A staggering 68% of Americans lack a valid will, leaving their loved ones vulnerable to unnecessary conflict, expenses, and legal complications. In fact, InvestmentNews cites LegalShield’s Survey that 58% of adults in the U.S. report experiencing or knowing someone who has faced familial conflict due to inadequate estate planning. Creating an estate plan is not just for the ultra-wealthy—it’s a critical step for anyone who wants to protect their family and control the legacy they leave behind.
Why Estate Planning Matters
Estate planning goes beyond money. It empowers you to:
- Make healthcare decisions through a living will or advance healthcare directive, ensuring your wishes are honored should you become incapacitated. Alarmingly, 18% of people don’t even know what an advance healthcare directive is!
- Provide instructions for guardianship of minor children and pets, ensuring they are cared for by the people you trust. Did you know 77% of pet owners designate a guardian for their furry companions?
- Manage digital and social media assets by naming a digital executor and outlining specific transfer instructions.
- Avoid lengthy and costly probate processes, which can drain up to 10% of an estate’s value and take months or even years to resolve.
- Leave a sealed, informal Letter of Intent or Family Letter couched with your formal documents telling your heirs what you want them to do with their inheritance. Sometimes called a Loving Will, it is an optional tool to leave a final personal note to your family.
Whether married with children or single with no dependents, an estate plan ensures you, not the State, decide what happens to your assets.
Planning for Legal or Financial Incapacity
Estate planning isn’t just about death—it’s also about ensuring care during incapacity. A living will and healthcare directive allow you to outline preferences for medical care, while a durable power of attorney enables trusted individuals to manage your financial affairs.
Disability income protection is a key component to have. It provides paychecks when your employer might stop paying. Some employers offer group short-term and long-term disability protection during open enrollment. It is typically the most cost-effective way to purchase LTC. However, the benefit from most workplace policies will be taxed, reducing your net take home payment. Also, such policies may or may not be continued beyond your retirement. You need to ask. Individual policies from private insurers that offer tax-free income will provide additional long-term security in case you are disabled. Benefits as part of a life insurance contract may also be efficient and less expensive.
The Risks of Dying Intestate
Dying intestate (without a will) often results in prolonged probate proceedings, higher costs, and unintended asset distributions. While this happens to regular folk there are the more sensational cases of famous people who died without a will.
These cases underscore the importance of proactive estate planning to minimize tax burdens and legal challenges.
Questions to Ask Yourself
To avoid pitfalls, consider these questions when planning or updating your estate:
- Is your life insurance adequate? During your working years, if you have young children and or are married, how would your family live without your income? Consider purchasing life insurance in an amount based on how long they would need to receive your income before they could live independently. For many, that term is ten to twenty-plus years.
- Are Your Beneficiary Designations Up to Date? Ensure retirement accounts, life insurance policies, and annuities align with your current circumstances and wishes.
- What About Digital Assets? Have you created a secure inventory of email accounts, cryptocurrency, and other digital property?
- Are Your Assets Properly Titled? Joint ownership and transfer-on-death (TOD) accounts simplify asset transfers but must align with your overall plan.
- Do You Have Guardians Named for Minor Children or Pets? Without clear instructions, the state will decide who cares for your loved ones.
- Is there someone you trust to be your Executor who will manage and oversee the distribution of your assets and other Estate matters?
- Is there another person, other than your Executor, whom you trust to manage any investments in your Estate?
Strategies to Maximize Your Family’s Inheritance
You’ve worked hard or possibly your ancestors did to build your wealth. Consider the following:
- Regular Updates to Your Plan - Review your estate plan after major life events such as births, deaths, divorces, the sale of real estate or a major windfall. This ensures your plan reflects your current wishes and is appropriate for your wealth.
- Gifting During Your Lifetime - Use the annual gift tax exclusion—$19,000 per recipient in 2025—to reduce your taxable estate while supporting loved ones.
- Charitable Giving - Donate to qualified charities through tools like charitable remainder trusts (CRTs) to lower your estate’s taxable amount while supporting meaningful causes.
- Trusts for Tax Efficiency and Control - Trusts offer privacy, bypass probate, and provide specific terms for asset distribution. Irrevocable trusts, for example, can shield large estates from significant taxes.
Income and Estate Taxes
Some invested assets such as 401(k) and IRAs, come with an income tax hit for the beneficiary. Will they still have adequate funds once income taxes are taken into account? Note that the income tax will be based on the inheriting recipient’s tax liability, not yours.
The federal estate tax applies to estates exceeding $13.61 million for individuals or $27.22 million for married couples starting in 2025. Rates can reach as high as 40%, and state-specific inheritance taxes may also apply. For example:
- Maryland and Nebraska: Impose state inheritance taxes.
- Texas and Florida: Have no state inheritance taxes.
Understanding your federal and state tax exposure is essential. Resources like the IRS’s Estate Tax FAQs can provide guidance, but consulting a financial planner ensures your strategy accounts for all variables.
Consider Costs Beyond Taxes
Taxes aren’t the only drain on inheritances. Legal fees, probate expenses, and unresolved debts can significantly reduce your estate’s value.
- Probate Costs: Can consume up to 10% of your estate.
- Creditors’ Claims: Must be resolved before assets are distributed.
Avoiding probate and managing debts proactively helps protect your heirs from financial surprises.
Taking the First Steps
Estate planning doesn’t have to be overwhelming. Start small:
- Add an in-case-of-emergency contact to your phone.
- Designate a trusted contact for financial accounts like brokerage or retirement plans.
- Re-evaluate and check your beneficiary designations. Communicate with potential executors to ensure they’re prepared for their role.
Conclusion: Planning for Peace of Mind
Estate planning is about more than money—it’s about making life easier for your family during a challenging time. Whether your estate is modest or substantial, taking the time now ensures your wishes will be honored and your loved ones are protected.
Start today by consulting resources like the American College of Trust and Estate Counsel and speaking with a financial planner to tailor your plan. Your future—and your family’s—deserves nothing less.
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James Brewer is the founder and CEO of Envision Wealth Planning in Chicago, Illinois. Brewer holds multiple certifications, including Certified Financial Planner, Accredited Investment Fiduciary and College Funding and Student Loan Advisor. He holds an MBA from the MIT Sloan School of Management.
G. Holland vanValkenburgh, CLU, CFP, RFP, ChFC is the founder and President of the VANCO Financial Group.