WillNation
Welcome to the WillNation Education Center

ESTATE PLANS
       What is an Estate Plan?
       What are the components of an Estate Plan?
       WillNation’s Estate Planning Philosophy

WILLS
       What is a Will?
       What happens if I don’t have a Will?
       Why can’t I prepare my own Will?
       What is a beneficiary? Devisee? Heir?
       Is this a Test(ator)(ate)(atrix)?
       What is an Executor or Personal Representative?
       Am I stuck with my Will once I sign it?
       When Do I Need to Change My Will?
       What do I have to do to make my will official?
       What is a testamentary trust? Do I need one?
       What Can’t my Will do?
       Isn’t Probate a Pain?
       Disinheriting Family Members
       Spouses
       Ex-Spouses
       Children
       Should my Will say how I want to be buried?
       Can husband and Wife have a shared will?
       Should I put health care instructions in my Will?

GUARDIANSHIP FOR CHILDREN
       How it works
       Who is going to raise them?
       How I am going to support them financially?
       A Trust Issue
       Funding the Trust
       WillNation Standard Testamentary Trust
       WillNation Custom Testamentary Trust
       Other Guardianship FAQs

LETTER OF INTENT

TRUSTS
       Shouldn’t I get a Trust instead?
       What is a Trust?
       Testamentary Trusts

POWERS OF ATTORNEY
       Who Should Be Your Agent?

FINANCIAL POWER OF ATTORNEY

ADVANCE HEALTH CARE DIRECTIVES
       Living Wills
       Health Care Power of Attorney
       Mental Health Power of Attorney
       Do Not Resuscitate Orders

ESTATE PLANNING ACTIONS YOU CAN DO YOURSELF
       Payable-on-Death Bank Accounts
       Retirement Accounts
       Joint Ownership
       Gifts

ESTATE PLANS

What is an Estate Plan?

An Estate Plan is a set of legal and financial documents that capture the essence of what you would want to happen to you upon your death or incapacitation. The law provides dozens of options to you to configure your estate most any way you like.

Everyone needs an estate plan, and, it may surprise you, even if you’ve never thought about estate planning, you already have one. If you haven’t gone to the trouble of putting together your own plan, the government will do it for you. Like most things involving the government, if you die without a Will (“intestate”), the government will be ready with a cumbersome, illogical, and stressful plan for those you leave behind. Imagine how your spouse would feel having a judge second guess the way he or she was handling the finances you left behind. Or if you’re single, but in a long term relationship with someone, imagine how that someone would feel when the law awards everything you have to your parents. See why you need an estate plan you choose?

What are the components of an Estate Plan?

You probably already have some components of an estate plan in place. If you have a job that provides a 401(k) or life insurance, you’ve probably designated a beneficiary. If you die, the person you designated will get the money. That’s a rudimentary estate plan.

Components of an Estate Plan include:

Life insurance policies
Beneficiary designations on savings accounts and funds
Jointly deeded property
Payable on death bank accounts.
A well-drafted Will
Documents that provide for the care of your children
Powers of attorney in the event you are incapacitated and cannot make decisions for yourself
Living Will and Do Not Resuscitate documents
Annuities and Retirement Benefits
Various types of trusts if your finances are complex or you are unusually well-off

Estate Planning, in truth, is something that people tend to put off doing, and then do incrementally over their course of their lives. The progression of most people’s estate planning efforts tends to go like this:

1. No estate plan.

2. Jotting down the name of their spouse as the beneficiary of their 401(k) or work-provided life insurance policy.

3. Buying their own life insurance and naming a beneficiary.

4. Having a will drafted.

5. Having a more comprehensive estate plan drafted.

6. Having a career during which savings and assets are accumulated.

7. Realizing they need a more complex estate plan than a will can provide

8. Having a comprehensive trust-based estate plan drafted.

The first conscious step a person takes in this progression is usually the realization the he or she needs a Will to have a secure estate plan.

WillNation’s Estate Planning Philosophy

Most online sites try to sell you documents you prepare yourself. The better sites might throw in some instructions, or a computer program to walk you through the basic steps. They call their product a good deal because you can get a will for as little as $69, and they sometimes even throw the face of a lawyer on their home page to make their product it seem safe and credible. But the reality is all they’re selling you is a piece of paper you have to fill in yourself. If someone walked up to you on the street and asked you to buy a piece of paper for $69, you’d think he was crazy. Online forms are cheap, but you don’t get any legal advice to go with it. No one to answer your questions or tailor the document to your specific plans, needs and goals. In short, no one to give you legal advice.

For legal advice, you have to go to a lawyer. The problem with most lawyers is they want to sell you a premium product you may not need, such as a complete estate plan centered around a living trust. That’ll run you $2500 - $3000, plus regular trips back to the lawyer to make changes. Trust-based plans are a profit center for many lawyers, and they’ll try to sell you on them because somebody has to pay for that marble-tiled office and all the art work on the walls. Most lawyers want that person to be you.

WillNation estate planning products were designed by an estate planning attorney (and former computer programmer) to bridge the gap between risky do-it-yourself estate documents and pricy law firm documents, while taking advantage of the convenience and informality of internet shopping. WillNation offers you a line of estate planning products prepared and reviewed by a lawyer, based on information you provide in a written form, emails, and a telephone consultation. A lawyer will prepare your will, and you will speak to that lawyer on the phone

WillNation is a line of discount estate planning products that provides quality estate planning solutions at low cost by limiting the number of attorney hours devoted to the product to only those necessary and by eliminating the need for prime office space. At WillNation, we believe you will appreciate the convenience of being able to handle your estate planning needs from the comfort of your own home, and you’ll love knowing your will was prepared by a lawyer at up to half the cost of walking through the door of a law firm.

