust, which distributes a percentage of the trust's annual value.
• Charitable Remainder Trust (CRT): This trust structure prioritizes providing for the donor's financial needs during their lifetime while ensuring a significant charitable gift upon their death. The CRT generates a regular income stream for the donor, or other named beneficiaries, for a specified period, which can be for life or a term of years. Upon the termination of this period, typically the donor's death, the remaining assets in the trust are irrevocably distributed to one or more designated charitable organizations. CRTs can also be structured as annuity trusts or unitrusts also known as a CRUT.

Both CLTs and CRTs offer potential tax advantages, including income, gift, and estate tax deductions, depending on the specific structure and terms of the trust. These trusts can be funded with a variety of assets, including cash, securities, real estate, and business interests.

Choosing between a CLT and a CRT depends on individual circumstances and philanthropic goals. A CLT may be suitable for donors who wish to see the impact of their charitable giving during their lifetime and have sufficient assets to provide for their heirs. A CRT may be appropriate for donors who need a source of income during their lifetime and wish to leave a lasting legacy to their chosen charities.

Why trusts are worth the expense

Estate planning through trusts can provide peace of mind that your assets will be protected in your lifetime and distributed according to your wishes. Establishing a trust can be more expensive and time-consuming than merely writing a will, but the benefits will likely outweigh the cost and inconvenience.

The assets in a properly executed trust can avoid probate and sometimes be protected from creditors and lawsuits. You still get to exercise a measure of control through instructions and the selection of a trustee. In the case of revocable trusts, you maintain control of your assets during your lifetime, and retain the ability to change or dissolve the trust at any time after it's created. Lastly, you have the opportunity to minimize your taxes; depending on the type of trust, you can reduce estate, gift or income taxes and preserve your wealth.

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Pam Krueger isn’t amassing a small fortune just to hand it over. While she plans to bequeath a gift to her beloved niece and nephew, the CEO is unapologetically putting her own needs first—planning her life around travel rather than a traditional legacy.

“I want to be able to rent a place for two or three months in Italy and Greece every year,” says Krueger, founder of the adviser-matching platform Wealthramp. “Why should I be ashamed to say I worked hard? I’m not planning my life around legacy.”

Krueger is part of a growing wave of solo agers. Without children to rely on for future care, she’s fortified her retirement savings to self-fund the what-ifs of aging.

She isn't alone. Zach Ungerott, senior wealth adviser at Hightower Wealth Advisors, says more clients than ever are wondering: If I don’t have heirs, what should I do with my estate?

“It becomes a value discussion. Do they want to give money to a niece, cousin, or do they want a large amount of the estate to go to charities?” says Ungerott. Do they want to leave nothing behind, spending down their entire nest egg?

Solo Aging: Why You Must Plan for the ‘What Ifs’ First

Deciding which way to go can be difficult, but Krueger argues that for solo agers, estate planning must come from a place of financial strength.

In her retirement, she envisions traveling the world, staying in luxurious hotels and enjoying high-end amenities. She’s also not frivolous. She has a dedicated plan for the "what-ifs."

That’s particularly important, given the high price for healthcare in retirement. A 65-year-old can expect to spend $172,500 in out-of-pocket health care expenses, according to Fidelity Investments' annual forecast. That doesn't include unforeseen emergencies or stints in a long-term care facility.

“If you don’t have heirs, it probably means you don’t have anyone to rely on for long-term care. What if you go into memory care? You have to figure out how you're going to cover the what-ifs,” she says. “Once long-term care is set up, you can use your money guilt-free.”

Who Will Speak For You?

But funding your healthcare is only half the battle; you also have to decide who will speak for you when you can't. After all, you don't have children or a spouse who will automatically be designated your proxy or power of attorney for your health care and financial decisions. It requires a different strategy.

If you don't have a spouse or adult child, a solo ager alternative for a power of attorney can include the following:

-A trusted friend or family member who can make the tough calls for you.

-A professional fiduciary that you pay to act as your agent.

The Guilt-Free Phase: Designing Your Heir-Free Estate Plan

Whether you want to leave your money to charities, give to loved ones, put your money to work while you are living or spend it, here’s a look at how you can make it happen.

1. Empower your chosen family

Best for: Friends, nieces, nephews or non-family members.

How it works: Use a will to lay out asset distribution, or a revocable living trust to maintain control of your assets while you are alive. For life insurance policies, bank accounts and retirement savings plans, name your friend or family member as a beneficiary directly with the financial institutions.

2. Launching your own giving fund

Best for: Leaving a long-term charitable legacy.

How it works: Utilize a donor-advised fund (DAF). You can fund it with cash, stocks, fine art or crypto, claim an immediate tax deduction, and have a say in how the assets are invested and donated after your death.

3. Give While Living

Best for: Seeing the real-world impact of your wealth today.

How it works: Transfer stocks or cash directly to qualifying organizations or charities to deduct up to 30% to 60% of your Adjusted Gross Income (AGI). If you are 70½ or older, you can utilize Qualified Charitable Distributions (QCDs) to make tax-free donations directly from your IRA.

4. Die With Zero

Best for: Maximizing your personal lifestyle and spending your hard-earned money on yourself.

How it works: Intentionally spend down your nest egg until it's gone. To do this safely without running out of money, you must work with a financial adviser to calculate a precise withdrawal rate after your long-term care and emergencies are fully funded.

Whatever you do, don’t wait until it’s too late

Estate planning should be part of your retirement, whether you have children or not.

It might be hard to think about something that is decades away, but planning for how your estate will be distributed while you're healthy and of sound mind is the best way to ensure your wishes are honored.

If you do nothing and something happens, your assets could end up in probate.

“If you want to support the Humane Society and it's not listed as a beneficiary, then it goes to the state courts to decide," says Ungerott. "Usually, that means it goes to the next of kin,” not the Humane Society.

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An estate plan is one of the most important elements of your financial life, directing what happens with your wealth after you pass. Effectively, a good estate plan ensures that your legacy is left in the way you want it to be.

A complete estate plan includes several parts, including a will and potentially, a financial power of attorney, beneficiary designations, trusts and more. There can be a lot to it, which is why you should work with a trusted financial adviser and attorney.

Whether you're at the start of the estate-planning process or want to check your work, there is some general guidance. Create a more effective plan and avoid common mistakes by following these seven best practices.

1. Have backups for different roles

Name a backup for such roles as ex­ecutor of your will, financial power of attorney (POA) and healthcare agent. If one predeceases you, someone else can step up. If your primary selection is about your age, name a younger loved one as a backup.

Read more: Choosing a Trustee? These Six Tips Can Help You Pick Wisely

2. Communicate with your loved ones

They should know where to find your estate-planning documents. You should also discuss inheri­tance plans so people aren't surprised.

Read more: How to Organize Your Financial Paperwork for Your Heirs

3. Check your state's laws

Each state has its own laws for estate planning. If you move to a different state, you will likely need to update your documents to conform with that state's laws.

Read more: 17 States With Scary Estate and Inheritance Taxes

4. Remember your pets

If you have pets, you could lay out in your will who will take care of them after you die and leave them money to do so. You could also set up a pet trust designed to pay out enough money each year to cover your pet's bills.

Read more: Why Your Pet Should Be In Your Estate Plan

5. Share with healthcare providers

Proactively give healthcare providers your living will and healthcare POA, especially before major surgery. Most will ask for these documents as part of the admitting process.

Read more: Why You Need an Advance Directive

6. Put assets in a trust

If you set up a trust, retitle your assets so they're under the trust's name and tax ID. To manage both your estate plan and trust properly, make sure you're doing a proper accounting of all your assets, including everything from 401(k)s and investment accounts to valuable artwork and collectibles.

7. Review and update regularly

Review and update your estate planning documents every three to five years or after signif­icant life events. Financial institutions will likely refuse a POA that's more than three years old because of concerns that your cir­cumstances have changed.

These days, you can create your entire estate plan online with services such as Gentreo, LegalZoom, Wealth.com and Trust&Will. Once you sign up for an online account, the software walks you through a series of questions before creating your estate plan documents.

Using one of these services typ­ically costs much less than hiring an estate attorney. For example, Gentreo charges $150 to generate the three primary documents: Will, living will and financial power of attorney. After that, it charges $50 a year to store your documents on the software with the option to update them later.

In comparison, a lawyer might charge from $1,000 to $3,000 to create your documents, then hundreds more later to revise them.

Online services can be conven­ient. You can handle everything from home at your own pace. "People sometimes get started on estate planning and want to learn more before making decisions. You aren't sitting in front of an attorney, feeling as though you need to figure it out on the spot," said Mary Kate D’Souza, chief legal officer at Gentreo. After you complete your plan, online services make it easy to share your documents with others electronically.

Generally, however, online options are most appropriate for those in a straightforward situation, such as a single adult with no children. If your circumstances are more complex, you'll benefit from the guidance and counseling of a lawyer, who can help you weigh your options and discuss possible issues.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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No one likes to imagine getting seriously ill, injured or worse, but these occurrences are a reality of life. Although you can’t prevent every catastrophic scenario, you can better manage the consequences by figuring out what you want to happen if you become incapacitated or pass away. Who should manage your money when you can’t? What are your preferences for health care? Who will inherit your property?

