What is estate planning and why is it important?

When you hear the word "estate," you might picture a grand, sprawling manor from a historical drama. As a result, it’s easy to assume that only wealthy or elderly people have estates. But in reality, everyone has an estate. It’s simply the term for everything you own — from real estate, bank accounts, and investments to cash, personal belongings, and even your pets.

If you have an estate — which you do — then you should make a plan for what happens to it when you die. This ensures your loved ones and belongings are cared for and properly handled when you pass away.

What is estate planning?

Estate planning is the process of writing down important decisions about your healthcare, belongings, and finances to be carried out when you’re incapacitated or pass away. Your estate plan is this collection of legal documents that will be followed and carried out by a court after your death.

Proper estate planning helps minimize estate taxes, legal fees, and potential conflicts among your loved ones. When planning your estate, you’ll make decisions about the assets you own, your future care, and the legacy you leave behind for the people and causes you care about most.

Why is estate planning important?

Whether your estate is large or small, simple or complex, it’s important to plan ahead — and there are many great reasons why you should.

With proper estate planning, you can:

• Simplify and streamline the probate process for your loved ones (or potentially avoid probate altogether!).
• Choose a guardian for your minor children, outline your wishes for their care, and leave them an inheritance.
• Name someone to care for your pets and set aside money for their care.
• Choose beneficiaries to receive your assets, including your real estate property, financial accounts, and personal possessions. This can help prevent conflict and confusion between loved ones after you’re gone.
• Leave a gift to charity in your estate plan to continue supporting the causes that matter most to you.
• Plan for incapacity by choosing someone to manage your affairs if you’re unable due to illness, injury, or cognitive decline.
• Reduce estate taxes and legal fees, preserving more of your assets for your beneficiaries.
• Gain peace of mind. Knowing that you have a plan in place can provide comfort and reassurance, allowing you to focus on enjoying your life.

At the end of the day, estate planning is the ultimate act of love. By thoughtfully making these decisions now, you can provide peace and clarity to your loved ones during a difficult time.

Components of an estate plan

An estate plan consists of multiple legal documents that work together to outline your wishes. A comprehensive estate plan should include the following:

• A last will and testament or living trust: These important legal documents sit at the heart of your estate plan. In your will or trust, you outline what should happen to your estate after you pass away — like who should receive each of your assets, care for your children and pets, and carry out the wishes outlined in your document.
• Advance healthcare directive (AHCD): An AHCD lets you outline your preferences about medical treatments and procedures in the event you’re unable to communicate your wishes yourself.
• Financial power of attorney (POA): A financial POA lets you authorize someone to manage your finances if you become unable to. This person can pay your bills, make bank deposits on your behalf, and more.
• Beneficiary designations: Some assets, like life insurance policies and retirement accounts, let you name a beneficiary to receive them when you pass away. These assets bypass the probate process and go directly to your beneficiaries, saving time for everyone involved.
• Funeral wishes: While not legally binding, including funeral instructions in your estate plan can ease stress for your loved ones during a difficult time. It lets them focus on honoring your life instead of worrying about making arrangements and wondering if it’s what you would have wanted.

For a detailed list of what to include in your estate plan, check out our step-by-step estate planning checklist.

What happens if you don’t have an estate plan?

Dying without an estate plan is known as dying “intestate.”

If you die without a plan, your state will decide what happens to your assets based on a set of rules known as intestate succession laws. These arbitrary laws determine who receives your property and becomes the legal guardian of your children.

The order of priority varies by state, but typically your spouse and children are first in line to inherit your property, followed by your parents and your siblings. If none of them can be located, the state will look for your next closest living relative, either by blood or marriage.

Contrary to popular belief, if you die without an estate plan, your loved ones won’t have a say in what happens to your property or — even more importantly — your dependents, including your children. Why leave these important decisions to the legal system when you have the power to make them yourself?

Frequently asked questions

Who needs an estate plan?

Everyone over 18 should have an estate plan. If you own assets like a home, bank accounts, or investments, it’s important to have a plan in place. If you have dependents — such as children, adult wards, or aging parents — estate planning ensures they’ll be cared for according to your wishes. And if you own a business, estate planning can help ensure its continuity and success after you're gone.

At its core, estate planning is about exercising your right to decide what happens to your property, your loved ones, and your legacy.

How much does estate planning cost?

It depends on how you create your estate plan.

A will can cost anywhere from $300-1,000 if you hire an attorney to draft it for you. However, with today’s technology, it’s easier than ever to create a valid last will and testament using online tools. There are completely free options — like FreeWill — and other providers who charge a fee to create your will and other estate planning documents.

With FreeWill, you can create all of your estate planning documents for free — including a will, trust, advance healthcare directive, and financial power of attorney.

Learn about the different ways to make your will and how much each one costs.

Do you need to work with an estate planning attorney?

No — you aren’t legally required to work with an estate attorney to make or manage your estate plan. You are allowed by the law to make a will without a lawyer because American citizens have a right to legally represent themselves.

There are many ways you can make your estate planning documents on your own — including using a free online service like FreeWill.

That said, there are situations where it may be a good idea to hire an estate attorney to draft your estate plan, such as if:

• You want to minimize or avoid estate tax. The 2025 federal estate tax exemption is $13.99 million for individuals and $27.98 million for couples — but your state’s exemption may be lower. If your estate is valued above the federal or state tax exemption, it may be subject to estate tax. An estate attorney can help you set up your estate plan in a way that reduces or avoids estate tax.
• You’re a business owner. Owning a business can add an extra layer of complexity to your estate. An estate attorney can help you navigate the best way to plan for your business’s future.
• You have complicated family dynamics. If your family struggles to agree or you think there’s a possibility that someone may contest your will, an estate attorney can help you create a plan that avoids or addresses potential conflict.
• You feel more comfortable using an attorney. If you simply feel more confident putting your planning in the hands of a professional, then working with an estate attorney is a great option to ensure your plan reflects your wishes and goals.

Where should you store your estate plan?

Once you’ve created your estate plan, you should store your documents in a safe place, like:

• A fireproof safe in your home
• A safe deposit box
• With a trusted friend or family member
• With your attorney
• With the probate court

You’re not required to file your will with the probate court, but some people choose to, as it can help simplify the probate process after you pass if the court already has a copy on file.

If you keep your estate planning documents in your home or at a bank, make sure you let your loved ones know where they can find them, so they can locate them quickly after you pass away.

How often should you update your estate plan?

Creating your estate plan isn’t a one-and-done project. Once you’ve created your documents, you need to keep them up to date as your life changes.

You should review your estate plan every three to five years. You should also update your estate plan whenever you have a big life change, like buying a house, getting married, having a child, or receiving a medical diagnosis.

With FreeWill, you can update and reprint your documents at any time and as often as you need, completely free.

An estate plan starts with a will

Having a complete and current estate plan is the best way to protect your assets, make your wishes known, and — most importantly — ensure the people and causes that matter most to you are cared for after you’re gone.

Ready to get started? For most people, making a will is the first step in creating an estate plan. With FreeWill’s free will-making tool, you can have a legal, ready-to-sign will in as little as 20 minutes.