Estate Planning for Seniors: Complete Guide
Some individuals believe that they don’t have enough assets to need a will or that their family members will sort things out on their behalf.
The reality is that anyone with assets can benefit from estate planning, and estate planning can be an empowering process to ensure that their wishes are carried out while reducing stress and costs for their family.
In this article, we’ll cover essential estate planning documents, the costs of planning your estate, and provide you with a checklist to guide you through estate planning for seniors.
Key Takeaways
Estate planning protects your assets and ensures that your wishes are followed.
Seniors have unique considerations beyond basic wills, such as health and medical decisions, financial management, and asset protection.
Proper planning reduces family stress and costs.
What is estate planning for seniors?
Estate planning makes sure your assets—like your home, personal items, and digital assets—are safe. It helps you pass them on to your loved ones as you wish. It also includes health and personal care wishes.
What comprises a senior’s estate?
We often think about estates as our homes and our finances, but an estate is more than just a person’s home and their bank accounts. An estate includes:
Properties, including your personal home and other real estate properties
Financial accounts, including retirement accounts, pensions, and Social Security benefits
Personal belongings, including vehicles and sentimental items
Digital assets and online accounts, such as PayPal accounts, cryptocurrency accounts, and social media accounts
Age-related estate planning considerations
As a senior, specific planning considerations can help protect assets. Care later in life, such as long-term care or in-home care, can be a significant expense. Because Original Medicare (Parts A and B) typically doesn’t cover long-term care, some seniors rely on Medicaid to help pay for long-term care. However, this is a needs-based program, so early planning can help to protect assets while still qualifying for the program. This is usually done using tools like irrevocable trusts and asset reallocation. Many seniors also wish to pass on their assets to their grandchildren or great-grandchildren. Tools like education savings plans and trusts help to make this happen while reducing the amount of taxes paid.
Why estate planning matters for elderly adults
Estate planning can protect your family from legal complications, ensure that your wishes are carried out, and prevent family conflicts.
Protecting family from legal complications
When someone passes away, their estate goes through probate. Probate verifies the will and ensures that assets are distributed as the will specifies. If there is no will, then probate distributes the person’s assets according to state law. However, probate is a lengthy process that can come with additional fees. Proper probate planning helps minimize the delays associated with probate and reduces added costs like administrative and legal fees. Having clear instructions also prevents any confusion and family disputes over inheritance.
Common goals seniors address through estate planning
Elderly estate planning ensures that your goals are fulfilled. Some of the common goals seniors address through estate planning include:
Providing for surviving spouses and any dependent children
Supporting their grandchildren’s education and future needs
Giving to charity or planning a community legacy
Minimizing state taxes and preserving wealth
Ensuring long-term care funding
Keeping properties or heirlooms within the family
Consequences of inadequate estate planning
Proper elderly estate planning can prevent many issues from occurring. For example, if someone doesn’t have a proper will, then state intestacy laws will determine how their assets are distributed. This can vary by state. Usually, it prioritizes a person’s spouse and children. If a person doesn’t have a spouse or children, then it moves on to other relatives. This can lead to lengthy legal processes and probate costs, and the individual’s wishes may not be carried out as they hoped. Inadequate estate planning can also create stress between family members, which can even lead to lawsuits.
Essential estate planning documents for seniors
Wills, trusts, beneficiary designations, healthcare directives, and financial powers of attorney are all essential components of estate planning.
Wills and testaments planning
A will and testament states how a person wishes their assets and personal affairs to be handled after their death. While the legal requirements can vary by area, it’s usually required that a will be put in writing, signed by the testator (the person who has made the will), and signed by two witnesses. When making a will, the person also needs to choose an executor. This person handles the estate and pays taxes and debts. The will should also outline the beneficiaries, which is a detailed account of who receives which assets.
Key components of a senior’s will
Including these important components helps to ensure that a will is complete and that a person’s goals happen as they wish:
Property distribution and specific bequests
Guardian appointments for dependent adults
Funeral arrangements and burial preferences
Digital asset access and management instructions
Alternate plans for contingencies
Understanding probate proceedings
Probate is the legal process that validates the will and distributes the assets. This involves court supervision. How long it takes for probate can vary. In some cases, it may take a few months, but, according to Trust & Will’s State of Probate Study, it takes 20 months on average.
Probate also comes with extra costs, like probate, court filing, and lawyer fees. However, some assets bypass probate entirely, such as assets with named beneficiaries, like life insurance policies and assets placed in a revocable living trust. Some people choose to divide their assets in this way to avoid the time and costs associated with probate proceedings.
