Estate planning is, unfortunately, a bit more complicated than most people expect. In many cases, it's not just enough to establish a will, name beneficiaries, and add your kids to your bank accounts. The choices that seem like the simplest ways to pass down your money and property can come with unexpected complications — from probate and taxes to questions about who can manage your finances or make medical decisions if you become incapacitated.
That's why we turned to an expert for a little guidance. We asked readers of our Wake-Up Call at Work newsletter to send in questions about inheritance, wills, probate, and whatever else you could come up with, and we invited estate-planning attorney Pamela Maass Garrett, better known on social media as "Law Mother," to share her best advice.
What is the purpose of putting your assets in a trust? If you have a will and beneficiaries, do you need a trust?
Pamela Garrett: The purpose of a trust is to make sure your money and property go exactly where you want, without a court getting involved, and to give you more control over how and when it's given. Do you need one if you already have a will and beneficiaries? Not necessarily. A will with beneficiary designations can work — but it comes with real gaps, and that's why many people choose a trust instead.
A will alone usually means probate, and probate isn't ideal. It hands control to a judge, a stranger who's never met you or your family. Plus, it takes nine months to two years on average, costing 5 to 9 percent of everything you own.
Beneficiary designations have their own gaps, too. Most states don’t allow you to name a beneficiary on real estate, for example, but doing so can make you ineligible for Medicaid later. Plus, if the person you named passes away first, or you simply forget to update it, the money can end up going to the wrong person or landing in probate anyway. And if you name more than one beneficiary on an account, there's no one clearly in charge, which can create conflict.
A will and a beneficiary form also only kick in after you die. If you become sick or incapacitated while you're still alive, neither one helps — your family would have to go to court just to step in and manage things for you.
A trust closes all of these gaps at once. It covers your real estate, plans for incapacity, and allows you to bypass probate entirely. It also gives you control over how the money is paid out — whether that's all at once, slowly over time, or kept in the trust for specific purposes, like education. A trust can also be designed to protect what you leave behind from a future divorce or creditor, and it lets you name one person who's clearly in charge, which cuts down on family drama.
So yes, a will with beneficiaries can work. But most people choose a trust because it covers more, protects more, and puts them in control while they're still here to make sure it's done right.
Most of my wealth is in properties. How do I leave them to my children to protect them from taxes?
Real estate causes more confusion than almost anything else, and here's why. If you give your house to your children while you're still alive, they inherit it at your original purchase price. That means when they eventually sell it, they could owe a lot in capital gains tax. But if you leave the house to them after you pass, through a trust, they usually receive what's called a step-up in basis. That means their tax bill is based on the value of the house at the time they inherit it, not on what you paid decades ago. That one difference can save your family a significant amount of money.
If you own more than one property, many people use a trust built specifically for real estate, sometimes paired with an LLC for rental properties. This allows everything to pass smoothly without probate, while keeping that tax benefit in place. If your estate is worth more than the estate tax threshold — whether that's your state's threshold or the federal one — you'll want to work with an attorney on additional structures to help minimize what's owed. Real estate is an area where the details matter a great deal, so it's worth sitting down with an estate planning attorney before doing anything permanent.
I'm 73, widowed, and live by myself. I have put my daughter on all of my bank accounts and CDs. Do I still need an estate plan?
Adding your daughter to your accounts only helps with those specific accounts. It doesn't cover what happens if you become too sick to make your own decisions, and it doesn't cover your belongings or anything else you own. Plus, depending on how it's set up, it can sometimes cause tax problems down the road.
You'll likely still want a healthcare power of attorney, so your daughter can step in and make medical decisions if you can't speak for yourself. A financial power of attorney matters just as much, since it lets her manage your money and pay your bills if you're ever unable to. And you'll still want a will or a trust for anything outside those joint accounts.
It's also worth having a lawyer look at exactly how your daughter was added to those accounts. Depending on how it's structured, you may have inadvertently exposed yourself to her creditors, her divorce if she gets one, or a lawsuit if she's ever in an accident. Your money could still be considered fair game in one of her legal situations, even though it's really yours.
Additionally, if you're at all concerned about long term care costs down the road, it's worth having a conversation with an elder law attorney. They can help you plan ahead in a way that protects what you have while also preparing for that possibility.
I've been hearing a little about POD (payable on death) and TOD (transfer on death). Are these important, and how do I arrange them to make things easier for my family?
Yes, they're worth setting up, and they're free. Just call your bank or brokerage and ask them to add a POD or TOD to your account. It's a quick form and usually takes just a few minutes.
But what people often don't realize is that they only work for the one account they're attached to — and they only kick in after you die. If you get sick or hurt and can't make decisions while you're still alive, a POD or TOD does nothing to help. They can also cause real problems if they don't match the rest of your plan. Say you named one child on an account 15 years ago, then later your will or trust says everything should be split evenly between all your kids. Now there's a conflict, and it usually ends up costing your family money and peace of mind to sort out.
That's why many people choose to list their trust, instead of a person, as the POD or TOD beneficiary. This way, everything funnels into one place and your trust coordinates all of it, instead of each account doing its own thing. It also opens up benefits a plain POD or TOD can't give you. Instead of your kids getting a lump sum the day the account transfers, the money can be paid out slowly over time, or protected from a future divorce or creditor, the same way the rest of your trust is.
What advice do you have for people who are single with no children? Who should oversee health decisions when relatives aren't in the picture? And what about estate proceeds when community foundations take a percentage of principal to manage each year?
People often think of estate planning as something for when you die, but it's just as much about protecting you if you become incapacitated at any point in life, at any age, not just later in life. A car accident, a sudden illness, a medical emergency— these can happen to anyone, and if you don't have a plan in place, you don't get to choose who steps in for you. If you don't have a spouse or kids, a lot of people assume there's no default plan, so nothing needs to be done. But in many states, the law automatically hands decisions to another family member, a parent, a sibling — potentially someone you might not be close to or wouldn't trust with something this important. You don't get a say unless you put it in writing yourself.
Get a healthcare power of attorney. This names a friend or trusted person to make medical decisions if you become incapacitated and can't speak for yourself. Get a financial power of attorney, too, for money matters.
On the foundation question, that's worth asking about directly. Community foundations typically charge an ongoing fee to manage the money you leave behind, so it's smart to ask upfront what percentage they take and how that's structured before you commit anything. The good news is most nonprofits and charities want your gift to actually make an impact, so they're often willing to work with you on how it's structured, whether that means a smaller upfront gift, spreading it out over time, or directing it toward something specific you care about.
I moved from Illinois to Texas. Do I need to redo my trust?
Texas will recognize a trust created in Illinois. That said, there may be some state specific reasons to update it. Your healthcare directive and power of attorney forms are worth taking a second look at, since Texas has its own rules, and a form written for Illinois might not be accepted by a Texas hospital or bank when you actually need it. Texas also has community property laws that Illinois doesn't, which can change how certain things are split between spouses. Work with a local attorney to review everything and make sure it fits Texas law.
