There is a pattern that appears regularly in conversations between estate planning attorneys and first-time founders. The founder has spent months negotiating a term sheet, preparing due diligence materials, and building investor relationships. They are about to close a round of financing that will value their company at a significant multiple of what they have invested in it. And when the attorney asks whether they have a will, the answer is almost always no. Not a will. Not a trust. Not a power of attorney. Sometimes not even a healthcare directive.
This is not a reflection of indifference. Founders are busy, the process of starting and building a company is consuming, and the estate planning conversation has a way of feeling like something to address later — after the raise, after the product launch, after the next hiring cycle. But there is a specific moment at which not having personal estate planning documents in place creates a real and concrete risk: when the founder’s equity becomes valuable enough that its disposition at death would cause serious harm to the people and institutions who depend on the company.
That moment, for most founders, arrives at or before the first significant funding round. By the time institutional money is in the cap table, the founder’s equity interest has value that a court, a state legislature, and a probate process could significantly disrupt. The five documents described in this article are the foundation of a plan that protects against that disruption. They are not the entirety of what a founder ultimately needs, but they are the minimum that every founder should have in place before their next funding round closes.
Document One: The Last Will and Testament
A will is the starting point for any estate plan, and it remains indispensable even for founders who also have a trust. The will serves several essential functions that no other document performs.
First and most fundamentally, the will expresses your intentions about the distribution of your property at death. Without a will, the state’s intestate succession statutes determine who receives your assets — and those rules are almost never what a founder would choose. The mechanical application of a state’s statutory formula takes no account of who you trust, who needs the money, who would use it wisely, or who has a relationship to your business that makes it logical for them to receive your equity. A will replaces that mechanical formula with your own considered judgment.
Second, the will names the executor (also called a personal representative) who will be responsible for managing your estate after you die. This person collects your assets, pays your debts and taxes, and distributes what remains to your beneficiaries. For a founder whose estate includes equity in a private company, the executor’s job is complex and demanding, and the choice of executor matters enormously.
Third, and most urgently for founders with young children, the will is the only legal mechanism through which you can nominate a guardian for your minor children. If both parents die without naming a guardian in a will, the court will make that decision. Courts try to act in the children’s best interests, but they do so without knowing your values, your relationships, or your preferences. A will ensures that the people you have chosen to care for your children are the people who actually care for them.
A will does not avoid probate — it is submitted to the probate court and becomes a public record. For founders who want their estates to pass privately and efficiently, the will is supplemented by a revocable living trust, which is described next. But even with a trust, a will is necessary: it catches assets that were not transferred into the trust, and it is the only document through which a guardian for minor children can be nominated.
Getting a will drafted is simpler and less expensive than most people expect. For a first-time founder with a relatively straightforward estate — without complex trust provisions or significant estate tax exposure — a competently drafted will can typically be completed in a few weeks of working with an estate planning attorney. The cost is modest compared to the value of the equity it protects.
Document Two: The Revocable Living Trust
A revocable living trust is the second foundational document and, for most founders, the one that does the most practical work. As described in detail elsewhere in this guide, a revocable living trust holds your assets during your lifetime, provides management continuity during incapacity, and distributes your assets at death — all without going through probate.
For a founder, the most immediate benefit of a revocable trust is privacy. When a will is probated, it becomes a public document. The value of your estate, the identity of your beneficiaries, and the details of your assets — including your equity in your company — become matters of public record. For a private company founder, this exposure can reveal information about the company’s ownership and financial condition that the remaining co-founders and investors would strongly prefer to keep confidential. A trust avoids this problem entirely, because trust assets pass outside of probate and are never filed with a public court.
The second major benefit is speed. Assets in a trust pass to beneficiaries almost immediately after death, without waiting for a probate proceeding to conclude. For a family that is navigating the emotional and practical aftermath of losing a founder and partner, not having to also navigate a year-long court proceeding is significant. And for a business that needs certainty about who controls the founder’s equity, the immediate succession of authority that a trust provides is far preferable to the prolonged uncertainty of a probate proceeding.