A comprehensive estate plan includes multiple legal documents that lay out your instructions for medical professionals, the financial institutions managing your money and the courts that will distribute your assets after your death. “An estate plan ensures your wishes are honored when you’re no longer there or able to enforce them,” said Joe Fresard, an attorney with Simasko Law in Mount Clements, Mich.

If you don’t put together an estate plan, the government and the courts will make these decisions on your behalf, following state law. Your loved ones will be required to apply for legal permission to manage your money and make your healthcare decisions, creating extra work during a highly stressful time.

“If you don’t have everything prepared, you’re leaving your loved ones with a mess and leaving yourself unprotected,” said Mary Kate D’Souza, chief legal officer at Gentreo, a digital estate planning service. For example, the court may pick someone you don’t trust to make decisions on your behalf. Your assets could go to people you haven’t spoken to in years.

Just over half of American adults have no estate planning documents, according to Trust & Will's most recent Estate Planning Report. That's unfortunate, because with a solid estate plan, you can rest easier knowing you are prepared for the worst.

With that in mind, here are the key components of an estate plan, as well as some optional components that could help your particular situation.

Key components of an estate plan

An estate plan is a combination of legally binding documents that outline your instructions and desires to “protect your voice when you can no longer speak,” said Lindsay Graves, an elder-law attorney in North Canton, Ohio.

Each document plays a different role. A complete estate plan should include the following.

Living will. A living will lays out your desires for medical care. Are there any treatments that you’d refuse, such as artificial nutrition through feeding tubes or blood transfusions? How aggressively do you want doctors to manage end-of-life care, such as when you’re alive but will never regain brain function?

If you have no documents in place, doctors typically will do whatever it takes to keep you alive, even if that care is more aggressive and invasive than you’d like. In addition, loved ones may be required to make these end-of-life decisions. “It’s such a difficult decision to ask someone else to make. They always feel like they killed the person,” Graves says.

Healthcare power of attorney. A healthcare power of attorney (POA) names someone to make medical decisions on your behalf when you cannot. That individual serves as your healthcare agent/proxy, communicating with the doctors and deciding what course of treatment is best based on what they think you would want and the instructions in your living will.

If you don’t name a healthcare proxy ahead of time, your loved ones will need to go to court to be legally assigned this role, which could become contentious if they disagree with one another about your wishes.

The Terri Schiavo case in Florida is a famous example. In 1990, 26-year-old Schiavo suffered cardiac arrest and fell into a vegetative state. Schiavo had never shared her wishes for care in such a situation, and for years, her husband and parents fought in court over whether she should stay on life support. She died in 2005 after courts ruled that doctors could remove her feeding tube.

Even if your family members are on the same page, they’ll be locked out of guiding your medical care while they seek legal authority to make decisions on your behalf. For that reason, every adult should have these healthcare documents set up, D’Souza said. “You might still be paying for your 19-year-old child’s health insurance, but you still need legal permission to make healthcare decisions for them.”

Financial power of attorney. A financial power of attorney names someone to manage your money when you’re unable to do it yourself. Typically, your named agent will be allowed to access your financial accounts to pay your bills and manage your assets. Once again, if you don’t pick someone ahead of time, the courts will decide for you. “It might end up being the last person you would ever trust with your money, like your child with drug problems,” D’Souza said.

When you set up a financial power of attorney, you decide whether you want it to be effective immediately or to take effect if you’re declared incapacitated. Although you might not want the other person to have access to your money until you need help, this can create problems down the line. “I had a case where a woman needed to use her mom’s POA because she had dementia, but she could fake it through a competency test,” Graves said. As a result, the daughter had a hard time getting permission to manage her mother’s money.

One alternative is to set up the POA to be effective immediately and store the document in a safe place, such as a locked file cabinet in your home office, where the other person will access it only when you need help.

Last will and testament. A last will and testament explains who should inherit your assets. It also names an executor to oversee the distribution of your final estate and pay any last bills. If you have minor children or other dependents, you should also use this document to designate who will take over as their guardian. For this reason, creating a will makes sense even if you don’t have a lot of property.

If you die without a will, known as dying intestate, the courts will distribute your assets to your closest family members according to state law. For example, New York intestate law says the money will go to your spouse and children, then your parents if you don’t have a spouse or children, then your siblings and so on down the family line. The money won’t go to charity, a friend or anyone else unless you lay out those instructions in a will.

You can create these documents with an estate planning attorney. Expect to pay between $1,000 and $3,000, depending on the complexity of your situation. You could also use an online estate planning service.

Transferring assets smoothly

A basic will is a good start toward leaving an inheritance, but there are additional steps you can take to save time, taxes and trouble for your loved ones.

Avoid probate. When you pass away, the courts will review your will and distribute property according to the instructions through a process called probate. Probate can take months and require considerable legal expenses, depending on the state.

Probate is also public. Others can see what you’re passing along and challenge the decisions in probate court. For example, an estranged sibling could try to claim some of your assets.

You could avoid these problems by reducing the assets transferred at probate. One option is to set up a transfer-on-death designation on assets such as real estate, vehicles, bank accounts and brokerage accounts. The accounts transfer directly to your heirs without going through probate.

Another option is to set up a revocable trust. You control assets in the trust while you’re alive. When you die, the assets pass through the trust to the named beneficiaries, avoiding probate. One advantage of a trust over TOD designations is that you can store all of your accounts in one place. In addition, a trust is private and offers protection against creditors. If an heir has financial problems or is facing a divorce, the trust could preserve their inheritance.

Finally, you could use a trust to control how and when assets are distributed after you die. Rather than leaving a large inheritance to your 18-year-old grandchild, for example, you could set up the trust so your grandchild gets the funds only after completing college or turning 25.

Update beneficiary designations. Some financial accounts, such as life insurance policies, annuities and retirement plans, are transferred to your heirs by a beneficiary designation rather than through your will. The accounts go straight to the beneficiary and avoid probate.

Beneficiary instructions take precedence over your will. If you fail to update your beneficiaries, your money could go to the wrong person, such as an ex-spouse, even if your will states otherwise, says Bryan Bell, a certified financial planner with First Horizon Advisors in Brentwood, Tenn. You should update your beneficiary designations whenever you undergo a major life change, such as marriage, the birth of a child, divorce or the death of a spouse.

Plan for taxes. Most families don’t have enough assets to be concerned with federal estate taxes. In 2026, you can leave up to $15 million to heirs without triggering federal estate taxes, or $30 million for married couples. However, 17 states and Washington, D.C., also charge estate and inheritance taxes, some with much lower thresholds. Oregon taxes estates that exceed $1 million, and Massachusetts taxes estates that exceed $2 million.

You could potentially minimize estate taxes by transferring property during your lifetime, either by making gifts to your loved ones or by placing property in an irrevocable trust. You can’t take assets back from an irrevocable trust, but it removes the property from your estate for taxes. If your estate is potentially large enough to trigger federal or state taxes, talk to an estate attorney about your options.

Special situations for estate planning

Most laws related to estate planning are designed for a traditional nuclear family: A married couple with adult children. However, a growing number of American households don’t fit this definition. Singles, unmarried couples and couples without children have additional estate plan issues to address to make sure their wishes are honored.

Childless couples. Spouses will likely choose each other to inherit property and handle roles such as the financial agent and healthcare proxy. However, it makes sense to list a backup, too. “What happens if you’re in a car accident together?” Graves asks.

You could name a sibling or friend, but if they’re about your age or older, they may no longer be physically able to handle the role when needed, or they could predecease you. Consider naming a younger family member, such as a niece or nephew.

You should also decide where your assets will go after you and your partner die, especially if you want money to go to charity or someone who is not a member of your family. If you don’t lay this out in your will, the courts will automatically give everything to your closest living relatives.

Unmarried couples. Estate planning is even more critical for unmarried couples because, in the eyes of the courts, they have no legal connection to each other. If one person becomes incapacitated, their partner may not have the right to make their medical decisions. Estate planning documents can protect your ability to care for each other.

The same applies to the distribution of your assets. Your unmarried partner won’t inherit the property unless you name them in your will and beneficiary designations.

Beware state estate and inheritance tax laws, too. For example, New Jersey charges taxes based on relationships. While spouses and civil-union partners do not pay inheritance taxes, unmarried couples can pay up to 16% for transferring property to each other at death. Start thinking about strategies to avoid these taxes, such as gifting assets to your partner while you’re alive.

Singles. If you’re single, divorced or a widow(er) without children, you may have to give some extra thought to who will make healthcare and financial decisions on your behalf. You could, for example, name a family member or a close friend.

Make sure you select someone who is well positioned to take on the responsibility and that they are aware you chose them to do it. “If you name your nephew who lives across the country, he might not realize you’re incapacitated and that you picked him for these roles until it’s too late,” says Fresard from Simasko Law. Because this role can be a big responsibility, you could let the relative or friend know they will be compensated by inheriting part of your estate.

Consider who you would like to inherit your money, especially if it’s a charity or friend. If you don’t clarify your wishes in your will, the money will go to the closest living relative, which could be a distant cousin you haven’t seen in years.

