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AARP Smart Guide to Estate Planning
How to ensure that your final wishes are honored and your heirs receive what they’re entitled to
Want to be sure your loved ones inherit your property in a smooth and timely manner after you’re gone? Our in-depth guide can help you get that process started.
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Key takeaways
- Where to start: A key part of estate planning is making an up‑to‑date inventory of assets, debts, dependents and sentimental items, which can reduce confusion, conflict and delays during estate settlement.
- Organizing documents and decisions: Wills, powers of attorney, beneficiary designations and trusts are the instruments that outline your plans for your estate, and mistakes or gaps could override your intentions.
- Organize, share and keep your plan current: Easily understood records, digital access, family conversations and regular updates help loved ones act without added stress.
It’s easy to understand why so many people put off estate planning. It means facing two of our least favorite topics — death and taxes — along with legal paperwork and a host of decisions most of us would rather avoid.
At the same time, estate planning is crucial because it can help ensure that your wishes are honored and reduce strain on the people you love. If you haven’t started yet, this guide will walk you through the process. And if you already have a plan in place, you can use it as a checklist to confirm that everything is up to date and reflects what you want.
WHERE TO START
Determining all the assets you own is the first step for any estate plan.
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1. Take stock of your assets
You can’t plan what to leave behind unless you know what you have. “Without a clear inventory, estate planning becomes guesswork, not intentional decision-making,” says Patrick York, a certified financial planner and a partner at Premier Path Wealth Partners in Madison, New Jersey.
List everything you own that has financial value, and note the approximate worth of each item. Include items like your home, car, bank accounts, retirement funds, other investment accounts, life insurance policies and fine jewelry. This inventory should reflect what you own, where it’s held and what may need to be managed, transferred or sold during the estate settlement process.
While you’re at it, look for opportunities to consolidate accounts or organize them in one secure digital or physical place so your loved ones won’t need to track down information scattered across multiple institutions.
2. Identify items with sentimental value to your heirs
Think about which personal items your loved ones will want most, such as family photos, handwritten letters, your vinyl record collection and those serving dishes used every Thanksgiving. Listing these items and what you’d like to happen to them can ensure that meaningful parts of your life aren’t overlooked or argued over.
“Ambiguity about who gets what is the leading cause of family estrangement after a death,” says Mitchell Kraus, a certified financial planner at Capital Intelligence Associates in Santa Monica, California.
Along with other assets, you can identify and bequeath these items directly in a trust or a will, says Alison Schrag, an estate planning attorney and partner at Sherman Atlas Sylvester & Stamelman in New York City.
3. Make a list of your debts
Before your beneficiaries receive any assets, your debts must be paid off. Heirs “inherit what’s left after the estate settles its obligations,” says Jeff Judge, a certified financial planner and managing partner at Chesapeake Financial Planners in Forest Hill, Maryland. He notes that he once had a client “whose family was shocked to learn that a $40,000 credit card balance had to be resolved before any cash accounts could transfer.”
Write out your debts, such as mortgages, car loans, credit cards and personal loans, and keep them with your estate-planning documents. This list and the amounts will likely change over time, but maintaining and updating it can help streamline the estate-settlement process.
“Subscriptions and recurring payments are worth noting, too,” adds Judge. “Not because they’re a legal liability, but because someone has to cancel them, and they’ll keep charging until someone does.”
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4. Identify everyone who depends on you
Make a list of everyone who relies on you for financial, physical or other support, such as a spouse or partner, children, stepchildren or aging parents. This is especially important for those in your life who have special needs that require ongoing care and coordination.
“Think about who is likely to be affected by your passing, and consider whether financial resources might be allocated to those people to provide support and resources,” says Nina Pflumm Herndon, president of the Aging Life Care Association, a national nonprofit with a membership of professional experts in the field of aging and disability.
Remember to include any pets. Creating a care plan for your cherished companions can ensure they are well cared for.
5. Build a collaborative team of advisers
It’s crucial that the professionals involved in your planning — such as your lawyer, financial adviser and accountant — work in conjunction with one another, says attorney Lawrence J. Macklin, a certified public accountant (CPA) and the immediate past president of the National Association of Estate Planners & Councils. “You need a collaborative team to do an effective estate plan.”
