Best 2 Retire

Importance of an Estate Plan: Your Situation and Your State

By Abontu LLC · Last reviewed November 7, 2026 · Editorial policy

Estate Planning
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Educational information only. This is not legal, tax or financial advice. Estate law is made by each state, and the right plan depends on your family, your property and where you live. We are not attorneys, and reading this page does not make us your attorney. Before you sign anything, talk to an estate planning attorney licensed in your state. See our full disclaimer.

What an estate plan is, and who needs one

An estate plan is the set of decisions and documents that say who handles your money and health decisions if you cannot, and who gets what after you die. It is not only for the wealthy. For most retirees the paperwork that matters has little to do with taxes: it is the will, the beneficiary forms on your accounts, a power of attorney and a health care directive.

The most important thing to know is that there is no single right plan. What you need depends on your situation, and the rules depend on your state. A plan that works well in one state may be incomplete in another. The sections below explain the main pieces, then show where your situation and your state change the answer.

It depends on your situation

These are common situations that change what a plan should include. The details of each are a question for your attorney.

  • Married or single. Spouses have rights under state law that a will cannot always remove, and the rules for what passes between spouses differ by state. If you are single, your choice of who inherits and who acts for you matters even more, because no spouse steps in automatically.
  • Children from an earlier relationship. If you leave everything to a new spouse outright, nothing legally requires that spouse to pass it on to your children. State inheritance rules can also split things differently when children are not also the surviving spouse's children. Many people in this position talk to an attorney about trusts.
  • No children. If you have no spouse or children and no will, state law passes your property to your nearest relatives in an order the state sets. Naming the people or charities you want, and an executor, is how you make your own choice.
  • Young children or grandchildren who depend on you. A will can nominate a guardian for a minor child, but a court makes the actual appointment. Minors also cannot manage inherited money directly, so a custodian or trust is commonly set up.
  • A family member with a disability. An outright inheritance can affect a person's eligibility for benefits such as Supplemental Security Income and Medicaid. A properly written special needs trust can keep it from counting as the person's resource, and the Social Security Administration's rules for these trusts depend on the type of trust and the person's age. This is a job for an attorney who handles special needs planning.
  • A business or rental property. What happens to a business depends on its legal structure, any partner or operating agreement, and state law. Rental and second properties raise their own title and tax questions. There is no one-size answer.

It depends on your state

State law controls most of this. Four places where it matters most:

  • Wills. Each state sets its own signing and witness rules. Some states accept a will written entirely in your own handwriting, and some accept electronic wills. A will that is invalid in your state does not do its job.
  • Probate. Probate is the court process for settling an estate. The rules, costs, timelines and shortcuts for smaller estates differ widely by state. In many states a smaller estate can skip full probate, so probate is not always long or expensive.
  • Taxes. Most estates owe no federal estate tax, but some states have their own estate or inheritance tax with much lower thresholds. See the table below.
  • Health care and money documents. Each state has its own forms and rules for powers of attorney and advance directives.

If you split your year between two states, or you own real estate in a state other than the one where you live, ask your attorney about both states. Real property is generally handled under the law of the state where it is located, which can mean a separate court process there, called ancillary probate.

What happens without a plan

Without a will, state intestacy law decides who inherits the property that goes through probate, and the shares depend on your family. A court appoints someone to manage the estate. The state may not divide things the way you would have, and the rules differ from state to state.

Two important details are often missed:

  • Intestacy and a will apply only to property that passes through probate. Many assets pass outside it (see the next section), so "the state decides everything" is not quite true. What the state decides is whatever is left in your name alone.
  • If you become unable to manage your affairs and have no power of attorney, a family member may have to ask a court to appoint a guardian or conservator. That process is public, slower and more restrictive than a power of attorney you set up in advance.

