What to know
The core documents
Most people's estate plans rest on four documents. A will says who inherits your property and names an executor and, if you have young children, a guardian. A durable power of attorney names someone to handle your finances if you cannot. A health care directive records your treatment wishes and names someone to make medical decisions. And for some people, a living trust holds assets so they can pass to beneficiaries without probate.
Will or living trust?
A will is simpler and cheaper to prepare, but property that passes under a will generally goes through probate, the court-supervised process of settling an estate. A revocable living trust can avoid probate for assets placed in it, keep the details private and make management easier if you become incapacitated. It takes more effort, because assets must be retitled into the trust. Many people with a trust also sign a pour-over will to catch anything left outside it.
Assets that pass outside your will
Retirement accounts, life insurance and many bank and brokerage accounts pass to the beneficiaries named on the account, regardless of what your will says. Jointly owned property with survivorship rights passes to the surviving owner. Review these designations whenever you update your will so your plan is consistent, and consider a transfer on death deed for real estate where your state allows it.
Signing it properly
Every state sets its own formalities. Wills generally must be signed in front of witnesses, commonly two, and many states allow a self-proving affidavit signed before a notary that makes probate easier. Powers of attorney and health care directives often need a notary, witnesses or both. A document that is not signed correctly may not be honored, so follow the signing instructions for your state carefully.
Keep it current
Review your plan after major life events: marriage, divorce, the birth of a child, a move to another state, or a significant change in your finances. Store originals somewhere safe and tell your executor and agents where to find them.