Parents of a child with a disability. If you have a child with a severe disability who receives government support, you need to be very careful about how you provide for them after you die. Government programs such as Medicaid and Supplemental Security Income have extremely low asset limits for eligibility. Your child could be disqualified simply for owning more than $2,000 of cash and other assets outright.

Instead of leaving money to a disabled child directly, you could pass along property using a special-needs trust (SNT). Your child can receive money from the trust for vacations, entertainment, electronics and other discretionary products and services without losing government support.

You should also decide whether another family member or professional guardian will take care of your child after you die. “It’s a huge ask to have someone take on this role, especially since siblings tend to move away from the family home,” Graves says. “The key is to figure it out while you’re alive rather than leaving it to the system to decide.”

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Women's financial lives are something of a paradox: They live five more years on average than men and so need their money to last, but generally earn less. That's why estate planning for women is crucial, helping secure their retirement and protect their property and health in case they are disabled.

Women also tend to pull back from work during their peak earning years in order to take care of children or parents. When women become caregivers, they are 2.5 times more likely to end up in poverty and five times more likely to depend on Social Security, even as their average Social Security check is lower than that of their male peers.

Estate planning for women — now more than ever

A generational shift is coming: $30 trillion is expected to pass to women by the end of the decade. As a result, women of all ages will eventually need to shoulder great financial responsibility. They must organize their affairs to fund their longer lives, set up a way to pay for long-term care, and direct the distribution of their assets in a way that they desire — whether they are married, widowed, divorced, single, or in blended families where there are kids from prior marriages.

"We have a set of unique factors that we need to plan for," said Lorna Kapusta, head of women and engagement at Fidelity Investments. "Because of that, it becomes even more important for us to have that financial plan, retirement plan, estate plan — and get that in order."

Since women outlive men on average, they face 18% to 20% higher health care costs, Kapusta said, but a common scenario is the husband gets ill, and his medical expenses eat into their savings, leaving her with less money.

The good news is that women are more empowered than ever to take charge of their finances and retirement, said Liz Windisch, a financial planner at Maia Wealth who mostly serves single women clients. "Women want to learn and understand their investments more than they have in the past." They are more engaged and proactive, especially if they are the main decision-makers, she said.

That means women are not "sitting there quietly" anymore as their spouses make retirement and estate planning decisions, said Daphne Jordan, senior wealth adviser at Pioneer Wealth Management in Austin, Texas, who has also served as chair of the National Association of Personal Financial Advisors (NAPFA), a group whose members charge fees instead of earning product commissions.

Don't put it off

Many people tend to delay estate planning until they are within striking distance of retirement. But that is a mistake because anything can happen at any age, said Catherine Arnet-Valega, a wealth consultant at Green Bee Advisory in Winchester, Massachusetts., which serves only female clients.

"What happens if you’re out hiking in Colorado and break your neck or fall into a coma for six months? Who’s going to pay the mortgage? Who’s going to keep the utilities on? … (Or make) the medical decisions?" Arnet-Valega said. "And should you pre-decease (your heirs), what do you want to happen to those funds? An estate plan ensures that your decisions are respected."

Passing away without an estate plan will put a court in charge of distributing your assets and paying your debts and taxes. This process, known as probate, can be lengthy and costly. Some might argue and say, "I’m a teacher. I’m only making $65,000 a year," and don’t need a plan, said Matthew Harrison, founding member of Harrison Law in Gilbert, Arizona. But you could still trigger probate if your assets include a home, he added.

How to get started

Harrison said these are the basic legal documents everyone needs in an estate plan, which can be customized to meet women’s unique situations:

• General power of attorney: Grants broad authority to someone you designate to make financial and legal decisions on your behalf. A sound power of attorney helps protect your interests when you cannot do so.
• Medical power of attorney: Grants someone the power to make medical decisions for you if you are ill, injured or incapacitated.
• Living will: Sometimes called an advance directive, outlines your wishes, typically for end-of-life care and other medical preferences. Unlike a medical power of attorney, in which your designated person can make decisions on your behalf, a living will only carries out your predetermined wishes.
• Will or last will and testament: A will specifies how a person’s assets and property should be distributed after death. But don't go overboard; there are a few things you should leave out of your will.
• Trust: A legal entity that can house your assets, including bank and investment accounts, real estate, business interests, personal property, insurance policies, and others. A trustee you designate oversees it and manages the assets according to your wishes for your beneficiaries. It can be a revocable or irrevocable trust.
• Other documents: You might consider adding a digital executor or clause for how the estate should handle your digital assets, a letter of instruction and related documents.

To the list, Jordan adds the HIPAA Authorization or Release Form, which gives your doctors and other health care providers permission to disclose your health information to others.

Expect to pay several thousand to execute an estate plan, but consider that hiring attorneys for probate typically costs a lot more, Harrison said. However, you can save on estate planning costs. Do the research to see if it's better to choose an attorney who charges a flat fee or by the hour.

Strategies for different life stages

As women live longer, it is even more critical for them to be part of the conversation when developing an estate plan, said Lauren Wybar, a senior wealth adviser at Vanguard. Don’t be afraid to educate yourself about money, such as by reading or listening to podcasts, she said.

Consider joining financial clubs for women. Major brokerages provide education, events and online communities to help women with financial and retirement planning, such as Fidelity's "Women Talk Money" and BMO's "Women & Wealth" programs.

Build your team. Assemble a bench of financial and legal experts you feel comfortable with, including a financial adviser, an attorney, an accountant and a banker.

According to financial advisers, here are specific questions to ask as you plan your estate based on whether you are married, widowed or divorced/single.

For married women

• Are you and your spouse aligned on your wishes?
• Are you your spouse's power of attorney?
• Do you know what the estate plan entails?
• Do you agree on who the designated executor is? Beneficiaries?
• Who should be the guardian of your kids?
• If you have a business, who will take care of it after you pass?

For widows

• Is your deceased spouse still the executor?
• Do you like the backup executor?
• Do you still agree with the estate plan and who gets what?
• Did you update your beneficiaries?

For single or divorced women

• Is your ex-spouse still listed as your beneficiary? If your spouse has remarried, your assets could potentially flow over to his new wife and their kids unless you update your plan.
• If you don’t have children, have you designated your beneficiaries such as a charity?

Make a plan

Start getting your affairs in order with proper estate planning, or update your current plan if your life circumstances have changed. Make sure it goes hand in hand with a sound financial plan that puts you on track to retire well. Afterward, sit back and relax. "Make a plan, trust the plan, and stick to it," Windisch said.

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It's easy to assume that estate planning is just for the wealthy. While it's true that estate planning for millionaires is vital, everyone needs an estate plan — no matter how much or how little money you might have. The good news is that you don't have to spend a lot to put an estate plan in place.

Here are the basics of what's in an estate plan and how to save money on each step.

What's in an estate plan? 

Such a plan sets out your wishes, both financial and healthcare-related, for those left behind or those making decisions on your behalf. Moreover, estate plans can save your heirs time and money by avoiding probate (the formal legal process that validates a will and allows a deceased person's assets to be distributed). In general, here are the most important documents you should have in your estate plan:

• Will. This document designates your heirs and states who will receive what among your assets and possessions.
• Durable powers of attorney. These documents include a durable healthcare power of attorney (POA) and a durable financial power of attorney, both of which kick in when you can no longer make decisions for yourself. These documents become invalid after your death.
• Advance healthcare directive (often with a living will). This document gives orders regarding what kind of medical treatment you want if you're incapacitated or for your end-of-life care. It might include other documents, such as a do-not-resuscitate (DNR) order. You decide how much or how little intervention you want to receive, including whether you want to remain on life support. Every adult should have an advance directive.
• Executor's certificate or letters testamentary. This document designates the person with the legal authority to act on behalf of your estate after you die. If you don't choose someone to act on behalf of your estate, the probate court will. Many people choose a family member, close friend or a professional, such as an attorney or accountant.
• Trust. Setting up a trust makes it easy to pass your assets directly onto your heirs, bypassing the probate court.

Estate-planning costs

The average cost of an estate plan in the U.S. varies widely. A basic will typically runs $300 to $600, a living trust runs about $1,500 to $3,500, and a bundled package of a will, powers of attorney and a healthcare directive usually costs $1,500 to $2,000, according to Jacob's Legacy Counsel.

Broadly, you can expect to pay $15 for a basic will to more than $5,000 for a comprehensive plan with an attorney. Business owners could pay $4,000, $5,000, or more, depending on the complexity and extent of their business.

When estimating the cost of an estate plan, consider whether a prospective attorney offers a flat rate or requires an hourly rate. Flat-fee plans typically include the most common documents such as a basic will, financial, property and healthcare powers of attorney, a living will and guardianship appointments for those with minor children.

If your estate plan doesn’t fit into a simple category in which you can pay a flat fee, you'll likely need to pay an hourly rate. Hourly rates are generally $200 to $500, depending on where you live. Fees tend to be higher in large metropolitan areas. Hourly rates also typically require a retainer; usually the hourly rate they charge times the number of hours they expect to work.

Saving money on an estate lawyer 

Do some legal legwork. Having a list is an excellent way to start the estate-planning process, especially for those on a budget. However, you don't need to be wealthy to afford all these documents. You just need to know where to trim the time your estate lawyer is billing for.

