When you hear “estate planning,” you might only think of wills and life insurance policies. You’re correct in assuming estate planning includes how your assets are divvied up, but there’s more to it. Proper planning also involves who you will assign to oversee your assets if you cannot do so for health reasons. Plus, you’ve got to think about tax implications and how you’ll transfer your financial resources, including real estate.

You don’t have to be uber-wealthy to start thinking about your estate plan. Nor should you expect your strategies to stay the same throughout your lifetime. Whether you’re pondering how to approach estate planning or revising existing arrangements, here are four strategies to consider.
 

Drafting a will is one of the essential steps in estate planning. It can spell out how you want your assets distributed after you pass. Wills might also dictate who will assume guardianship of your children and ownership of your pets. These provisions can include the transfer of guardianship of adult children who can’t care for themselves. Conditions like autism and physical disabilities could make transfers of guardianship necessary.

But there’s more to a comprehensive estate planning strategy than a will. Lifestyle Investing expert Justin Donald argues that a complete plan “should include a will, a trust, and a power of attorney.” He recommends consulting with an estate planning attorney so “you can dictate how your assets are distributed and who will handle your affairs in the event of your incapacitation.”

A will might say who will receive your assets, such as your home. However, you’ll want to appoint an executor who will carry out what your will says. Instead of just using a will to determine who gets your assets, putting them into a trust can lower your beneficiaries’ tax obligations. Depending on the type of trust you establish, you might want a separate manager to oversee it. And you’ll want to grant a trusted individual power of attorney to manage your affairs if you can’t. 

A power of attorney allows that person to act on your behalf if you cannot make decisions on your own. Say you have a stroke, which puts you in long-term care, or you’re in a car accident and temporarily in a coma for six weeks. During this time, the person who holds your power of attorney can make financial and healthcare-related decisions according to your wishes. Granting a power of attorney to a trusted individual is a way to protect your beneficiaries’ interests when you can’t.
 

A will is a tricky thing. You might believe your will has the final say over who gets what. But this isn’t necessarily the case when discussing accounts and policies with specific beneficiaries. Remember the IRA you set up decades ago, listing your brother as your sole beneficiary? He will likely still get 100% of your IRA money even if you state something to the contrary in your will.

When you select beneficiaries for your 401(k), life insurance, or other financial accounts, it acts as a binding contract. Your beneficiary designation tells the fund manager who gets the money and policy benefits upon your death. By ensuring your account beneficiaries match what you put in your will, you can help your heirs avoid legal disputes. It also clears up any confusion for the executor of your estate.

Besides ensuring your will matches the beneficiaries listed on your accounts, be sure to review your documents periodically. It can be easy to name a beneficiary to your 401(k) and forget who you chose. This person may be an ex-spouse or someone who is no longer alive. As major life events and changes happen, update your beneficiaries to reflect your current wishes. Be sure to look at all annuities, pensions, life insurance policies, bank accounts, and investments.
 

For your heirs, remember that real estate is less liquid than the cash they inherit from your savings account. They must sell the property to get any cash value from real estate. The process of selling (called liquidating) could take months and result in expenses like sales commissions and taxes. Sometimes, you might want to avoid your estate executor selling your property. You may choose to retain the property and use it as a rental, for residual income, or donate it to a charitable organization. Some people choose to pass real estate down to their children to ensure they have a place to live.

In other scenarios, you might be okay with your executor selling your former home. But you want specific percentages of the proceeds to go to each of your heirs. Say you have three adult children and currently live in your home mortgage-free. Two of your adult children own their own homes. Your other adult child lives with you because they have a permanent disability.

You’ve already determined none of your children will live in the home when you pass. You state that you want your executor to sell the house, forestalling arguments among your heirs about what to do with it. To avoid further disputes, you indicate the percentage of sale proceeds each gets when the property is sold. For example, your executor might place the bulk of the proceeds in a trust to fund your disabled child’s care at an assisted living facility. Arguments between siblings over inheritances are common, but thoughtful planning and discussion can prevent them.
 

If the financial assets you pass down to heirs include taxable income, they may have to pay additional taxes. The IRS calls it Income in Respect of a Decedent, or IRD. It includes income on assets you didn’t pay taxes on before death. Think royalties, stock dividends, retirement account distributions, and capital gains.

Your beneficiaries must report these amounts as income on their tax returns. Capital gains can come from the sale of real estate after your death. And if your heirs rent out inherited property, they’ll have to report the proceeds as taxable income. It’s why you want to have an estate planner who is well-versed in tax implications by your side before you pass.

This individual can help map out different scenarios where your heirs may owe both estate and IRD taxes. An estate planner can recommend ways to minimize tax burdens for beneficiaries or at least prepare them for those obligations. During your estate planning, list what your income sources after death might be, including potential sales and uses of your properties.
 

You don’t need to have huge amounts of wealth to consider estate planning. It’s necessary for nearly everyone, even if you want to donate all your assets to charitable organizations. Estate planning strategies also help protect your wealth if you can’t manage it while you’re alive. Your estate plan should likewise consider healthcare decisions and who will act in your best interests. Considering all possible scenarios that can carry financial implications, you’ll do your heirs an enormous favor before you’re gone.