If you have any type of assets, have a family, or both, then trust and estate planning should be a priority regardless of your age. But alarmingly, only 24% of Americans have a will, and that number has been declining over the last few years, according to Caring.com’s 2025 Wills and Estate Planning Study.
Without having the right legal documents in place, you run the risk of state laws dictating how your assets are distributed after your death — and those processes may not align with your personal vision. No matter how old you are or how much money and property you have, learn about wills and estate planning to save your loved ones time and effort during what would already be a difficult period.
Key Points
• Estate planning ensures assets are distributed according to wishes.
• Guardians are appointed for dependents in estate plans.
• Probate can be avoided through proper planning.
• Tax liabilities are minimized with strategic estate planning.
• Medical directives are included to guide healthcare decisions.
Understanding Estate Planning
What is estate planning? Understand what it is — and isn’t — to find out if you need a plan and how to get started.
Definition and Purpose
Estate planning is the process of designating how your assets and property will be distributed when you pass away. It can also include legal decisions like power of attorney and health care directives so that your wishes are executed in a variety of situations that could happen in the future.
Depending on your needs, an estate plan may incorporate a will, life insurance, a letter of intent for your executor, trust accounts, and documentation on how and where to access your financial accounts.
Wondering about the difference between estate planning vs. a will? A will is one document that’s part of estate planning. But estate planning is a much broader process that can include a number of documents, accounts, and directives.
Common Misconceptions
There are several myths around estate planning, especially when it comes to who actually needs a plan in place. Here are some that you may have heard or thought of:
• Only rich people need an estate plan.
• You don’t need an estate plan if you’re young.
• It costs a lot to create an estate plan.
• I already have a will, so I don’t need to do estate planning anymore.
• My family knows how I want my assets handled.
The reality is, any adult who has a family and any size of assets or property should have some type of estate plan in place.
Recommended: How Much Does Estate Planning Cost?
Who Needs an Estate Plan?
It’s important to know if you need estate planning because not having the right plan in place can lead to legal battles and slow access to your assets for your intended beneficiaries. With a proper estate plan in place, you could help your family avoid or shorten probate, a court process that makes sure the estate is distributed in accordance with your will and other legal documents.
Even if you don’t have any assets to distribute, an estate plan can include instructions on how you want certain medical and legal situations to be handled. If something happens and you can’t make medical decisions on your own, a health directive gives guidance to someone you trust to make those decisions for you.
The same is true for assigning power of attorney. This responsibility allows someone to legally and financially act on your behalf — all within the limits of the document created as part of your estate plan.
Finally, even new parents need estate planning. In addition to creating a will, you should assign a guardian to your children, and may also opt to purchase a life insurance policy to financially provide for your children in a worst-case scenario.
Key Components of an Estate Plan
Here are the most common estate planning documents to consider including as part of your own plan.
Wills vs. Trusts
A will serves as a foundational document in an estate plan. It’s a legal document that primarily outlines who will inherit your assets once you pass away. Generally, there are three types of wills to choose from:
• Simple will: This is the most basic version and can be done easily and affordably with an online estate planning tool. A simple will typically states who will receive your property and money after your death and who you’d like to serve as guardian for any minors in your household.
• Joint will: As the name implies, this type of will is shared by two people, usually a married couple. It will outline how the estate will be divided in two scenarios: if one individual passes away, and if both pass away.
• Testamentary trust will: This version incorporates a trust into your will, which means you can make stipulations as to how and when your assets are given to your beneficiaries. A trustee is in charge of making sure those wishes are met.
Most wills don’t allow your beneficiaries to avoid going through probate. Adding a trust in addition to a will is usually for larger or more complex assets, but avoids probate by transferring asset ownership to a trust account.
Powers of Attorney & Healthcare Directives
The next component of estate planning is your powers of attorney and healthcare directives. Collectively, this is called advance care planning and legally assigns proxies who can make legal, financial, or medical decisions on your behalf. You get to add details on how you would like those decisions made, so you’re not blindly giving someone else total control over these scenarios.
• Financial power of attorney: You can limit when the power begins and ends, and what accounts your agent has access to. For instance, perhaps they can pay your bills from your checking account, but can’t sell your house.
• Durable power of attorney: This goes into effect as soon as the document is legally created.
• Springing power of attorney: In this version, a licensed physician must confirm that the individual is incapacitated before the document can be used.
Decisions outlined in a medical directive include:
• Do not resuscitate (DNR) order
• Do not intubate (DNI) order
• Do not hospitalize (DNH) order
• Out-of-hospital DNR order
• Orders for life-sustaining treatment
Beneficiary Designations
In addition to naming heirs in your will, you can also designate beneficiaries on individual financial accounts, such as checking, savings, investment, and retirement accounts. The advantage of doing this step is that it skips the probate process entirely. Depending on the type of account, funds can be paid out or transferred to your beneficiary (or beneficiaries) immediately after your passing.
