Estate planning

Estate planning answers three questions: who gets your property, who is in charge of the process, and who acts for you if you cannot act for yourself. For most households the last question arrives first, which is why a complete plan includes documents for incapacity as well as death.

The federal estate tax now touches only a small fraction of families; in 2026 the first $15 million per person passes free of it. For everyone else, the real work of estate planning is not tax avoidance. It is making sure the right names are on the right forms, keeping documents current as life changes, and sparing your family months of court paperwork and guesswork at a hard time.

None of this requires wealth. A renter with a checking account, a car, and three adult children has exactly the same failure modes as a millionaire: an outdated beneficiary form, an account nobody can find, a family argument nobody settled in writing.

The documents most plans need#

The incapacity documents do heavy lifting in later life. A power of attorney determines whether your family can pay your bills without a court-appointed guardian, and advance directives settle medical decisions before a crisis. Funeral wishes belong in the letter of instruction or a separate document rather than the will, which is often not read until after the funeral; funeral planning covers the options.

What a will does, and what happens without one#

A will controls only probate assets: property titled in your name alone with no beneficiary designation. Within that domain it does two jobs, naming the executor who will settle your affairs and directing who inherits. Die without one (called dying intestate) and state law supplies both answers: a court picks the administrator, and a statutory formula divides property among your closest relatives. The formula has no room for an unmarried partner, a stepchild you raised, a charity, or the reality that one child has been your caregiver for a decade. Family caregiving arrangements in particular tend to go unrecognized unless they are written down.

Wills must meet state formalities, typically a signed writing witnessed by two adults. A botched signing is a common way plans fail, which is one argument for professional help even when the plan itself is simple.

Probate: what it is and what it costs#

Probate is the court process that proves a will is valid, appoints the executor, and supervises paying debts and distributing what is left ¹. The executor inventories assets, notifies creditors and heirs, files tax returns, and accounts to the court. An average estate takes six to nine months to complete the process ². An especially large estate, an heir who contests, or a beneficiary nobody can find stretches the timeline ³.

Costs come in layers: court filing fees, which range from about $50 to $1,200 depending on the state; executor commissions, which state laws often cap around 3 to 5 percent of the estate; and attorney fees, billed hourly or at a flat rate, with some states allowing a percentage of the estate ³. The estate itself pays these costs, which shrinks inheritances but spares the family out-of-pocket bills ³. Probate files are also public records, which some families mind and most never notice.

Two correctives to the sales pitches: many states offer expedited or simplified procedures for small or simple estates, and the American Bar Association notes that most probates are neither expensive nor prolonged, contrary to the marketing of some living-trust vendors ¹. Probate is a real cost and a real delay, but it is a knowable one.

Sources for this section: [1] [2] [3]

Beneficiary designations outrank the will#

Retirement accounts, life insurance, annuities, and any bank or brokerage account with a payable-on-death or transfer-on-death registration pass by contract to whoever is named on the beneficiary form, no matter what the will says. A 401(k) left to an ex-spouse on a form signed in 1995 goes to the ex-spouse, even if the will, the family, and common sense all point elsewhere. For many retirees these accounts hold most of their wealth, which means the beneficiary forms, not the will, are the real estate plan. Use the beneficiary review to inventory each institution's current record, backups, restrictions, and confirmation.

Caution: After any marriage, divorce, death, or falling-out, check the beneficiary forms on every IRA, employer plan, and insurance policy, and name contingent beneficiaries as backups. Custodians pay the form on file. Courts almost never rescue an outdated designation.

Beneficiary choices also carry tax consequences. Most non-spouse heirs must empty inherited retirement accounts within 10 years under the rules described in required minimum distributions, which can concentrate taxable income into an heir's peak earning years; inherited Roth IRA money follows the same clock but comes out tax-free.

The home itself can pass by designation in much of the country. As of 2025, 32 U.S. jurisdictions allow a transfer-on-death deed, which the owner signs, notarizes, and records in the local land records during life; it names a beneficiary for the property, takes effect only at death, and stays revocable until then ⁹. The Uniform Law Commission, which wrote the model law, sees these deeds as a fit for small estates whose main asset is the home, and as a safer route than retitling the house jointly with an adult child, a step that takes effect immediately, cannot be reversed without the child's consent, and can expose the home to the child's creditors ⁹.

Sources for this section: [9]

Revocable living trusts#

A revocable living trust is a container you create during life, naming yourself trustee and retitling assets, such as the house and brokerage accounts, into the trust's name. You keep full control and can amend or revoke it anytime. At your death, a successor trustee distributes the assets under the trust's terms without probate; at incapacity, the successor can step in without a guardianship proceeding.

