6 Questions to Ask Your Estate Planner

Quick Answer

Thinking about these six questions before meeting with an estate planner or creating an estate plan on your own will help ensure your wishes are carried out after your death.

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An estate plan can guarantee your assets are distributed the way you want after your death. During your lifetime, it can ensure that if you're physically or mentally incapacitated, your affairs are managed as you wish.

Not everyone needs an estate planner, but even if you take the DIY route, considering a few critical factors will help you make smart decisions. Ask your estate planner these questions to make sure you're on the right track when getting your affairs in order.

1. Do I Need a Will and a Trust?

Wills and trusts have several similarities but serve different purposes.

  • A will is a document stating how you want your assets distributed after your death and naming an executor to oversee the process. If you have children under age 18 or other dependents, your will can designate guardians for them. After your death, a probate court reviews and authenticates your will, supervises the executor and makes sure any taxes are collected from your estate.
  • A living trust is a legal entity to which you transfer assets, typically including real estate, bank accounts and investments. The trust is managed by a trustee (usually you); after your death, a successor trustee named in the trust takes over. A trust dictates what happens to your assets upon your death, so your estate doesn't have to go through probate. Unlike a will, a trust can't designate guardians for minors or dependents; however, the assets in the trust can be used to provide for them.

Most people can benefit from both a will and a trust. While a will shortens the probate process, a trust can eliminate it altogether, giving beneficiaries faster access to your assets. Because trusts are legal entities, they can continue after your death. For instance, you could use a trust to gradually transfer assets to your children as they become older and more responsible. Trusts may also be useful if you have a blended family, are passing on substantial assets or want to minimize estate taxes.

2. What Is Included in an Estate Plan?

The following documents are usually part of an estate plan:

  • A will, or last will and testament, explains how assets will be distributed after your death, names an executor to supervise the process and may specify guardians for minor children.
  • A trust specifies what happens to your assets upon your death and names a trustee to oversee the trust and the distribution process.
  • A financial power of attorney names someone to take over your finances if you can no longer do so due to physical or mental incapacitation.
  • A medical power of attorney, sometimes called a health care power of attorney, names someone to make decisions about your health care if you're unable to do so due to physical or mental incapacitation.
  • A living will, or advance directive, states your preferences for medical treatment, including end-of-life care, if you cannot make your own decisions.

3. Do I Need an Estate Plan if I Already Have a Will?

A will is the basis of your estate plan, but is it all you need? An unmarried person with no children and minimal assets probably doesn't also need a trust. But an advance directive, financial power of attorney and medical power of attorney provide assurance that your wishes for your health and finances are carried out even if you're incapacitated.

You can sometimes direct assets to a beneficiary without a will or trust. Life insurance proceeds, 401(k) and IRA accounts, pensions and "payable on death" financial accounts don't go through probate, but are distributed to the beneficiaries listed on each account. Real estate held in joint tenancy generally transfers to the surviving owner.

Still, an estate plan incorporating a living trust can benefit your loved ones in several ways:

  • Time savings: Although uncontested wills generally go through probate quickly, even a few months without access to your assets could financially strain your family.
  • Cost savings: Court and attorney costs for even simple probate can take up to 5% of your estate.
  • Tax savings: Most people aren't affected by federal estate taxes: In 2022, you can leave over $12 million to heirs without being taxed. However, state inheritance or estate taxes may affect smaller estates. An estate plan with a living trust can minimize these taxes.

4. How Do I Choose Beneficiaries?

Before meeting with your estate planner, consider whom you want to inherit your assets. You may already have beneficiaries for life insurance policies, brokerage accounts or retirement plans. Choosing a beneficiary usually eliminates the probate process; the asset goes directly to that person.

Beneficiaries don't have to be people. You could name a school, nonprofit or house of worship as a beneficiary, for example. You can also split an asset among multiple beneficiaries. Select a contingent beneficiary in case your primary beneficiary doesn't want or can't take the asset.

5. How Is My Property Transferred When I Die?

If you have a will, your estate will go through probate to determine if the will is legitimate. The probate court oversees the executor named in your will, making sure applicable debts and taxes are paid and your property goes to the right people.

Assets held in trust avoid probate. Like a will's executor, the successor trustee you choose pays your outstanding debts and taxes and distributes your assets as directed by the trust.

Financial accounts for which you've named a beneficiary typically go directly to that person upon your death. Beneficiaries of life insurance policies must file a claim with the insurance company, which may offer them a lump-sum payout, a payout in monthly installments or other options.

If you have minor children, the guardian named in your will takes over their care, while your chosen trustee manages their finances.

6. How Often Should I Update My Estate Plan?

Evaluate your estate plan annually or after a major life change, including:

  • Moving to another state
  • Getting married or divorced
  • Purchasing or selling real estate
  • Having or adopting a baby
  • Receiving an inheritance or other significant windfall

Review the beneficiaries on your financial accounts annually. If there's a conflict between the beneficiary listed for an account and your will, beneficiary designations generally take precedence.

The Bottom Line

Whether you hire an attorney to write your estate plan or use DIY resources such as LegalZoom or RocketLawyer, estate planning is an important component of your overall financial plan. Signing up for free credit monitoring is another way to help keep your finances in good shape for your and your family's future.