Wills, trusts, and
the one mistake that costs the most.

What a will does

A will tells courts: who gets your assets, who becomes guardian of your minor children, and who serves as executor of your estate.

A will does NOT: transfer assets with beneficiary designations (IRAs, 401(k)s, life insurance), transfer jointly owned assets with right of survivorship (those pass to the surviving owner automatically), or avoid probateprobateThe court-supervised process of validating a will, paying debts, and distributing assets after death. Slow, costly, and public.Full definition (a will goes through court).

Beneficiary designations, the most important thing

These accounts pass outside your will entirely: 401(k) and employer retirement plans, IRAs (Traditional and Roth), life insurance policies, annuities, bank accounts with PODPayable on Death (POD)A name you write on a bank account that says: when I die, this person gets the money directly. The account skips the slow court process for sorting out a dead person's assets.Full definition (payable on death) designation, brokerage accounts with TODTransfer on Death (TOD)A name you write on a brokerage account that says: when I die, this person gets these investments directly. The account skips the slow court process for sorting out assets after death.Full definition (transfer on death) designation.

Check your beneficiaries right now: every retirement account, every life insurance policy, every bank account with a POD. Set up primary AND contingent beneficiaries on everything. This is a 30-minute task that can matter more than a will.

Do you need a trust?

A revocable living trust avoids probate (assets transfer without court), keeps the estate private (wills become public record, trusts do not), costs more to set up ($1,000 to $3,000+ attorney fees), and must be properly funded (assets retitled into the trust's name).

Probate and how to avoid it

Probate is the legal process of validating a will and distributing assets under court supervision. People try to avoid it for three reasons: it is a public record (anyone can see what you owned and who received it), it takes 6-18 months in most states, and it can cost 3-8% of the estate in court and attorney fees verify×DON'T TRUST, VERIFYClaim: Probate typically takes 6-18 months and costs 3-8% of the estate.Verify at: American College of Trust and Estate Counsel ↗ACTEC publishes practitioner guidance; figures vary widely by state and estate complexity..

How to avoid probate

• Beneficiary designations. Accounts with named beneficiaries transfer directly, bypassing probate. Includes retirement accounts, life insurance, TOD (transfer-on-death) and POD (payable-on-death) accounts. Must be kept current; an ex-spouse named as beneficiary can still inherit.
• Joint ownership (JTWROSJoint Tenancy with Right of Survivorship (JTWROS)Two or more people own a home or account together; when one of them dies, the survivors automatically own the whole thing without going through a court.Full definition). Joint Tenancy with Right of Survivorship automatically passes to the survivor. No probate for that asset. Different from tenancy-in-common, which does go through probate.
• Living trust. Assets transferred into a revocable living trust bypass probate because the trust owns the asset, not you. Costs more to set up than a will. Requires ongoing maintenance: new assets must be re-titled in the trust's name.

Healthcare directives

Two documents most people do not have and everyone should:

1. Healthcare Power of Attorney (or Healthcare Proxy): names someone to make medical decisions if you cannot. Without this, courts decide and family members may fight.
2. Living Will (Advance Directive): specifies what treatments you do or do not want in specific situations (terminal illness, persistent vegetative state). Guides your healthcare proxy.

These are separate from your financial will. Both should exist. Many states offer standard forms free from state medical or bar associations. An attorney review is worthwhile, but these documents do not strictly require one to execute.

Digital and Bitcoin estate planning

For Bitcoin holders, your heirs need three things: that the Bitcoin exists, where it is (which wallet), and how to access it (seed phraseseed phraseThink of it as the combination to a bank vault that exists only in your head: 12 or 24 specific words in a specific order. Anyone who copies the combination opens the vault. The bank has no copy. There is no locksmith, no reset, no customer service. Lose the words, lose the Bitcoin.Full definition). Do not put seed phrases in a will. Wills become public record through probate. A seed phrase in a will becomes a publicly accessible theft instruction.

Consider a "digital assets memorandum," a private document (not part of the public will) that your executor knows exists and can access. Can include password manager, email accounts, social media, domain names, exchange accounts, and secure pointers to hardware wallets or seed phrase storage.

For the full Bitcoin-specific treatment, see Bitcoin Inheritance.

Advanced estate and giving structures

US-only. Each of the structures below is part of US tax law and requires US-licensed professional involvement.