Piggyback on other professionals. If you're already receiving other services from an accountant or financial adviser, you can also ask them questions about estate plans. They should be able to help you establish a foundation for an estate plan so you can go to an attorney with your documents prepared in advance.

Understand attorney fees and qualifications. Make sure you're getting your money's worth. You don't want just any lawyer to draft or review your documents, but someone with special training and certification. You can find a local estate attorney using an online directory, such as the American College of Trust and Estate Counsel (ACTEC), Justia or Legal Match. Ensure you understand how you'll be charged, and try to negotiate a free, first-time consultation.

Use templates (carefully). If you feel comfortable doing so, you may draw up your own documents. Sites such as LegalZoom and RocketLawyer provide templates you can fill in. While using online guides might be a good option for those with a basic understanding of their needs and wants (and the ability to write), it's still an excellent idea to have an estate lawyer review them to ensure everything is in order, legal and binding.

Using a DIY online service to save 

Do-it-yourself (DIY) websites can help save money on estate planning, but proceed with caution. You want to avoid paying more by failing to have the documents properly executed or seeing the will be contested.

Estate-planning software such as Nolo’s WillMaker & Trust will typically cost from $100 to $220, depending on the number of documents included. However, you might pay nothing for a basic will or as little as $70 to $100, while a more complete plan that includes a living trust and other documents can cost $200 to $600. Online services such as Trust&Will also offer flat rates depending on the number of documents in your package.

Such services can save you hundreds or even thousands of dollars. However, you need to know which documents you require. Buying a package that doesn’t include everything you need will result in an added expense that could approach the cost of an attorney’s basic flat fee as listed above.

You should always consult a lawyer for complex family situations involving children from a previous marriage, children with special needs, family businesses or other such cases.

Review your plan regularly

Once your plan is in place and executed, you might be tempted to think of it as done and dusted. Instead, it's a good idea to review your estate plan every three to five years, updating your beneficiaries and heirs so your wishes will be honored at the end of your life. Keep passwords and account information in a place where family members can access them, and make sure they have copies of the pertinent paperwork, especially anything that applies to them.

No matter how much money you have, you must have an estate plan. You probably have more assets than you realize, but you don't have to spend a month's worth of wages to establish your plan.

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An advance directive is an often overlooked part of estate planning, but it shouldn't be. This set of critical legal documents clarifies your medical care wishes if you become incapacitated. After all, most people want to leave some kind of legacy after they pass away, but many forget to think about what may come before.

"An advance directive is a gift to the people who will do the talking for you," says Rory Farrand, senior consultant at Confidis Consulting. "It takes the guilt and the stress of that decision away from them. It’s a kind and gentle thing to do for the people that love you."

An advance directive can help you with your own end-of-life planning, such as palliative or hospice care. And if you are concerned about a loved one with a new dementia diagnosis or serious chronic illness, the advance directive is a key tool to protect their wishes. Think of it not as one document to sign, but as a process of figuring out what you need, talking with your doctor and loved ones, and then setting up legal structures to formalize your plan.

Why do I need an advance directive?

While an advance directive allows you to specify someone to make medical decisions for you if you cannot do so on your own, there is much more to it than that. It also clarifies what to do in certain medical situations that leave you unable to manage your care or make decisions.

“I have kids, and if I became incapacitated, I would never want them to make the decision whether or not to take me off life support,“ says Evan Beach, founder and president of Exit 59 Advisory. "It's too heavy a burden on somebody else."

An advance directive also lets you specify if you want to be an organ donor. Farrand says you can even specify if you want to donate anything beyond organs, such as your cornea, skin, tissue, bones, veins or whatever else is viable. "We always have a dearth of viable organs at all times," she says.

For these reasons, all adults should have an advance directive. Yet only about a third of U.S. adults have one, according to a study published in the journal Health Affairs.

If you cannot communicate and don't have an advance directive on file, your healthcare provider will attempt to reach an immediate family member, who will then be tasked with making decisions on your behalf.

Some states have a family agency act that designates the order of priority governing which family member must make decisions on your behalf if you have no advance directive. If you have no immediate family, then the healthcare provider may make the best decisions they can on your behalf until a legal surrogate is identified. Different states have various rules governing such situations.

What types of documents make up an advance directive?

Here are the standard documents that you may wish to include in your advance directive.

• Living will: A living will provides guidance for terminal illness or unconsciousness, when you can no longer make decisions about your care. It specifies the treatments you do and don’t want in that situation.
• Medical power of attorney (POA): A medical POA designates someone you trust to make medical decisions for you if you cannot do so. Importantly, a durable medical POA gives the person the authority only to make medical decisions on your behalf — not financial decisions. Another term for a medical POA is a healthcare power of attorney or healthcare proxy.
• HIPAA Authorization: A Medical Power of Attorney often needs an accompanying HIPAA release form. Without it, doctors can legally refuse to share your medical records with your healthcare proxy, making it impossible for them to make informed decisions.

Here are some additional documents you might consider, depending on your situation.

• POLST or MOLST: This portable medical order informs healthcare providers and facilities of your wishes for end-of-life interventions, including emergency medical care, resuscitation, intubation or use of a ventilator. Depending on your state, it may be called a Provider Orders for Life-Sustaining Treatment (POLST) or a Medical Orders for Life-Sustaining Treatment (MOLST).
• Do-not-resuscitate (DNR) order: This order tells healthcare providers not to implement cardiopulmonary resuscitation, better known as CPR, if you stop breathing or your heart stops beating. It is often reserved for those who are terminally ill.
• Mental health or psychiatric advance directive (PAD): This directive allows someone with mental illness to express their treatment preferences before a crisis occurs in case they become unable to make their wishes known. The legal guidelines for PADs vary by state. PADs are a fairly new tool for patients and clinicians alike.
• Advance directive for dementia: If you or a loved one is facing an Alzheimer's or dementia diagnosis, a standard directive may not be enough. This specialized document lets you state your preferences for different stages of the disease, covering issues like assisted nutrition, hydration, and comfort care as cognition declines.

How do I get an advance directive?

Medicare beneficiaries can get advance care planning for free under Part B. During your next annual wellness visit, ask your doctor about a living will and a healthcare proxy. However, Medicare will charge you if you have this conversation with your doctor outside of your wellness visit.

For those not on Medicare, you may want a lawyer to draw up your advance directive to ensure that it clearly expresses your wishes and meets all legal requirements in your state. If the word "lawyer" makes you see dollar signs, try some of the tips we've put together on how to save money on estate planning.

Check your state's required documentation if you cannot afford an attorney's assistance. Some websites also enable you to create your own legal documents, providing some guidance to help ensure your final document checks all the necessary boxes for legality. Farrand pointed to the Five Wishes advance directive document as one example.

Almost all states require two witnesses (who usually cannot be relatives or healthcare providers) and/or a notary public to sign the document.

Where should I keep my advance directive?

Store your completed advance directive where a family member or legal representative can easily find it in an emergency. You could also store copies in a home safe.

Never keep your original advance directive in a bank's safe deposit box, as it would be difficult to access quickly. It's also a good idea to make copies of your advance directive and keep one in your car, in your wallet or purse and on your refrigerator (EMTs are trained to look there).

Android Medical ID and Apple Health let users list emergency contacts and indicate whether they have an advance directive right on their lock screen.

You should also provide a copy of the document to your primary care or other healthcare provider. It's also a great idea to upload it to the national U.S. Advance Care Plan Registry in case you're traveling or being treated by a different healthcare facility than the ones you usually frequent.

Common pitfalls with advance directives

Aside from not having a living will or advance directive, the other common pitfall is not being clear or specific enough in explaining what you want. Unfortunately, a lack of experience with certain medical conditions and available treatment options can make it hard to anticipate what steps you want taken.

If an advance directive does not give clear instructions, it can result in a lack of care because it may be interpreted as a blanket do-not-treat statement. On the other hand, there is always a chance that family members will opt for far more care than you would wish for at the end of your life.

For example, some common questions that should be addressed in an advance directive include the use of ventilators or feeding tubes, DNR orders, and any other specific areas of concern you might have.

Don't put it off, and keep it current

Of course, no one can anticipate what medical problems or accidents might befall them in the future, especially years in advance. However, the best way to ensure your wishes are followed is to put an advance directive in place with clear instructions. Be sure to update it every five years, or after a major life change or diagnosis.

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Even if your estate plan is in order, it won't be of much help to your heirs if they can't locate important documents when you're no longer around. Organizing your financial and estate-planning documents — and letting your family know where you've stored them — will make it easier for your loved ones to care for you if you become incapacitated, and it will smooth the process of settling your estate after you're gone. Plus, while you're still alive, you'll be able to quickly track down paperwork when you need it.

Sandra Batra, 56, created a binder to organize all of her father's documents after he was stricken with cancer in 2011. Batra says the project helped her and her mother easily locate her father's important documents while he was in the hospital.

After her father's death in 2012, Batra decided to turn her idea into a business, LifeLink Consulting, which helps clients organize estate-planning documents into a binder or flash drive. Batra also gives clients blank worksheets they can use to provide other details, such as who they want to care for them and their end-of-life wishes. Her online course costs $99.

To organize your own records, you can use an accordion file or binder and divide the documents into different categories, such as estate planning, life insurance policies, property titles and investment statements.