WILLS

What is a Will?

A Will is a legal document that contains instructions on how to distribute your property and care for those you leave behind. It is your last word, and once you die, it cannot be changed. In a Will you can name the guardians of your minor children, the people you want to receive your money and property (“beneficiaries”) and the person you want to oversee the transition (the “executor” or “personal representative”).

A will is the single most important document in an estate plan. Whether you’re just starting out in the workforce, or nearing retirement, you need a will.

If you’re in single and in your 20s, your will is the centerpiece of your estate plan and probably all you need. For you, a will can be a tool to identify your major or sentimental assets and distribute them the way you want, including making donations to favorite charities. You can even name the person you would like to care for your pets. If you stop and think about all the people you care about, and what you would like to give them to remember you by in the event of a tragedy, you will be disheartened to realize that if you die without a will those important gifts will never be made. For less than you spend on a few months of car insurance, you can feel good knowing that you’ve said thank you to all the people who you loved and who cared about you. And, unlike car insurance, your will never expires.

If you are in a committed relationship (whether hetero or same-sex) but not married, a will is even more crucial. Without a will, your partner, the person you bought so much property together, will get nothing. Most likely, everything you own will go to your parents. A will is an inexpensive way to make sure that your estate is handled in the same way you and your partner handle your finances today: together, for each other’s benefit.

If you have children, a Will isn’t just instructions on what to do with your stuff. It’s about who is going to take care of your children, and how you’re going to pay to support them. Not having a will in this case is a nightmare. If you die without providing a guardian for your children (and the other parent is unavailable), a judge – a person you’ve never met – is going to decide who is going to raise your children for you. Also, without a will, some of your property may automatically pass to your minor children, even if you are married. This sounds fine until you realize minors can’t legally manage their own estates, and the law doesn’t allow your spouse to just step in informally to manage it for you. Your spouse is going to end up going to court to get appointed by a judge, suffer the humiliation of swearing under oath to manage the property for the children, and possibly forced to purchase a yearly bond or insurance to guarantee against “embezzling” the kids’ money. A few hundred dollars spent on a will now is the best insurance you can buy to prevent these kinds of disasters.

As you get older and approach middle age, you financial condition becomes more complex, but your will is still an important component of your estate plan. You have grown or nearly grown children, college funds, mutual funds, life insurance, 401(k)s, real estate, and a myriad of other assets and financial concerns. You have a lot of estate planning options, including revocable living trusts. A trust might be right for you, but even if you have a trust-based estate, you still need a will. Most trusts do not cover everything you own, only major assets and money accounts. Typically, your personal effects, like family photos or furniture, are not part of the trust, and can only be disposed of with a will. And, if you’ve opened new accounts or purchased major new assets since the trust was finalized, you may have major assets that fall outside the trust. These assets will pass through your will. In a complex estate plan, a will is the safety net to make sure you didn’t miss a thing. Without a Will, in all likelihood, some part of your estate will end up in court.

What happens if I don’t have a Will?

If you die without a will, Arizona law provides the following for your property:

The following part of the intestate estate, as to both separate property and the one-half of community property that belongs to the decedent, passes to the surviving spouse:

1. If there is no surviving issue or if there are surviving issue all of whom are issue of the surviving spouse also, the entire intestate estate.

2. If there are surviving issue one or more of whom are not issue of the surviving spouse, one-half of the intestate separate property and no interest in the one-half of the community property that belonged to the decedent.

Any part of the intestate estate not passing to the decedent's surviving spouse or the entire intestate estate if there is no surviving spouse passes in the following order to the following persons who survive the decedent:

1. To the decedent's descendants by representation.

2. If there is no surviving descendant, to the decedent's parents equally if both survive or to the surviving parent.

3. If there is no surviving descendant or parent, to the descendants of the decedent's parents or either of them by representation.

4. If there is no surviving descendant, parent or descendant of a parent, but the decedent is survived by one or more grandparents or descendants of grandparents, half of the estate passes to the decedent's paternal grandparents equally if both survive or to the surviving paternal grandparent or the descendants of the decedent's paternal grandparents or either of them if both are deceased with the descendants taking by representation. The other half passes to the decedent's maternal relatives in the same manner. If there is no surviving grandparent or descendant of a grandparent on either the paternal or the maternal side, the entire estate passes to the decedent's relatives on the other side in the same manner as the half.

If you’re cool with that, maybe you don’t need a will. Oh, if none of these people are available, the government keeps your stuff.

Why can’t I prepare my own Will?

You can do your own Will, but it’s at your own risk. And it’s a pretty big risk. Once you die, your will can no longer be changed. Not under any circumstances. You could have left an impassioned entry in your journal in your own handwriting about how you want to leave your video game collection to the Big Brother kid you volunteered with, but unless you say that in your will, the youngster’s going to be disappointed. When they call it your “last will and testament,” they mean it. Under the law, a will is the written equivalent of a deathbed wish. A court will enforce it as though you had written it moments before you died. Whatever it says is how your estate will be distributed. If you make a mistake, you can’t fix it.

Maybe you are saying, So what? I’ll just draft it carefully. There’s nothing wrong with being careful, of course, but you might want to consider that lawyers spent whole classes learning all the ways that a will can be done wrong. It might seem pretty innocent, for example, to leave your money to your kids, and then their kids after them, and then their kids on down the line. What’s wrong with keeping your money in your bloodline? In principle, nothing, but it’s illegal. If you do it in your will, it’ll be thrown out, and your money could be left for a judge to decide who gets it. Wills seem simple enough when they are done, but there are hundreds of invisible pitfalls that you could fall into, and never realize it.

