Estate Planning 101: Wills, Trusts, and Protecting Your Legacy

Why estate planning is not optional

The single most common estate-planning mistake is doing nothing. Roughly two-thirds of American adults do not have a will. When someone dies without one, state intestacy rules dictate who inherits — and those rules rarely match what the deceased would have wanted. A surviving spouse may share an estate with estranged siblings. Minor children may be placed in the custody of a relative the parents would never have chosen. The decedent's wishes never get a vote.

If you are an adult with any assets, dependents, or digital presence, you need a basic estate plan. This guide covers what every adult should have in place, regardless of net worth.

The four essential documents

1. Last will and testament. Your will directs who inherits your probate property, names a guardian for minor children, and names an executor to administer the estate. A will does not avoid probate, but it makes probate orderly and predictable. Without a will, the court appoints an administrator and applies the state's intestacy statute.

2. Revocable living trust. A trust is a separate legal entity that holds title to your assets. You can serve as trustee during your lifetime (keeping full control), name a successor trustee to take over if you become incapacitated or die, and direct how the trust assets are distributed. Trusts avoid probate entirely for the assets they hold, which means faster distribution, lower cost, and complete privacy. Trusts are especially valuable in California, New York, Florida, Illinois, and other states where probate is expensive.

3. Durable power of attorney for finances. This document appoints an agent to handle your financial affairs if you become incapacitated. Without one, your family may have to petition a court for conservatorship — an expensive and time-consuming process that strips you of dignity.

4. Advance healthcare directive (living will + healthcare proxy). This document names an agent to make medical decisions if you cannot and specifies your wishes regarding life-sustaining treatment. Every adult over 18 should have one. The alternative — family members guessing what you would want during a medical crisis — is exactly the scenario this document prevents.

What most people get wrong

Failing to fund the trust. A trust does nothing until you actually transfer assets into it. People pay $3,000 to draft a trust, then forget to retitle their house and brokerage accounts. The trust sits empty. Probate still happens. The attorney did their job; the client did not.

Naming the wrong executor. Choose someone organized, trustworthy, and willing to do the work. Geographic proximity matters less than you think; a competent executor in another state can still handle most duties by mail and phone. Co-executors are usually a mistake because they create deadlock.

Outdated beneficiary designations. Life insurance, retirement accounts, and transfer-on-death brokerage registrations pass outside your will. A 1989 IRA beneficiary designation will override your 2026 will every time. Review your designations annually, especially after major life events.

DIY wills. Online will services have improved, but they are not a substitute for a lawyer when the situation is anything other than the simplest. Blended families, special-needs dependents, business interests, real estate in multiple states, and significant tax exposure all require professional drafting.

Trusts vs. wills — when to use which

Wills are mandatory for any estate that includes minor children (you cannot name a guardian in a trust) and for directing assets that are not held in trust. Trusts are preferable when:

• You own real estate in multiple states
• You want to avoid probate entirely
• You have a blended family and want to provide for children from a prior marriage while preserving assets for a current spouse
• You want to control how beneficiaries receive their inheritance (e.g., staged distributions at ages 25, 30, and 35)
• You have privacy concerns (wills are public record in every state; trusts are not)
• You have a taxable estate that will face federal estate tax

Most well-drafted plans use both: a will as a safety net, with a living trust holding the major assets.

Federal estate tax in 2026

The federal estate and gift tax exemption for 2026 is approximately $13.99 million per individual ($27.98 million for married couples). Above that threshold, the top federal estate tax rate is 40 percent. Most estates will never trigger this — but if you live in a high-cost-of-living state, own significant real estate, or hold a successful business, your estate may approach or exceed the exemption even without realizing it.

State estate taxes are a separate and often more aggressive issue. States like Massachusetts, Oregon, Washington, New York, Illinois, and Rhode Island have their own estate tax with much lower thresholds (often $1 million to $5 million). A well-drafted plan coordinates federal and state exposure.

Common estate-planning mistakes to avoid

Joint ownership without understanding. Adding a child as joint owner on your house avoids probate at your death but creates new problems: the child's creditors can reach the asset, the child's spouse has a claim in divorce, and the step-up in basis is lost. Joint ownership is sometimes the right tool — but usually only when used deliberately with a qualified estate-planning attorney.

Outdated powers of attorney. A 2005 power of attorney is often rejected by banks in 2026. Most banks require their own forms or a recent POA that references their internal requirements. Update your POA every five years.

No digital estate plan. Email, social media, cryptocurrency, cloud storage, and online subscriptions all need direction. Without a plan, your family cannot access your accounts, and your digital life persists as an unmanaged liability.

What to do this week

If you have any of the following — minor children, significant assets, real estate, a family business, or strong feelings about how your estate should be distributed — schedule a meeting with an estate-planning attorney this week. The cost of a basic plan ranges from $1,500 to $5,000 depending on complexity. The cost of doing nothing is usually measured in tens of thousands of dollars of unnecessary taxes, legal fees, and family conflict.

For most adults, an hour with a competent attorney will produce a complete basic plan. The conversation is not morbid; it is one of the most thoughtful things you will ever do for the people you love.