Estate planning is one of those things that’s on most women’s financial to-do lists — right at the bottom. It rarely feels like a priority when you’re young. Then, as you hit life milestones and continue to age, estate planning can feel overwhelming and uncomfortable. Plus, the term itself tends to evoke certain ideas about what an “estate” is — rolling green lawns, a centuries-old mansion, a Rolls-Royce, and a pair of purebred hunting hounds in the driveway all come to mind.

But everyone owns stuff in life. And that means you probably have opinions on how you want that stuff to support the people (and causes) you love when you’re gone. 

Who needs estate planning, then? You do. And you should consider getting started now, whether you’re nearing retirement age or not. Estate planning isn’t just about what happens after you pass. There are plenty of life events where having an estate plan in place can protect you and your family, chosen or otherwise. So let’s talk estate planning basics.

What is estate planning?

Estate planning is the process of preparing and protecting your estate (aka all of your assets, which is basically everything you own) to be managed by someone else of your choosing in the event that you can't manage it yourself. 

For example, it can determine how and to whom investment accounts or real estate is directed. Or, it can provide guidance on who becomes the guardian of your dependents (even your pets). 

Estate planning makes carrying out your wishes as clear and easy as possible — for the legal system and for your loved ones. And, it creates a plan for your finances to remain as untouched as possible by things like fees and taxes, leaving more for those with whom you choose to leave it. That’s why estate planning is popular for people who want to give generational wealth.  

Who needs an estate plan? 

You do. Even if you don’t have any major assets. Even if you’re not retired. Everyone can benefit from having an estate plan. 

Why do I need an estate plan? 

Here are five main reasons: 

1. You get to control your legacy. And your family’s financial future, too. Because if you don’t make a plan for your estate, the courts will.

2. Accidents and illnesses happen. “Nothing is certain except death and taxes,” right? That’s why having an estate plan is important no matter what stage of life you’re in. When something happens, there’s no questioning what you want to happen next.

3. It can avoid probate. A deceased person’s estate commonly goes through a process called probate, which is a legal review on the public record that determines how the estate is divided. And probate has a reputation for being grueling, time-consuming, and costly, especially if certain paperwork isn’t in place at the time of death. An estate plan helps to minimize the costs and time associated with the probate process if your estate must be probated — which is something that’s determined state by state.

4. It can limit taxes on your estate. Federal estate tax, state tax, gift tax — these can significantly impact how much of your estate‌ reaches your loved ones. An estate plan can put legal measures in place to preserve as much of your assets as possible. 

5. It can bring your family clarity and peace of mind. Creating an estate plan isn’t just good financial logistics; it’s also a really generous and loving gesture. An estate plan can help your family feel like they’re respecting your wishes. What’s more, it can help your family feel less stressed. An estate plan can help mitigate any tension and put your family in a better position to come together, not clash, after the death. 

Why is estate planning important for women? 

Because, like most things in finance (and life), estate planning is different for women.

Almost half of women are the sole breadwinners or co-breadwinners for their families — even though we’re paid less than men.The gender pay gap makes building wealth more difficult for women than men, which leads to an even bigger gender wealth gap. 

On top of that, five out of six parents who have custody of their children are women. And, as our parents age, it's becoming more common for adult children to become caregivers. As caregiver needs increase in the US, almost 60% of caregivers are women. If we were to pass, the dependents who rely on us might be in a tough financial situation and without a guardian ‌— leaving it to the courts to decide. 

Women also largely outlive their spouses, and then become responsible for figuring out the best way to manage their household finances, when, traditionally — and even still today — women have been left out of important financial conversations and decisions. Everything from bank account details to investment decisions to expert financial advice suddenly becomes their responsibility. While grieving such a major loss, it’s all too much, too fast.

These financial realities are disappointing and unfair. But it’s important that women are aware of them so that we can make the best moves to equip ourselves with the confidence to take control of our financial lives — and in turn, our whole life, our future, and our family’s future.

How do I make an estate plan? 

While estate plans vary state by state and get more complex with your situation, a basic estate plan includes three components: a will, a trust, and advance directives. 

What is a will?

A will is officially known as a last will and testament. It’s a legal document that explains your wishes regarding how you'd like your assets to be distributed. It can also explain how you’d want your dependents, like minor children, to be taken care of after your passing.  

