Too many people think that wills and estate plans are for someone else—someone with more assets or more heirs, someone who owns a business or vacations in a second home.
But the truth is much simpler: An estate plan, which includes a will, is a tool that everyone can use. It helps people know that you promised a special necklace to a grandchild. It makes clear that you intended to donate to your favorite animal shelter. And it offers a plan for how others can best take care of your children. Death can be complicated, and in many ways an estate plan and a will help uncomplicate it for the people you love.
If the why of whether you need an estate plan is clear, the how may be a little fuzzier. These five essentials, from what’s in an estate plan besides a will to how you can create one that suits your needs, can help.
Use our estate planning workbook (PDF) to outline your wishes and information family members will need.
1. What’s an estate plan? Do I need one?
An estate plan includes a will, but it’s much more than that. A good estate plan outlines who you want making financial and health care decisions if you can’t make them for yourself. In general, it includes a will, a trust, a durable power of attorney, a health care power of attorney, and designations (often detailed in a letter of intent) as to beneficiaries and guardianship.
The end result of these documents is to:
- support family, friends, or causes that are important to you,
- establish control over who gets what (and who doesn't),
- provide for any children who need a guardian,
- minimize taxes and fees on your estate, and
- establish ownership when you’re gone for a business or property such as a house or car.
2. Why do you need a will as part of an estate plan?
It helps establish control.
Without a will, no one will know exactly how you wanted your property distributed or who you wanted to watch over your children. That means state law (e.g. probate court) dictates both of those things.
It helps expedite the process.
If you don’t leave a will, the probate process could take a long time, often years (depending how complex your estate is). A will makes this process go faster.
It helps save money.
Court costs, probate expenses, fees for attorney, accounting, and appraisal can take a chunk of your estate. Having a will in place, especially combined with a trust, often significantly reduces probate expenses.
Tip: Protect your privacy with a trust. Your last will becomes public record when it’s submitted for probate (a public forum to resolve disputes raised by creditors or heirs). Probate documents list all your assets, appraised value, and the new owners of your assets—and this information can be seen by anyone. Who wants their whole (financial) life on display? If your property is placed into your trust, the information available to the public is limited.
3. There are 2 ways to create your estate plan.
Work with an attorney who specializes in estate planning.
Your financial professional or tax professional may be able to recommend one since they often work together on behalf of clients. It’s always a good idea to consult with an attorney. Here are some specific scenarios that call for extra help:
- Your estate is significant.
- You own a business.
- Taxes may be due upon your death.
- Distributing your assets will be complex, especially if you lived in several states or outside your home country.
- You have young children who may require guardianship.
- You want to leave some (or all) of your estate to charity or friends.
- Your family dynamics are complicated.
Do it yourself.
If you participate in a retirement plan from Principal® or have one of our IRAs, you and/or your spouse have access to free online resources to prepare your own will, power of attorney, power of attorney for health care, living will, and more.
Tip: Check with your employer to see if pre-paid legal help is part of your employee benefits. Like medical benefits, an employee pays a fixed amount each month or year in exchange for certain legal services.
4. Regularly review your will and other documents in your estate plan.
“As life changes, your estate plan should change, too,” says Heather Winston, assistant director of financial advice and planning at Principal. Review your estate plan annually or when one of these events occurs:
- marriage or divorce,
- birth, adoption, or death of a child,
- death of a spouse or partner,
- change in beneficiaries,
- death of beneficiaries, executor(s), guardians, or trustees,
- purchase a new home or real estate,
- sale of a property previously included in your will,
- birth or adoption of grandchildren, or raising grandkids,
- a move to another state, which can have different laws,
- estate and tax law changes, or
- significant changes to your financial situation (income, value of assets).
5. Safeguard and share your wishes and your estate plan.
It’s also a good idea to put all the documents in a safe place and tell someone where to find them. “I know someone who put her important papers in a safe deposit box—but forgot to tell anyone where it was located. That left the family scrambling to find the paperwork they needed,” Winston says.
Watch one man’s story about his father’s passing: "When I’m gone, there’s a blue folder.”
She offers these suggestions:
- Give your local hospital and primary care physician copies of your living will and health care power of attorney (not just your family).
- Give your executor(s) a list of all your accounts and records.
- Review beneficiaries once a year, and your will or trust at least every three to five years.
Next steps
- Log in to your Principal account to check/update your beneficiaries for life insurance, retirement plans, and investment accounts.
- Watch this webinar: Estate planning: Can you DIY? We talk through steps to create your plan, including whether you may be able to DIY.