For instance, he says, your attorney must understand your full financial picture. Yet there could be elements that only your CPA knows.
An aging life care manager could also be a valuable member of your team, Herndon says. This is a trained professional — often a nurse or social worker — who helps coordinate care, navigate the health system and guide families through complex decisions about aging and long-term care. You can locate one through the Aging Life Care Association’s website.
The costs and fee structures for these professionals may differ greatly. For example, an attorney or accountant may bill by the hour or charge a flat fee for a specific service. Financial advisers may charge an hourly rate (typically between $200 and $400 per hour), a project-based fee or a percentage of the assets they manage, such as 1 percent.
The rates for an aging life care manager vary as well, generally ranging between $150 to $300 an hour, according to Herndon.
6. Let loved ones know they can bring in support
Many people assume their children will step in if caregiving becomes necessary, Herndon says. Yet without a plan, the emotional, physical and logistical demands of caregiving can quickly overwhelm them. Being willing to accept outside help when the time comes can prevent burnout and preserve your loved ones’ quality of life.
If you’re open to bringing in professional help, let your loved ones know. “Give them guidelines, like ‘If you’re spending more than 10 hours a week on my care, please get a professional involved if we can afford it,’ ” Herndon says.
Being proactive with this guidance can help your loved ones avoid second-guessing themselves and feeling guilty about bringing in support down the line.
ORGANIZING DOCUMENTS AND DECISIONS
Documents such as wills, trusts, powers of attorney and advanced directives need to be in place well before you pass away.
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7. Create an advance directive
An advance directive “outlines details such as what kinds of medical treatments or life-support measures you would want if you were seriously ill or incapacitated and cannot speak for yourself,” says Macklin.
It can include details on life-support measures you want and don’t want, such as resuscitation, ventilator or tube feeding, and your desires for pain management. Every state has different laws and requirements, so it’s important to use forms recognized by your state, such as those provided by AARP. It’s important to note that these forms can be nuanced, Macklin says; a qualified attorney could offer valuable assistance with them.
8. Expand beyond the standard advance directive
Thorough end-of-life planning considers other areas beyond life support, resuscitation and pain management. Put some deep thought into what would give you a sense of comfort toward the end of your life, says Herndon. Is it important to spend your final days at home and not in a hospital? Would you want religious or spiritual support? If possible, would you like time outside in a garden or another meaningful place?
“Define what ‘a good death’ looks like to you,” she says. The more clearly you outline your wishes now, the easier it will be for your loved ones to carry them out later. How can you expect your kids or anyone else to know what you’d like if you haven’t figured it out for yourself? “It’s important to get really clear for yourself,” Herndon says.
You might find it helpful to talk it through with a neutral party, such as a professional or a trusted relative, she adds.
9. Name a health care power of attorney
A durable power of attorney for health care names your health care proxy or health care surrogate, a trusted person to make medical decisions on your behalf, usually if you are incapacitated.
Who to name is “unique to every person’s individual situation,” says York, adding that it’s best to have someone who’s familiar with the health care system and “comfortable making tough decisions in tough times.”
Talk with them ahead of time so they understand your wishes and feel comfortable taking on the responsibility. “You certainly want to make whoever is in the document aware, so they’re not surprised,” York adds. It’s also important to name at least one backup in case your primary choice is unavailable.
10. Establish a financial power of attorney
A financial power of attorney (POA) allows a trusted person to manage your money matters — for example, paying your mortgage or credit card bills if you are unable to do so yourself.
“If you become mentally or physically incapacitated, you would have someone there to step into your shoes,” says York.
Your decision will depend on your specific situation, yet York and Macklin both note that a durable power of attorney is usually preferred over a springing one. A durable POA takes effect as soon as it is signed and remains in place if you later become incapacitated, allowing your chosen agent to step in right away if needed.
It’s “effective immediately, easier for institutions to accept, and ready when needed,” says Judge. The tradeoff is that [your representative] has legal authority from day one, which requires genuine trust in that person.
