Estate Planning

What Happens If You Die Without a Will?

If you die intestate (without a will), your state's laws of descent and distribution will determine who receives your property by default. These laws vary from state to state, but typically the distribution would be to your spouse and children, or if none to other family members. However if you are married to a second spouse with children from a prior marriage, this spouse will not receive the entire estate. A state's plan often reflects the legislatures' guess as to how most people would dispose of their estate and builds in protections for certain beneficiaries, particularly minor children. That plan may or may not reflect your actual wishes, and some of the built-in protections may not be necessary in a harmonious family setting. A will allows you to alter the state's default plan to suit your personal preferences.

What a Will Does
A will provides for the distribution of property owned by you at the time of your death in any manner you choose. Your will cannot, however govern the disposition of properties that pass outside your probate estate such as joint property, life insurance, retirement plans and employee death benefits unless they are payable to your estate.

Wills can be of various degrees of complexity and can be utilized to achieve a wide range of family and tax objectives. If a will provides for the outright distribution of assets, it is sometimes characterized as a simple will. If the will establishes one or more trusts, it is often called a testamentary trust will. Alternatively, the will may leave probate assets to a preexisting inter vivos trust (created in your lifetime), in which case it is called a pour over will. In either case, the purpose of the trust arrangement ( as opposed to outright distribution) is to ensure continued property management and creditor protection for the surviving family members, to provide for charities, and to minimize taxes.

Aside from providing for the intended distribution of your property to your spouse, children etc., there are a number of other important objectives that may be accomplished in your will.

Guardianship:
You may designate a guardian for your minor child or children if you have survived the other paerent and by judicious use of a trust and appointment of a trustee, eliminate the need for bonds and supervision by the court regarding the care of each minor child's estate.

Executor:
You may designate an executor of your estate in your will and eliminate the need for a bon; in some states the designation of an independent executor will eliminate the need for court supervision of the settlement of your estate.

Heirs:
You may choose to acknowledge or otherwise provide for a child (e.g. stepchild, godchild, etc.) in whom you have an interest, an elderly parent, or other individuals.

If you are acting as custodian for the assets of a child or grandchild under the Uniform Gift to Minors Act, you may designate your successor custodian and avoid the expense of a court appointment.

Good planning can also enhance your support of religious, educational and other charitable causes.

What a Will Does Not Do
A will does not govern the transfer of certain types of assets, called nonprobate property, which by operation of law or contract pass to someone else on your death.

How to Execute a Will
Wills are signed in the presence of witnesses and certain formalities must be observed. A later amendment to a will is called a codicil and must be signed with the same formalities. A will that is formally executed with the signatures notarized is deemed to be self proved and may be admitted to probate without testimony of witnesses or other additional proof.

What is a Trust?
The term trust describes the holding of property by a trustee (which may be one or more persons or a corporate trust company or bank) in accordance with the provisions of a written trust instrument for the benefit of one or more persons called beneficiaries. A person may be both a trustee and a beneficiary of the same trust.

If you create a trust during your lifetime, you are described as the trust's grantor or settler, the trust is called a living or inter vivos trust and the trust provisions are contained in the trust agreement. The provisions of that trust document will usually determine what happens to the property in the trust upon your death.

A living trust may be revocable (subject to change and terminated by the settler) or irrevocable. Either type of trust may be designed to accomplish the purposes of property management, assistance to the settler in the event of physical or mental incapacity, and disposition of property after the death of the settler of the trust.

Trusts are not only for the wealthy! Many young parents with limited assets choose to create trusts either during life or in their wills for the benefit of their children in case both parents die before all their children have reached an age deemed by them to indicate sufficient maturity to handle property. This permits the trust estate to be held as a single undivided fund to be used for the support and education of minor children according to their respective needs, with eventual division of the trust among the children when the youngest has reached a specified age. This type of arrangement has an obvious advantage over an inflexible division of property among children of different ages without regard to their level of maturity or individual needs at the time of such distribution.

Power-of-Attorney
An important part of lifetime planning is the Power of Attorney. Valid in all state, these documents give one or more persons the power to act on your behalf. The power may be limited to a particular activity (e.g. closing the sale of your home) or general in its application, empowering one or more persons to act on your behalf in a variety of situations. A Power of Attorney may be revoked, but most states require written notice of revocation to the person named to act for you.

The person named in a Power of Attorney to act on your behalf is commonly referred to as your "agent" or "attorney-in-fact". With a valid Power of Attorney, your agent can take any action permitted in the document. Often your agent must present the actual document to invoke the power.

Why would anyone give such sweeping authority to another person? One answer is convenience. If you are buying or selling assets and do not wish to appear in person to close the transaction, you may take advantage of a Power of Attorney. Another reason is to be prepared for a disability or incapacity (e.g. due to travel, accident or illness).

If you do not have a Power of Attorney and become unable to manage your personal or business affairs, it may become necessary for a court to appoint one or more people to act for you. People appointed in this manner are referred to as guardians, conservators, or committees. If a court proceeding is required, then you may not have the ability to choose the person who will act for you. With a Power of Attorney, you choose who will act and define their authority and its limits, if any.

How Should the Agent Sign?
Assume Santa Claus appoints his wife, Mrs. Claus as his agent in a written Power of Attorney. Mrs. Claus, as agent, must sign as follows: Santa Claus, by Mrs. Claus under POA or Mrs. Claus, attorney-in-fact for Santa Claus.

The Advanced Medical Directive or Living Will
An Advanced Medical Directive or Living Will is a legal document that states you have thought about the possibility of being permanently incapacitated with no chance of recovery, and states that you choose NOT to be kept alive artificially. This document also describes the kind of care you would like to receive and names another person to act as your health care agent.