Anyone can write a will at any time on any piece of paper — a napkin even. It’s even better to have a testamentary will, one that’s signed in the presence of a witness. Better yet is a will that’s signed in the presence of an estate attorney.

Without a will, every decision about your assets and your dependents will be left up to the state — something most people want to avoid at all costs. A will can help alleviate the estate process and might even quicken the probate process if there’s clear guidance for your wishes. 

What is a trust?

A trust is another way for beneficiaries to gain access to your assets quickly and smoothly — usually even more quickly and smoothly than with a will.

A trust is a legal entity set up by a grantor (or the person who establishes the trust) that allows a trustee (a person appointed to manage the trust) to hold assets on behalf of a beneficiary (the person who’ll receive the assets). 

A trustee can be yourself, or anyone the grantor trusts to carry out the financial duties to manage the trust assets, from family and friends to a professional trustee / fiduciary. Law requires the trustee to disburse assets to the beneficiary following the grantor’s instructions. 

Maybe you have children who are minors and you want to make sure the assets you set aside for them are managed properly if you pass unexpectedly. Or, maybe you have a blended family and want to make sure specific loved ones can access your assets. Regardless of your situation, a trust can give you that level of control — and then some. 

At a high level, there are two types of trusts:

1. A revocable trust, aka a living trust, which allows you to maintain 100% control over your assets today while assigning beneficiaries for your assets when you pass away.

2. An irrevocable trust, which, once you make beneficiary decisions, requires you to give up some control of them in exchange for tax benefits.

From there, trusts get even more complex and precise (financial pros often refer to it as  “alphabet soup” — QTIPs, GSTs, CRTs, ILITs, it goes on). It’s best to talk with your estate attorney about what might be the best fit for you. 

What are advance directives?

Advance directives are documents your family will use if you aren't medically able to make decisions for yourself. They’re called “advance directives” because you’re submitting instructions for your own care in advance of any accident or illness that leaves you unable to express them yourself. 

Obviously, no one wants to think about scenarios that lead to the use of advance directives. But it’s important for anyone to set aside time to consider and complete them.

Three key advance directives are:

1. A health care proxy, a person chosen to make medical decisions for someone who can no longer make them for themselves.

2. A living will, a document that specifies what medical procedures you’d like — or would not like — to be performed in the event you become incapacitated.

3. Power of attorney, or authorization for someone to make financial and health care decisions on your behalf. You can have ‌separate medical and financial powers of attorney. 

Process-wise, all of these advance directives are relatively easy to set up. After these documents are prepared, generally two adult witnesses must be present at signing, as well as a notary public.

Emotionally, this can be an extremely hard topic to think about and put in writing. Give yourself some grace and patience while you work through whatever feelings come up. But we urge you: Don’t use that as a reason to put off completing this task.

When should I start estate planning? 

When to start estate planning is as important as how to start estate planning: Start it now. 

Because estate planning is a big topic, and it’s a process that takes time. And because it’s one of those topics that deals in what-ifs, so people end up putting it off, accepting the gamble of being subject to default rules if we never get around to it — a gamble that could be, in the end, emotionally and financially costly to your legacy and your loved ones. 

How do I get started with estate planning?

As you can imagine, getting started can be tough. But, again, it’s not anywhere near as tough as it could be for your family without having an estate plan in place. 

To get started, consider: 

• What are your assets? Assets can include cash, bank accounts, real estate, businesses, life insurance policies, stocks, retirement accounts, personal belongings, pets … you name it.

• What are your wishes? Be as detailed as possible about how you’d like your loved ones to pay tribute to you, plans for services, and full names of the people or organizations that you’d like to receive your assets.

• Which family members should you talk to? Loop loved ones into the conversation about your estate plan as early as possible, as casually as possible. It doesn’t — and honestly, shouldn’t — be a big, official meeting. Once the topic has been normalized, get into the who’s who and what’s what for your situation.

• What pros are on your estate planning team? Take all of this prep work to an attorney and financial expert you trust — and who can help you make a plan to control your life, your legacy, and your family’s financial future.

Book a complimentary consultation with a financial expert on Ellevest’s all-women team for help determining your next steps to reach your goals.

Disclosures