A springing POA “springs” into effect once a specific event has occurred, such as a physician determining that you lack the capacity to make decisions on your own. With a springing POA, “the principal retains control until incapacity, which appeals to those uncomfortable granting early authority,” Judge explains. The drawback is possible delays when you need someone to step in quickly, such as during a medical crisis.
11. Ensure you have the correct beneficiaries on financial accounts
Review the beneficiary designations on your retirement accounts, investment accounts, bank accounts and life insurance policies. Update anything outdated.
In general, you can designate beneficiaries for “payable on death” (POD) bank accounts, such as checking, savings and certificates of deposit (CDs), or “transfer on death” (TOD) investment accounts, such as stocks, bonds and mutual funds. Some states allow you to create a TOD for assets such as real estate or a vehicle.
“Many people don’t realize that beneficiary designations override the will,” says York. That means those assets will transfer automatically to the person listed on the account, regardless of what your will says.
The consequences of outdated designations can be significant, cautions Kevin Higginbotham, managing partner and senior wealth management adviser at OpenArc Corporate Advisory in Atlanta. For instance, you can accidentally leave more assets to one child than another, unintentionally cut out a loved one entirely, or have your hard-earned money go to an unintended recipient, such as an ex-spouse. “Some states have automatic revocation statutes that void a former spouse’s designation upon divorce, but this is not universal,” cautions Judge.
While reviewing, also make sure each account has a secondary beneficiary in case your primary beneficiary dies before you do.
12. Create your will
A will typically determines who inherits assets that don’t pass to a beneficiary automatically or go to a joint owner. It also outlines who will manage your estate and care for any dependents.
Without one, you’re considered to have died “intestate,” meaning state law will determine how assets are distributed following “a rigid one-size-fits-all formula” that may not reflect your wishes, says Schrag.
“In that scenario, someone’s personal wishes could effectively be bypassed,” she says. “Unintended heirs may receive all assets, while close friends, partners or loved ones may receive nothing.”
Tempted to use an online, do-it-yourself form? Proceed with caution. Those forms may not comply with state law. And if a will isn’t executed properly, such as not meeting your state’s witnessing requirements, it may ultimately be considered invalid.
13. Consider who would be an ideal executor
Your executor, also known as a personal representative, is responsible for carrying out the wishes outlined in your will. The role may involve locating and inventorying assets, distributing property and handling administrative tasks.
Because the job can be complex, “you want someone who’s detailed, organized and who can communicate really well,” says Higginbotham. As with other crucial roles, like a financial or health care power of attorney, make sure they are comfortable taking on what can be a demanding responsibility. Also, make sure to have a backup in case your first choice is unable or unwilling to serve.
14. Get a basic understanding of your state’s probate laws
You don’t need to understand all aspects of probate. Because the costs and complexities vary considerably by state, knowing the basics of your locality’s process and factoring that into your planning can save your heirs significant time, money and stress.
Probate is the formal court-supervised review and approval process for assets that flow through your will because they are owned solely by you without a beneficiary designation. It’s a necessary step to have the will validated and the named executor appointed, says Schrag. And, depending on the state, it “can be lengthy and expensive.”
In fact, Kraus says fees can consume 3 to 7 percent of an estate, and the process can drag on for years. During that time, your family may have limited access to those funds to pay bills. And there’s an emotional toll as well. “It’s public, adversarial and slow at a moment when people most need closure,” Kraus says.
15. Determine whether a trust makes sense
Many people assume trusts are only for the wealthy, but that’s a misconception, says Higginbotham. In reality, trusts can benefit many people in varied situations by helping them avoid probate, keep affairs private and make assets easier to manage.
While they may not make sense for everyone, it’s important to understand how wills and trusts work, and to determine what’s right for you. As with other estate-planning steps, professional advice can be invaluable.
In brief, a trust is a legal entity that holds whatever property and assets you decide to place in it. A trust offers more privacy than a will and greater control over whom you transfer your assets to.
If you opt for a trust, don’t overlook this critical follow-up step: “After the legal documents are drafted, accounts and assets still need to be retitled and aligned with what the attorney created,” Higginbotham says. That means the names on the accounts and property need to be changed from the person’s name to the trust’s name. “If that follow-through doesn’t happen, the plan may not work the way it was intended.”