You should also include categories for health insurance, long-term-care insurance, and bank account and credit card information. That way, your family will have the details they need to pay medical bills if you're hospitalized for a long period.

Use Microsoft Word or Google Docs to write down additional details, such as who you want to take care of your pets, a list of subscriptions and memberships, and passcodes to any home security systems or online accounts. Once you draw up the documents, print them and place them in your binder (you can also store them digitally — more on that below).

Where to keep your documents

Store your documents in a secure area, such as a locked filing cabinet or fireproof safe in your home. Make sure your loved ones know the location of your cabinet or safe, and give them any keys, combinations or codes required to access it.

If you don't want to keep the documents in your home, you can entrust them with your estate lawyer, says George Taylor, estate attorney with Brinkley Morgan.

"Your estate attorney can store original documents, like your will and titles to your house and car. Then you and the executor of your will can have copies," he says.

You can put copies of your will and other important documents in a safe-deposit box, but it's usually not a good idea to keep originals there if you're the sole owner. After your death, the bank will seal the safe-deposit box until an executor can prove he or she has the legal right to access it. That could lead to long and potentially costly delays before your will is executed.

Digital options for financial paperwork

You should keep original, paper versions of your will, power of attorney and other key estate-planning documents. But if you'd like to create a backup of your paper documents, consider using a flash drive, which you can plug into your computer's USB port, to collect them all in one place.

Alternatively, you can use a cloud storage system, such as Microsoft's OneDrive or Apple's iCloud. OneDrive's free version gives you 5 gigabytes of cloud storage. Its family version, which allows up to six individuals to share and access documents, costs $129.99 a year.

Apple's iCloud Drive provides 5GB of free storage. For 99 cents a month, you can upgrade to iCloud+, which provides 50GB of storage, and you can share it with up to five family members.

Another option to consider is Quicken's LifeHub. It's an online document storage solution that helps you gain easy access to copies of important financial documents whenever you need them. It's also ideal to protect files from wildfires, floods and any other threats that could damage your home.

Your heirs will need passwords to log in to your online accounts, so make sure they have easy access to them. You can write them down in a document to store in your binder or use a secure password-management tool.

A family membership to 1Password ($4.99 a month after a two-week free trial) offers shared account access for up to five family members. With Bitwarden, you can share your account with one other person for free. Or sign up for a family membership ($47.88 a year), which allows access for up to six people.

How to make updates in paperwork

Batra recommends updating your documents each time you have a life change. For example, you may need to alter the beneficiaries in your will or life insurance policies if you get divorced or have grandchildren, and living trusts should be updated to reflect the purchase or sale of property included in the trust. Even if you haven't undergone any big changes, check your documents at least once a year to make sure the information is current.

If you entrusted your estate attorney with your documents, he or she can also help you keep them up to date, Taylor says. Ask your estate attorney to send you an annual e-mail or letter reminding you to update your information and make sure the right person is still in charge of your affairs, he says.

Key documents to share with your family

Make sure to include the following information in a binder or digital file:

• Will or trust
• Powers of attorney for finances and health care
• Organ donation form
• Living will
• Letter of instruction for your heirs
• Beneficiary designations
• HIPAA release (allows health care providers to share information about you with authorized individuals)
• Bank and financial statements
• Real estate deeds and titles
• Retirement-account documents
• Life insurance policies
• List of important personal property, such as jewelry and artwork, and estimated values
• Funeral instruction

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Although it might be tempting to set up a will and consider your estate planning complete, trusts should potentially be part of your plan, too. And if you set up a trust years ago, changes in tax law mean you should revisit what kind of trust is best for your estate.

"Creating the right trust can make estate planning smoother, more private and less stressful for your family," explained Phillip Reed, estate planning and asset protection attorney at Reed Law PLC. "Trusts keep your affairs out of the public record, speed up distributions, cut down on court costs and delays, help minimize taxes and simplify transfers of property in multiple states."

There are many kinds of trusts, but they fall into one of two categories: revocable or irrevocable. Both types of trusts have pros and cons that can significantly affect your estate and beneficiaries, so it's important to consider your goals for your trust and factors such as your net worth and the type of tax shelter your heirs might need.

Revocable vs irrevocable trust

How do you decide whether a revocable vs irrevocable trust is best for you and your family?

Avoid probate

Both types allow you to avoid the dreaded probate process when a court manages the distribution of your assets after death.

"Probate is a lengthy, stressful, and expensive process that is much more likely to exacerbate family conflicts and lead to extended litigation," explained Joseph Fresard, an elder law and estate planning attorney at Simasko Law.

Trustees

Both types of trusts also allow you to appoint a trustee to manage the trust and create a separate legal entity that owns your assets and controls the treatment of your real estate, cash and other investments.

"Trusts help ensure someone you choose can manage your assets seamlessly if you become incapacitated with no court oversight or disruption," Reed explained. "Trusts also cover both death and incapacitation, which people often forget. Having assets properly managed and used if you or your loved one is incapacitated is key to family harmony."

However, there are important differences, and the type of trust that should be included in your estate-planning documents depends on what you wish to accomplish.

Revocable trust: The people’s choice

As its name suggests, a revocable trust, also called a revocable living trust, allows you to modify or terminate it during your lifetime.

Flexibility.

Its biggest benefit is the flexibility and control it gives the "grantor" — or you, the asset owner. The biggest drawback is that assets in the trust are still counted toward income and estate taxes. Assets are also not protected from creditors, legal judgments, liens and other obligations.

"Deciding between a revocable and an irrevocable trust comes down to your individual and family priorities as well as risk profile," Reed said. "If you want flexibility and control, being able to change terms, access assets and keep options open, a revocable trust usually fits, and is the preferred planning method for most people."

Very high gift and estate tax exemptions are now the norm.

Most people choose to set up revocable trusts unless they're high-net-worth individuals seeking to maximize their estate and gift tax exemption, confirmed Betty Wang, president of BW Financial Planning in Denver.

For 2026, the federal estate and gift tax exemption is $15 million per person or $30 million for a married couple. This permanently high threshold comes courtesy of the One Big Beautiful Bill Act (OBBBA), which scrapped the looming "sunset" cliff that would have cut exemptions in half, starting in 2026. Because this "use-it-or-lose-it" tax angst is gone, wealthy families no longer have to rush into irrevocable trusts.

Consider a single person with an estate worth $22 million in 2026. They might wish to place $7 million in an irrevocable trust. This leaves them with $15 million of remaining assets in their estate, but only $8 million of remaining tax exemption ($15 million total limit minus the $7 million already used). The remaining $15 million can be held in a revocable trust, $8 million of which is exempt from federal estate and gift taxes, since it falls under the cap. However, income generated by the revocable trust is still taxed at the individual rate. Furthermore, over a dozen states and Washington, D.C. also have some form of inheritance or estate tax that may be owed by the estate or its heirs.

Typically, the owner or grantor serves as trustee of the revocable trust during the owner's lifetime, as long as the owner is not incapacitated, although others can also serve as trustees. A married couple can serve as co-trustees so that, when one spouse becomes incapacitated or dies, the other can carry on. When both have died, the trust becomes irrevocable.

Irrevocable trust: Is it really irrevocable, and does it offer better protection?

In an irrevocable trust, the grantor gives up the ability to control or benefit from the assets after the trust is established. These trusts used to be the darlings of the wealthy, but are less in favor since the OBBBA went into effect in 2026.

Protecting your assets, but (mostly) losing control.

People choose this type of trust if they have a specific purpose for the funds, such as controlling payouts to beneficiaries, designating the funds for a specific purpose and protecting assets from liens, legal judgments, creditors, divorces and other obligations.

These trusts can also help shield your assets from Medicaid, which requires you to spend down your savings to qualify. There is a five-year look-back period and other rules you must follow, so consult an estate planning lawyer if you go this route.

Due to changes in state law in the past few years, it has become easier to change irrevocable trusts. “It’s a bit of a misnomer that an irrevocable trust can’t ever be changed,” said Lee McGowan, president of Monument Group Wealth Advisors in Concord, Massachusetts, which manages $550 million in assets. “You can — it depends on the situation.”

One way to change an irrevocable trust is to name an independent trustee to make changes consistent with the grantor’s wishes. Another way is to give a beneficiary the power to appoint or redesignate the recipient of trust assets.

The court can also order changes to a trust — or trustees can do what’s called "decanting," moving assets from an old trust to a new one with better terms and conditions — as long as the changes are reasonably consistent with the original intent of the trust, said McGowan.

Taxes on these trusts may be very high for income above $16,000.

An attractive benefit of an irrevocable trust is that the grantor doesn't pay taxes on it; the trust can pay its own taxes without distributing its income.

Alternatively, the trust can choose to distribute the income to beneficiaries, who'll pay the taxes. This might be a better option if the beneficiaries fall into a lower tax bracket.

That’s because the taxes levied on the trust can be at par with the highest income tax rates.

Trust tax brackets are much more compressed than individual tax brackets, so taxable income from the trust is taxed at the highest 37% rate for income above $16,000 in 2026.

In contrast, the 37% tax rate doesn’t kick in for income taxes until $640,600 for single filers and $768,700 for married filers under the 2026 tax brackets.

Your heirs will pay capital gains taxes.