The goal of a will, after all, is to make sure your property is given away as you want it after your death, but if the legalese isn’t right, you run the risk that that the people you love won’t be cared for the way you wanted. Sure, you can study all the do-it-yourself internet sites trying to tell you (sell you) that a do it yourself will is easy, or you can buy do-it-yourself software and let a computer ask you a thousand questions. In the end you’ll spend hundreds of dollars and have a will written with all the legal expertise you and your computer possess. For only a slightly higher fee, you can have a will prepared by WillNation, and you’ll talk to a real lawyer on the phone about your hopes and plans and dreams for the future and wishes when you die. And, you can be sure your will expresses those desires.

What is a beneficiary? Devisee? Heir?

A beneficiary is someone who receives a “bequest,” or gift, in your will. A beneficiary can either receive specific gifts (“I leave my daughter grandma’s wedding ring”) or general (“To my beloved spouse, I leave all the remainder of my estate”). The latter is called a residual beneficiary, because they receive whatever is left over. Usually, the residual beneficiary is intended to receive the greatest share of property under the estate, but if you are not careful, that won’t happen. If you leave too many specific bequests, they can eat up the estate, and specific gifts are paid out first.

A “devisee” is someone in your will designated to receive a “devise.” That clears it right up, huh? Okay, a devisee is really the same as a beneficiary, and a devise is simply some of the property passed through the will. These are legalese words for a “person” who gets some “stuff.”

An “heir,” aside from being the stuff of bad puns, is a person who receives your property if you die without a will (intestate). While in common parlance we speak of “heirs” in a more general sense, the word is only used in the legal context if you don’t have a will.

Is this a Test(ator)(ate)(atrix)?

If you read even a little bit about estate planning, you are going to run into words like testator, testatrix, intestate, and testate. Here’s a primer.

These words all stem from the same root as “last Will and Testament.” These words all have to deal with one’s status in relation to a will.

A “testator” is a person who makes a will. “Testatrix” is an old fashioned word meaning a woman who makes a will. “Testator” suffices for both genders these days.

“Testate” means dying having executed a valid will. No one wants to die, but this is the way to go. “Intestate” literally means without a will, but in reality it means the government is going to be deciding who gets your stuff. (P.S. The government is on the list of potential recipients).

What is an Executor or Personal Representative?

The executor or personal representative is the person you appoint to carry out the wishes you leave in your will. Different states use different terms. (Arizona uses personal representative.) You personal representative is appointed by you in your will. He or she will take care of paying bills, closing accounts, selling property, distributing property and doing anything else needed to close your estate. The executor can also handle court proceedings, if any, or retain a lawyer to do it for them.

It goes without saying that you should choose as your executor someone you trust and someone who is willing to undertake the efforts needed. Don’t name someone as personal representative without asking them first if it is okay, since the person you name has the right to decline the appointment. It is an honor to be named, but it is also a significant commitment in time.

Because of the time commitment, personal representatives are entitled to compensation out of your estate. In Arizona, your personal representative is entitled to reasonable compensation by law, but you can set the exact amount in your will, and the personal representative can waive compensation if he desires.

When deciding who to select, keep in mind the person need not have legal or financial training. What’s most important is to pick someone you trust. Many people choose a spouse or adult child. It also makes sense to pick someone who is going to inherit a lot under your will, as they have incentive to dispose of your estate correctly. Lesser concerns include picking someone with good organizational and people skills, or someone who lives nearby, which adds a layer of convenience.

Another thing to think about is that unless your will expressly waives the requirement, a personal representative will be required to post a bond to ensure he or she scrupulously carries out the terms of the will. This can be an expensive and insulting requirement, and most wills expressly waive the requirement. Unless there is reason to be concerned about your personal representative’s honesty (in which case you might consider picking someone else anyway), it is generally recommended that the bond requirement be waived. If you do require a bond, you can name the amount, o you can leave it to the court. Typically, the bond will be set at a value approximating the value of the estate.

Am I stuck with my Will once I sign it?

Nope. You can change it anytime. You can scrap it entirely and start over, or you can amend it with a “codicil.” The only time a will becomes permanent is after a person’s death. At that point, it can no longer be changed.

WillNation makes it easy to execute rewrite your entire will. We keep an electronic copy of your will for you, and once a year we drop you an email letting you know a summary of its contents. If its time to make a change, you can do so easily and quickly, and at very low cost.

WillNation does not provide codicils, because codicils can create more confusion than they fix. A codicil is just an appendix to a will that has to be signed and witnessed just like a will. Why tack an edit onto the end of your will when, thanks to computers, you can just as easily edit the original and re-execute it? The upshot is at WillNation, changing your will is quick and easy.

It is usually a good idea to review and update your will when you experience major life changes such as marriage or divorce, birth of a child, or a major change in your financial condition

When Do I Need to Change My Will?

Reviewing your estate plan once a year is not a bad idea. WillNation makes that easy. Every year, about the time you are considering your New Years Resolutions, you’ll get an email from us that summarizes the important details of your plan. In just a moment, you’ll be able to determine if you need to change your Will.

Your will should always match your marital, familial and financial status. You should update your will if you get married or divorced, you have a new baby or stepchildren, or you acquire or dispose of substantial assets.

What do I have to do to make my will official?