16. Take stock of your life insurance needs
In general, life insurance proceeds are income tax–free and can serve a wide range of purposes.
“Life insurance is one of the most flexible legacy tools available,” says Kraus. “It can replace income for a surviving spouse, create liquidity to pay estate taxes without forcing asset sales, equalize inheritances among children or fund charitable giving.”
If you have an existing policy, see if your coverage still fits your family or financial situation. If it doesn’t, you may need to update beneficiaries, increase or reduce coverage, adjust premiums, or even switch or convert your policy so it better reflects your current finances and family situation.
17. Plan for who will inherit your home
A home is one of the most emotional assets in an estate, notes York.
“The question isn’t just who should inherit it,” he says. “It’s about who wants to own it, maintain it, and how the rest of the estate can be structured to create fairness across beneficiaries.”
Think realistically about the ongoing cost of maintaining the property, including taxes, insurance and upkeep, says Higginbotham. Without clear direction from you, heightened feelings and differing desires about what to do with the home can lead to conflict if you’ve named multiple heirs. Be explicit in your estate-planning documents about what you want done with the home, whether it’s leaving it to one person, selling it and dividing the proceeds or some other arrangement.
It’s also important to understand the financial implications for heirs who want to sell the home. When they inherit your property, its value for tax purposes is usually reset to what it was worth when you died, says Kraus. If heirs sell the home at or near that value, little or no capital gains tax is owed. However, any appreciation that occurs after the date of death would be subject to capital gains tax upon sale.
“If you give your home to children while you’re still alive, they inherit your original — generally lower — cost basis, which can create a significant tax bill if they sell,” Kraus explains.
A reverse mortgage introduces additional complications. Heirs typically have a limited window to repay the loan and keep the home, sell it and pay off the balance, or allow the lender to take the property if the loan exceeds the home’s value. Heirs are not personally liable if the outstanding loan balance exceeds the home’s value, says Judge.
18. Factor in long-term health care needs
Without a plan in place, your later-life health care needs, such as assisted living or extended home care, can quickly drain the assets in your estate.
Herndon’s advice: When you’re doing estate planning, have your financial adviser work up different scenarios based on what might happen to you as you age. Higginbotham adds that the best approach is to plan early, before health issues arise. “That often means exploring long-term care insurance or a life insurance policy that includes a long-term care rider,” he says. “Putting a plan in place early can make coverage more affordable and give you more options down the road.”
19. Think through coverage of final costs
Take some time to consider how you or your heirs will cover expenses such as a funeral, cremation or burial plot. (You can prepay for items like these.)
“Do you want to be buried and need to buy a burial plot? Is it a simple cremation? Perhaps you want a green or natural burial? Will your family be hosting a gathering somewhere?” says Elliott Appel, a certified financial planner and the founder of Kindness Financial Planning in Madison, Wisconsin. “Those costs vary, so while someone may spend less than $1,000, another person might spend over $20,000.”
While you’re giving it some thought, also consider what you’d like your obituary to say, and if you’d like to write it yourself.
20. Plan for taxes
Many people wrongly assume that because they fall below the federal estate tax exemption — $15 million per individual or $30 million for couples in 2026 — they don’t have a tax issue.
“What is frequently overlooked is that there are state estate taxes in some states and inheritance taxes in others,” Schrag says. If your estate exceeds your state’s limit, you may owe taxes even if you’re well under the federal threshold.
Tax responsibilities don’t end at death, either. “Executors are still required to file the person’s final income tax return, and in many cases the estate itself must file a separate return for income earned after death,” says Higginbotham. “These obligations often catch families off guard and can delay distributions.”
21. Decide whether to include charitable giving
If supporting a cause after your death matters to you, speaking with a professional can make a tremendous difference.
“I’d strongly recommend determining your goals with charitable giving at the end of life and working with an attorney to make it as tax-efficient as possible,” says Appel. And your donation choice can also make it tax-efficient for the charity, too.
For instance, IRAs are usually better than other assets for a charity to receive.