1031 exchange (real estate)

A 1031 exchange is a tax-deferred exchange of one investment property for another. No capital-gains tax at the time of the exchange. Tax is deferred until eventual sale.

• Both properties must be "like-kind" (investment real estate for investment real estate, not primary residence).
• Must use a Qualified Intermediary (QI). You cannot touch the proceeds.
• 45 days to identify replacement property.
• 180 days to close on replacement property verify×DON'T TRUST, VERIFYClaim: Section 1031 like-kind exchanges are limited to real property. The 45-day identification and 180-day closing windows are statutory.Verify at: IRS 1031 like-kind exchanges ↗TCJA (2017) limited 1031 to real property only. Personal property and crypto are excluded..
• The Bitcoin angle: 1031 does not apply to Bitcoin. Real property only.

Donor-Advised Fund (DAF)

A charitable giving account that lets you take a deduction now, invest the funds tax-free, and distribute to charities on your timeline.

• Contribute cash, stock, Bitcoin, or other appreciated assets.
• Take a charitable deduction immediately, in the year of contribution.
• Assets grow tax-free inside the DAFDonor-Advised Fund (DAF)A charitable account where you contribute, take an immediate tax deduction, and direct gifts to charities over time.Full definition.
• Distribute to qualifying charities at any time, on your schedule.

For Bitcoin holders: donate appreciated Bitcoin directly to the DAF. Avoid all capital-gains tax on the appreciation. Take a deduction for the full fair market value.

Where to open: Fidelity Charitable, Schwab Charitable, Vanguard Charitable. Each accepts Bitcoin donations.

Qualified Charitable Distribution (QCD)

Direct transfer from a Traditional IRA to a qualifying charity. Counts toward Required Minimum Distributions (RMDsRequired Minimum Distribution (RMD)The minimum amount the IRS requires you to withdraw annually from Traditional IRAs and 401ks starting at age 73 (rising to 75 in 2033). Calculated as account balance divided by your IRS life expectancy factor. Roth IRAs have no RMDs during the owner’s lifetime.) without being taxable income.

• Who it is for: people 70½+ with Traditional IRAs who would otherwise take RMDs as taxable income.
• Transfer up to $108,000 in 2026 (indexed for inflationinflationA general increase in prices over time, meaning each dollar buys less than it did before.Full definition) directly from IRA to charity verify×DON'T TRUST, VERIFYClaim: 2026 QCD limit is approximately $108,000 (indexed annually). Available to IRA owners 70½+.Verify at: IRS IRA distributions FAQ ↗SECURE 2.0 indexed the QCD limit. Verify the current-year amount..
• Counts toward your RMD.
• Not included in your taxable income.
• Cannot also claim a charitable deduction. The exclusion from income is the benefit.

When QCDs beat regular giving: if you take the standard deductionstandard deductionA fixed dollar amount that reduces your taxable income without itemizing. Most people claim this instead of listing individual deductions.Full definition (most people post-TCJATax Cuts and Jobs Act (TCJA)The big 2017 federal tax law. It nearly doubled the no-questions-asked tax deduction everyone gets, limited the deduction for state and local taxes to $10,000, and cut corporate and individual tax rates. Most of the personal tax cuts expire at the end of 2025 unless Congress extends them.Full definition), a normal charitable deduction provides no benefit. A QCD reduces income directly, which also reduces IRMAAIncome-Related Monthly Adjustment Amount (IRMAA)A Medicare surcharge added to your monthly premium if your income exceeds certain thresholds.Full definition exposure, Medicare premiums, and SS taxation. See IRMAA: The Medicare Income Surcharge.

Special Needs Trust (SNT)

A legal structure that holds assets for a disabled beneficiary without disqualifying them from government benefits (Medicaid, SSI).

• First-party (d4A): funded with the disabled person's own assets. Requires Medicaid payback at death.
• Third-party: funded by family members. No payback requirement. Most common for inheritance planning.
• Pooled: managed by a nonprofit. Useful for smaller amounts.

Action required: this requires an attorney specializing in special-needs planning. Do not attempt DIY. Find one through the Special Needs Alliance verify×DON'T TRUST, VERIFYClaim: Special Needs Alliance is a national organization of attorneys specializing in disability and elder law.Verify at: specialneedsalliance.org ↗SNA members are vetted attorneys with specific practice expertise..

How to actually get a will done

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