All adults need an estate plan, especially in their 40s or 50s. Your plan can be very simple; without one, you're subject to the laws of your state. This could make managing your finance and health decisions difficult if you're incapacitated, and state laws could result in unintended consequences at your death. Most general practice attorneys can help you with a basic estate plan, and in much of the country they may charge less than $1,000 — less than you might spend on a vacation or a piece of new furniture.

Minimum Need

A basic estate plan includes a will, a power-of-attorney document, and a health care proxy or living will, depending on your state. Your will is basically instructions to the probate court regarding what to do with your assets and whom you name as guardian for your young children. The power-of-attorney document gives a specified individual the power to legally act in your stead. The health care proxy is like a power of attorney for your health care and can govern medical decisions made on your behalf. These decisions may be as simple as consulting with your doctor while you recover from anesthesia after a simple operation or as complex as making the decision about your life support. Some states make provisions for a separate living will in which you can dictate end-of-life choices; other states expect that these instructions will be spelled out in the health care proxy.

Alternative Ways to Control Assets

Being married creates some rights regardless of whether you have a formal estate plan. These include the right to inherit a portion of your estate and receiving unlimited gifts and inheritance without estate or gift tax. Your spouse would also be able to continue living in your joint home if you're incapacitated and could have a right to your pension benefits. Remember that in many states, your children would be inheritors if you die without a will — called dying intestate.

Not all assets pass to inheritors according to the directions in your will. Retirement accounts, life insurance, and annuities should have appropriate beneficiaries listed within those particular documents. Be sure to keep these up-to-date as your children grow and your relationships with your family change. The original designation you might have listed — “to all my children equally,” for example — may not still be appropriate if one child is dealing with a difficult divorce or another child is receiving government benefits that could be affected by an outright inheritance. If you're helping your parents manage their estate, don't forget to review their beneficiary designations as well. Each account should have both a primary and a contingent beneficiary — to receive the inheritance if the primary beneficiary isn't alive — to avoid having the funds revert to the estate to be distributed through the will. An advantage to assets being distributed through beneficiary designations is that they are available almost immediately, without the delays of the probate court having to read the will.

The Players

There are several different roles that you'll need to assign in your estate plan. The executor moves your will through the probate process and makes sure your instructions are followed. Your power-of-attorney designee has the right to act for you while you're alive but unable to act for yourself, and is nominated under either a durable power of attorney, which takes effect immediately upon your signing the document, or as a springing power of attorney who takes over for you after a number of physicians have declared you incompetent. Your health care proxy is charged with making medical decisions for you. If you have children, you'll name a guardian to care for them if you die.

If you've created a trust to manage your assets while you're alive, it's likely that you have assigned a trustee, possibly with a co-trustee, depending on the laws in your state. The trustee has a fiduciary duty to manage the assets in the trust according to the trust's instructions. You would also name a trustee if your trust doesn't take effect until after your death. For these trusts, many people name a family member who will understand the needs of the family in addition to an institutional trustee such as a bank trust department or attorney who, in conjunction with the family member, would manage the trust assets.