You have to sign it in front of two witnesses, and the witnesses have to sign too. WillNation sends you complete instructions along with your Will to make it easy. And, when you send it all back, we double check that you did it right.

If you don’t sign your will in the state where it is intended to be probated, it will usually be held to be valid if it complied with the laws of the state where it was signed or the state where it is to be probated.

It is not necessary to have your will notarized for it to be valid, however, if you and your witnesses sign the will before a notary it becomes “self-proving” which speeds up probate.

What is a testamentary trust? Do I need one?

A testamentary trust is a trust fund created by your will. It is typically used to manage assets for your minor children in the even both you and your spouse die. In that case, the person you have named as guardian will raise your children. You are going to want to leave resources to assist the guardian in caring for your kids, but you don’t want to leave it directly to the guardian personally – he could blow it all in Vegas – and you don’t want to leave it in the hands of a two year old. Leaving the money in a testamentary trust creates a legally enforceable obligation that the guardian only use the money for your children’s benefit, and allows the money to pass to the kids when they reach the age you pick.

The downside of a testamentary trust is the money has to pass through your estate. If estate taxes are a worry, a living (inter vivos) trust is a better option.

If you intend to provide for your kids with a life insurance policy, you need to remember to make your estate the beneficiary of the policy if you are using a testamentary trust. Otherwise, the money will simply pass to the person named in the policy.

The upshot is if there is no risk of hitting the estate tax limit, a testamentary trust is a simple and useful way to add an extra layer of protection for your kids.

What Can’t my Will do?

Your will can take care of the distribution of your estate and guardianship of your children, but there are limits on what a will can accomplish. Here are some things you can’t do in a will.

Distribute some types of property, such as jointly deeded real estate, life insurance and retirement accounts if you have named a beneficiary, trust property, and accounts you have designated payable on death.
Reduce Estate Taxes. If you are rich enough to worry about estate taxes (3.5 million in 2009), a will should not be your primary estate planning vehicle.
Make people do things. You can tell your daughter in your will that she can have everything as long as she dumps that motorcycle riding punk, but no court will enforce it. You can get away with more reasonable requests, like leaving a bonus to your kids for graduating college.
Tell people how you want to be interred. You can put in your will that you want to be put into a space capsule and shot into orbit, and when they find your will a month after the burial they’ll regret that they didn’t know that sooner.
Leave the house to Fido. Pets can’t own property, so don’t even try. You can create trusts that hold money for the care of your pets, but you can’t do it in a will.
Fund illegal activities. This seems like a no brainer.
Take care of people with special needs. You need a specially trained lawyer to set up a trust in this case. Please don’t leave it to a will.
Give away your spouse’s share of your community property. In a community property state such as Arizona or Wisconsin, in generally the marital property is split in half equally, automatically. You can’t give away what’s not yours.

Isn’t Probate a Pain?

Probate is a process through which the property disposed of by a will is distributed with supervision of the superior court. The superior court in reality exercises very little supervision of the process, but is there if you need it. Usually, the process is controlled primarily by the personal representative. Creditors are given a few months to file claims against the estate, after which the personal representative can distribute assets.

If your will is correctly prepared by a lawyer, probate is a fairly hassle-free process. As long as the will is in order, all “probate” really requires is a trip down to the courthouse to file the will. Then, you will receive “letters testamentary” which are just court orders allowing you to access the deceased person’s bank accounts and sign their checks. Once you have these letters, you can basically handle the person’s finances as if you were them. For typical estates, which include a house, bank accounts and maybe a 401(k), avoiding probate by the extra cost of preparing a trust, because probate isn’t as difficult a process as it is often made out to be. The whole process rarely takes more than a few months, and most of that is simply waiting to give creditors a chance to respond.

Some disadvantages of Probate:

• The process is public: anything filed with the court is subject to inspection.

• It typically takes a few months to complete.

• If a lawyer is needed, legal expenses will be incurred. (Trusts, however, incur unique expenses as well.)

• Doesn’t help avoid estate taxes, in the unlikely event you need to worry about them

Some advantages:

• Probate ties up loose ends of an estate.

• Probate limits the amount of time creditors have to collect.

• The court is easily available to resolve any disputes.

· It is a much cheaper estate plan than a trust based plan

It is important to remember that not all property passes through probate. Here are some examples of property that passes outside the will.

Property held in an inter vivos or some other types of trusts.\
Jointly held deeded real estate
Life insurance proceeds (unless the estate is the beneficiary)
Retirement account proceeds (unless the estate is the beneficiary)
Payable on Death Accounts
A spouse’s share of community property

Disinheriting Family Members

It is not always desirable to have spouses or family members inherit under a will. Sometimes, poor familial relationships lead to the desire to disinherit. But the need to disinherit a spouse or family member can also stem from other circumstances. Perhaps one child has made a fortune and the others need more help. Perhaps your spouse brought wealth to the marriage and doesn’t need your support.

Spouses

Disinheriting a spouse can be tricky, because the laws of most states entitle a spouse to a significant share of your estate. In community property states like Wisconsin and Arizona, the law presumes that any property acquired during the course of your marriage, even the money in your individual retirement account, belongs to both spouses equally. And, if your real estate is titled in both your names, it passes to your spouse outside your will.

Ex-Spouses

For the most part, getting divorced revokes gifts made to a former spouse in your will. But to be on the safe side, if you get divorced, make a new will that revokes the old one. Then you can simply leave your former spouse out of your new will.