Third, the trust provides a framework for incapacity planning. If you become incapacitated, the successor trustee you have named can immediately step in and manage the trust assets on your behalf, without any court involvement. For a founder who holds significant business equity in the trust, this means that the equity continues to be managed by a designated, trusted person rather than being subject to a guardianship or conservatorship proceeding.
A revocable trust must be funded to be effective. Funding means transferring assets into the trust — retitling them from your individual name to the trust. For your company equity, this means working with the company to update its records to reflect that your shares or membership interests are now held in the name of the trust. This requires careful attention to the company’s transfer restrictions and consent requirements, as discussed in detail elsewhere in this guide. Your estate planning attorney should coordinate with your company’s counsel to ensure that the transfer is properly documented and does not trigger any unintended consequences under the company’s governing documents.
Document Three: The Durable Power of Attorney
A durable power of attorney is a written authorization naming another person to manage your financial and legal affairs on your behalf. The word “durable” means that the authorization remains effective even if you become incapacitated — which is the very situation in which it is most needed. Without this document, a family member who wants to manage your finances during a period of incapacity must petition the court for a conservatorship — a time-consuming, expensive, and very public process.
For a first-time founder, the durable power of attorney is the incapacity planning document that covers everything outside of the trust. Your trust covers the assets held in the trust. The power of attorney covers everything else: managing accounts that were not transferred to the trust, filing your tax returns, handling disputes with government agencies, managing any personal or business obligations that require your individual authority, and — if the document specifically grants it — exercising your rights as a shareholder or member in your company.
The person you name as your agent under the power of attorney — your attorney-in-fact — has broad authority over your financial life. This should be someone you trust completely, someone who has the financial literacy to manage complex matters, and someone who is practically available to act when needed. Many founders name their spouse as their primary agent and a trusted business colleague or sibling as an alternate. The choice should be made deliberately, with an honest assessment of what the role actually requires.
The power of attorney document should be specifically tailored to include the authority to exercise rights in connection with your business interests. A generic or form power of attorney may not give your agent the specific authority they need to manage your equity stake, vote your shares, or execute contracts on your behalf in connection with the business. Working with an attorney who understands your business situation to draft a power of attorney that specifically addresses your business interests is an important step that many first-time founders skip.
Document Four: The Healthcare Directive
A healthcare directive — also called a living will, an advance directive, or an advance healthcare directive — is a written document in which you record your wishes about your medical care in circumstances where you cannot speak for yourself. It is a deeply personal document that addresses some of the most significant decisions a human being can face: what kind of medical intervention you want if you have a terminal illness and no reasonable chance of recovery, whether you want to be placed on life support in a persistent vegetative state, what your preferences are about pain management, and where you want to be cared for at the end of your life.
The healthcare directive serves two functions. First, it gives guidance to the medical team caring for you when you cannot express your own preferences. Doctors and nurses who are treating an incapacitated patient want to honor that patient’s wishes, but they often do not know what those wishes are. A healthcare directive provides the answer. Second, it relieves your family members of the burden of making agonizing decisions without knowing what you would have wanted. The decision about whether to continue life support for a family member is one of the most painful decisions a person can face. If you have recorded your wishes in a healthcare directive, that decision has already been made. Your family’s role is to advocate for your wishes, not to make the decision themselves.
For a first-time founder, the healthcare directive is often the estate planning document that feels most remote from the business — it is about personal medical decisions, not corporate governance or asset distribution. But it is listed here as a foundational document because its absence can create a family crisis that consumes the same energy and time that would otherwise go toward protecting the business and supporting the people who depend on it. A founder whose family is in conflict about end-of-life care decisions is a founder whose business is not getting the attention it needs. The healthcare directive resolves that conflict before it starts.
Most states have standardized healthcare directive forms that can be completed with minimal attorney involvement. Some states also have a separate form for a do-not-resuscitate order and for organ donation preferences. The specific requirements for a valid healthcare directive vary by state, but in most cases, the document must be in writing, signed by the person making it, and witnessed or notarized according to the applicable state requirements.