Consider Michael, who bought a house in 1990 for $100,000. He moved the house into an irrevocable trust in 2018 and named his children as beneficiaries. When he died in 2026, the house was worth $600,000. Since there is no step-up in cost basis, the heirs must pay tax on the capital gains going back to 1990, or $500,000. If we assume a fairly conservative 15% tax rate, their federal taxes would be $75,000 (in addition to state taxes).

Now imagine that the parent had put the house in a revocable trust. The capital gains would get a step-up in value to the date he died, when the house was valued at $600,000. When the heirs sell the home for that amount, they pay $0 in capital gains taxes.

Bottom line.

Irrevocable trusts add complexity, and with the estate tax exemption remaining near record highs into 2026, there might be less incentive to create them. Still, they may be useful for ultra-high-net-worth families or those with complex assets.

Revocable or irrevocable trust: Which one to use?

Whether to use a revocable trust or an irrevocable trust depends on what you are trying to achieve.

If you want to avoid probate and don't need protection against creditors or estate tax, a revocable trust might be the right choice. Your heirs will get a step-up in basis. You have control of the assets while you're alive and can easily change your mind — but you don’t get a tax break with a revocable trust.

An irrevocable trust, on the other hand, might be the better choice if your priority is to reduce taxes and protect assets. By transferring assets into an irrevocable trust, you remove them from your taxable estate, protect them from being lost, and ensure they go to your chosen beneficiaries.

Keep in mind that you give up control, so it's important to be certain about your decisions before setting one up.

Related trusts

Irrevocable and revocable trusts are just a small sampling of the trusts out there. There are others that you might want to create in certain circumstances.

Beneficiaries with disabilities might need a supplemental needs trust or special needs trust, which can be revocable or irrevocable. These trusts provide for disabled beneficiaries without jeopardizing their government benefits.

Business trusts can help protect assets within LLCs, among others.

Life insurance trusts, which hold proceeds from insurance policies, are also fairly common but are irrevocable.

States with the most favorable trust laws

A trust created in one state is valid in all other states. However, each state has its own rules governing trusts and "death" taxes.

You can set up a trust in any state where you have sufficient connections, such as owning a vacation home there.

In general, look at each state’s tax treatment of trusts, asset and creditor protection, privacy, and modification rules.

The best states for trusts are Delaware, Nevada, and South Dakota, according to U.S. Bank.

These states don't charge state income taxes, allow perpetual trusts that are passed down through generations, provide asset protection, and offer flexible decanting.

However, if the trust elects to shift the tax burden to beneficiaries, these favorable tax laws will be moot if beneficiaries don’t live in these states.

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Estate planning for singles is crucial for your long-term peace of mind. It lays out what you want to happen to your assets after death and during situations when you can’t make decisions. But if you've never married or were married a long time ago and have no children, don't assume estate planning is a breeze. It's not.

"People often think estate planning will be simpler in this situation, [but] it's a lot more complicated," said James C. Bartholomew, an estate planning attorney in Bend, Oregon. "That's why getting the right documents and plans in place is so important."

Estate planning for singles: Why it's different

There are a few reasons why estate planning for singles can be tricky.

First, many older retirees are female, so estate planning for women is critical. Women have unique issues to consider, such as longer lives and more pressure to leave work to be caretakers, for example.

Second, many singles have fewer resources to pay for estate planning. There are ways to save money on an estate plan, if need be. (If you are single and wealthy, you should look into special trusts and other tips for estate planning for millionaires.)

The number of single, child-free Americans over 50 continues to grow. If you’re among them, here's what you need to know:

1. Having no estate plan can put a stranger in charge 

If you die without an estate plan, a.k.a. intestate, the courts distribute your property according to state law. The courts also pick someone to make healthcare decisions and manage your money when you cannot.

For someone with a spouse and/or children, it can work out because state laws pick these immediate relatives by default. But if you're single, state laws will go down your list of relatives — parents to siblings to nieces and nephews, aunts and uncles and cousins until they find a match.

"The further a relative is down this list, the less likely they are to be who the person would have named," says Bartholomew.

If you have no living relatives, the courts will pick a guardian for you. The state will also keep your property if you have no living relatives and die without an estate plan.

2. List your healthcare wishes ahead of time 

You can use a healthcare power of attorney to pick someone to speak with doctors about your medical situation and help make decisions for your care. If you name a close friend, make sure they can come see you and wouldn't be blocked by hospital visitation rules.

You could also draw up an advance directive laying out your desires for end-of-life care, such as whether you want to stop aggressive treatment if you have no chance of survival.

3. Decide who will manage your money 

A financial power of attorney names someone to manage your financial accounts and pay your bills when you cannot.

This role can usually be handled by a nonprofessional, with the support of your professional advisers. A sibling, a niece or nephew or a close friend are possibilities. Make a list of your financial accounts for this person, as well as the names of your advisers.

4. Plan your inheritance and update as needed 

A will lays out where you want your property to go after you pass away. You can leave property to friends, charities and other organizations; it's not just restricted to family.

You could also leave money behind to care for a beloved pet and name who will look after it when you're gone. You could set up a trust fund to pay out a set amount each year to make sure your pet is taken care of.

Your will should name an executor to oversee the process of distributing the inheritance. You could use a friend or family member for this role. You could also hire a professional from a bank, a lawyer or an accountant. You can hire an attorney to create all your estate plan documents or you could use online services like LegalZoom or Trust & Will.

Make sure to review every three to five years and update estate plan documents as your life and priorities change.

5. Trust funds streamline the process 

A revocable trust fund is a legal entity that can hold your property, such as bank accounts, brokerage accounts and real estate. But since it's revocable, you can take the property back whenever you want.

You set up a revocable trust with a trust company or the trust division of a bank. If you become incapacitated, your contact at the trust company manages the accounts on your behalf and pays your bills.

There are benefits to working with a professional. A good professional knows the details of the work, has experience and has the time to do this work. There is the possibility that you select someone you know and trust, but their life circumstances change by the time they have to step up to this work, which is also why a professional can be a good choice.

When you die, you also list instructions in the trust fund for distributing your assets. You sidestep probate, the court process of reviewing your will. A trust fund costs about 1% per year of the assets you put in, according to estimates.

6. State inheritance tax laws are a potential problem 

You can leave up to $15 million in 2024 without owing federal estate taxes. However, 17 states and the District of Columbia charge estate and inheritance taxes with lower exemptions, especially for single people.

"A lot of exemptions are based on family relationships," said Bartholomew, the estate planning attorney from Oregon.

For example, New Jersey doesn't charge inheritance taxes on property left to spouses, civil union partners, children, grandchildren and parents. But leave property worth $500 or more to more distant relatives or friends, and the state will tax it at rates of up to 16% — no exemptions.

7. You can pre-arrange your funeral 

If you plan your funeral ahead of time, that takes another uncomfortable decision off the hands of your relatives and friends.

You could pre-arrange a package with churches, cemeteries and funeral homes. You could pre-pay while alive, or your executor could pay out of your assets after you pass. If you pre-arrange a funeral, make sure to document what the other party agreed to on costs, and let relatives or loved ones know where they can find this information.

8. Make your long-term-care plan 

This should be one of your most significant areas of focus. Consider what you want to happen if you need help being taken care of after a severe illness or injury. You could use an in-home nursing service if you want to age in place and stay out of a nursing home as long as possible.

If that's what you want, think about how you'd pay for long-term care, either using long-term care insurance, a hybrid life insurance policy with long-term care coverage or your savings. You should also modify your home so you can still manage it after a decline in physical abilities.

9. Be careful when dating 

It's possible to find love at any age. But keep your guard up if you enter a new relationship, whether in real life or online, as dating scams are unfortunately very real, especially for people with assets.

You can avoid being taken advantage of by maintaining separate finances and not giving the new person control over your accounts or making them your financial power of attorney.

Online dating and social media have increased the vulnerability of those seeking romance. In a practice known as catfishing, scammers steal the social media identity of another person to woo potential lovelorn victims online, eventually asking for loans, favors or help paying for travel to meet in person. It's a good idea to be on the lookout for general financial frauds and scams these days, as con artists use artificial intelligence and deepfakes to make their scams even more challenging to spot.

10. Find others to check up on you 

Consider teaming up with another relative or close friend to make sure you're both OK. You could schedule a daily check-in call or text message. You might ask the person with your financial power of attorney to keep an eye on your spending. If there are any unusual purchases, he or she should make sure you’re still making appropriate decisions.

Stay active in groups and activities. If you stop showing up, someone likely will check up on you. It's good for your mental well-being as well.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that's right on the money.

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Talking to your loved ones about end-of-life decisions can be awkward and stir up deep emotions for everyone involved. Many people worry about causing pain, starting family arguments, or making the discussion feel too final.

Even so, talking with family about estate planning is one of the most loving conversations you can have. It allows you to be open with your requests and reduces future misunderstandings and stress. It also ensures your wishes (and theirs) are known and respected.

Trust & Will’s 2026 Estate Planning Report shows that a lack of planning can often lead to family disputes, with at least 35% reporting personal or known conflicts.

The fact that overall, 56% of U.S. adults still have no estate planning documents is especially concerning given that 42% of those surveyed say they wouldn’t know what to do if a family member died today. That figure rises to 56% among those without estate plans.

