What is Estate Planning?
An Intro into Securing Your Future
| By: Veronica Balderas, Financial Coach | |
| April 1, 2026 | clock icon 7.5-minute read |
Most people associate estate planning with the ultra-wealthy or the elderly. They picture a stack of legal documents reserved for the end of life, not something a 32-year-old with a starter home and a dog needs to think about. That assumption is one of the most damaging myths in personal finance. Whether you're 25 or 75, with a modest savings account or a complex portfolio, your assets, your wishes, and your family deserve an estate plan.
Without a documented plan, a court may decide who raises your children, who inherits your home, or who makes medical decisions on your behalf, whether or not these are people you would have chosen for the task. The good news? Getting started is far more accessible than you might think.
What Holds Americans Back from Estate Planning?
A recent study found that procrastination is the most common reason people haven’t created an estate plan. However, there are many other reasons, including age, income, lack of knowledge, and uncertainty about who to name as beneficiaries (a person, group, or entity legally designated to receive assets). Studies like these offer a window into the psychological and practical barriers that keep people from taking action.
The most common reasons people delay creating estate plan documents:
- "I'm too young to worry about this."
The future is never a guarantee. Anyone with a bank account, a home, or strong wishes about their healthcare deserves a plan.
- "Estate planning costs are too expensive."
Traditional estate planning lawyers may charge thousands of dollars. This misconception has made middle-class Americans feel priced-out of the process for decades, but affordable estate planning options exist, such as Legal Karma.
- "It's too complicated."
The legal language alone can feel overwhelming. In reality, basic documents like a will or power of attorney are more straightforward than most people expect. Many online estate planning applications simplify the process for you, making it easy to navigate and understand.
- "I don't have enough assets."
Estate planning isn't only about distributing wealth. It's about naming guardians for minor children, designating who will make medical decisions, and specifying how debts will be settled. You can even include who will take care of your pet if you are unable to or pass away.
- "I'll get to it eventually."
Life rarely gives notice before it changes. Illness, accidents, and sudden death don't wait for convenient timing.
Recognizing these myths is the first step. The second is understanding the differences between the key estate planning documents so you can see the benefits.
Key Estate Planning Documents
These three types of documents form the foundation of most estate plans. Understanding what each one does can help you figure out which fit your situation.
Last Will and Testament
If you're wondering how to create a will, the process starts with a legal document that specifies how you want your assets distributed after death. It can also name a guardian for minor children, which is arguably the single most critical function for young parents. A will only takes effect after death, and it must go through probate (more on that below) before assets are transferred to beneficiaries.
It can:
- name beneficiaries for specific assets.
- designate a guardian for minor children.
- identify an executor to manage the estate.
- specify funeral or burial wishes.
A will does not override assets with named beneficiaries (like life insurance or retirement accounts), jointly held property, or assets held in a trust. Those transfer independently.
Powers of Attorney
Powers of attorney (POA) are documents that authorize someone else (your "agent") to act on your behalf. They're especially vital during your lifetime, not after death, and cover two major areas:
Financial (Durable) Power of Attorney: Grants your agent authority to manage financial matters like paying bills, managing investments, and handling real estate transactions if you become incapacitated. "Durable" means it remains effective even if you aren’t mentally capable of making decisions.
Healthcare Power of Attorney / Advance Directive: Names someone to make medical decisions on your behalf and, in the case of an advance directive (sometimes called a living will), documents your specific healthcare preferences, including end-of-life decisions. These documents can be lifesaving tools for your loved ones who might otherwise be left guessing during an already difficult time. Typically, your healthcare provider offers this document and will place it in your medical file.
Revocable Living Trust
So, what is a living trust, and how does it differ from a will? The will vs. trust question is one of the most common in estate planning, and the answer comes down to timing, privacy, and probate.
A trust is a legal arrangement where you (the "grantor") transfer ownership of assets into a trust, which a trustee manages for the benefit of your named beneficiaries.
With a revocable living trust, you typically serve as your own trustee while alive and mentally competent, meaning you retain full control over your assets.
The key advantage over a will is that assets held in a trust bypass probate entirely, transferring directly to beneficiaries upon death. This can save time, reduce costs, and keep your affairs private (probate is a public process).
A revocable living trust can:
- avoid probate for assets held within it.
- provide seamless management of assets if you become incapacitated.
- keep the details of your estate private.
- offer more control over how and when beneficiaries receive assets (e.g., at a specific age).
What Is Probate and Why Do People Work to Avoid It?
Probate is the court-supervised legal process of validating a deceased person's will, settling outstanding debts, and distributing remaining assets to beneficiaries. Knowing how to avoid probate (or at least minimize it) is a core goal of smart estate planning. If someone dies without a will, the state's default laws determine who receives what, regardless of any informal wishes.