Children

For the most part children don’t have automatic inheritance rights like spouses. With a few exceptions, if your child is not mentioned in your will, he or she may receive nothing at all. Such mistakes, which can easily occur if a will is not updated frequently enough, will often lead to lengthy litigation about the intent of the parent. Was the omission intentional or not? Because of the potential for bitter litigation, if a person intends to disinherit a child, it is the best practice to specifically state your intentions in your will.

Should my Will say how I want to be buried?

There’s nothing wrong with it, but it probably won’t accomplish your purpose. The reality is that when someone dies, no one ever stops and says “Let’s find the will so we know how to bury her.” A person’s passing is a time of such stress and sorrow that burial decisions are likely to be made without spending much time wondering how you would want it done. If you have particular wishes about your funeral, you should make those wishes clear to the people who love you, so they will be aware of your desires. If your desires are complicated or detailed and need to be written down, make sure your loved ones have a copy or know where to find them. As long as someone knows where to look, you’re fine. Your instructions can be in your will, as long as your loved ones have been told to look there.

Can husband and Wife have a shared will?

They can, but it is ill-advised. The only advantage of a shared will is its simplicity: one document expressing mutual love and giving everything to each other when one dies. The disadvantage is the will also has to have a contingency for when the second spouse dies. Often, the couple will leave their estate to a charity or other worthy cause. (If you have children you should not even consider a joint will). Here’s the problem: If one spouse dies many years before the other, the terms of the will still control the property. The favored charity might no longer exist when the second spouse dies, but she was powerless in her life to change the will, because it can only be changed by both signers, one of whom is no longer with us.

Should I put health care instructions in my Will?

No. Your will only becomes a legally binding document when you die. Health care directives, no matter how you look at it, are for living people. If you want to provide instructions for your health care in the event of incapacitation, you need an Advance Health Care Directive, also known as a Living Will and a Durable Power of Attorney for Health Care. WillNation lawyers can prepare these documents for you.

GUARDIANSHIP FOR CHILDREN

Who is going to raise your children if you aren’t around to do it? That’s a thought no one likes to face, but if you don’t make a choice now, a court will make it for you. Setting up a guardianship for your kids is the single most important reason to take care of your estate plan now.

How it works

Setting up a guardianship for your children boils down to two basic things: figuring out who is going to raise your little ones, and figuring out how you are going to support them financially.

Who is going to raise them?

Choosing a person to entrust with your children is a momentous and often wrenching choice. Before you give it serious thought, it might seem easy – your own parents or a sibling or a close friend. But as you think deeply about your kids, their personalities, who they are as little people, you realize very quickly that there’s no one quite like you, and picking a substitute is a hard, hard choice. Here are some things you have to consider:

• Is the person you are considering stable? If your sister is your first choice, but she’s still living in a college dorm and the longest relationship she’s ever had lasted 3 weeks, maybe she’s not ready to take on the responsibility.

• Does he or she have the time? Your choice may be perfectly stable, consistently working 80 hours a week managing his new business venture, playing on a midnight hockey league and doing triathlons on the weekend. Some kinds of stable don’t have time for kids.

• Is the person too young or old? Sure, mom did a great job with you, but does she have the energy now to raise another little you? Parents are often great choices, and they are even more often willing to raise their grandkids, but you have to match their health and vitality with your children’s needs and energy. On the opposite end of the spectrum, you can’t appoint an older child as guardian. The person you choose must be at least 18. Needless to say, while some 18 year olds are mature enough to raise children, youth and immaturity have to be concerns in picking someone young. One good thing to keep in mind is to appoint someone who can best handle the job today. You can change your will down the road as the situation changes.

• Does the person you are considering hold similar moral and ethical beliefs to you? Are you a free-wheeling hippie considering placing your children with a close friend who happens to be devoutly religious? While that might be a funny premise for a movie, it could be a recipe for disaster and conflict for your kids.

• Does the person you are considering have kids of his/her own? A “yes” answer here is good on two levels. First, if the kids are similar in age, your children will have companions (with all the friendship and fighting that goes with it). More importantly, people who already have children are typically at a stage in life where they are ready to have kids, and you’ve probably had a chance to observe their parenting skills.

• Where does the person you are considering live? Would your kids have to move to live with the person you are considering? If your children have just lost their parents, consider the additional trauma of being completely uprooted from their daily routine, friends, activities, and everything familiar to them.

• Does the person you are considering genuinely care about your kids? You’re old college roommate, the guy you trusted with your life, might seem perfect. He’s grown up, settled down, had kids of his own. But he lives in another state and you don’t see him very often. He hardly knows your kids. Sure, you know he’d say yes, but would he love them like a father?

• Can the person you are considering afford it? Your goal is to leave enough to raise your kids, but that’s not always possible. If you can’t manage it, does your choice have sufficient income to raise your children?

• Have you spoken to the person you are considering? Don’t assume your choice will be willing, and certainly don’t let it be a surprise. Talk about what you would expect of them, and about whether they want and think they could handle the job. If you’re considering more than one person, speaking to each may help you narrow down the field.

• Have you spoken with your kids about your possible choice? If you have older children, it’s not a bad idea to talk to them about the choice you are making. Aside from the awkward beginning to the conversation (“suppose dad and I were killed in a car crash”), you may find your children provide you with a fresh and unexpected perspective on who they would like to live with if it couldn’t be you.

Finally, remember that no one’s lives can revolve around your kids like yours. So, in making your choice, there’s not going to be any perfect solution. No one can be you. All you can do is consider the above factors and pick the person best suited to watch over your children.

How I am going to support them financially?

