• Print
  • Default text size A
  • Larger text size A
  • Largest text size A

Estate Planning Basics

Although estate planning can be a complex task, a well-informed plan can make a big difference in what is left for your loved ones.

Before you begin to take action on your estate plan, it’s important to understand the key topics that may arise as you address your specific needs.

Working with an attorney or tax advisor

It’s important to work with an attorney and possibly a tax advisor on your estate plan. The attorney’s role will include guiding you through the creation of fundamental estate planning documents. These may include a will, health care proxy, and durable power of attorney. The tax advisor can help you with any associated tax issues.

You’ll make the decisions, but your attorney and tax advisor can help you think through and understand the sometimes complex implications of each option. They will also help you communicate your wishes clearly, avoid mistakes, minimize taxes, and adjust your plans as time goes by or your circumstances change.

An attorney or tax advisor can be well worth the cost—significant savings can result from thorough, informed planning.

Maximizing what you leave behind

This will be a key theme throughout your estate planning efforts. It's important to get legal or tax advice and think through how each asset will pass to your beneficiaries, as well as your estate as a whole. The best options may vary by the asset type, asset size, your age, or many other factors.

You'll want to be thoroughly informed on what actions you can take or plan now to make sure as little as possible is lost to taxes, court fees, and other expenses.

Estate, inheritance, and gift taxes

A big part of maximizing what you leave behind is minimizing taxes. Federal taxes on gifts and estates can be among the highest assessed on any financial transaction. In addition, some states levy their own estate or inheritance taxes.

More about taxes

Get access to resources, forms, education, and tools.

Visit the Tax Center.

Both estate and gift taxes usually have exemption limits, meaning you can give up to a certain amount without incurring tax. Many people use the gift tax exemption to transfer assets while they are still living, as part of their strategy to maximize what their beneficiaries receive.

Estate and inheritance taxes usually are based on the value of the taxable estate and are paid before the assets are distributed to the beneficiaries.

In recent years, estate and gift tax laws have been changing fairly frequently. For the latest on the federal estate and gift tax exemptions, see Estate and gift tax changes in Fidelity Viewpoints®.

Next topic

What is a will?
Even for estates that seem straightforward or have few assets, a will is essential.

Focus is on tooltip

beneficiary

individual who receives the benefit from an estate, trust, retirement account, life insurance policy, or account with a transfer on death (TOD) designation

Focus is on tooltip

will

legal document that defines how a person wants his or her assets distributed at death; may name an executor for the estate and guardianship for minor children

Focus is on tooltip

taxable estate

fair market value of all assets owned by the deceased, minus funeral expenses, debts owed by the deceased, and assets passed to a surviving spouse

Focus is on tooltip

health care proxy

type of power of attorney that gives a designated individual decision-making power over one's medical affairs; may include "living will" provisions, as well (also known as durable power of attorney for health care)

Focus is on tooltip

durable power of attorney

a document that gives a designated individual the ability to manage your financial affairs, make health care decisions, or conduct other business for you if you are incapacitated

Questions?

The tax information and estate planning information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. Fidelity does not provide legal or tax advice. Fidelity cannot guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws which may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of such information. Federal and state laws and regulations are complex and are subject to change. Changes in such laws and regulations may have a material impact on pre- and/or after-tax investment results. Fidelity makes no warranties with regard to such information or results obtained by its use. Fidelity disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Always consult an attorney or tax professional regarding your specific legal or tax situation.

612176.3.0