Retirement 101 · Chapter 7 of 8

Estate Planning Basics

Wills, trusts, beneficiaries, and the documents every retiree needs.

The four documents everyone needs

A will (who gets what). A durable financial power of attorney (who handles money if you can't). A healthcare power of attorney and living will (who makes medical decisions, and what you want). A HIPAA authorization (so doctors can share info with the people who need it). Without these, the courts decide — expensively and publicly.

Beneficiary designations override your will

Your will does not control IRAs, 401(k)s, life insurance, or TOD/POD accounts. Those pass by beneficiary designation — and whoever is listed gets the money, even if your will says otherwise. Divorces, new spouses, and deceased primary beneficiaries create traps. Review every beneficiary form every 2–3 years.

Trusts — when they help and when they don't

Revocable living trusts avoid probate, keep estates private, and provide continuity if you become incapacitated. They don't save taxes for most people (under the $13.99M federal exemption). Irrevocable trusts can provide creditor protection, Medicaid planning, and estate tax avoidance — but you give up control. Not everyone needs a trust; most retirees with simple estates do fine with well-drafted beneficiary designations and a solid will.

Step-up in basis

When you die, heirs receive your appreciated assets at fair market value on the date of death — erasing the capital gains tax that would have been owed if you sold them yourself. This is why "never sell your most appreciated stock" is sometimes good estate advice.

Key takeaways

  • Everyone needs 4 documents: will, financial POA, healthcare POA, HIPAA.
  • Beneficiary designations override your will. Review them regularly.
  • Trusts help with probate avoidance and complex situations — not usually taxes.
  • Step-up in basis at death eliminates capital gains on appreciated assets.

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