Estate planning is very important, no matter how small your estate may be. It ensures that your property will go to the people you want, in the way you want, and when you want. It permits you to save as much as possible on taxes, court costs and attorneys' fees; and it affords the comfort that your loved ones can mourn your loss without being simultaneously burdened with unnecessary red tape and financial confusion.
All estate plans should include at least two important estate planning instruments: a durable power of attorney and a will. A durable power of attorney is an instrument used for managing your property during your life, in case you are ever unable to do 
so yourself. A will is an instrument used for the management and distribution of your property after death. Additionally, more and more individuals are using revocable (or "living") trusts to avoid probate and to manage their estates both during their lives and after death.
Durable Power of Attorney
A durable power of attorney allows a person you appoint, an attorney-in-fact, to act in your place for financial purposes when and if you ever become incapacitated. The person you choose will be able to take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, your representative may have to seek court permission to take planning steps that she could implement immediately under a simple durable power of attorney.
A power of attorney may be limited or general. A limited power of attorney may give someone the right to sign a deed to property on a day when you are out of town. Or it may allow someone to sign checks for you. A general power is comprehensive and gives your attorney-in-fact all the powers and rights that you have yourself.
Last Will and Testament
A last will and testament is a legally-binding statement directing who will receive your property at your death. It also appoints a legal representative to carry out your wishes. However, the will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly-owned property, property in trust, life insurance proceeds, and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate.
Trusts
A trust is a legal arrangement through which a "trustee", such as an individual, bank, or law firm holds legal title to property for another person, called a "beneficiary." The rules under which the trustee operates are set out in the trust instrument.
There can be several advantages to establishing a trust. Best-known is the advantage of avoiding probate. In a trust that terminates with the death of the donor, any property in the trust prior to the donor's death passes immediately to the beneficiaries by the terms of the trust without requiring probate. This can save time and money for the beneficiaries. Certain trusts can also result in tax advantages both for the donor and the beneficiary. Other trusts may be used to protect property from creditors or to help the donor qualify for Medicaid.