Trust options for elderly estate planning
Some seniors place their assets in trusts. This helps them avoid probate. It also keeps asset distribution private and protects against lawsuits. Trust options include:
Revocable living trusts, a type of trust that can be altered and can help avoid probate
Irrevocable trusts, which cannot be changed or canceled, but can limit taxes and protect assets
Special needs trusts, which can provide support for disabled beneficiaries without impacting their eligibility for government assistance programs
Beneficiary designations and updates
Once you have set your beneficiaries, it’s important to review them regularly, especially after any major life changes like marriage or divorce. This ensures that things are up to date with your current wishes. Some beneficiary designations to consider include retirement accounts, life insurance policies, bank accounts, and investments. Primary and contingent beneficiaries to consider include:
Spouse, children, and grandchildren
Charitable organizations and foundations
Trusts and estate entities
Healthcare directives and medical decisions
Your will can also be a place for you to outline healthcare directives and medical decisions. This includes a living will that outlines preferences for end-of-life care.
Healthcare proxies and medical powers of attorney can be designated, which is a person who can make healthcare decisions on the individual’s behalf. Finally, HIPAA authorization allows medical information to be shared with specified individuals, such as family members. When planning healthcare directives, important questions to ask include:
Do you want life-saving measures like CPR to be taken if it is unlikely that you will recover?
If you can’t eat or drink on your own, do you want to receive artificial nutrition or hydration (such as through an IV)?
Do you want medication to relieve pain, even if it makes you drowsy?
Do you want hospice or palliative care?
Do you wish to donate your organs? Are there any organs that you wouldn’t want to donate?
How do you feel about donating your body to medical research?
Are there any restrictions on medical treatments due to religious or cultural preferences?
Would you like to consult a religious leader?
Are there any religious or cultural rituals you would like to be carried out after your death?
Financial power of attorney for seniors
A durable financial power of attorney allows a senior to appoint someone who is able to make financial decisions on their behalf. There are different ways to manage the amount of control given under a power of attorney. General powers of attorney have a broader scope of authority, including managing bank accounts and paying taxes.
Limited powers of attorney have more specific powers or have authority for a limited period. A power of attorney can go into immediate effect, or a springing power of attorney can be specified, meaning that the agreement goes into effect when a certain event happens, such as being mentally incapacitated. When choosing a financial power of attorney, it’s important to consider:
Trustworthiness and financial responsibility
Geographic proximity and availability
Understanding of your values and preferences
Backup agents and succession planning
Estate planning costs and professional fees
There’s a common misconception that estate planning is expensive, but this isn’t always true. Basic wills can be more affordable, and proper estate planning can prevent extra fees.
DIY vs. attorney-prepared documents
If you choose to work with an attorney, costs can vary. Simple wills can be around $300, but more complex types of wills can be over $1,000. There are also online will preparation services, which can be more affordable. However, these are best used for simple wills. They don’t offer the customized advice that a lawyer provides, and there is a possibility that you could make a mistake. For more complex wills—like those with foreign assets, blended families, or special needs dependents—it's best to work with a lawyer.
Typical estate planning attorney costs
Many attorneys provide a flat rate for those with a basic will. This fee covers essential documents like a will, powers of attorney, and basic medical directives. The national average is around $375. For more complex trust and tax planning, attorneys charge hourly rates.
These hourly rates range from about $150 to $400 an hour, depending on location and experience. Once a trust is created, it can require ongoing management. Fees for this management might be charged as percentage fees, hourly rates, or fixed annual fees. Knowing what ongoing management fees are required helps with financial planning.
Long-term cost savings from proper planning
While estate planning has upfront costs, it can save money in the long run. Potential long-term cost savings include:
Reduced probate and court costs for families
Tax savings through strategic planning
Avoided family conflicts and litigation expenses
Estate planning checklist for seniors
In addition to working with an attorney, an estate planning checklist can provide guidance throughout the process.
Document preparation and review
Initial steps of estate planning include:
Appointing a power of attorney
Preparing healthcare directives
Planning for long-term care and possible Medicaid coverage
Preparing how to store important documents, such as a safe deposit box
Documenting asset distribution and additional gifting
Creating a contingency plan
After the initial documents have been created, regular review is important to keep them up to date. This includes:
Updating your current will and trust documents
Reviewing your beneficiary designation forms
Informing executors of any updates
Asset inventory and valuation
Reviewing your assets removes any ambiguity and helps ensure a smooth transfer of assets. This includes:
Real estate appraisals and property records
Financial account statements and investment portfolios
Personal property and valuable item documentation
Digital asset inventory and access information
Professional team coordination
Proper estate planning includes working with professionals to understand the tax and financial implications of different choices. This includes:
Estate planning attorney consultation and selection
Account and tax professional involvement
Financial advisor and insurance agent coordination
Family communication and expectation management
When to update your estate plan
Estate plans should be reviewed regularly, but updates are also needed for certain life events and legal and tax law changes.
Life events requiring plan revisions
Major life events that would require you to revise your estate plan include: