Estate planning basics — wills and beneficiaries

Most people put this off because it sounds like something wealthy people do with lawyers and trusts and complicated family situations. It isn’t. If you have a bank account, a 401(k), or a child, you have an estate — and without the right paperwork, you’ve handed every decision about it to state law and whoever shows up to probate court.

Every adult with any assets or any children needs four documents. The cost ranges from $0 (online tools, simple situations) to a few thousand dollars (complex estates with a lawyer). The cost of not doing it is borne by your family at the worst possible moment.

The four documents

1. A will

A will tells a probate court:

• Who gets what (or what percentage of your residuary estate)
• Who the executor is — the person responsible for carrying out your wishes and settling the estate
• Who the guardian is for minor children — arguably the single most important clause for parents

Without a will, your state’s intestacy laws decide these things. Intestacy usually sends money to spouse and children first, but the split varies by state and can involve relatives you’d prefer to skip. For minor children, a court appoints a guardian — not necessarily whom you would have chosen.

A simple will for a straightforward estate can be drafted through online services (Trust & Will, Nolo, LegalZoom, Rocket Lawyer) for $100–300. For blended families, business ownership, or assets over the estate-tax exemption, hire a lawyer.

2. Durable power of attorney (financial)

This authorizes someone to handle your financial affairs if you become incapacitated. Pay bills, file taxes, manage accounts — the agent you name can act on your behalf.

“Durable” is the critical word. A standard POA ends when you become incapacitated. A durable POA continues specifically into that scenario — which is the entire scenario you’re planning for.

Without one, if you’re hospitalized long-term, your family may have to go to court to get a conservatorship — expensive, public, and slow.

3. Healthcare power of attorney (healthcare proxy)

Names someone to make medical decisions when you can’t. Pairs with:

4. Living will / advance directive

States your preferences for end-of-life care: what treatments you do and don’t want if you’re permanently incapacitated or terminally ill. DNR orders, ventilator decisions, artificial nutrition — the forms vary by state but the principles don’t.

Many states combine healthcare POA and living will into a single document. Free state-specific versions are available from AARP, CaringInfo, and most hospital systems.

The beneficiary-form rule that overrides your will

This is the part most people don’t know, and it matters more than any other single thing in this article: beneficiary designations override your will.

Retirement accounts (401(k), IRA, Roth IRA), life insurance policies, and transfer-on-death brokerage accounts all have beneficiary forms. Whatever name is on the form is who inherits the asset, regardless of what your will says.

Common disaster scenario: someone gets divorced, updates their will, and forgets to update the 401(k) beneficiary. Ex-spouse still inherits the 401(k). No court will override the beneficiary form.

The fix is 30 minutes of work:

1. Log into every financial account you own.
2. Find the beneficiary section.
3. Name a primary beneficiary (usually spouse or trust) and a contingent beneficiary (kids, or “per stirpes” to pass through to their descendants).
4. Review after every major life event — marriage, divorce, death, birth of child.

Accounts that use beneficiary forms:

• 401(k), 403(b), 457, TSP, and all other workplace retirement plans
• Traditional, Roth, SEP, and SIMPLE IRAs
• Life insurance policies
• Annuities
• HSA accounts
• Payable-on-death (POD) bank accounts
• Transfer-on-death (TOD) brokerage accounts

These assets skip probate entirely if beneficiaries are named. That’s a good thing — probate is public, slow, and sometimes expensive.

Probate, and why avoiding it is often worth the effort

When someone dies, their assets titled only in their own name go through probate — a court process to validate the will, pay debts, and distribute what’s left. Probate takes 6 months to 2 years depending on state and complexity, costs 3–8% of estate value in some states, and is a public proceeding.

Ways assets avoid probate:

• Beneficiary designations (above)
• Joint ownership with right of survivorship (most common between spouses)
• Transfer-on-death deeds for real estate (available in most states)
• Living trusts (below)

For most middle-class households, naming beneficiaries on every account and holding property jointly with a spouse handles 90% of the probate problem.

When a living trust makes sense

A revocable living trust is a more elaborate structure where you transfer assets into a trust during your life. You remain the trustee and beneficiary, so nothing changes day-to-day, but on your death the assets pass to your named successor beneficiaries without probate.

Living trusts are worth the setup cost (typically $1,000–3,000 with a lawyer) if:

• You own real estate in multiple states (avoids multi-state probate)
• You have a complex family situation (blended family, minor children inheriting significant assets, special-needs beneficiary)
• Your state’s probate process is particularly bad (California, Florida)
• You want privacy — trusts aren’t public; wills that go through probate are

For a simple estate in a state with reasonable probate, a will plus beneficiary forms is often enough.

Guardianship for kids

If you have minor children, the guardianship clause in your will is the single most important piece of estate planning paperwork you will ever do. It names the person who raises your children if both parents die.

Talk to the prospective guardian before naming them. Make sure they’re willing. Consider separately naming a financial guardian (or trustee) — the person who manages any money inherited by the kids — who may or may not be the same person as the physical guardian.

Leaving a large inheritance outright to minor children is a disaster in slow motion. Put it in a trust that stages distributions (e.g. one-third at 25, one-third at 30, remainder at 35) with a trustee you trust to make reasonable decisions in the interim.

The minimum viable estate plan

If you do nothing else this week:

1. Update beneficiaries on every 401(k), IRA, and life insurance policy. Free and takes an hour.
2. Draft a basic will through an online service. $100–300, one evening.
3. Fill out healthcare directive forms for your state. Free from most hospitals or AARP.
4. Tell your executor, guardian, and POA agent what you’re doing. Nobody should learn they have a job from a lawyer after you’re gone.
5. Document where things are. A one-page “in case of emergency” note listing account institutions, beneficiaries, and where to find the paperwork is worth more than most $5,000 estate plans.

For more complex situations — business ownership, non-citizen spouse, estate over the federal exemption (~$13.6M per person in 2024, halving in 2026 unless Congress acts), special-needs beneficiaries — hire a lawyer. Don’t DIY beyond your confidence level.

Further reading

• Net Worth calculator — survey what’s actually in the estate and needs a beneficiary
• Retirement / FIRE calculator — the retirement accounts that beneficiary forms govern
• What is term life insurance? — the other half of protecting dependents
• AARP: Advance directives and living wills — state-specific templates