The Ultimate Estate Planning Guide

Written by: Emily Boothroyd , JD, CFP®, CPWA®, Wealth Manager

What is estate planning? Estate planning is the act of organizing your financial and personal affairs to allow for a seamless distribution process upon your death, and to allow your loved ones to make effective decisions around your healthcare and finances.

A common misconception is that unless you are very wealthy, you don’t need to do an estate plan.  The truth is that all of us need some form of estate planning in our lives.

The main components to a solid estate plan are healthcare decisions, asset distribution, and asset protection.  In this article, we will walk through these components and provide a general framework for estate planning.  However, it’s important to discuss your personal plan with your financial advisor and estate planning attorney to determine what’s best for you.

What documents are commonly used?

A typical estate plan consists of a Will and Advanced Directives, though it may also include a few different types of trusts.  Below, we will walk through the most used documents.

First, it’s important to understand what assets flow through your estate, and what assets do not.  Any asset with a specified or designated beneficiary will not flow through your estate planning documents.  This usually includes retirement accounts, joint or transfer on death accounts, and life insurance.

For example, if my beneficiaries on my 401(k) are my spouse, and if my spouse is not then living, to my children, my 401(k) assets would not pass through my Will or Revocable Trust – they would pass directly to the named beneficiary.

Documents will vary per state, so it’s crucial to work with an attorney who understands the laws of the state of your residence.

Advanced Directives – healthcare and personal documents that take place during your lifetime:

Power of Attorney


This document allows the attorney in fact to act on your behalf during your lifetime, and typically covers financial and personal matters.  For example, my power of attorney could execute real estate documents or make a bank withdrawal on my behalf if I am away on vacation or otherwise not able to act on my own behalf.

If you’re more comfortable only allowing someone to act on your behalf if you are incapacitated, you can choose a Springing Power of Attorney, which only “springs” into action when you are incapacitated.

People Involved:

Your Attorney in Fact is the person you choose to act on your behalf.  You can choose more than one and allow them to act singly (alone) or unanimously (all must reach a decision together).

Health Care Agent/Health Care Power of Attorney


This document appoints an agent to act on your behalf for medical reasons.  For example, if you are under anesthesia or in the hospital and unable to advocate on your own behalf, your healthcare agent can make decisions for you.

People Involved:

Your Healthcare Agent is the person you appoint to act on your behalf.  You can choose more than one and allow them to act singly (alone) or unanimously (all must reach a decision together).   This doesn’t need to be the same person as your Attorney in Fact.

Living Will


This document spells out your end of life wishes.  Different than a Do Not Resuscitate, this document is only used during the end of your life, and addresses what type of life support and pain relief you would like to receive, if any.  Your Healthcare Agent would be responsible for making sure the wishes expressed in this document are honored – it is guidance for your loved ones and medical professionals to ensure they are carrying your end of life wishes.

People Involved:

Your Healthcare Agent.

Designation of Conservator/Guardian


If you become incapacitated (stroke, dementia), and are unable to act on your own behalf, you can appoint a Conservator or Guardian to act on your behalf, rather than allowing the probate court to appoint a Conservator or Guardian for you.  This only comes into play if you are incapacitated.

People Involved:

Your Conservator or Guardian will make personal and healthcare decisions on your behalf.  This is usually the same person/people that you’ve selected as your Attorney in Fact and Healthcare Agent.

Last Will and Testament (“Will”)


Considered a testamentary document, the Will only comes into consideration at your death.  The main purpose of the Will is to make sure your assets are distributed in accordance with your wishes.

Parents of minor children will also use the Will to determine who the Guardians of their minor children should be.

Within a Will, you can create a testamentary trust for children and loved ones.  For example, I may have a Will that leaves my assets to my spouse, and if my spouse is not living, to my children in trust until they reach a certain age.  This is called a testamentary trust created under my Will.

Your Will also addresses your tangible personal property (think jewelry, furniture), and can cover specific gifts of money before the rest of the estate is divided among your loved ones.

People Involved:

Executor – the person who will carry out the wishes stated in your Will.  The Executor is responsible for finding out what assets you own that will pass through the Will (excluding assets with specific beneficiaries, mentioned earlier in this article), what debts you may have at death, and working with the Probate Court to properly distribute your assets.

Guardians – this person (or people) will act as the legal guardians of minor children where both parents are deceased, caring for the children in the same capacity as a parent.

Trustee – this person will be responsible for the proper management and distribution of assets held in trust.  They will be the gatekeeper for getting money to your beneficiaries, oversee the preparation of tax returns, and investment management.  Where a Trustee will be responsible for a trust for minor children, it’s important to make sure your Trustee and Guardian will work well together if you’ve decided to use two different people or groups.

Revocable Trust


Often referred to as a “will substitute”, a Revocable Trust is a document that provides for distributions to yourself and loved ones during your lifetime and determines how your assets (excluding the assets with specified beneficiaries, mentioned earlier) will pass at your death.

Revocable Trusts come in handy for people who wish to avoid the public record and process of Probate Court.  You cannot completely avoid Probate Court involvement in an estate, but assets placed in a Revocable Trust prior to death are usually not under the jurisdiction of the Court.

Revocable Trusts do not, on their own, provide for tax savings or asset protection. Trusts for tax savings and asset protection can be incorporated into a Revocable Trust or Will.

Revocable Trusts also provide for distributions to yourself and loved ones if you are incapacitated and allow for the appointment of a Trustee to help you in this event.

As the title implies, a Revocable Trust remains able to be changed or revoked completely up until death.

People involved:

Trustees – this person will be responsible for the proper management and distribution of assets held in trust.  They will be the gatekeeper for getting money to your beneficiaries, oversee the preparation of tax returns, and investment management.

Irrevocable Life Insurance Trust

Irrevocable Trusts are usually funded with gifts of assets during lifetime that the grantor (person creating and funding the trust) will not take back or retain a benefit from.  The most common use of an Irrevocable Trust is for life insurance.

If you do not retain “incidents of ownership” over a life insurance policy (i.e., if you let go of control over the policy), life insurance is not included in your taxable estate at your death.  Many people choose to buy life insurance within an Irrevocable Trust to take advantage of this current allowance.

For example, if my Irrevocable Life Insurance Trust (“ILIT”) buys life insurance on me, but the Trustee is the owner of the policy, the beneficiaries are noted in the trust and I personally do not have the ability to change the beneficiaries, and the Trust pays the premiums, and all of the other administrative rules are followed, the life insurance proceeds will not be part of my gross estate at my death – meaning, the beneficiaries will not have to pay estate taxes on the insurance proceeds.

There are many other uses for Irrevocable Trusts, which we will cover in subsequent articles.

What should I think about before meeting with my attorney?

List your fiduciaries

Previously noted in the “People Involved” sections, your fiduciaries are the group of people you are asking to help administer your plan.  Your attorney will need to know who you would like to appoint for each of the positions within your plan, and a back-up person in the event the first selection is not available.

Keep in mind that some of these positions are time consuming and can be difficult, so try to choose the best person for the role.  For example, a relative who is a healthcare worker with very little financial interest or acumen may not make the best Trustee or Attorney-in-Fact but could be a perfect fit for a Healthcare Agent.

List your beneficiaries

Establish your beneficiaries – who you’d like to receive your assets, and how.  This can be loved ones, charities, and other organizations that matter to you.  This may also include pets.

If you have younger children, think about when you might want them to be in control over their share of the assets, and what help they may need with management.

List what you have, and how it is owned

Come prepared with a list of your assets (only include tangible personal property to the extent that you have individual items that are of significant value or importance to you).  Your attorney will also need to know how your assets are owned.  This includes but is not limited to joint assets, transfer on death assets, retirement assets with specific beneficiaries.  If you’re in doubt, ask the institution or request a title/deed to the property to confirm.

List your goals and concerns

Whether you are focused on asset protection or making sure you are giving a specific amount to charity, list what’s important to you about your end-of-life plans.  Think of your planning attorney as the doctor, and your estate plan as the medicine.  Your doctor doesn’t usually invent a new medicine or prescribe a custom medicine from a pharmacy.  Rather, your doctor gets to know you, assesses your situation, and prescribes a medication for your condition.  Following this analogy, you’ll want to make sure you inform your attorney and advisor of your goals and concerns.  For example, if you are concerned about a child’s ability to choose appropriate partners and are concerned about a future divorce, alert your attorney and advisor.  Your attorney can then make sure to address any of your concerns with the right language in your documents.

Estate planning is an intricate business. Whether you’re looking for specific guidance or general estate planning advice, or you’re ready to begin your estate planning journey, reach out to one of our advisors to discuss how we can help. Contact Merit Financial Advisors today!

This information is not intended to be a substitute for individualized legal advice. Please consult your legal advisor regarding your specific situation.