Estate planning is often overlooked, but it plays a crucial role in ensuring that your assets are distributed according to your wishes and that your loved ones are protected. The story of Charlie Wright, a retiree from Brooklyn, New York, highlights the consequences of neglecting this essential process. After a decade-long dispute with her sibling over the sale of her late mother’s house, Wright finally reached an agreement to divide the proceeds equally. However, she emphasized that this situation could have been avoided had her mother implemented a proper estate plan.
Wright’s experience is not unique. According to a survey by Caring.com, the percentage of Americans with a will has declined from 33% in 2022 to 24% in 2025. Without key documents like wills and trusts, individuals cannot specify how their assets should be distributed upon death, leading to potential family conflicts and legal battles.
Understanding Estate Planning
Estate planning involves more than just drafting a will. It encompasses a range of mechanisms designed to manage and distribute assets, protect against unforeseen circumstances, and ensure financial security for future generations. Christina Rosas, a member of the trust and estate and property departments at Bond, Schoeneck & King in Melville, New York, explains that estate planning allows individuals to determine how their assets should be handled after their passing.
Patrick Simasko, an elder law attorney and financial advisor based in Mount Clemens, Michigan, likens estate planning to building a toolbox. “You go out in the garage, you’ve got a hammer, a screwdriver, and a wrench,” he says. “Our toolbox is making sure that while you’re alive and healthy, you’re the boss. If you get sick, someone’s there to make your medical and financial decisions. Then, if you pass away, you want your stuff to go to your beneficiaries without probate, without court involvement.”
Key Components of Smart Estate Planning
Wills and Trusts
A will is a legal document that outlines how an individual’s assets will be distributed upon their death. It can also specify custody arrangements for minor children. Typically, the individual names a trustee or executor to oversee the estate and ensure that the deceased’s wishes are fulfilled. Trusts, on the other hand, are legal structures where an individual (the grantor) transfers assets to a trustee for management and distribution according to their wishes. Unlike wills, trusts can go into effect while the individual is still alive.
Rosas notes that without a will or trust, the law fills the void, but many people prefer to have control over their assets’ distribution. “Under a will or trust, you have certain abilities to maybe even eliminate some of the people who would naturally be entitled to receive a share of an estate, like a child,” she says.
Simasko emphasizes the importance of beneficiary designations across different assets to ensure that a testator’s desires are followed. While wills are susceptible to probate, trusts bypass this process, offering a more efficient way to distribute assets.
Power of Attorney and Healthcare Directives
While wills and trusts ensure that wishes are honored after death, power of attorney and healthcare directives ensure that decisions align with an incapacitated person’s wishes while they are still alive. These directives cover decisions around assets that cannot be overseen by trusts, including retirement accounts, life insurance, and health insurance.
Rosas highlights the importance of advanced directives in emergencies. “Having those advanced directives in place ahead of time will facilitate that process and make it easier for everyone involved,” she says.
Beneficiary Designations
Beneficiary designations can supersede wills and trusts, dictating the distribution of assets such as retirement accounts or life insurance policies. Rosas warns that outdated designations can conflict with the deceased’s wishes. For example, a 30-year-old man who names his two children as beneficiaries on a life insurance policy may find that only those two children receive shares if he has additional children later.
Simasko suggests that a trust can also be named as a beneficiary of various accounts, simplifying designations. However, this approach has drawbacks, such as required minimum distributions (RMDs) that limit the deferral potential of qualified plans.
Asset Protection Strategies
Trusts for Asset Protection
Trusts can shield assets from future creditors and legal claims, but only certain types of trusts offer these protective attributes. Revocable trusts, which can be changed at any time, do not protect assets from creditors or tax authorities. In contrast, irrevocable trusts, which cannot be altered, provide asset protection by transferring assets out of the grantor’s control.
Rosas explains that irrevocable trusts can also be used to secure Medicaid benefits by removing funds from the individual’s possession. Additionally, spendthrift trusts can protect assets for individuals with special needs, drug or gambling addictions, or other vulnerabilities.
Business Entities
Establishing an LLC or corporation separates personal and business assets, protecting them from legal claims. For example, an individual who owns a construction company would create an LLC or corporation to shield personal assets from lawsuits or tax troubles.
Homestead Exemptions
Homestead exemptions, applicable in most states, protect a primary residence from some creditors following the death of a homeowner’s spouse. They also provide property tax relief, with each state having its own limits and rules.
Tax Considerations and Tax Strategies in Estate Planning
Estate and Gift Taxes
The federal estate tax applies to the recipient of a deceased individual’s property, with a threshold of $13,990,000 for 2025. Gift taxes come into play when gifts exceed the IRS limit of $19,000 per recipient. Charitable giving can also reduce estate taxes, though its impact has diminished due to changes in tax laws.
Dynasty Trusts
Dynasty trusts allow wealth to be passed on to future generations without incurring estate or transfer taxes. Assets remain owned by the trust, providing long-term financial security for beneficiaries.
When Should You Start Estate Planning?
There is no ideal time to start estate planning; the best time is as soon as you have assets you want to protect. Simasko emphasizes that “there’s a drop-dead date that you have to have it done by: the day before you drop dead.” Starting early ensures that all necessary documents are in place before unexpected events occur.
What Are the Potential Risks of Not Having an Estate Plan?
Without an estate plan, you cannot guarantee that your assets will go to the people you want. This can lead to family conflicts and legal battles, as seen in Wright’s case. Regularly reviewing and updating your estate plan is essential, especially after significant life changes such as the birth of a child, divorce, or the acquisition of a large asset.
Conclusion
Estate planning is a cornerstone of financial security, far more comprehensive than drafting a will. It involves strategies to minimize taxes, streamline asset transfers, and protect wealth for future generations. Whether you’re setting up trusts, exploring life insurance options, or adapting plans to market conditions, estate and legacy planning equips you to confidently navigate retirement’s challenges.