“They don’t pay income taxes on the funds they receive,” Appel adds. “Whereas an individual would pay ordinary income tax on any withdrawals, and for most beneficiaries, funds need to be distributed within 10 years.”
ORGANIZE, SHARE AND KEEP YOUR PLAN CURRENT
Make sure someone you trust can access the passwords to all your digital accounts after you’re gone.
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22. Ensure trusted people have access to your digital passwords
In some states, an executor may have the right to access your digital assets. But as a general rule, include explicit authority over digital assets and online accounts in a financial power of attorney. Also, make sure key account information and passwords for bank and investment accounts, credit cards and any other financial services are stored in one secure, easily accessible place, such as a secure digital vault, with access information given to a trusted person, such as a spouse or an executor.
And heed this warning from Judge: Never put passwords in the will itself, as they become public record in probate.
23. Consider your social media, email accounts and digital photos
If you use platforms like Facebook, Instagram, Google or Apple, think through what you’d want to happen to your photos, social media accounts and other digital assets upon your death. For instance, on Facebook, you can opt for actions such as having the account deleted upon your death or “memorialized,” where it remains online and can be managed by a “legacy contact,” but with limited features. With Apple, you can add a legacy contact as well to access meaningful material, such as photos.
Judge recommends being proactive. “Go into your account settings on each platform now and make the designation,” he says.
24. List key contacts and account information
Create “a simple family road map that lists key contacts, account locations, insurance policies, estate-planning documents and the locations of originals,” says Kraus.
Include the names, phone numbers and email addresses for important professionals in your life, such as your attorney, financial adviser, accountant and insurance agent.
Like other organizational steps, this will save your executor and loved ones from having to track down basic information during what can be a harried and stressful time.
25. Store all documents in a safe, accessible place
Once you’ve pulled all your documents together, store them in a secure location. This can be a digital vault you own or one provided by a professional adviser, such as an estate attorney. It could also be a fireproof safe at home. Make sure a trusted person knows where the information is and also has the password, code or key to access it.
“The goal is not just organization,” Kraus says. “It is reducing confusion at exactly the moment when the family is least equipped to deal with it.”
One place to avoid: a safe deposit box. Do not store any original documents there, as your heirs may need to petition the court for access, which could cause unnecessary delays at an already difficult time.
26. Share your plan and intentions
“It can be a hard thing, but you need to talk to your family about your estate plan,” says Macklin. Your open communication now can help to prevent family rifts later.
As he points out, it can be challenging for a plan to come across as equal and fair, even when you’re aiming for that. “Let the kids in on what’s happening,” he says. Have an open conversation, explain your thinking and be open to feedback.
Families who openly discuss topics like values and intentions before a death occurs “experience dramatically less conflict and grief in the aftermath,” Kraus says. “When adult children already understand the ‘why’ behind decisions, they grieve their loss rather than fight about money. That’s the real gift of good planning.”
Additionally, consider taking your estate-planning discussions a step further by bringing your advisers and your loved ones together.
“One of the most helpful steps is to have your heirs meet your financial adviser, CPA and estate attorney while everyone is healthy and decisions are calm,” says Kraus. “That does not mean giving up privacy or control, but it does create familiarity and trust before someone is grieving, or trying to find documents under pressure.”
27. Keep your plan updated
Finally, remember that estate planning isn’t a one-time task, says Schrag. Take time to review your plan after major life events, such as marriage, divorce, a move or the birth of a grandchild.
Not only do personal circumstances change, so do state and federal laws, which include estate tax laws, she notes. That’s yet another reason to look through your paperwork every few years, even if you haven’t had any significant life changes.
And if you need more motivation, here it is: “It is genuinely heartbreaking when a surviving spouse learns an account will be going to an ex, potentially from decades earlier, just because the participant never updated the form after the divorce,” says Peter Bo Rappmund, a certified financial planner with Counterpoint in Santa Fe, New Mexico. By reviewing your plan, you can prevent your hard-earned assets from going somewhere you wouldn’t have wanted.
The key takeaways were created with the assistance of generative AI. An AARP editor reviewed and refined the content for accuracy and clarity.
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