A Will, Power of Attorney and Health Care Proxy Aren’t Just for “Old People”
This is a long one because it is so important!
Nobody wakes up on a Saturday morning and says, “You know what sounds fun today? Let’s update our wills!”
I get it.
Estate planning ranks somewhere between cleaning the garage and getting a colonoscopy on most people’s list of favorite activities.
But here’s the problem: not having a plan is still a plan. It just means you’re letting state law, the courts and potentially people you’ve never met make some very important decisions for you.
And unfortunately, I have seen enough situations over the years to know that things can get complicated very quickly.
There are three basic documents I believe every adult should at least discuss with an attorney:
A Will. A Power of Attorney. And a Health Care Proxy.
They each do something different, and together they can save your family an enormous amount of aggravation at exactly the time they least need it.
1. The Will — “Who Gets My Stuff?”
At its most basic level, your Will provides instructions about what should happen to your property after you die.
Who receives your assets?
Who handles your estate?
Who should serve as guardian for minor children?
Are there specific gifts you want made?
Without a Will, you don't get to answer many of those questions. State law does it for you.
And sometimes the result can be very different from what you would have wanted.
Consider this example:
John and Mary are married with two children. They have a house, savings and investments, but they never get around to preparing wills.
John dies unexpectedly.
Mary eventually receives the assets she is entitled to under the applicable beneficiary designations, ownership arrangements and state inheritance laws.
Several years later, Mary remarries.
Her new husband has children of his own. Mary and her new husband combine finances, change the ownership of certain assets and build a life together.
Then Mary dies.
Her assets may now pass according to her beneficiary designations, how the property is titled, her estate plan at that time, or—if she still doesn't have a Will—the applicable intestacy laws.
The end result?
John and Mary’s children could receive far less than John ever imagined, and in some circumstances they could receive nothing from particular assets.
John may have assumed, “Everything goes to Mary, and eventually it will go to the kids.”
Unfortunately, “eventually it will go to the kids” is not an estate plan.
A properly designed estate plan can address remarriage, children from prior relationships, trusts, guardianship and how assets should ultimately be distributed.
2. What Happens When There Is No Will?
Here is another situation people don't think about.
Imagine someone dies owning a home, investment accounts and other property, but leaves no Will and has not properly arranged how those assets should pass.
The family assumes one of the children will simply step in, handle everything and divide the estate the way Mom or Dad always talked about.
Not necessarily.
The estate may have to go through a court process before someone has legal authority to act. Depending on the circumstances and state law, the court may appoint an administrator or other fiduciary. If there are disagreements among family members—or nobody appropriate or willing to serve—the process can become even more complicated, and a neutral professional such as an attorney or other fiduciary could potentially become involved.
Now imagine months going by while the family is trying to deal with the house, bills, investments and personal property.
And eventually the assets are distributed according to state law, rather than according to the conversations Dad had around the kitchen table.
Maybe Dad wanted one child to receive the family shore house.
Maybe he wanted money left to his grandchildren.
Maybe he wanted to leave something to his church or favorite charity.
Maybe he wanted his 1967 Corvette to go to his nephew.
It doesn't matter how many times he said it at Thanksgiving dinner.
If it isn't properly documented, the law generally doesn't treat Thanksgiving dinner as an estate-planning document.
A Will allows you to put those wishes in writing and appoint the person you trust to carry them out.
3. Power of Attorney — “Who Can Handle Things While I’m Still Here?”
This one is often misunderstood.
A Power of Attorney isn't primarily about what happens when you die.
It's about what happens while you're alive but unable to handle your financial affairs yourself.
Suppose you're hospitalized or incapacitated and someone needs to:
Pay your bills.
Deal with your bank.
Handle an investment account.
Sign financial documents.
Deal with an insurance company.
Take care of a real estate issue.
Without the proper authority, even your spouse or adult children may not automatically be able to do everything that needs to be done.
A properly drafted Power of Attorney allows you to choose someone you trust to act on your behalf under the circumstances specified in the document.
Think of it this way:
You can choose the person now, or potentially make your family deal with a much more difficult legal process later.
Personally, I prefer Door Number One.
4. Health Care Proxy — “Who Speaks for Me?”
The Health Care Proxy may be the most personal of the three documents.
It allows you to designate someone to make medical decisions for you if you cannot communicate or make those decisions yourself, subject to the document and applicable state law.
Most married couples immediately say:
“My spouse would obviously make those decisions.”
Maybe.
But why leave something that important to assumptions?
A properly prepared health care directive can make your wishes clear and identify exactly who you want speaking for you.
It can also help prevent one of the worst situations a family can face: several people who love you, all trying to do what they believe you would have wanted, but disagreeing about what that actually is.
Your family shouldn't have to guess.
“But Chip, I’m Only 40.”
Great.
I hope you don't need any of these documents for another 60 years.
But estate planning isn't really about your age.
It's about whether anyone depends on you and whether you own anything or have financial and medical decisions that someone might someday need to make on your behalf.
If you have a spouse, children, a house, investment accounts, retirement accounts, a business or simply opinions about who should handle your affairs, it's worth having the conversation.
And don't forget: beneficiary designations and account ownership matter too.
Your Will doesn't necessarily control everything. Retirement accounts, life insurance, jointly owned property, trusts and accounts with beneficiary designations may pass outside your Will.
That's why estate planning shouldn't be done in isolation. Your Will, beneficiary designations, account registrations and financial plan should all work together.
The Chip’s Tips Bottom Line
Estate planning isn't really about death.
It's about making life easier for the people you love.
A good estate plan answers some very simple questions:
Who gets what?
Who is in charge?
Who handles my finances if I can't?
Who makes medical decisions if I can't?
And what do I actually want to happen?
If you don't have a Will, Power of Attorney and Health Care Proxy—or if yours were written when your kids were still watching Barney—it might be time to pull them out and take another look.
You don't need to obsess over it.
You don't need a 200-page estate plan.
But you should have a plan.
Because when the unexpected happens, your family will already have enough to deal with.
Don't make them guess what you wanted. PLEASE make an appointment with a local attorney and at bare minimum write down your intentions and appoint an executor.
-Chip Buckman
Important Disclosure
This material is provided for general educational and informational purposes only and is not intended to provide legal, tax or estate-planning advice. Estate-planning laws vary by state and individual circumstances. The examples above are hypothetical and are intended only to illustrate potential issues that may arise when an estate plan is not in place; actual outcomes depend on applicable law, account ownership, beneficiary designations and other circumstances. Consult a qualified estate-planning attorney and, where appropriate, a tax professional before preparing or changing documents or beneficiary designations.