The honest tradeoffs: a trust costs more to create than a will, and it only avoids probate for assets actually retitled into it, so an unfunded trust accomplishes nothing except paying for two documents (a "pour-over" will catches strays, but through probate). A revocable trust does not reduce income taxes or estate taxes, and it does not shelter assets from nursing home costs or the Medicaid look-back rules. Trusts earn their keep for people who own property in more than one state, want privacy, expect incapacity to be managed within the family, or live in states where probate is genuinely slow and expensive.

Federal estate and gift taxes in 2026#

The July 2025 tax law (the One Big Beautiful Bill Act) set the federal estate and gift tax exemption at $15 million per person, or $30 million for a married couple, effective January 1, 2026, with inflation indexing beginning in 2027 ⁴. Unlike the previous exemption, which was scheduled to fall by roughly half, this one is permanent unless Congress acts again ⁵. Estates above the line pay up to 40 percent on the excess.

A surviving spouse can inherit unlimited amounts tax-free and can also claim the deceased spouse's unused exemption, called portability, but only if the executor files an estate tax return (Form 706) to make the election, even when no tax is due ⁶. The return is normally due nine months after the death, and an estate below the filing threshold can still make a late portability election on a return filed within five years of the death ⁶. The tax-free spousal inheritance generally assumes the survivor is a U.S. citizen; property left to a non-citizen spouse qualifies for the deduction only if it passes to or is placed in a qualified domestic trust ¹⁰. Several states levy their own estate or inheritance taxes with far lower thresholds: as of 2025, estate taxes exist in twelve states plus the District of Columbia, five states tax inheritances at rates that depend on how closely the heir was related to the deceased, Maryland collects both, and exemptions run as low as $1 million in Oregon ¹¹. State law deserves a look even when federal tax clearly does not apply.

Lifetime giving has its own allowance. In 2026 the annual gift tax exclusion is $19,000 per recipient, or $38,000 from a married couple, with no limit on the number of recipients ⁴. Amounts paid directly to a school for tuition or to a provider for medical care do not count as gifts at all ⁴. Gifts beyond the exclusion rarely trigger tax; they simply require filing Form 709 and reduce the $15 million lifetime exemption ⁴.

Sources for this section: [4] [5] [6] [10] [11]

Step-up in basis#

Inherited assets receive a new cost basis equal to fair market value at the owner's death, the step-up in basis ⁷. Stock bought for $20,000 that is worth $100,000 when you die passes to your heir with a $100,000 basis; the $80,000 of gain is never taxed to anyone. The same applies to a long-held house, which interacts with the home sale rules covered in downsizing.

The step-up changes giving decisions. Handing that same stock to a child during your lifetime transfers your original $20,000 basis along with it, so the child pays capital gains tax on the full gain when selling. Holding appreciated assets until death and giving cash during life is often the better sequence for heirs, while selling appreciated assets yourself in a low-income year can use the 0 percent capital gains bracket described in taxes in retirement. Which combination wins depends on the numbers, and this is a place where an hour of professional advice tends to pay for itself.

Sources for this section: [7]

Digital assets#

Email, photo libraries, financial logins, subscription accounts, and cryptocurrency need their own plan, because passwords die with their owner and federal privacy law limits what companies may hand over. Nearly every state has adopted a version of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which lets your executor or agent manage digital property, but access to the content of communications generally requires your documented consent ⁸. Practical steps: keep an inventory of accounts, use each major provider's legacy-contact or inactive-account tool where offered, give your power of attorney and will explicit digital-asset authority, and store passwords in a manager with a designated emergency contact rather than in the will itself, which becomes a public document in probate. The digital legacy plan turns those steps into an account, preservation, first-days, and lawful-access checklist.

Sources for this section: [8]

Keeping the plan current#

Documents drift out of date faster than people expect. The standard triggers for a review: marriage or remarriage, divorce, the death of a spouse or named beneficiary, a new grandchild, a move to another state (whose forms and property rules differ), a significant change in assets, and the retirement of the lawyer or bank named in old documents. After a spouse dies, updating the survivor's own documents is an easy task to defer and an expensive one to forget; grief and loss includes a practical checklist for that period. Absent any event, rereading the documents every three to five years catches quiet problems, and telling your executor and agents where everything is stored turns a good plan into a usable one.

RetiredWiki. (2026, July 18). Estate planning. https://retiredwiki.com/article/estate-planning