The Estate Planning Process
Now that you understand the parts of an estate plan, here are the steps it takes in order to get everything in place.
Gathering Documents and Information
Before you figure out how you want to distribute your assets through an estate plan, make sure you have a complete understanding of what you actually own. Create an inventory list of the following information and the relevant documents:
• Property, including real estate, vehicles, jewelry, and collectibles
• Checking and savings accounts
• Investment accounts, including retirement funds and health savings accounts
• Contents of safety deposit boxes
• Cryptocurrency holdings
• Life insurance policies
Also gather information on debt and other liabilities, like mortgages, lines of credit, and loans. Any outstanding balances are usually paid from the estate before the remaining funds are distributed to your heirs.
Working with Professionals (Attorneys, Financial Advisors)
Depending on the type of assets you have, you may need to loop in a team of professionals to help establish your estate plan. Your financial advisor can be a great place to start. They can help you designate beneficiaries on your account, and the firm can help execute your wishes after you pass away.
Consulting a tax professional can help you minimize your tax burden, both during your lifetime and after your death. Finally, an estate attorney can help establish legal documents like your will and advance care directives. On top of that, they can help establish and manage more complex estate needs, like trusts.
Recommended: Estate Planning Checklist
Why Estate Planning Is Important
Getting a proper estate plan in place comes with a number of benefits.
Protecting Loved Ones and Assets
One of the biggest advantages of having a clear estate plan in place is protecting those you love and making sure your wishes are followed for asset distribution. Perhaps most importantly for parents, you can also name a guardian for your minors, which can prevent family discord and additional stress for the kids.
Avoiding Probate and Minimizing Taxes
Avoiding or minimizing the time in probate court benefits your heirs because it allows them to access their inheritances more quickly. Plus, there’s less contention with an established estate plan because your directions are clear.
Your estate plan can also help navigate any potential tax issues. The government sets a threshold for what size of assets must pay an estate tax. As of 2025, anything under $13.99 million won’t be taxed, but that provision is set to expire and future tax bills can change that amount as well. Individual states may also levy their own estate taxes at different amounts.
Ensuring Your Wishes Are Followed & Reducing Conflict
An estate plan gives clear instructions on your final wishes, from funeral details to asset distribution. And with legally sound documents in place, there’s little room for arguing among family members who may feel they’re entitled to part the estate.
Common Estate Planning Mistakes to Avoid
Here are mistakes to avoid in order to ensure the estate planning process goes smoothly for you and your beneficiaries.
Failing to Update Your Plan Regularly
Life doesn’t stay the same, and your estate plan needs regular review in order to make sure everything is in order. Take an in-depth look every three to five years. On top of that, do another review when major life events occur in your family, such as a birth, death, or divorce.
Overlooking Tax Implications
Stay on top of tax law updates to make sure you understand new tax implications as regulations change. Prior to the 2017 Tax Cuts and Jobs Act raising the exemption to just under $14 million, the estate tax exemption cut off was around $7 million. It’s unclear what that number will be in 2026 and beyond.
Forgetting Digital Assets
Digital assets can refer to a few different things and all need to be tended to properly. In terms of financial assets, it can be things like cryptocurrency and non-fungible tokens (NFTs). Have a plan in place that allows your beneficiaries to access and transfer those assets in the way you wish.
Other digital assets may be more common — things like your passwords to online accounts. You can manually create a list of your accounts or use a password management tool that only requires a single password to access all of your accounts.
The Takeaway
Estate planning is important for every adult, regardless of net worth or family situation. And once a plan is in place, it’s important to revisit it every few years to ensure everything still fits your needs.
When you want to make things easier on your loved ones in the future, SoFi can help. We partnered with Trust & Will, the leading online estate planning platform, to give our members 15% off their trust, will, or guardianship. The forms are fast, secure, and easy to use.
Create a complete and customized estate plan in as little as 15 minutes.
FAQ
What’s the single most important estate planning document?
A will is the most foundational estate planning document. It can outline all the vital information, such as naming an executor, guardianship for minors, distributing assets, and even medical and financial directives.
Can I create an estate plan myself online?
Yes, there are a number of online will makers that can walk you through the process to create a customized will.
Why do people put off estate planning?
Many people put off estate planning because they think they don’t need to do it, often because of age or a lower net worth. Plus, it can be hard to think about death and plan for different challenging scenarios.
How does probate work and why is it often avoided?
Probate helps to settle an estate through the court system. Each state has its own process and records are made publicly available. People try to avoid it because it takes time as well as money.
Do beneficiary designations on accounts override my will?
Yes, typically accounts with named beneficiaries override wills and won’t go through probate.
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