4 reasons why estate planning is important

January 12, 2024

Most people know how important it is to have a will, but an estate plan goes beyond deciding how to distribute your assets.

An estate plan is a set of documents that outline how you’d like your assets to be handled after you die or if you became incapacitated. Your assets may include your home, your investments and anything else of value, plus any other important responsibilities you have, such as children or a guardianship.

According to a recent survey, inflation has caused more people to see a need for an estate plan. It also found that younger adults are now almost as likely to have a will as middle-aged adults. Yet only 34% of Americans say they have a will or other type of estate planning document in place.1

Many people put off estate planning either due to lack of motivation or the assumption that they don’t have enough assets to make it worthwhile. However, a good estate plan covers who would make decisions for you about your finances and your health if you were no longer able to, no matter your age or level of wealth. And when it comes to getting started, there’s no time like the present.

Here’s a look at four reasons why estate planning is important.


1.  An estate plan is comprehensive

Many people think an estate plan deals exclusively with financial assets. But that’s only a part of it. The most basic estate planning documents should include:

  • Property power of attorney: Also known as financial power of attorney, this person will handle your property and financial matters if you're unable to do so yourself. For example, should a health emergency or accident happen, this person could pay your bills or manage other financial considerations on your behalf.
  • Healthcare power of attorney: Someone you designate to make healthcare decisions for you if you're unable to. If you’re moving away from family for the first time, it’s important that you designate someone to make healthcare decisions should something happen — preferably someone who lives near you.
  • A will: Wills document how you want your assets distributed after you die. A will can also include information like who you’d want to care for your children. Assets passed according to the terms of a will are supervised by the probate process, a court supervised process that is public record.
  • Advance directive or living will: An advance directive provides instruction regarding your end-of-life care if you’re unable to communicate them. They include directions like whether you want to have life-sustaining measures taken and other end of life care decisions.
  • A trust: When it comes to your financial assets, a trust can offer potential benefits not available with a will. A trust keeps your financial information out of the probate process and allows for the care of your assets during any time of disability prior to your death. A revocable trust allows you to benefit from your assets during your lifetime and is often paired with a pour-over will, which assures that any assets not held in the trust are added to the trust after your death.


2.  An estate plan identifies key players

Part of estate planning includes appointing people to play key roles for “in the event of” scenarios. Consider and discuss the following roles with your attorney.

  • Healthcare and property powers of attorney: Ask yourself, “Who do I want making medical decisions and handling my financial affairs for me if I can’t?” This could be your spouse or someone else who understands your wishes and you can trust to follow them.
  • Guardian of your children (if you have any): Be sure to talk about this with your spouse or partner.
  • Trustee or executor: Being a trustee can be time-consuming. You may want to consider not only who you trust, but also who has bandwidth. A corporate trustee acting along with a trusted individual trustee(s) often provides a great balance of responsibilities. Trustee responsibilities include: 
    • Investing funds properly and in the best interests of all beneficiaries.
    • Filing tax returns on a timely basis.
    • Informing beneficiaries of anything that’s happened in the trust, including any investments and distributions that have been made.


3. An estate plan can minimize gift and estate taxes

Taxes are an inevitable part of life, but there are ways to minimize the taxes that will be payable on your death. As part of your estate planning process, you’ll estimate your total assets, which include:

  • Properties
  • Stocks and bonds
  • Cash
  • Interest in life insurance or annuity contracts
  • A 401(k) or other retirement accounts
  • Personal property, such as a vehicle, clothing or household furnishings

Federal estate tax is payable if your assets reach a certain threshold at the time of your death; this is $13.61 million or more per individual in 2024. This tax must be paid before your assets are distributed to your beneficiaries.

Ideally, your estate plan will include tactics that will reduce your overall assets to less than the estate tax threshold. These tactics could include charitable giving, an irrevocable trust or an irrevocable life insurance trust (ILIT) policy.

Gifting to loved ones is another way to reduce the amount of your total assets during your lifetime. Importantly, you won’t have to pay gift tax as long as you stay under the gift tax limit (which is $18,000 per recipient in 2024).

Along with charitable giving, there are other ways to give that aren’t subject to gift tax, including:

  • Qualified gifts made to your spouse or contributions to a political organization
  • Qualified medical or education expenses paid directly to the educational or medical provider 

A comprehensive estate plan will assess all tactics and implement those that are most appropriate to your circumstances.


4. An estate plan puts you in control

Not accounting for what happens to your assets can open you and your loved ones up to risk. If you were to face an untimely death, the statutes of the state where you reside will dictate the terms of your default plan. The courts will appoint an administrator to settle your estate, which can be an expensive process, and one that you wouldn’t have control over.

Estate planning includes many legal and financial documents. A financial professional can make the process feel more manageable by helping you account for your assets, your finances, and your life situation. Plus, a financial professional may make your trustee’s life easier by handling many administrative burdens that can sometimes be overwhelming.

Regardless of your finances or age, talking with a professional about why estate planning is important for you can help ensure your loved ones are cared for if anything were to happen to you.


Learn about trust and estate services at U.S. Bank.

Related content

6 tips for trust fund distribution to beneficiaries

4 reasons why estate planning is important

How to talk about money with your family

Estate planning documents: Living trusts vs. will vs. living will

Reviewing your beneficiaries: A 5-step guide

Gifting money to adult children: Give now or later?

How to protect your digital assets in your estate plan

7 beneficiary designation mistakes to avoid

How to access digital assets after a loved one's death

LGBTQ+ estate planning considerations

Key components of a financial plan

Resources for managing financial matters after an unexpected death


Start of disclosure content

Investment and insurance products and services including annuities are:
Not a deposit • Not FDIC insured • May lose value • Not bank guaranteed • Not insured by any federal government agency.

U.S. Wealth Management – U.S. Bank is a marketing logo for U.S. Bank.

The information provided represents the opinion of U.S. Bank. This is not intended to be a forecast of future events or guarantee of future results.

U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.

U.S. Bank does not offer insurance products but may refer you to an affiliated or third party insurance provider.