Document Five: The HIPAA Authorization
The Health Insurance Portability and Accountability Act of 1996 — universally known as HIPAA — created a comprehensive federal framework for the privacy of medical information. Under HIPAA, medical providers are prohibited from disclosing your personal health information to anyone, including your family members, without your written authorization. This is an important privacy protection, but it can create an unexpected and serious problem in an estate planning context.
If you are hospitalized or incapacitated, your spouse, your healthcare proxy, or another family member may need to speak with your doctors to understand your condition, receive information about your treatment, and make informed decisions on your behalf. But if they are not your HIPAA-authorized representatives, your doctors may not be able to share your medical information with them, even though they are the very people who are supposed to be making decisions for you. The healthcare proxy document nominates someone to make medical decisions, but a HIPAA authorization separately confirms who is permitted to receive your medical information.
A HIPAA authorization is a short, simple document in which you specifically identify the individuals who are authorized to receive your protected health information. It is typically signed at the same time as the healthcare directive and the healthcare proxy. Without it, the people you have designated to manage your affairs in a medical emergency may find themselves legally blocked from obtaining the information they need to act effectively.
Some estate planning attorneys include HIPAA authorization language directly in the healthcare proxy document, while others use a separate form. Either approach is acceptable. What matters is that the document exists, that it names the right people, and that it is accessible to those people when they need it. Unlike other estate planning documents, the HIPAA authorization is immediately effective upon signing and does not require any triggering event to be operative.
Why Investors and Co-Founders Increasingly Care About This
Sophisticated institutional investors and experienced co-founders have begun to treat founders’ personal estate planning as a component of investment due diligence and partnership risk assessment. The reason is straightforward: if a founder who controls a significant block of equity in a company dies without a plan, the resulting ownership uncertainty, operational disruption, and potential litigation can materially harm the company and the other investors. A founder’s personal estate plan is, in a real sense, part of the company’s risk management infrastructure.
Some venture capital firms and institutional investors include questions about estate planning in their due diligence processes for investments in companies with founder-controlled cap tables. Some experienced co-founders make it a condition of their participation that their partners have basic estate planning documents in place. This is not an invasion of privacy — it is a reasonable professional expectation by parties who are exposed to significant risk if a founder’s personal affairs are not in order.
For a first-time founder preparing for a funding round, having the five foundational documents described in this article is increasingly a mark of professional seriousness. It signals that you understand the risks associated with running a company, that you take your obligations to your co-founders and investors seriously, and that you have thought carefully about what happens to your equity — and to the people who depend on the company — if something happens to you.
Beyond the Five Documents: What Comes Next
The five documents described in this article are the foundation of an estate plan, not its entirety. As a founder’s company grows and their equity becomes more valuable, the estate plan should evolve in complexity to address additional concerns. These may include more sophisticated trust structures to minimize estate tax exposure (particularly if the estate may be subject to federal estate taxes), irrevocable life insurance trusts to hold life insurance outside of the taxable estate, generation-skipping trusts to provide for grandchildren in a tax-efficient manner, charitable planning structures, and — as discussed elsewhere in this guide — buy-sell agreements and coordination of the estate plan with the company’s governing documents.
The right time to start this process is not when the company reaches a specific valuation milestone or when a specific life event occurs. The right time is now. The five foundational documents can be drafted and executed in a matter of weeks, at a relatively modest cost, and they provide immediate and substantial protection. Every day that passes without them in place is a day on which the founder, their family, their co-founders, and their investors are carrying a risk that was entirely preventable.
Founding a company requires enormous courage, creativity, and commitment. Managing the legal and personal risks that come with it requires the same quality of attention. An estate plan is not an admission of mortality — it is an expression of confidence that the business will matter, that the equity will be worth protecting, and that the people who depend on the company deserve the security of knowing that a plan is in place. Getting these five documents done before your next funding round is one of the clearest and most concrete things you can do to demonstrate that confidence.