Most clients are surprised to learn that most Americans do not have a Last Will and Testament. In fact, according to the American Association for Retired People 47% of Americans report they don’t have a Will because they “haven’t gotten around to it” and another 29% believe they don’t need a Will because they “don’t have enough assets.”
The most basic estate plan generally consists of a Healthcare Power of Attorney, Living Will, General Power of Attorney and a Last Will. Here are some of the reasons everyone should have basic estate planning documents in place.
A Healthcare Power of Attorney nominates an individual to act on your behalf in the event that you are not able to make healthcare decisions for yourself. Without a Healthcare Power of Attorney, upon incapacity no one would have the legal authority to act on behalf of the incapacitated individual. This results in the family having to go to Probate Court to obtain Guardianship over the incapacitated individual. This can take a lot of time and a lot of money. It can also result in a dispute over who the appropriate family member is to serve in that role. This is easily avoidable by putting a Healthcare Power of Attorney in place.
A Living Will, as opposed to a Last Will, relates to life support. The Living Will only comes into effect when a person is in a persistent vegetative state or in an irreversible coma and cannot communicate their wishes. The Living Will is often confused with a “Do Not Resuscitate” or “DNR”, but they are different directives. A DNR is a medical order written by a doctor that instructs healthcare providers not to perform CPR if the patient’s breathing stops.
A General Power of Attorney for finances nominates someone to act your behalf as it relates to financial affairs. If you were to become incapacitated without a General Power of Attorney in place, no one would have the legal authority to act on your behalf and your family would be forced to file for Guardianship of the Estate in order to exercise legal authority over the incapacitated person’s property. Similar to the Guardian of the Person, this results in a lot of wasted time and money that can easily be avoided by putting a financial Power of Attorney in place.
Regardless of whether a person has a lot of assets or not, it’s important to have a Last Will in place, particularly if there are minor children involved. In a Last Will, parents of minor children can nominate who they would like to serve as Guardians in the event of their passing. Failure to put this in place forces the family to fight over control of the children, ultimately leaving the decision up to a Probate Court Judge.
If you die without a Will, state law determines who gets your property. This means that if you’re married, but separated, your property goes to that soon to be ex-spouse. Another bad outcome can result where you may not have a lot of assets and your desire is to take care of your second spouse, but the children from the first marriage will have some rights where there’s a second marriage situation and there’s no Will. Most people also don’t realize that beneficiary designations supersede the terms of your Will. This means that assets such as life insurance, retirement accounts, brokerage accounts that may have beneficiary designations attached to them will go to the named beneficiary on the account and not the person or persons named in the Last Will. This often leads to unintended consequences.
In short, estate planning is complicated. It’s worth it to spend a little money to do the job right. It’s not a gift for you. It’s a gift for your family.