Saving & Investing

Text size: 


5 estate planning facts you need to know now

February 14, 2017

A goal without a plan is just a wish. Don't wish your assets away—make a plan to ensure that your life savings are properly distributed after your death.

Read the five facts below, get inspired, and create an estate plan today.

Yes, you have an estate. (So yes, you need an estate plan.)

You don't have to be wealthy or retired to have an estate. In fact, if you own anything, you have an estate.

Your estate includes both tangible and intangible personal possessions and real property—like a home, rental property, or land. Possessions you can physically touch (like a car, clothes, or a stamp collection) are tangible property, and assets you can't touch (like a checking account or an IRA) are intangible property.

Where there's a will, there's a way.

An estate plan is a collection of legal documents that come into play if you become incapacitated or pass away. These documents are a way to voice your wishes when you're not able to communicate on your own behalf.

An estate plan typically contains:

  • A will, which dictates who gets your assets and how (and when) they get them.
  • A general power of attorney, which appoints somebody to take care of your financial needs in case you become incapacitated or are otherwise unable to act.
  • A healthcare power of attorney, which designates someone to make healthcare decisions for you if you become incapacitated or are otherwise unable to do so yourself.
  • An advance directive for healthcare, which communicates your wishes if you can't make decisions for yourself.

When you're drafting an estate plan, it's important to consider the whole picture—including both your assets and your liabilities.

Alisa Shin"Do your homework before meeting with an attorney. A personal financial inventory that includes details about your bank, credit union, and investment accounts—as well as your liabilities, like loans and credit cards—can help you stay organized and ensure that you're disclosing everything to your attorney," said Alisa Shin of Vanguard Personal Advisor Services®.

If you don't have a plan, your state of residence will step in.

If you don't take the time to create an estate plan, your state will take care of it for you—on its terms. For example, if you become disabled and aren't capable of making your own decisions, your loved ones will have to go through the legal process of appointing a guardian or conservator, which can be lengthy and potentially costly. If there's too much conflict around who should be chosen or there aren't appropriate options, the court may appoint a third party to control how your assets are used to cover your medical and living expenses.

If you pass away before making an estate plan, your assets will be distributed according to your state's intestate laws, which determine who's entitled to property from an estate in which the decedent had no will. "If you have minor children, the court will decide on the parameters of their inheritance," Ms. Shin said. "And if you leave behind a minor child who has no alternate legal guardian, the court will appoint a guardian on your behalf."

While state laws are designed to accommodate most people's wishes, the best way to ensure that your wishes are carried out is to create a customized plan yourself. "The state operates under certain assumptions—for example, that you want your assets to be distributed evenly among your next of kin—but that may be too simplistic. I encourage everyone to make their voice heard about who they want to care for their children and receive their assets," said Ms. Shin.

Updating your plan is almost as important as creating it.

There's one caveat to an estate plan that everyone should understand—it's not final unless you become incompetent or pass away. You can change your mind, and your estate plan, throughout your lifetime.

"Revisit your estate plan regularly, especially your beneficiary designations, about every three to five years," said Ms. Shin. "Many of us have the best intentions to make adjustments after a major life event—like a marriage, a divorce, a death, or a birth—but it's easier said than done."

Your estate plan should be dynamic, not a once-and-done document. "If your plan is keeping pace with your life and accounting for accumulation of wealth and changes in your family structure and living arrangements, expect the plan you have when you're 80 to look different from the plan you had when you were 40," said Ms. Shin.

Estate planning isn't the place for self-sufficiency.

Call around or ask a friend or family member for a referral for an affordable and qualified attorney who can help you prepare your estate planning documents. "To save money, you may be tempted to turn to a software program to draft your will," said Ms. Shin. "But many of these do-it-yourself options use generic language that may not be appropriate for your personal situation. The least costly route right now may end up having an unfavorable financial impact on your loved ones in the long term. "


  • This article is for educational purposes only. We recommend that you consult a tax or financial advisor about your individual situation.

Advice services are provided by Vanguard Advisers, Inc., a registered investment advisor.

© 2016 The Vanguard Group, Inc. All rights reserved.

PrintComment | Email | Share | Subscribe