A Trust Issue

Children complicate life, so it should come as no surprise that they complicate estate planning too. Without children, all you need is a basic will to leave your property to those your love. The people you give your property to are free to manage it as they like, and that’s just fine with you.

When children are involved, suddenly you want to exert control of your property for 18 or 25 years beyond your death. You want to make sure the money is used in ways that are good for your kids, ensures their health, well-being, and college education. You wouldn’t want to leave your money directly to the kids – they’d blow it on Disneyland. And it’s not a good idea to leave to your guardian either. While you may trust him or her, people change, especially when money is involved. If you leave money directly to the guardian, he is under no legal obligation to spend it on your kids. He could lose it to his secret gambling problem, or – here’s one you won’t see coming – a court could order him to pay half of it to his wife when if they divorce. It’s his money, not your kid’s money.

This is usually you usually get the upsale from a lawyer. The whole sales pitch about why you need a complicated estate plan where everything you own goes into an inter vivos trust. To avoid probate (which isn’t a big hassle for most folks). To avoid estate taxes (which odds are you will never owe). But most of all… for the kids. Oh, that’ll be two, three thousand dollars please.

Here’s the truth: you do need a trust to take care of your kids, but you don’t need the one the lawyer is selling you. If your kid puts a baseball through a window, you don’t buy a new house. You just buy what you need. Just because you have kids doesn’t mean you have to fund an inter vivos trust and transfer your house and stock portfolio into it.

What you really need is a trust that lies dormant and stays out of the way until it is needed, and then springs to life and takes care of your children. It’s called a testamentary trust, and – bonus – it costs a fraction of what the lawyer wants to sell you.

Setting up a testamentary trust just requires making sure your will has the right language in it to express your intentions. Then, when you die, the trust is automatically created if you still have minor children. WillNation offers two testamentary trust products, a Standard Testamentary Trust that covers most needs, and Custom Testamentary Trust that you can adjust to your specifications.

Funding the Trust

Once you have created the trust, the trust can be named as a beneficiary under your will. So, you can name the trust as your residual beneficiary, and then the proceeds of your estate will spill over into the trust during the probate process. You can also name the trust as the beneficiary of life insurance policies and other assets should you choose to do so.

WillNation Standard Testamentary Trust

A WillNation Standard Testamentary Trust creates a single trust to cover all your biological and adopted children, including those not yet born or adopted, and any step-children you specifically name. The trust is managed by your named guardian for the benefit of every child in the trust. Once the youngest child reaches the age you designate (usually 18, 21, or 25), the trust is terminated and all proceeds are divided equally among each child (or his estate). At the trustee’s (guardian’s) discretion, children over the designated age may continue to receive authorized support, but a preference is given to children under the designated age. The trustee is admonished to manage the assets exclusively for the children’s benefit, to manage them fairly among each child, and weigh the importance of any given expenditure against the future solvency of the trust. At the trustee’s discretion, an adult child my receive his share of the ultimate disbursement (think of it as a buy out), or a part thereof, so long as the buy out won’t jeopardize the needs of remaining minors. Authorized expenditures under the trust include:

• Expenditures for the support, upkeep, and shelter of your children. (This is the basic groceries and clothes shopping clause)

• Expenditures for educational purposes. (This includes everything from swim lessons to graduate school)

• Expenditures for health care. (This includes anything from checkups to insurance premiums to life-saving emergency care).

• Expenditures for the general well-being and happiness of your children. (You want them to have a nice Christmas and to pay their fair share of a trip to Disneyland. This clause could also authorize travel in general).

• Expenditures for the legal needs of the children.

WillNation Custom Testamentary Trust

A WillNation Custom Testamentary Trust starts with the standard trust and allows you to change or delete any of the terms, or add new ones, to fit your circumstances.

The Custom Trust plan also allows you to decide to have individual, separate trusts for each child if you choose, which can prevent problems of who gets what, but decreases the overall earning power of the corpus.

The Custom Trust also allows you to limit more specifically how funds are spent. If you want to budget how much is spent on your children at the holidays, or if you want to ensure that each child gets to go on a Senior Year abroad, or if you want to prohibit the use of your funds for any purpose objectionable to you, you can do so.

The Custom Trust also allows you to establish specific gifts and incentives. Maybe you want to give each child a car when they turn 16, or a cash gift if they graduate college with a B average or better.

There is virtually no limit to what you can do with a WillNation Custom Testamentary Trust.

Other Guardianship FAQs

What happens if I don’t set up a guardianship?

If you don’t decide, a court will do it for you. That means the court picks who has permanent custody of your children and appoints someone to manage the money left for them. The money will be managed in a manner the court wishes, which may mean your kinds are not provided with everything you would want for them. (For example, the court-appointed trustee might pay for college but not graduate school or dance lessons).

I’m divorced. Can I keep my ex from having the kids?

No. If you die, your ex-spouse in all likelihood will receive full custody. If you genuinely believe there are reasons why your ex-spouse should not receive full custody, you should leave a Letter of Intent explaining why. That won’t necessarily make a judge strip your ex of parental rights, but it is something that can be used in court as evidence.

Does the guardian have to be the trustee?

No. You can name separate individuals to care for your children and manage their funds using either WillNation Trust product.

My spouse and I have children from previous marriages. How does that work?

The WillNation intake form allows spouses to enter separate answers for most questions, so you both will have an opportunity to make your wishes clear. Specifically with regard to children, WillNation products take into account biological, adopted, unborn and step children, and allows each spouse to state his/her wishes for each.

Is it bad to name two people as guardian? Trustee?

