• 3-Minute Article
  • |
  • Jan 23, 2018

Yes, You May Need an Estate Plan – Even If You Don’t Have a Large Estate

Having a plan in place can help others implement your wishes.

Updated: December 6, 2023

Questions this article can help you answer:
  • What is estate planning?
  • What does an estate plan include?
  • How do I make an estate plan?

You may hear the word “estate” and think mansions and sprawling grounds, but an estate is all the property a person owns – including real estate, cars, cash, and other assets. Anyone who wants their assets to be transferred to one or more surviving loved ones after they pass away should consider establishing a formal estate plan. This important set of legal documents can make it easier for your family to ensure that your wishes and needs are met if you’re unable to speak for yourself.


What Is an Estate Plan?

An estate plan is a collection of documents that protects your assets and personal property and explains how you want to pass them down. It documents your wishes and specifies exactly who will preserve those wishes and act on them in your absence.


What Does an Estate Plan Include?

A will, which identifies who you want to:

  • Receive each of your assets
  • Be your children’s guardian
  • Be an executor to oversee the estate plan process

A power of attorney, who:

  • Makes financial decisions if you’re unable to
  • Pays your bills, manages investments, and makes legal or business decisions

A medical power of attorney, who:

  • Makes your medical decisions if you’re unable to

A living will, which:

  • Documents your end-of-life preferences

A trust, which:

  • Controls how and when your assets are distributed
  • Can help reduce or eliminate estate taxes


What Are 3 Important Functions of an Estate Plan?

1. Protects your assets for your family (or other heirs)

An estate plan can act as a safety net that helps preserve the value of your assets, minimizes wait times for disbursement, and helps ensure that the legacy you envisioned is carried out.

2. Gives you a say in who receives your belongings

By creating a will, you can name your assets, beneficiaries, and an executor who will carry out your wishes after you pass away.

3. Allows you to choose who will make your decisions

An estate plan often contains a durable power of attorney form and a health care proxy form – two vital legal documents that ensure your plan will be carried out the way you want. A durable power of attorney form appoints a trusted person, such as a relative or friend, to manage your legal and financial affairs should you become incapable.1 A health care proxy form gives someone permission to make health care decisions for you based on your wishes if you’re unable to do so.2

If you have a durable power of attorney or a health care proxy, it’s important to include that information on accounts such as IRAs, 401(k) plans, and insurance policies.


How to Get Started With Estate Planning

1. To help calculate your worth, create a list of all of your financial assets and personal property, and document any liabilities

2. Ask a financial professional to refer you to a qualified estate planning attorney

3. Determine (or update) your beneficiaries

4. Revisit your estate plan regularly


How Life Insurance and Annuities Can Help With Estate Planning

Life insurance and annuities can play an essential role in estate planning. Life insurance can provide a source of income for surviving family members. Proceeds from life insurance can typically bypass the probate process (the distribution of an estate) so they can provide an immediate source of cash that survivors can use to pay off taxes or remaining debts, such as a mortgage.

Annuities with a named beneficiary can generally avoid the probate process, potentially providing income directly to beneficiaries without delay.

Talk to a financial professional to learn more about the importance of estate planning, and partner with other professionals to help you develop an estate plan.


Read How to Prepare Financial Information for a Trusted Contact to explore additional information that can help you discuss your finances with your trusted contacts.