Wills, Guardians and the Documents Every Plan Needs

If you died or became unable to make decisions tomorrow, who would raise your children, who would pay your bills, and who would decide on your medical care? Without a few signed documents, the answers come from state law and a court, not from you. This chapter covers the core set every adult plan rests on: a will, a durable power of attorney, a health care directive, and the beneficiary forms that quietly control more money than most wills. It also explains what a will cannot do, which is why the next chapter exists.

Estate law is mostly state law. The rules below describe how things usually work in the United States, but signing requirements, who inherits when there is no will, and how a spouse is protected all differ from state to state. Where a detail depends on your state, this chapter says so.

What happens if you do nothing

Dying without a will is called dying intestate. Every state has an intestacy statute that sets out who inherits, usually a surviving spouse first, then children, then parents and siblings. The order rarely matches what people would have chosen. In many states a spouse shares the estate with children rather than receiving all of it. An unmarried partner, a stepchild who was never adopted, a close friend and a charity typically receive nothing.

The bigger problem for parents is guardianship. If both parents die and no guardian is named, a judge chooses one. Relatives may disagree in court, and the person appointed may not be the one you would have picked. Money left to a minor is also a problem: a child cannot legally manage property, so the court may appoint a conservator and supervise the account until the child turns 18 or 21, depending on the state, at which point the child receives everything outright.

Incapacity is the gap people overlook. A will only speaks at death. If a stroke, an accident or dementia leaves you unable to manage money while you are alive, your family may need a court-supervised guardianship or conservatorship to sign checks, sell a house or deal with a retirement account. That process is public and slow, and the court often requires a report on the money every year.

The will: what it does and what to put in it

A will is a written instruction for the property that is in your name alone at death. A useful will does five things.

Names an executor (some states say personal representative) and at least one backup. This person gathers assets, pays debts and final taxes, and distributes what is left. Choose someone organized and trustworthy rather than the eldest by default. Many wills waive the requirement that the executor post a bond, which saves the estate a premium; some states allow this and some limit it.

Names a guardian for minor children, plus a backup. You can separate the person who raises the children from the person who manages their money, which suits families where the best caregiver is not the best bookkeeper.

Makes specific gifts of particular items or sums, such as a ring, a car or a gift to a charity.

Leaves the residue, meaning everything not specifically given. The residuary clause is the most important line in the document, because most property passes through it.

Plans for the unexpected: contingent beneficiaries if someone dies before you, and a trust for anyone under a chosen age so a young adult does not inherit a large sum outright at 18.

Signing rules matter. Most states require the will to be in writing and signed in front of two adult witnesses who do not inherit under it. Many states let you add a self-proving affidavit, signed before a notary, so the witnesses never need to be found later. Some states accept handwritten wills without witnesses, and a growing number accept electronic wills, but a will that meets the strictest common standard is the safest choice if you own property in more than one state or might move.

What a will cannot do

A will controls less than most people think.

It goes through probate. Property that passes under a will is distributed through the probate court. That brings court filings, fees and months of delay, and the will becomes a public record. Chapter 2 covers probate and the ways around it.

It does not control accounts with a named beneficiary. A 401(k), an IRA, a life insurance policy, an annuity, and bank or brokerage accounts with a payable-on-death or transfer-on-death designation go directly to the person named on the account's form. If your will says "everything to my children equally" and the old beneficiary form on your 401(k) still names a former spouse, federal law governing workplace plans generally sends the money to the former spouse.

It does not control jointly owned property held with a right of survivorship. That property passes to the surviving owner automatically.

It does nothing while you are alive. For incapacity you need the documents in the next section.

Because so much passes outside the will, the beneficiary forms deserve as much attention as the will itself. Review them after every marriage, divorce, birth and death in the family.

The documents for incapacity

Durable power of attorney for finances. This names an agent who can act for you on money matters: paying bills, filing taxes, managing accounts and dealing with government agencies. "Durable" means it stays valid if you lose capacity, which is the whole point. Some states let you make it effective only on incapacity, often called a springing power, but proving incapacity to a bank can be slow, so many attorneys prefer a power that is effective at signing and given to someone you trust. Banks and brokerages sometimes resist a power of attorney that is old or on an unfamiliar form; many states have adopted a version of the Uniform Power of Attorney Act, which requires institutions to accept a valid document in most cases.

Health care power of attorney (also called a health care proxy). This names someone to make medical decisions if you cannot.

Living will or advance directive. This records your wishes about life support, resuscitation and end-of-life care, so the person you named is carrying out your choices rather than guessing. Many states combine the proxy and the living will into one form.

HIPAA authorization. A short form letting doctors share your medical information with the people you name. Without it, privacy rules can keep your family in the dark at the moment they need information.

Where a trust fits

A will can create a trust for children at death, called a testamentary trust, which solves the problem of a young adult inheriting outright. It still goes through probate first.

A revocable living trust is created and funded while you are alive. You are usually the trustee and the beneficiary, so day to day nothing changes, and you can amend or revoke it at any time. When you die or become incapacitated, a successor trustee you chose takes over without a court. A revocable trust does not save income tax or estate tax and does not protect your assets from your own creditors. Its value is privacy, speed and a ready-made plan for incapacity.

When you use a living trust, you still sign a short will, called a pour-over will, that sends anything left outside the trust into it. It catches the car you forgot to retitle or the inheritance that arrived late. Chapter 2 explains how to fund a trust so the pour-over will has little to do.