Compounding the issue, 27% have never discussed end-of-life wishes with loved ones and do not plan to. The main reason? Discussions about mortality feel too uncomfortable or even taboo.

Because it’s so important to have these conversations, here are six key things to keep in mind when discussing estate planning with your loved ones.

1. Get your plan in shape before talking to family

Determine what you want your estate plan to include before you sit down with your family.

You might be wealthy enough to need an estate plan for millionaires, or you might be struggling financially and need guidance on saving money on estate planning. In either case, it's important to designate who will inherit your assets and manage your end-of-life health care choices (called an advance directive).

Advice from the experts: talk with your partner or spouse first and get on the same page before discussing the plan with the rest of your family.

2. Tell your family what documents exist and where to find them

Next, take care of the practical side of estate planning, which starts with something as simple as ensuring that your family knows what documents you have prepared and where to find them.

In addition to your will, you should let them know where to find your financial statements, banking information and other relevant papers. Do you have a 401(k) or pension tucked away? What are the online logins for the financial institutions you use? How much is your coin collection worth, and who gets that pristine 1955 Mercedes-Benz safely stored in your garage?

It's also a good idea to include details about your estate attorney, accountant, or any other professional who can help with the transfer of assets. In many cases, financial decisions might need to be made quickly after you're gone, but your family won't be able to act if they can't find the paperwork you so thoughtfully compiled.

3. Emphasize the importance of keeping family unity

Families squabble about all sorts of things. Make sure you have a plan in place so your final wishes are carried out cooperatively and respectfully, without the possibility of a turf war.

One of the main goals of an estate plan is to promote family unity and avoid conflicts among your loved ones following your passing. It isn't just about finances and possessions; it's also about preserving relationships and family values.

4. Consider the emotional impact on your family

Discussing estate planning also means preparing for potential emotional reactions. You might not always be there as a shoulder to cry on.

Many adult children are surprised by the size of their inheritance because they expected either significantly more or less than what you left behind. But if you put guardrails in place to prevent your heirs from blowing their inheritance, they might feel that you don't trust their judgment.

Besides that, if you've left an unequal inheritance to your children or other family members, you can explain your reasoning in your estate plan. For example, if one child has special needs, you might want to provide more support to that child.

To avoid conflict, talk to your estate lawyer about how best to structure these differences in your plan. When dealing with the loss of a parent or other loved one, emotions are often running high, and when there are significant surprises, it adds to the confusion.

5. Determine who will be in charge of your estate 

Be realistic when creating your estate plan. For example, there’s debate over how many people should serve as executors — the ones responsible for managing and transferring your wealth. You want to be fair, but 'two heads are better than one' doesn't always pan out.

If you only choose one person, other family members, usually siblings, might feel resentful that they weren't allowed to participate in the process. Besides, co-executors can provide an extra layer of checks and balances.

On the other hand, piling all the responsibilities onto one person might overwhelm them, especially if they're dealing with their own challenges.

Naming co-executors or co-trustees has its pros and cons, including the fact that they must act in unison on all official business — signing every check, tax return, and court filing. If they live in different states, coordinating the details can delay simple tasks. Plus, when co-executors or co-trustees disagree, the administration of the estate can hit a stalemate.

That's why it's often easier to name one executor and communicate why the person was picked. Or, it may be better (and cause fewer conflicts) to assign a different child the role of healthcare proxy, for example, so everyone feels included.

Or, you could name one individual and list others as alternates; use a neutral third party, such as a bank or professional trust company, or include language in your estate plan that allows the majority to rule and make the important decisions.

6. Choose the right time and place

Because end-of-life conversations can be difficult and even a bit awkward, choosing the right time and place is important — for you and your family.

Select a time and place that lead to open and honest communication. Family gatherings, holidays and other celebrations, when emotions are already running high, might not be the best time.

Instead, schedule a family meeting at a time and place that works for everyone, or set aside some one-on-one time with each family member to discuss your estate plan privately.

Another option is to use an event to bring up the topic of estate planning. This might include a relative's passing or casually talking about a report of how a celebrity died without a will and the problems it caused.

And don’t assume one conversation will cover everything. It may be better to have these conversations continually, rather than a one-and-done. Things can change, and so may your wishes.

Communicate now to avoid confusion later

Discussing estate planning with your family can be a real challenge, but with a little forethought, the transfer of wealth doesn't have to result in confusion or resentment. Communication is key.

Finally, whether you're a multi-millionaire or considerably less wealthy, estate planning can be a complex process. A wealth manager or estate planning attorney can explain the intricacies of your plan and help you make the best decisions for you. If circumstances change, a professional can also make sure any revisions are properly incorporated into the documents.

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When is the last time you checked who you have designated as a life insurance beneficiary? If you can't remember when, now is the time to check that you've listed a beneficiary and that it's the person you intended the policy to help.

Providing for loved ones upon your death remains a priority for many people. That’s why it’s important to choose beneficiaries and update your choice as needed. Failure to do so could tie up death benefits in probate court, and court costs could reduce how much your loved ones receive.

Whether you've recently bought term life insurance or you've been hanging onto whole life insurance without thinking much about it, here's what you need to know about life insurance beneficiaries and how they work.

What is a life insurance beneficiary?

A life insurance beneficiary is the person or entity you name to receive the death benefit from the policy. Beneficiaries could be one or more persons, the trustee of a trust you establish, a charity or your estate. If you do not name a beneficiary, the death benefit automatically is paid to your estate.

There are two types of life insurance beneficiaries: primary and contingent. The primary beneficiary is the person or entity named in the policy to receive the death benefits. The contingent beneficiary receives the death benefit in the event the primary beneficiary cannot be found.

How does a life insurance beneficiary work?

When a person purchases a life insurance policy, he or she chooses a person, persons or entity to receive the death benefits upon the policyholder’s death. This could be the person’s spouse and/or children, other loved ones, even a charity. When the policyholder dies, the beneficiaries file a claim to receive their portion of the death benefits.

What are the rules for the beneficiary?

While choosing life insurance beneficiaries is up to the policyholder, there are some basic guidelines to follow to ensure your wishes are carried out.

1. You don't have to name beneficiaries.

Life insurance beneficiaries are not required, but not naming beneficiaries could make it more difficult and time-consuming for your heirs to receive the death benefits of the policy. Even if you state beneficiaries in your will, it’s important to name them on the insurance policy, as well.

2. You can name as many beneficiaries as you want.

This means you can name your spouse or partner, your children and other loved ones to receive the death benefits of the life insurance policy.

3. Your state might require you to name your spouse as a beneficiary.

If you live in a community property state, check your state’s requirements regarding life insurance benefits. Your spouse may be entitled to a specific portion of the death benefits of any life insurance policy.

4. You must make any changes to life insurance beneficiaries.

It’s important to keep your life insurance beneficiaries up to date. If there’s a major life change such as a divorce or death, you are responsible for updating your beneficiaries to reflect these changes. Otherwise, your death benefits might go to someone you don’t want to have them. Making changes to your will does not automatically carry over to your life insurance benefits.

Does the beneficiary get all the life insurance money?

In most cases, beneficiaries will receive the full amount of the life insurance death benefits. In some cases, they'll have to pay estate taxes on the insurance payout if the policyholder’s estate, including the life insurance payout, is worth more than a set amount.

According to the Internal Revenue Service, that amount for 2026 is $15 million for an individual and $30 million for married couples. As such, many beneficiaries won't have to pay estate taxes on a life insurance payout.

If beneficiaries choose an interest-based payout instead of a lump sum, they'd have to pay taxes on the interest.

Who should be your life insurance beneficiary?

When selecting your beneficiary, think about who you want to provide for after your death. For many people, this is a spouse, children, grandchildren or other loved ones. However, it could be another person or people you hold dear.

Can a minor be your life insurance beneficiary?

Yes, minors can be beneficiaries. However, they must be 18 or 21 (depending on your state) to receive the death benefits. It’s important to either name the minor’s caregiver as the beneficiary or set up a trust for the minor and name the trust as the beneficiary.

With a trust, you'll need to choose a trustee to manage the funds for the minor until he or she reaches age 18 or 21.

Naming the right life insurance beneficiary matters

Choosing the right beneficiaries is essential to ensuring your loved ones are financially supported after your passing. Regularly reviewing and updating your beneficiary designations — especially after significant life changes such as marriage, divorce, the birth of a child or the loss of a loved one — helps keep your policy aligned with your current wishes.

By keeping your policy up to date, you can ensure the death benefit is distributed as intended, minimizing the risk of complications or disputes during an already difficult time.

Need help reviewing your life insurance and estate plan? Connect with a financial professional who can help you evaluate your options. Use the Bankrate tool below to connect with a vetted financial professional today:

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Estate planning isn’t necessarily about how much you have. Instead, it’s about protecting what you’ve spent a lifetime building. You've worked for years to pay down debt, pay off your home and grow your investments and savings. A solid estate plan ensures none of that disappears in probate, long-term care costs or excessive taxes. It keeps you and your spouse in the home you’ve shared for decades and makes certain your grandkids receive the inheritance you intended, not the IRS.

