Estate Planning 101

The purpose of this white paper is to provide you with an overview of estate planning basics. Establishing or revising an estate plan first and foremost involves making a series of decisions, some of which can be daunting. We hope the information below serves as a useful guide during this process.

What is an estate plan and why do I need one?

Contrary to popular belief, estate planning typically involves more than just signing a Will. It generally involves two sets of considerations: lifetime planning and testamentary planning. Lifetime planning may involve choosing decision-makers to make health or financial decisions on your behalf should you become incapacitated. For high net worth individuals, lifetime planning may also involve establishing tax-efficient gifting strategies during life.

A testamentary plan, on the other hand, will designate the individuals or charities who are to inherit your assets at death, and in what capacity (e.g., outright vs. in trust). In addition, a testamentary plan may appoint a guardian to care for your minor children, as well as an executor to administer your estate, and a trustee to oversee any trusts that may be created after your death. Lastly, if you have a taxable estate, your testamentary plan will be crafted with specific tax planning strategies in mind.

It is important for you to be in the driver’s seat with respect to these decisions. If you do not have an estate plan, the default provisions of state law will govern how your assets pass at death. The result may not be what you want.

What documents comprise it?

Your personal situation will dictate what paperwork needs to be drafted and signed in order to implement your estate plan. If you own your own business, for example, business succession planning may necessitate the need for more complicated agreements.

Below is a list of basic documents that may have an impact on your estate plan:

  • Will/Revocable Trust
  • Financial Power of Attorney
  • Health Care Proxy and Living Will
  • Beneficiary designation forms (e.g., IRA, life insurance, 401(k))
  • Real estate title documents
  • Trusts you created and funded during life (e.g., Irrevocable Life Insurance Trust)

Note that if you own assets jointly with rights of survivorship (e.g., real estate or brokerage accounts), those assets pass outright to the surviving owner by operation of law and not as a result of your Will. Similarly, any retirement benefits or life insurance proceeds pass to the beneficiaries named on the beneficiary designation forms – regardless of what your Will says. Any assets not passing by law or beneficiary designation will generally pass pursuant to the provisions in your Will.

What do these documents do exactly?

Each of your estate planning documents will serve a slightly different purpose. Below is an explanation of each.

Durable Power of Attorney (DPOA). The DPOA appoints an agent to act on your behalf during your life. It allows the agent to act on a broad range of matters, including financial and real estate. It is signed during life, becomes effective immediately and continues to remain in effect if you become incapacitated. A DPOA terminates on death.

Health Care Proxy (HCP). The HCP appoints an agent to make health care decisions for you if you are unable to do so. So long as you are not incapacitated, you make your own health- related decisions.

Living Will. A Living Will provides written instructions on your wishes in the event of incapacity. For example, the Living Will would indicate whether you would want to forego life-sustaining treatment in the event you had an incurable or irreversible condition that rendered you incapacitated.

Beneficiary Designations/Joint Property. A beneficiary designation for “non-probate” property – such as an IRA or life insurance policy – provides instruction as to who will receive the property remaining at your death. These types of assets are “non-probate” property because they pass outside of your Will, and are not impacted by the terms of your Will. As mentioned above, at your death, the property passes automatically to the named beneficiary. Additionally, if you own property – such as real estate or brokerage accounts – jointly with another individual, the remaining assets will pass automatically to the joint owner at your death.

Will/Revocable Trust. The assets you own at your death that have not passed via beneficiary designation or operation of law will generally pass under the terms of your Will. A Will also specifies who you would like to serve as guardian of any minor children, and also as executor of your estate. A Will is generally structured so that you dispose of your tangible personal property to a specific individual or individuals, while the remainder of your estate passes either to a trust (or trusts) for one or more individuals, or outright. If your Will creates a trust at your death, the Will would also name an individual to serve as trustee of the trust. A trust created under a Will is called a “testamentary trust”. If your Will contains any testamentary trusts, those trusts would not come into existence until your death. In some cases, it may make sense to also have a Revocable Trust. A Revocable Trust is a separate document that functions like a Will. Your Will would direct that your estate “pour over” into a Revocable Trust at your death and be governed by the terms contained in the Revocable Trust. A Will/Revocable Trust structure does not have any tax advantages, but it can offer some distinct advantages with respect to asset management during a time of incapacity and with respect to estate and trust administration after death.[1]

Example. Judy is a widow with two children – Nate and Sara. Sara has two children of her own – Olivia and Kate. Judy’s Will names Nate and Sara as equal beneficiaries of her estate, and as co-Executors. Judy’s estate is worth $3,500,000:

  • Two bank accounts. One account is owned individually by Judy and has a value of $500,000. The other account is owned jointly with Nate (with rights of survivorship) and has a value of $250,000.
  • $2,000,000 life insurance policy where Judy’s two grandchildren are named as equal beneficiaries.
  • A home in Westchester worth $750,000, with Judy as the sole owner.

