What does someone mean when they say “basic estate plan”? What documents are included? And why are they important?
There are four key documents included in a basic estate plan: the Last Will and Testament, the Financial Power of Attorney, the Healthcare Power of Attorney, and the Healthcare Directive (also called a Living Will).
Most people have little knowledge of what all is involved in estate planning, other than a basic will, so I'd like to give an introduction to each document involved under the umbrella of an “estate plan”, and explaining why each of them are important.
I will be beginning with the most basic and well-known document in any estate plan, the Last Will and Testament, commonly known as the Will.
What Is A Will?
We are commonly familiar with a Will as the document that bequeaths our belongings to others upon our death. However, this is not the only capacity of a will. Depending on who you are and what your assets are, it may not even be the most important function.
First, a few definitions. A decedent is the person who dies. If a decedent dies with a valid will, they are said to have died testate, and their property will be distributed as outlined in the will. If the decedent does not have a valid will, they are said to have died intestate.
In that situation, the intestacy statutes of the decedent’s state will come into play. These statutes lay out a schedule as to how that propertyshould be distributed. Thus, if you have a valid will, you can distribute it however you want; if you do not, the state will do it for you, and possibly not the way you desire.
Three Primary Functions Of A Will
A Last Will and Testament should accomplish several things.
First, it should identify who (family members, friends etc.) will receive your property, and in what proportion.
Second, it should appoint an executor, called the personal representative. This person oversees and directs the tedious, often thankless, but vital task of probate, the administering the estate of the decedent.
Choosing a personal representative is an extremely important part of making a will. This role requires the personal representative to file the appropriate court documents, gather all the property of the decedent, notify creditors, pay debts, put together an accounting of the property, and distribute the remaining assets according the terms of the will, as well as deal with any complaints of the beneficiaries of the will. The personal representative need not do all the above tasks themselves (they can hire an attorney to help), but they are the one ultimately responsible for the process, so due care should be given to appoint a trusted and competent person to deal with probate.
Third, in the case of minor children, the will should appoint a “guardian.” The guardian will care for the children until they reach majority (age 18). The will should also appoint a “trustee” for the children. The trustee manages the children’s inheritance until they reach age 18, or are deemed old enough or mature enough (as spelled out in the will), whichever comes last.
For families with minor children, this is vital. Otherwise, upon the death of the parents, a guardianship case will commence, and the court will appoint the guardian. This process is expensive and drawn out, and may not reflect the parents’ wishes. A wise parent puts a plan in in place ahead of time, and a valid will insures this plan will be followed.
Clearly, there are a number of reasons to create a will: designating beneficiaries, selecting a personal representative, and providing for minor children. In the absence of a will, state intestacy laws will decide how property is distributed and a judge will decide guardianship of children. Your will insures that you decide these things, not strangers.
In my next post, I will outline and explain the intestacy statutes for Idaho and Washington, as well as both states’ requirements for a valid will.