A simple, up-to-date will, revocable living trust, powers of attorney and healthcare directives can be completed in just a few hours with the right financial advisor, and give you the peace of mind no amount of money can buy. Do it while you’re healthy and clear-headed, so your loved ones never have to make agonizing decisions or fight in court while grieving. You’ve taken care of everyone else your whole life — now take one afternoon to review these 10 things you should know about estate planning.

But first, why is an estate plan even necessary?

Why have an estate plan?

An estate plan lays out how you want your assets handled at your death or when you’re physically or mentally incapacitated. That's not the most comforting subject, so it's no wonder most people procrastinate creating one.

“It’s shocking how many people don’t have their documents in order,” says Bruce Tannahill, a director of estate planning with MassMutual.

According to Trust & Will’s 2026 Estate Planning Report, only 26% of Americans have a will. That's down from 31% in 2025. What's even more alarming is that just over half, or 56%, have no estate planning documents at all. While an estate plan cannot prevent death or illness, it can protect your family from stress, grief and emotional fallout.

“Once you’re gone, it’s a really hard time for your family. People don’t always react in the best ways,” says Anne Rhodes, chief legal officer with Wealth, which provides estate planning software for financial advisors. “Your estate plan gives them clarity on what to do and a chance to move on.”

Here are 10 things you should know about estate planning:

1. Estate planning covers decisions in life and death 

Estate planning lays out what will happen to your property at death. Who gets what and when? Do you want to leave anything to charity? Who will be the executor in charge of paying off your last debts and distributing your remaining assets?

An estate plan can also explain your wishes when you have a serious medical condition or can’t make decisions yourself by naming a family member or trusted friend to decide for you. You can create specific instructions, like whether you want to be an organ donor or want to refuse treatment when on life support with no chance of recovery, in an advance directive.

“Loved ones who have to make these decisions on their own always feel like they killed mom or dad,” says Lindsay Graves, an elder law attorney and founding partner of The Graves Law Firm in North Canton, Ohio.

Careful planning can also help you avoid estate planning calamities, such as the wrong relative inheriting your money.

2. You need more than a will 

A complete estate plan has a few documents. Your last will lays out what you want to happen with your property at death. A financial power of attorney (POA) names someone to manage your financial accounts and pay your bills when you’re alive but unable to.

A healthcare POA names someone to make your healthcare decisions. You can also create a healthcare directive that lays out your preferences for medical treatment in different situations.

3. Have a plan, or the government decides for you 

Each state has laws for what to do when someone dies or becomes incapacitated without an estate plan. “You lose the opportunity to make your voice heard,” says Wealth.com's Rhodes. The person who ends up making your health care and financial decisions might not be the one you want.

Inheritance laws prioritize a nuclear family structure, meaning the money usually goes first to your spouse and children. You need an estate plan if you’d like to leave anything to charity, friends and other family members.

4. Beneficiary designations override your will 

Retirement accounts and life insurance policies ask you to name a beneficiary to inherit the money after your death. These instructions override whatever you may have written in your will and other estate plan documents.

For example, if you still have your ex-spouse named as beneficiary on your 401(k), they inherit the money rather than whoever you named in your will. You can update beneficiary designations by submitting a short form to the company that manages the account or insurance policy.

5. Trust funds provide control after death 

A trust fund is a legal entity that holds property for the benefit of someone else. You can set up a trust fund to control how your money and property are distributed after your death. For example, if you’re worried about your 18-year-old grandson being able to manage a six-figure inheritance, you could put the money in a trust fund with a delayed distribution, mandating that your grandson gets the money only after turning 25 or finishing college. In general, you will want to decide between a revocable and an irrevocable trust.

6. A good plan speeds up inheritances 

When you die, the state courts review your will and distribute your assets to the listed heirs through a process called probate. If you don’t have an estate plan and your family members fight over the inheritance, they could waste everything on legal fees. Even if probate goes smoothly, the process can still take several months.

Accounts with beneficiary designations sidestep probate and go straight to the named beneficiaries. You could also set up transfer-on-death (TOD) instructions on bank accounts, brokerage accounts, vehicle titles, and home titles for the same result, says Tannahill from MassMutual.

Another option is to set up a revocable trust. You put property into the trust fund, but you can take it back as needed. When you pass away, the trust passes along the property according to your instructions without going through probate.

7. Estate planning saves on taxes inherited by your heirs 

The estate tax is a tax charged on large property transfers at death. In 2026, the federal exemption is $15 million. which is not an issue for most people.

However, 17 states and the District of Columbia charge some form of estate or inheritance tax with much lower limits. Oregon taxes estates starting at $1 million and Massachusetts at $2 million. You could minimize these taxes by planning in your lifetime, such as making more gifts or using trust funds. After you pass away, it’s too late. “The state legislature is not kind enough to do tax planning on your behalf,” says Rhodes from Wealth..

8. Remember your pets — and online accounts 

If you have a cat, dog, or other animal as part of the family, include what you want to happen to them in your estate plan. Who will take care of the pet? Will it be a friend, a family member, or a local humane society? “You could set up a pet trust specifically to help the other person pay for pet food, vet bills, and other needs,” says Tannahill.

You need a digital estate plan to enable your executor and family to access your digital assets if you pass away. You should also consider whether you have any digital photos or files you want families to have. Make sure to send them along while you still can. Consider sharing passwords to social media accounts if you want a family member to close them at your death.

9. Lawyers and online services can prepare your documents 

LegalZoomThe cost of preparing your estate plan depends on its complexity and where you live. A lawyer might charge around $1,000 to create a will and the POA documents at the low end, to between $3,000 and $10,000 if you have a more complicated estate and want to set up trusts. Estate planning for millionaires is a different animal from an average family's needs, and there are plenty of ways to save money on estate planning.

Online services like LegalZoom or Trust & Will can prepare your documents for a fraction of the price. These could be an alternative if you feel your estate plan is simple and you are comfortable with a DIY approach.

Online programs can overlook technical questions, warns Graves, the attorney from Ohio. “You may answer a question where an attorney would say that’s something we need to know more about, that a computer might miss.” For example, you leave money to a family member with special needs, which accidentally leads to them losing government benefits.

10. Review your plan every few years 

If you drew up a will 20 years ago, chances are your situation and wishes have changed since then. Laws also change. You should formally work with a legal professional to check your estate plan for mistakes and give it a general review at least every five years, recommends Graves. If you have a good relationship with the lawyer who created the documents, she suggests calling them every two years to ask if anything has come up that could affect your plan. “Some practitioners proactively contact clients, but not all do.”

If you’ve been holding off on creating or updating your estate plan, Graves urges you to figure everything out before it’s too late. “We’re seeing an uptick in profound medical issues happening at younger ages. You never know when life will throw a curveball.”

Note: This item first appeared in Kiplinger’s Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

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It's not pleasant to think about, but someday you may be unable to make decisions for yourself. Designating a power of attorney will protect your interests.

A durable power of attorney gives someone you designate, known as your agent, the authority to make decisions if you become incapacitated. An agent who has durable power for health care, sometimes known as a health care proxy, can make decisions about your medical and end-of-life treatment.

An individual who has durable power of attorney for finances has the authority to handle your financial matters, such as paying bills and managing your property. You can give the same individual both medical and financial power of attorney or name separate agents, based on their expertise.

Selecting a power of attorney should be part of your estate plan, says Ashwani Prabhakar, a trust and estate lawyer with Davidoff Hutcher & Citron. While many people assign power of attorney to an adult child or other family member, it's not necessary to pick a relative — and it's not always wise. You can, for example, choose your financial adviser to manage your investment decisions if you don't think a family member would be able to handle that responsibility.

What are the steps to establishing a power of attorney?

Once you've selected your agent (or agents), you can have an estate attorney draft a form identifying the kind of power of attorney that individual will have. Legal fees vary, but the average cost of having an attorney draw up power-of-attorney paperwork ranges from $200 to $300. You can also find power-of-attorney forms on do-it-yourself websites such as LegalZoom and Nolo. You'll pay about $40 to create the forms online.

Regardless of how you draw up the power-of-attorney document, you should have it notarized to make the arrangement official (some states require this). Estate attorneys can act as notaries if they're commissioned by the state where they're practicing law, Prabhakar says. He recommends that you also arrange to have a witness when you and your agent sign the form.

Some banks and brokerage firms use their own power-of-attorney form, or they may not honor a power of attorney unless certain conditions are met. Make sure you and your agent complete the paperwork required by your financial institutions, and ask them to keep a copy on file.

How do you change power of attorney?

Selecting a trustworthy agent is critical because an individual with power of attorney has broad authority over your finances and health care. In April 2023, Terry Lynn Culver was sentenced to three years in prison after he was convicted of stealing more than $426,000 from a 92-year-old Wisconsin woman as he was acting as her agent using a power of attorney. He wrote checks from the woman to himself without her knowledge, took possession of her home and sold multiple real estate properties she owned.

If you suspect an individual who has your power of attorney may make decisions that aren't in your best interest, you can revoke the agent's authority as long as you're mentally competent. It's a good idea to include a provision in your power-of-attorney document that states you reserve the right to change the agent at any time.

To avoid legal challenges, you should document any change on a power-of-attorney revocation form. Go through the same process you went through initially, such as having the document notarized, and inform the previous power-of-attorney agent of the change.

Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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