If Judy dies, who gets what? What questions do you need to ask yourself in order to answer this question? First, you should determine what passes under the Will and what passes outside of the Will. The joint bank account with Nate passes directly to Nate at Judy’s death because he is a joint owner. In addition, the life insurance proceeds pass directly to Judy’s granddaughters because they are the named beneficiaries. The only assets to pass under Judy’s Will are her individually-owned bank account and her home in Westchester.

In the end, Nate receives $500,0002 and half an interest in the home, while Sara receives $250,000 and half an interest in the home.3 Judy’s granddaughters each receive $1,000,000. The moral of the story? It is better to be Judy’s granddaughter than her child. But, seriously, without knowing more, we cannot be sure if this plan accurately reflected Judy’s wishes.

Below are some questions we might ask ourselves about her situation:

  • Did Judy intend for Nate to receive twice as much as Sara? Or did she set up the joint account for convenience, and unknowingly leave more to the child who was listed as the joint owner?
  • Are there any issues with her granddaughters receiving $1,000,000 of cash outright from the life insurance? Would the amounts have been better left to trusts for their benefits? One benefit of a trust is that it can provide a level of asset protection, particularly if, for example, one of the granddaughters was in the midst of a divorce or has creditor issues. Another benefit is that a trust can allow a trustee to handle investment management of the funds if the granddaughters were too young or not financially sophisticated. Also, if one of her granddaughters had special needs (medical or otherwise), a trust may very well have been a better option than an outright gift.
  • Do Nate and Sara get along well? If not, they will need to think about how to best administer Judy’s estate since they are named as co-Executors. Should one of them resign? Also, what if Sara wants to keep the house but Nate is adamant that they sell it because he needs the cash? Sara could conceivably buy him out, but will there be practical hurdles if they don’t like each other very much?

Believe it or not, the above example is fairly simple. But even seemingly simple life situations can raise more complicated estate planning questions. Hopefully, Judy would have taken the above considerations into account when crafting her estate plan. In addition, it would have been a good idea for Judy to regularly revisit her plan to ensure that it continued to reflect her current wishes.

What decisions will I need to make in order to establish an estate plan?

What decisions you need to make in order to establish or revise your plan will depend on your unique circumstances, but below are some basics questions to consider:

  • If I become ill, who should make health care or financial decisions on my behalf?
  • Who would I like to name as executor, trustee or guardian, if applicable?4
  • Who should inherit my assets at my death?
  • Who should inherit my assets at the death of the primary beneficiary, or if the primary beneficiary dies before me?
  • Should any of my assets pass to trusts for the benefit of individuals, rather than outright?
  • Would I like to incorporate charitable giving into my estate planning?

How do I create or update it?

In most cases, you will need to find a qualified estate planning attorney to draft or update your estate planning documents. You can find an attorney by seeking recommendations from your friends and family or from your trusted advisors, such as your financial advisor or accountant. Once you find an estate planning attorney, it will be helpful to prepare in advance of your first meeting by collecting copies of your current documents, and taking time to consider the questions listed above.[5]

Lastly, remember that while it is important to have an estate plan in place, it is equally important to regularly revisit your plan to ensure it continues to reflect your wishes. We recommend that you revisit your estate plan whenever there is a change in your circumstances or the circumstances of a loved one. Some examples include: marriage, divorce, birth, death, a change in personal finances or health, and moving to another state. Even if there have been no major changes in your life, it is best to revisit your plan every three to five years to ensure that it is in line with current law and still accurately reflects your wishes.[6]



[1] A detailed discussion on Revocable Trusts is beyond the scope of this White Paper. For more information on Revocable Trusts, see our other White Paper: Revocable Trusts.
[2] He receives the $250,000 jointly-owned account, plus half of the $500,000 individually-owned account.
[3] If Nate and Sara decide to sell the home, then they would split the proceeds from the sale.
[4] For a detailed discussion on the roles of executors, trustees and guardians, see our other White Paper: Choosing Executors, Trustees and Guardians.
[5] For a discussion of how to prepare for your first meeting, see Preparing to Meet with Your Estate Planning Attorney.
[6] For a more detailed discussion on what to consider when updating your estate plan, see Estate Plan Checkup Checklist.


Wealthspire Advisors LLC is a registered investment adviser and subsidiary company of NFP Corp.
This information should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The commentary provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Wealthspire Advisors cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use. © 2023 Wealthspire Advisors

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