I’m going to attempt the improbable here and try to make a morbid topic light-hearted and enjoyable, so let’s just dive in.
Death. Along with paying taxes, it’s the only other guarantee in life. Father Time is undefeated and we all return home someday.
No one plans on dying tomorrow (unless you’re David Blaine or you fly in those wing suit things because it’s somehow fun to you). If you told me when you were going to die, we could solve a lot of financial problems for you and your family.
While the timing is unknown, the probability of it happening is known with absolute certainty.
When it’s my time to get called home, I’m going to leave a bunch of stuff behind to people I love: belongings, car, money, sentimental items, etc. Do I want them fighting over who gets it? Well, I don’t really care, because I’m dead, but I’m a non-confrontational person and care a lot while I’m alive, so I’d rather they didn’t.
This is one reason why it’s important to make these decisions today while I’m able to. Doesn’t do me any good to have second thoughts or regrets while I’m up there having dinner with Einstein and Ben Franklin. Or asking D.B. Cooper (if that’s even his real name) over a glass of wine if he really stole the plane.
Fortunately, our legal system allows us to craft binding documents that contain decisions like these and many others. Some of these documents come into force while we’re alive, others after we go home, but it’s important to have them all established and the proper family members notified before that day comes.
Skip ahead:
- Last Will & Testament
- Advantages of probate
- Disadvantages of probate
- Durable Power of Attorney
- Living Will
- The Terry Schiavo story
- Durable Power of Attorney for Healthcare (DPoAH)
- How Do I Get These Documents In Force?
- Conclusions
Last Will & Testament
A last will and testament allows an individual to make their final wishes regarding their assets and children, if applicable. This is where we can decide who will receive our belongings, property, and/or prized possessions.
We can leave our assets to family members, friends, or even charities as long as those assets do not have a named beneficiary (more on this below). The probate court will help the executor of our will carry out our wishes, which has both advantages and disadvantages:
Advantages of probate
- Ensures the will is administered properly (court supervision)
- Inventory and valuation of all assets
- Paying of any bills and resolving pending credit issues
Disadvantages of probate
- Loss of privacy (probate is a public process)
- Must go to court and bear the accompanying expenses (lawyers, court fees, delays in process, etc)
- Possibility of a will contest (most states allow certain family members to contest the will if they are left out)
If we have things like life insurance policies, transfer on death (TOD) or payable on death (POD) accounts, or qualified accounts (401k, IRAs, etc), these are called “will substitutes” and pass on to the named beneficiaries we listed on those assets. They bypass the entire probate process and all the publicity, expenses, time, and effort associated with it, which is a major benefit to our heirs.
A will also allows us to name a guardian for minor children in the event something happens to us. This is extremely important for everyone who has minor children, but especially vital for young, new parents who may not even know this is something they need to do.
Durable Power of Attorney (DPoA)
A DPoA grants an individual the power to make financial decisions for you in the event you cannot make them yourself. These decisions can be tax (power to make gifts to family members, power to disclaim, power to sign tax returns) and non-tax (buy/sell assets, collect from debtors, engage in lawsuits) related. Once it’s our time to go home, the DPoA terminates with us.
Having a DPoA is beneficial because it allows us to appoint someone today, while we’re healthy and in a good frame of mind, to have legal standing and make important financial decisions for us if we become incapacitated. We can be assured that someone we know and trust will have our best interests in mind if we aren’t able to speak for ourselves.
Living Will
A living will directs our physician to either continue or discontinue life-sustaining procedures if we are in a terminal condition or permanently unconscious (also called a persistent vegetative state). Fortunately, this document gives us the ability to make that decision today. While it’s morbid and depressing, it’s actually really important to make this decision today while we’re in a good state of mind. Cue the Terry Schiavo story.
The Terry Schiavo story
I won’t go too in depth (I’ll link an article to the story here if you want all the details), but the basic gist is that Terry Schiavo, a 26-year-old Floridian woman, went into cardiac arrest and was left in a coma for over two months in 1998. At that point, she was deemed to be in an irreversible persistent vegetative state by her doctors.
Her husband, and legal guardian, knew she would not have wanted prolonged life support if the doctors did not think she would able to recover, so he elected to remove her from such support. Her parents were obviously distraught and argued for her to be kept on life support. Her husband and her parents ended up battling in court for over seven years, with the case being elevated all the way up to President Bush and the Supreme Court.
Moral of the story: a living will grants you the power to decide what you want today, but also can prevent family members from ending up in a situation with no good outcomes that can affect them for a long time.
Durable Power of Attorney for Healthcare (DPoAH)
Combined with a living will, a DPoAH creates an “advanced medical directive” that allows us to name an individual who can make medical decisions for us in the event of our incapacitation. This is very similar to a regular DPoA, but different in the following ways:
- It only concerns medical decisions
- It is what’s called a “springing” power, which means it “springs” into effect upon our incapacitation. If we are aware enough to make our own healthcare decisions, physicians will grant our wishes
- It is a separate document from the DPoA
The advanced medical directive covers all possible situations that could arise due to medical reasons and allows us to decide today what kind of treatment we do or do not want to receive, whether we’re able to say so ourselves at that time or not.
How Do I Get These Documents In Force?
When we’re young and our lives are not overly complicated, a simple and effective way to get these four documents is through DIY platforms like LegalZoom, Nolo or Rocket Lawyer. While this is not legal advice, it’d be wise to do some research to see which service would best suit your needs. Obtaining basic documents on these platforms most likely will cost less than $500 and shouldn’t take more than an hour or two to complete.
Once we have the documents completed, we need to get them notarized so they hold legal standing. Completing the documents online is not enough for the documents to be in force. Once they’re notarized, it would be wise to digitize copies of the signed originals in addition to keeping the originals in a safe place so you can ensure you, or someone you trust, always have access to them.
Then when we make it big in our careers and we have 4 kids, 5 cars, 3 houses, a yacht and a plane (sarcasm, but you get my point, hopefully), it will probably be in our best interest to see an estate attorney at that point and get new documents drafted to go along with a revocable living trust. That will be a different post at a different time, but the gist is that as our lives continue to grow in complexity, so too will our estate plans.
Conclusions
These four basic documents provide a solid foundation to an estate plan for younger folks. They allow us to cover our bases (will, guardianship for kids, general last wishes) and head off potential Terry Schiavo situations (durable power of attorney’s) in the future. None of it is fun to think about or write down, but it ensures our wishes are carried out and reduces the chances of grievances occurring amongst family members.
Another key point is that having these basic documents allows us to keep our wishes and belongings in the private confines of our families. A few interesting facts to know are that people like Aretha Franklin, Stan Lee, Chadwick Boseman, Prince, and Bob Marley all passed away without a will, known as “intestate.” These are multimillion dollar estates that had dozens of claimants after their deaths, claiming a portion of the estate belonged to them. And all of the court documents regarding these estates are public knowledge.
Moral of the story: we should bite the bullet and face some of the hard questions and decisions in life today so we ensure our wishes are honored and our estates are handled privately. Our family will thank us one day!