Estate planning is a field of law that deals with the management and transfer of property in connection with one’s death. The estate planner, also known as the testator, can use a variety of tools and documents to plan for the distribution of their property when they pass away. This can include the use of wills, trusts, durable powers of attorney, and other mechanisms. 

If a person dies without a valid will in place, then their property will be distributed according to the state’s intestacy rules. This can sometimes yield property distributions that aren’t exactly in line with what the testator would have wanted. Thus, it’s important to plan out one’s estate distribution well before the end of one’s life.

What Does Intestacy Mean?

If a person dies without a valid will, they are said to have died “intestate”. This means that the person died without a valid will and so their property will distributed according to their state law. This means that the property will be distributed to the person’s “heirs”. For example, if the decedent (the person who died) had a spouse, then the spouse is considered an heir and has the first right to inherit property. 

In a community property state, the spouse may usually claim their half of the marital property. The other half of the marital property will be distributed according to the will or laws of the state. In a common law state, property ownership is distributed by other means, such as title (legal ownership of the property). However, many common law states will often give the spouse a portion of the deceased spouse’s property and many property owners hold their property in joint tenancy with right to survivorship.

After the spouse, the descendants (children and grandchildren) are usually next. Many state laws follow each child’s line down until there is a survivor. However, some states will divide the estate property by generation: first children, then grandchildren, great-grandchildren, etc. If the decedent has no children, then the property will go to the decedent’s parents. But if there are no parents, then it will go to the surviving siblings. But if there are no surviving siblings, then the property will either go to the sibling’s heirs (depending on the local law).

But if there are no heirs through the surviving siblings, then the next to take property are usually more distant relatives, such as aunts, uncles and cousins. In the event that the decedent does not have any close family at the time of their death, the law will determine who will inherit is the next of kin.

How Do I Create a Will?

A will is a written or oral communication by a person (the testator) stating how they want their property to be disposed of at their death. To create a will, the will must generally meet the following requirements (this may vary by state):

  • The testator must be at least 18 years old;
  • The testator must understand what a will is, the nature of it, and that the document they are creating is a will;
  • The testator must understand the relationships one has with their friends/family, and must know what kind of property he or she owns;
  • The testator must sign the will document;
  • The will document must be signed by two to three witnesses or be handwritten.;
  • The document must state which specific persons will inherit which specific property; and
  • The testator must select an executor to carry out the will.

Are There Any Limitations to a Will?

Although a well-written will is often the centerpiece of a thorough estate plan, wills do have limitations. For instance, wills cannot give away property that you do not own. They also can’t transfer property to your pet(s). If you wish to modify your will, then you need to be specific about which parts of the will document you are modifying. If you intend to modify the entire will, your previous will is considered revoked, or canceled

It is very important that the testator is clear on what kind of changes are being made to the will. A will can only be challenged by a person who has standing, so an “interested party” (that is, a person who stands to gain or inherit something from the will).  

There are only two groups of people in relation to a will document: persons who inherit under the will and persons who would inherit if the will was null and void. Typically, a will is contested for the following reasons:

  • The will maker was not mentally competent at the time they drafted or signed the will document;
  • The will maker was pressured by someone to agree to those terms (i.e., instances of duress or coercion);
  • The will maker has another will or trust which overrides this one;
  • The will was not properly witnessed or signed according to state requirements; and
  • The will maker was mistaken or induced by fraudulent means to sign.

What is a Trust?

A trust is a legal arrangement or agreement wherein one person (the settlor) allows another person (the trustee) to hold assets, which they will later transfer to a third person (the beneficiary). 

In order to create a valid trust, the settlor must meet certain steps and requirements. They must:

  • Intend to create a trust;
  • Find and appoint a trustee;
  • Deposit property into the trust (the property is called the “trust res”); and
  • Designate beneficiaries who will receive the trust property. 

Although trusts are typically created during a settlor’s lifetime, some trusts are intended to outlast the settlor. Trusts are often useful in situations where the beneficiaries are not prepared to receive or manage the property they are given. 

For instance, the beneficiaries might be young children who might not be ready to possess the property. On the other hand, there is no requirement that beneficiaries are unable to act for themselves. Trusts are also favorable because they exist outside the probate system and can help avoid costly court battles. 

There are many different kinds of trusts. For instance, a living trust allows the settlor to maintain, modify, and live off the trust while the settlor is still alive. Spendthrift trusts can help shield assets from creditors while also ensuring that beneficiaries won’t spend all the trust funds at once. A special needs trust can be created for an individual with special needs who will need continued care for the rest of their life.

Regardless of the type of trust, all trustees owe the settlor a heightened level of duty. This means that trustees cannot abuse their positions for their own gain or commingle the funds with their own funds. 

What are “Payable on Death” Accounts?

Payable on Death accounts, or POD accounts, are bank accounts that transfer the account funds upon the death of the account owner. PODs are useful estate planning tools because they can quickly move money to intended beneficiaries without a court hearing. The principal can access the account while still alive. Also, there are typically no limits on the amount of money a POD account can hold and transfer.

What is Digital Estate Planning?

Digital estate planning is a newer concept. Digital estate planning involves management and distribution of digital or online assets. These may include assets like email, text messages, websites, financial or personal information, and social networking accounts. 

Since digital estate planning is so new, there are very few laws regulating this field, and they may not always be consistent. Instead, private user agreements with social media companies like Facebook or Twitter often address most of the issues with digital assets after a person passes. Although the legal landscape may change over time, estate planners should take into account their digital assets now. A trust might be a useful way to manage digital assets so that personal data won’t be stolen or lost when the account owner passes away.

End of Life Decisions: Durable Power of Attorney

A Durable Power of Attorney, also known as an Advanced Health Directive, is a legal arrangement where one person appoints another person (the “agent”) to act on their behalf. If the principal is unconscious or incapacitated due to an injury, illness, or age, the agent can make financial or healthcare decisions on behalf of the principal. Depending on what legal powers are given, the agent can file taxes, purchase or sell property, remove or preserve life support, or decide whether the principal can undergo surgery. 

More than one agent can be appointed; if this is the case however, a process for conflict resolution should be in place if the agents disagree with one another. The powers of the agent end upon the death of the principal or if the principal actively revokes it.

What are Physician Orders for Life Sustaining Treatment (POLST)?

While Durable Powers give third person the ability to make financial and medical decisions on behalf of the patient, POLST powers give directions directly to the physician and medical personal. Physician orders are directions to the treating physicians to perform or not perform certain medical treatments in the event that the patient cannot make that decision (for instance, if they are unconscious after an accident). 

POLSTs are commonly used to order the physician not to save a patient’s life in the event that the patient loses brain function, or any number of other medical conditions. POLSTs must be signed by a physician. However, some states do not require that the physician meet with the patient or the patient’s agent before the physician signs the paper. POLST are often given prior to surgical procedures, in case anything goes wrong.

Should I Hire an Estate Planning Attorney?

If you need to create a will or otherwise need help manage your estate, you should contact a wills, trusts, and estates lawyer for assistance. Your attorney near you can provide you with legal advice on the matter, and can represent you if a conflict has arisen. As you can see, there are many aspects of estate planning, but an attorney can provide you with guidance on the matter.