Estate planning is a crucial part of retirement, ensuring your assets are distributed according to your wishes while minimizing taxes and legal hurdles for your loved ones.
During my time in the beneficiary department at my previous employer, I witnessed firsthand the difficulties that can arise when individuals neglect estate planning.
One case that stuck with me involved a widowed father who never updated his life insurance beneficiary after his wife passed away. When he later passed, the payout defaulted to his estate instead of his children, forcing them into a lengthy probate process.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
Legal fees and delays left them struggling for months to access the funds he had intended for their financial security.
This situation could have been avoided with a simple beneficiary update, underscoring how small oversights can cause unnecessary hardship.
Estate planning isn’t just for the wealthy; it’s essential for anyone who wants to protect their loved ones. According to a 2023 survey by Caring.com, two-thirds of American adults do not have an estate plan.
Whether you're starting fresh or updating your plan, here’s a checklist of key legal and financial steps to take.
1. Create or update your will
A will is the foundation of any estate plan, specifying asset distribution and designating guardians for dependents.
If you already have a will, review it periodically to ensure it reflects any changes in your financial situation or family dynamics.
2. Establish a trust (if needed)
Revocable and irrevocable trusts can help manage assets, avoid probate and provide structured support for beneficiaries in the following ways:
Revocable trust
- Control. The grantor (the person who creates the trust) retains full control and can modify or revoke it
- Probate avoidance. Assets bypass probate for a smoother transition
- Asset protection. Offers little protection from creditors
- Taxes. The trust’s income is typically taxed as part of the grantor’s personal income
Irrevocable trust
- Control. The grantor permanently gives up control; changes require approval
- Probate avoidance. Avoids probate, like a revocable trust
- Asset protection. Provides stronger protection against creditors and lawsuits
- Taxes. May offer estate tax benefits, as assets are removed from the grantor’s taxable estate
3. Assign power of attorney
Power of attorney grants a trusted person the ability to handle financial and legal matters if you become incapacitated.
Without this, your family may face costly and time-consuming legal challenges to manage your affairs.
4. Create a health care directive
Also known as a living will, this document outlines medical treatment preferences and designates a health care proxy.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
One of the most well-known cases highlighting the importance of a living will is Terri Schiavo. In 1990, Schiavo suffered a cardiac arrest, leaving her in a persistent vegetative state. Without an advance directive, her husband and parents fought a years-long legal battle over her care.
The case, which reached Congress and the White House, underscored the need for clear health care directives.
5. Review beneficiary designations
Retirement accounts, insurance policies and other financial assets allow you to name beneficiaries. These beneficiary designations override your will, so ensure they align with your estate plan.
6. Minimize estate taxes
Depending on your estate size, taxes may be a concern. Strategies such as gifting assets, establishing charitable trusts or converting traditional retirement accounts to Roth IRAs can help reduce tax liabilities.
Real-life example: How one family saved millions in estate taxes
The Johnson family had a $15 million estate, subject to more than $1.6 million in estate taxes. To minimize their tax burden, their financial planner implemented:
- Annual gifting. Each parent gifted their three children $17,000 per year tax-free, reducing the taxable estate.
- Charitable remainder trust (CRT). A $2 million donation provided tax deductions and lifetime income while avoiding estate tax.
- Roth IRA conversions. By converting traditional IRAs to Roth IRAs, they paid taxes upfront at lower rates, ensuring tax-free inheritance for heirs.
7. Organize important documents
Keep estate planning documents, financial records and legal paperwork in a secure, accessible location. Tell your executor and family members where to find them in case of an emergency.
8. Review your plan regularly
Life changes — marriage, divorce, new grandchildren or financial shifts — may require updates to your estate plan. Regular reviews help avoid unintended consequences and ensure your wishes are honored.
Estate planning isn’t just about distributing assets. It’s about securing your family’s future. Whether drafting your first will or updating an existing plan, take control of your legacy today.
Schedule a consultation with an estate planning attorney or financial adviser to ensure your loved ones are protected.
Alex Allegro is a planning advisor with Rooted Wealth Advisors, Inc. This article is not intended as tax or legal advice. Consult with a qualified professional before implementing any strategies discussed.
The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.
Related Content
- 15 Estate Planning Terms You Need to Know
- Five Tips For Estate Planning in 2025
- Five Trusts You Need to Know About and the Best Time to Use Them
- You've Got a Trust: Now Who Should Be the Successor Trustee?
- Six Ways to Make Talking With Family About Estate Planning Easier
-
The '8-Year Rule of Social Security' — A Retirement RuleThe '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
Should I Buy Stocks or Should I Buy Bonds Right Now?Generally speaking, stocks provide reasonable growth while bonds provide stable income. Each play important roles in diversified portfolios.
-
The '8-Year Rule of Social Security' — A Retirement Rule
The '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
Should I Buy Stocks or Should I Buy Bonds Right Now?
Generally speaking, stocks provide reasonable growth while bonds provide stable income. Each play important roles in diversified portfolios.
-
Tips for Expat Retirees, From Expat RetireesYou may enjoy a lower cost of living by moving abroad, but it requires careful planning.
-
You Were Planning to Retire This Year: Should You Go Ahead?If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get ItThe Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning PlaybookConsider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Why Investing Abroad Could Pay OffCountries overseas are stimulating their economies, and their stocks are compelling bargains.
-
Why Retirees Need a Budget, According to a New RetireeA new retiree explains why retirees need a budget.