If you name more than one person, they have to agree about every decision, which tends to lead to conflict. It is better to have no more than one guardian and one trustee, at the most, and it is more convenient still if the guardian and trustee are the same person. An exception is making another couple guardians of your children. If you think both members of that couple would make good parents to your children, then naming two guardians/trustees is reasonably safe in that situation. (If you don’t trust one member of the couple, just name the person you do trust).

Should I be worried if my child’s other parent is my same-sex partner?

Generally no, especially if you both have some form of legal custody, but to be safe it is not a bad idea to name your partner as guardian in your will. Also consider writing a Letter of Intent to explain your wishes.

LETTER OF INTENT

A letter of intent is an opportunity for you to clarify any of the actions you have taken under your will. It’s a sad truth that families do not always get along and don’t always agree with the choices a person makes in his or her will, either with regard to the choices of whom to give specific assets, or the choices for guardianship. If there is anything you believe would be beneficial to discuss with your family members after your passing, a letter of intent gives you that opportunity. You can also use the letter to say your final goodbyes to your loved ones.

In the unlikely event that your will is disputed in court, the words you write could be introduced as evidence of what you intended your will to mean. You should be careful that you do not say anything that would contradict any of the terms you have chosen for your will.

If your will ends up in court over guardianship issues, the judge will use your letter as evidence. His concern will be the best interests of the child, so be sure your letter of intent explains why your choice is in the children’s best interests.

The letter of intent is an optional document in your estate plan. You do not have to create one.

TRUSTS

Shouldn’t I get a Trust instead?

Not necessarily. The only reason to have a trust-based estate plan rather than simply a will if if your financial condition is sufficiently complex that a will-based estate will lead to (1) estate taxes and (2) a burden on the person you designate to enforce your will (you personal representative or executor). Currently, an estate has to be worth more than 2 million dollars to be subject to estate tax, and that figure is going up to 3.5 million in 2009. For most middle class Americans, a trust is not necessary to avoid estate taxes. Similarly, executing a will is not terribly burdensome for your personal representative if your estate consists of things like a family home, bank accounts, cars, credit cards and even a 401(k) or other mutual fund account. As you become wealthier, and your holdings more complex and varied, a trust is probably the better choice, but until then, there’s no reason to spend thousands of dollars to fix estae planning “problems” that don’t actually exist.

So, for most middle class Americans, a will is an adequate instrument.

What is a Trust?

Think of a trust as a friend who you can completely, well, trust. Because you trust him, you sign over all your property – your home, cars, bank accounts – to him. You own nothing during your lifetime, you simply trust your friend to do with your assets what you tell him to. You also tell him what you want him to do with your assets when you die. When that day comes, your assets don’t have to go through probate, because you don’t own them – the trust does. Your property is managed by the trust using the instructions you left.

There are obvious advantages to having a trust. If you have a complex estate, a trust will simplify life for those charged with managing it after you are gone. If you are very wealthy (an estate worth more than 3.5 million in 2009), a trust should be used to avoid estate taxes.

But there are disadvantages too. Trusts are significantly more costly to set up than wills – thousands rather than hundreds of dollars. And, during your lifetime they require constant maintenance. If your trustworthy friend owed your house, you’d have to go through him every time you want to sell it and move. Having all your property in trust adds an extra layer every time you acquire or dispose of assets. Plus, the trust documents themselves will require more maintenance and revision (legal fees) than a simple will does.

The long and short of it is if you are a typical middle class American, you don’t need a Trust. A will represents a good balance. There is, however, one type of trust that can be created by your will and is important if you have young children. This trust is called a testamentary trust.

Testamentary Trusts

A testamentary trust is a trust fund created by your will. It is typically used to manage assets for your minor children in the even both you and your spouse die. In that case, the person you have named as guardian will raise your children. You are going to want to leave resources to assist the guardian in caring for your kids, but you don’t want to leave it directly to the guardian personally – he could blow it all in Vegas – and you don’t want to leave it in the hands of a two year old. Leaving the money in a testamentary trust creates a legally enforceable obligation that the guardian only use the money for your children’s benefit, and allows the money to pass to the kids when they reach the age you pick.

The downside of a testamentary trust is the money has to pass through your estate. If estate taxes are a worry, a living (inter vivos) trust and other complex estate planning options are better options.

If you intend to provide for your kids with a life insurance policy, you need to remember to make your estate the beneficiary of the policy if you are using a testamentary trust. Otherwise, the money will simply pass to the person named in the policy, which can be problematic if you name minors as beneficiaries.

The upshot is if there is no risk of hitting the estate tax limit, a testamentary trust is a simple and useful way to add an extra layer of protection for your kids.

POWERS OF ATTORNEY

A Power of Attorney is a document that allows others to make decisions for you that would normally be only yours to make. With the appropriate POA, a person can withdraw money from your checking account or decide what medical treatment you will receive. If you become incapacitated without a POA, your family will incur legal expenses in excess of $1000, not to mention critical delays, obtaining a court appointed guardian. This person may not be the person you would have picked, and on top of that you will have to pay for regular additional court reviews.

Powers of Attorney can come in many varieties. Some POAs are meant to be temporary, like a POA giving your spouse the right to sign on your behalf at a home closing if you can’t be there. Some are meant to be more general, such as giving your spouse a POA covering all your finances if you are going to be away for an extended period. A POA can be temporary or permanent, but can always be revoked in writing. POAs are an important estate planning tool because they allow you to plan ahead in the event you should become incapacitated.