Probate comes with real downsides:
- Time: The process can take anywhere from a couple weeks to over a year, depending on the estate and state law.
- Cost: Attorney fees, court costs, and executor compensation may eat up 3%–8% of an estate's total value.
- Public record: Probate proceedings are open to the public, meaning anyone can look up details about your assets and beneficiaries.
- Family conflict: Court proceedings sometimes start family disagreements, especially without a clear will.
Certain assets avoid probate automatically—accounts with named beneficiaries (like IRAs and 401(k)s), jointly held property with rights of survivorship, and payable-on-death (POD) or transfer-on-death (TOD) accounts. Assets held in a living trust also bypass probate. Strategic estate planning deliberately uses these tools to minimize what must pass through the court system.
When Should You Start? (Spoiler: Now)
Estate planning isn't a one-time event. It's an ongoing process that should evolve with your life. That said, there are certain life moments when reviewing or creating your documents is especially timely:
- Turning 18: You're now a legal adult. Without a healthcare directive and basic Power of Attorney, your parents may not be able to assist if something happens to you.
- Getting married or entering a domestic partnership: Your assets and decision-making rights need to reflect your new legal partner.
- Having a child: Naming a guardian is arguably one of the most important decisions a parent can make for both the child and their family.
- Buying a home or accumulating significant assets: Property and financial accounts need to be part of a coordinated plan.
- Experiencing a major health diagnosis: Documents like advance directives become immediately relevant.
- Divorce or remarriage: Outdated beneficiary designations and wills may no longer reflect your wishes.
- Retirement: It's an ideal time to revisit documents, update beneficiaries, and consider trust structures.
Life changes quickly. The best estate plan is the one that exists, not the one on your to-do list.
Your Legacy Starts with a Decision
No one likes imagining worst-case scenarios. But the discomfort of thinking about incapacity or death is minor compared to the very real chaos that can follow for the people you love when there's no plan in place. A few hours of thoughtful documentation may protect years of hard work, spare your family from avoidable conflict, and give you genuine peace of mind.
How to Get Started with Estate Planning
To get started, you can work with an attorney or use an estate planning service that walks you through the process and provides live support from specialists. Online services tend to be more cost-effective than going to an attorney. Depending on your estate’s complexity and how much you can afford will determine which route you take. Check with your employer or financial institution; they may have a partnership with an online application like Legal Karma and offer discounts for their members or employees.
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Real-Life Scenarios: With and Without an Estate Plan Scenario 1: Young Parents Without a Will Miguel (34) and Kayla (31) have two kids under the age of six, a joint checking account, and a house they've been paying down for three years. Neither has a will. Without an estate plan: If both parents die unexpectedly, a probate court decides who becomes guardian of their children. Extended family members may dispute custody. The process can drag on for months or years, during which the children's care is uncertain and legal fees drain the estate. The family’s largest asset, their home, may get tied up in probate, delaying its transfer to the next generation.
With an estate plan: Miguel and Kayla have a will that names a trusted guardian for their children and a revocable living trust that holds their home, allowing it to transfer directly to their heirs without having to involve the courts. The transition, while painful, is orderly and reflects exactly what they wanted. Scenario 2: A Single Adult with No Estate Planning Documents Without an estate plan: If Diane becomes incapacitated, her partner has no legal authority to make medical or financial decisions on her behalf. That right falls to her estranged sister by default. When Diane dies, her condo goes through probate and, without a will, may pass entirely to her biological family under state laws, not to her partner. With an estate plan: Diane has a durable power of attorney designating her partner as decision-maker, an advance healthcare directive documenting her medical preferences, and a will that leaves her condo to exactly who she intends. Her wishes are protected. Scenario 3: Retirees Who Think It's Already Handled Without updating their estate plan: Their outdated wills still name an executor who passed away five years ago. An old life insurance policy still lists an ex-daughter-in-law as a beneficiary. Their assets are distributed according to a version of the family that no longer exists. With updated estate planning documents: They refresh their wills, establish a joint revocable living trust to help their estate avoid probate, update beneficiary designations, and put in place healthcare directives so their adult children know their medical wishes. Their legacy is protected and their family is spared unnecessary conflict. |
 Veronica Balderas Financial Coach |
About the Author For the past five years, Veronica has provided members with the tools to create personalized financial plans that align with their goals. She offers information regarding budgeting, savings strategies, and spending plans to help members stay on track for long-term financial stability. Whether you're working to pay off debt, improve your credit score, or navigate a major financial change, Veronica provides practical advice. She focuses on building financial literacy and attacking complex challenges. Her hands-on approach ensures members are able to gain a better understanding of their finances and a clear plan for the future. |
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