The main pieces of a plan

  1. A will. A will says who inherits your probate property and who serves as executor. It must meet your state's signing rules. It controls only what passes through probate.
  2. Assets that pass outside your will. Life insurance, retirement accounts, pensions and annuities with a named beneficiary, jointly owned property with survivorship rights, payable-on-death bank accounts, property in a living trust and, in states that allow them, transfer-on-death deeds for real estate generally go straight to the named person or surviving owner. A will does not change them. This is why checking your beneficiary forms is one of the most useful steps you can take, and why you should review them after a marriage, divorce, death or move.
  3. Trusts. A trust lets someone you choose manage property under rules you set, during your life, after your death, or both. A revocable living trust can let the property you put into it avoid probate, but only the assets that are actually titled in the trust or name it as beneficiary. Two common misunderstandings are worth clearing up: a revocable trust does not reduce estate tax, and it does not protect your assets from your own creditors, because you can still change or cancel it. Other trusts, such as irrevocable trusts and special needs trusts, work differently and are used for different goals.
  4. A power of attorney. This document gives someone you choose, called an agent, authority over your money or property. Whether it keeps working if you lose the ability to decide for yourself depends on how it is written. A power of attorney that stays in effect is called a durable power of attorney. State law governs these documents, an agent has legal duties, and banks sometimes ask for their own forms. The authority ends when you die. Choose your agent carefully, because the document gives that person real control. The Consumer Financial Protection Bureau has a guide for agents under a power of attorney that explains the role.
  5. Advance directives. A living will records the medical treatment you would or would not want. A health care power of attorney (also called a health care proxy) names someone to make medical decisions for you. According to the National Institute on Aging, most states provide free forms and a lawyer is not required, but the forms and witness rules vary by state. How another state treats a directive signed in your home state also varies, so review yours if you move or spend long periods elsewhere. Give copies to your agent and your doctor. The National Institute on Aging explains advance directives in plain language.
  6. A letter of instruction. This is an informal note for your executor and family covering things such as funeral wishes, where documents are kept and who to call. It is generally not legally binding. Do not put account numbers or passwords in it in plain text, and make sure someone can find it in time.
  7. A plan for a business, if you own one. Without one, the future of the business is uncertain. A business owner's attorney and accountant can explain the options.

Taxes: for most people, not the main issue

The federal estate tax applies only when an estate's value is above a threshold that is set for the year of death, and most estates owe none. Simple estates generally need not file a federal estate tax return. The IRS estate tax page has the current threshold. Gifts you make during your lifetime can count toward it, and a surviving spouse can carry over a deceased spouse's unused exclusion only if the estate files a return to elect it.

Some states have their own tax, and their thresholds can be very different from the federal one. A state estate tax is paid by the estate. A state inheritance tax is paid by the people who inherit, and the rate often depends on how closely they are related to you. Spouses are commonly exempt. As of November 2026, these states and the District of Columbia have one or the other, or both, according to their own revenue agencies:

State Kind of tax Official page
Connecticut Estate Department of Revenue Services
District of Columbia Estate Office of Tax and Revenue
Hawaii Estate Department of Taxation
Illinois Estate Attorney General
Kentucky Inheritance Department of Revenue
Maine Estate Maine Revenue Services
Maryland Estate and inheritance Comptroller
Massachusetts Estate Department of Revenue
Minnesota Estate Department of Revenue
Nebraska Inheritance (county) Department of Revenue form
New Jersey Inheritance Division of Taxation
New York Estate Department of Taxation
Oregon Estate Department of Revenue
Pennsylvania Inheritance Department of Revenue
Rhode Island Estate Division of Taxation
Vermont Estate Department of Taxes
Washington Estate Department of Revenue

States change these laws, so check the state's own page and ask your attorney. Iowa repealed its inheritance tax for deaths on or after January 1, 2025, and New Jersey no longer has an estate tax. Some states also tax nonresidents who own real estate or tangible property there, so owning a second home in one of these states can matter even if you live elsewhere. Our state pages show each state's income and retirement tax picture. They do not cover estate taxes.

Other things that depend on where you live

  • Community property. The IRS lists nine community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In those states, much of what a married couple earns during the marriage is owned equally by both spouses, which changes what each can leave. Alaska, Tennessee and South Dakota let spouses choose community property treatment. See IRS Publication 555. If you move between a community property state and another kind, ask an attorney how your documents and property are affected.
  • Medicaid estate recovery. Federal law requires states to seek repayment from the estates of some Medicaid enrollees age 55 and older for long-term care and related costs. States administer this differently, and there are protections for a surviving spouse, certain children and hardship cases. See Medicaid.gov and your state Medicaid agency, and ask an elder law attorney if long-term care may be in your future.

Putting it into practice

  • Start with what is easy. Check the beneficiary forms on your retirement accounts and life insurance, and any payable-on-death designations.
  • Set up powers of attorney and a health care directive. For many retirees, planning for incapacity is more likely to matter than planning for death.
  • Take stock. List your assets, how each is titled, and who is named on each. Tell your agent and executor where the documents are.
  • Talk to an attorney licensed in your state. Bring the list, and ask what is different in your state. Your state bar association can help you find one. Many bar associations and courts also publish free information.
  • Review after big changes. Marriage, divorce, a birth or death in the family, retirement, a move to another state, or a change in your health are all reasons to look at your plan again.

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