Simple and Living Wills
When a person dies, someone gets their stuff. Unfortunately, the question of who can be quite complicated. While every state has laws in place to govern how a person’s assets are distributed if they die, it can be a complicated process for everyone involved and take months, if not years, to sort out.
The good news is that most of the mess can be addressed by creating a Last Will and Testament, which gives clear instructions on who receives your assets upon your death. The most basic version of this is called a “Simple Will”.
What is a Simple Will?
A Simple Will is a document a person can make giving instructions on how to divide up their assets if they die. Simple Wills do not need to be long documents. The only essential components are:
- A statement that you are indeed creating a simple will, and that this is intended to be your final wishes in case of death.
- A statement that you are of sound mind and mentally competent when creating the will.
- Who your beneficiaries are and what they should receive.
- Who is in charge of making sure those beneficiaries get what they should, (also called an Executor of your Estate).
- Your signature, and the signature of at least 2 witnesses.
The beneficiaries of a simple will can be just about anyone, including giving some or all of your assets to charities. The Executor of your Estate oversees the distribution of your assets. This could be a simple job if most of what you own is cash in your checking account but can also be complicated, like selling off property or interpreting vague instructions.
Your Debts
A simple will has instructions about your assets, but what about your debts? If you die in debt, your debts need to be repaid before any assets can be distributed to your beneficiaries. This means your executor will need to sell off assets to repay your loans first.
The good news is that debt cannot be inherited. If all your stuff is sold off and there is still more debt, that is the end of it. The debt dies with you.
Complex Wills
Simple wills are called simple because there is not much to it. Complex wills are much longer with a lot more provisions. Things that can make a will “complex” include:
- Naming who becomes the guardian of a child (if both parents are dead)
- Complicated allocations of assets, such as making sure a specific daughter inherits a specific piece of jewelry. This can make wills complicated because it means the executor cannot easily sell off these “dedicated” assets to satisfy debts, so it can lead to conflicts that the will should address.
- Instead of giving assets away to beneficiaries, a will could also specify that their assets should be put into a Trust Fund, with specific rules of how much money can be taken out of the trust fund and when. This is common for wills listing young people as beneficiaries.
- Complex cases of when spouses die at the same time, or if both spouses have different provisions in their will who should be considered first.
Complex wills are not legally different than “simple” wills, but usually would require having an actual attorney designated as the Executor of the Estate just to make sure all the legal requirements are satisfied.
No Will
If you do not have a will at all, how your assets are divided becomes subject to the laws in the state where you lived. Generally, assets are automatically transferred to your spouse, or divided evenly between your children. However, the process of executing this can take a VERY long time and is an expensive legal process. Even if you have very few assets, a simple will outlining clear instructions saves your survivors a huge amount of headache and stress when they are already grieving for your loss.
But I’m Not Dead Yet!
Not being dead does not mean wills are not important. There are a few concepts related to wills that are an important part of wealth management.
Living Wills
A “Living Will” is a set of instructions for what your wishes are if you are nearing the end of your life and are no longer able to communicate with doctors and other medical professionals. Living Wills generally have instructions on when it is acceptable to “pull the plug” or what kind of treatment options you would object to.
Without a Living Will, it can be very messy for a family to establish who, exactly, gets a say in these kinds of decisions.
Durable Power of Attorney
Giving someone Durable Power of Attorney does not mean they act as your lawyer but means that they have the authority to make decisions on your behalf. This is just as important if you have a deteriorating mental state and can no longer manage your own affairs.
There are two ways to assign Durable Power of Attorney:
Financial Durable Power of Attorney, which lets someone manage your financial affairs on your behalf (both making sure your bills are paid, but also buying and selling property, accessing your bank accounts, and more).
Healthcare Durable Power of Attorney, which has a similar purpose as a living will. This is a person who you assign to make all healthcare decisions on your behalf if you are unable to do so. Healthcare durable powers of attorney are often assigned before risky healthcare procedures, so someone else can make a judgement call whether an operation that is going poorly should continue, a different procedure utilized, or aborted.