Estate Planning Essentials: Wills, Trusts, and Powers of Attorney

Why Estate Planning Matters

Estate planning is not just for the wealthy. It is for anyone who wants a say in what happens to their assets, their dependents, and their medical care if they become unable to make decisions for themselves. Without an estate plan, those decisions fall to the state — and the state's default rules almost certainly do not match your wishes.

When someone dies without a will or trust, their estate is distributed according to intestacy laws, which vary by state. In Ohio, for example, intestacy rules may divide assets between a surviving spouse and children in proportions you would not have chosen. If you have minor children and no will, a court will appoint a guardian for them — and it may not be the person you would have selected.

The probate process for an intestate estate (one without a will) tends to be longer, more expensive, and more stressful for your family. There is no executor you chose to guide the process, no instructions on who receives what, and no mechanism to minimize the burden on your loved ones. Estate planning solves all of this, and the core documents are neither complicated nor prohibitively expensive to set up.

Core Estate Planning Documents at a Glance

Wills: The Foundation of Your Estate Plan

A last will and testament is the most fundamental estate planning document. It allows you to name an executor — the person responsible for managing your estate through the probate process — and to specify exactly how your assets should be distributed after your death.

If you have minor children, a will is where you name a guardian. This alone is reason enough for every parent to have a will. Without one, a court decides who raises your children, and the process can involve family disputes and legal proceedings that serve no one's interests, least of all the children's.

A will covers your "probate assets," which are assets titled solely in your name without a beneficiary designation. This includes things like personal property, individually titled bank accounts without a payable-on-death designation, and real estate held solely in your name. It does not cover assets with named beneficiaries (like IRAs and life insurance) or jointly titled assets, which pass by their own rules regardless of what the will says.

One limitation of a will is that it must go through probate — a court-supervised process that validates the will, settles debts, and distributes assets. Probate is public, can take several months to over a year, and involves court fees and often attorney fees. For many families, probate is manageable, but for larger or more complex estates, or for people who value privacy, a trust may be a better tool.

Trusts: Flexibility and Probate Avoidance

A trust is a legal arrangement in which one party (the trustee) holds and manages assets for the benefit of another (the beneficiary). The most common estate planning trust is the revocable living trust, which you create during your lifetime, fund by transferring assets into it, and can modify or revoke at any time.

The primary benefit of a revocable living trust is probate avoidance. Assets held in the trust at your death pass directly to your beneficiaries according to the trust terms, without any court involvement. This means faster distribution, lower costs, and complete privacy — unlike a will, which becomes a public record once filed with the probate court.

Revocable trusts also provide excellent incapacity planning. If you become unable to manage your affairs, your successor trustee steps in immediately to manage trust assets, without the need for a court-appointed conservator.

An irrevocable trust, by contrast, generally cannot be modified once created. It offers benefits that a revocable trust does not — primarily asset protection and potential tax advantages — but it requires giving up control of the assets placed inside it.

A revocable living trust makes sense for most people with moderate to significant assets, real property, or complex family situations. But remember: a trust only works for assets that have been transferred into it. An unfunded trust — one where you never retitled assets — provides no benefit. Your attorney should help you fund the trust properly at the time it is established.

Powers of Attorney: Planning for Incapacity

A power of attorney (POA) authorizes another person, called your agent or attorney-in-fact, to act on your behalf. There are two critical types that everyone should have.

Financial Power of Attorney authorizes your agent to handle financial matters such as paying bills, managing investments, filing taxes, and accessing bank accounts. A "durable" financial POA remains effective if you become mentally incapacitated, which is precisely when you need it most. A "springing" POA only becomes effective upon a triggering event, usually a physician's determination of incapacity. Durable POAs are generally preferred because they avoid the delay and difficulty of proving incapacity when urgent financial decisions need to be made.

Healthcare Power of Attorney authorizes your agent to make medical decisions on your behalf when you cannot communicate your own wishes. This includes decisions about treatments, medications, surgeries, and end-of-life care. Your healthcare POA works in conjunction with your living will (advance directive), which documents your specific wishes regarding life-sustaining treatment.

Choosing the right agent for your POA is one of the most important decisions in your estate plan. Your agent should be someone you trust completely, who is capable of managing financial or medical decisions under pressure, and who understands your values and wishes. Many people name a spouse as their primary agent and an adult child or trusted friend as a backup.

Beneficiary Designations: The Override You Cannot Ignore

Beneficiary designations apply to a wide range of accounts and policies, including:

• Retirement accounts (Traditional IRAs, Roth IRAs, 401(k)s, 403(b)s, pensions)
• Life insurance policies
• Health savings accounts (HSAs)
• Transfer-on-death (TOD) brokerage accounts
• Payable-on-death (POD) bank accounts
• Annuities

Each of these assets passes directly to the named beneficiary outside of probate. This is efficient and fast, but it also means these assets are only distributed correctly if you keep the designations current. Life events that should trigger a beneficiary review include marriage, divorce, the birth or adoption of a child, the death of a previously named beneficiary, and significant changes in your financial situation or estate plan.

Also consider naming contingent (secondary) beneficiaries. If your primary beneficiary predeceases you and no contingent is listed, the asset may default to your estate, forcing it through probate and potentially undermining your plan.

Getting Started: Your Action Steps

Creating an estate plan may feel overwhelming, but it does not need to be. Here is a practical roadmap to get your plan in place.

1. Gather your information. Make a list of all your assets, including bank accounts, investment accounts, retirement accounts, real estate, insurance policies, and any business interests. Note how each is titled and who the current beneficiaries are.

2. Think about your wishes. Who should inherit your assets? Who should be guardian for your minor children? Who do you trust to manage your financial and medical affairs if you cannot? What are your wishes regarding end-of-life medical care?

3. Choose your key people. Select your executor (for your will), your trustee (if using a trust), your financial POA agent, and your healthcare POA agent. Discuss these roles with the people you choose before finalizing — serving as executor or agent is a significant responsibility.

4. Consult an estate planning attorney. While online templates exist, estate planning is one area where professional guidance pays for itself. State laws vary significantly, and a qualified attorney ensures your documents are properly drafted, executed, and coordinated. Your financial advisor can often recommend trusted attorneys in your area.

5. Fund your trust (if applicable). If you create a revocable living trust, work with your attorney and financial advisor to retitle assets into the trust. This step is frequently overlooked and renders the trust ineffective if not completed.

6. Review and update regularly. Estate plans are not "set it and forget it" documents. Review your plan every 3 to 5 years and after any significant life event: marriage, divorce, birth of a child or grandchild, death of a beneficiary, a move to a different state, major changes in your assets, or changes in tax law.

This article is for informational purposes only and does not constitute investment advice. All information should be discussed with a qualified financial advisor before implementation.