All WillNation POAs are “durable.” A durable power of attorney is one which remains in effect even if you are incapacitated, thus permitting your designee to manage your life while you are unable. “Durable” POAs are a good estate planning tool because they allow you to plan in advance for the possibility that you will need to have someone make decisions for you. You can decide now who will be permitted to make those decisions, and what they will be allowed to decide.

WillNation offers two different types of durable POAs, a general POA and a limited POA. The general POA grants authority to your designee upon signing. The specific POA only springs into action when you become incapacitated. The “springing” POA have the downside that whether one is “incapacitated” can be a matter of debate, leading to delays when you most need someone to take control. Customized POAs that provide additional conditions and restrictions can be prepared by WillNation attorneys where appropriate for additional fees.

WillNation offers three kinds of POAs covering financial and health care matters. The financial POA covers virtually every aspect of your financial life. The health care POAs include both a medical and mental health POA, as well as a Living Will and an optional Do Not Resuscitate Order. Taken together, these medical documents are called Advance Health Care Directives.

Who Should Be Your Agent?

The person you appoint under your POA is called your agent (or also your “attorney in fact”). You may pick anyone you want, so long as the person is not a minor or otherwise incapacitated. (In legal terms, incapacitation includes minors, mentally ill persons, and others who arguably are unfit to make decisions for another. Mental illness runs along a spectrum of course, and if your spouse suffers from mild depression, that probably is not a problem, but as the seriousness of the illness worsens, the ability of the person to be your POA decreases.)

Obviously, you should choose carefully and pick someone you trust with your finances and your life. It is also a good idea if the person is nearby. If you are unconscious following a car accident, you would probably prefer it if your POA was able to come down to the hospital and speak personally with the doctors. Finally, you should name a backup person in case your first choice is unavailable for any reason.

You do not have to name the same person for your medical and financial POAs.

FINANCIAL POWER OF ATTORNEY

Your designated agent will have complete control of virtually ever aspect of your financial life. Additionally, the Power of Attorney you sign is “durable,” meaning it is effective upon your signing it and persists even if you are incapacitated. It is thus important that your agent be trustworthy. Your agent is required by law to manage your finances in your best interests, and you can sue if he or she mismanages or steals your money, but that is of little comfort if the money has been spent or has disappeared. Trust, ultimately, is the most important factor.

Other factors to consider are whether the person is willing, competent and financially secure. It is generally preferable that your POA live nearby, as that can be significantly more convenient. Your POA will be checking your mail and depositing any checks you might receive, for example. Imagine trying to do that from halfway across the country. If a spouse, relative or friend takes on the job, you probably won’t have to pay them, but you also have the option of locating an attorney, bank or other profession financial manager to do the work for a fee.

Your agent can perform many services for you, including:

Pay your expenses
Pay your bills and taxes
Buy, sell, maintain, and mortgage real estate and other property
Invest your money
Handle insurance polices
Manage your retirement accounts and children’s college funds
Handle your banking needs
Collect Social Security, Medicare, or other benefits
Operate your small business
Hire someone to represent you in court
Hire financial planners or other experts to assist in managing your assets

Your durable financial POA automatically ends at your death, so your agent cannot continue to manage your funds when you die. (The job at that point is turned over to the executor of your will.)

ADVANCE HEALTH CARE DIRECTIVES

Your advance health care directives are a set of documents which include a Living Will, a Health Care Power of Attorney, plus other documents to facilitate another person controlling your care if you are unable to make decisions for yourself. Once a doctor determines that you are incapacitated, the person you designate can begin making decisions, or, if your POA is general, your agent may make decisions even if you are not completely incapacitated. Lacking capacity usually means you can’t understand the health care choices being offered to you or you are unable to communicate your preferences, or both.

You must be of sound mind and legally an adult to validly sign advance health care directives.

Your advance health care directives are valid as long as you are living, and in limited circumstances, even after your death, for purposes of determining funeral rites and whether there will be organ donation or an autopsy. You may revoke your advance health care directives at any time. In the unlikely event of a court challenge (usually by someone claiming you were not of sound mind when you signed the document), a court has the authority to revoke your directives as well.

Living Wills

A WillNation Living Will is one part of your advance health care directives. A Living Will is a document which outlines your desires in various types of unfortunate health care situations. A Living Will lets you decide whether you want the doctor to “pull the plug” if you are in a persistent vegetative state or comatose. A person in a persistent vegetative state may live for years with just food and water, so your WillNation Living Will permits you to indicate that you would like food and water withheld. Because dying of starvation and dehydration might be painful, even to the comatose, you can choose to instruct doctors to give you whatever treatment will keep you comfortable.

Your WillNation Living Will also permits you to make specific decisions about the kind of care you do and don’t want, and addresses what doctors should do in the event you are pregnant at the time of your incapacity.

Finally, your WillNation Living Will permits you to make known your desires for your funeral, and your preferences for an autopsy and organ donation. Your agent will be legally bound to follow your requests, if possible, but keep in mind that state laws regulate these areas as well, and you cannot command your agent to do something illegal.

A common estate planning mistake people make is to include such things as funeral wishes and medical directions in their will. Most of the time, their will is not opened until days after the funeral, when it is too late.

Health Care Power of Attorney

Your Health Care POA is a document which gives your agent the power to make medical decisions on your behalf, including following your instructions in your Living Will. Your agent will have complete authority to authorize or decline medical procedures, review your medical records, and consult with your doctors. Your agent literally has your life in his hands, so trust is of paramount importance in making the choice of who to appoint. Other factors to consider are whether the person is willing and competent. You should pick someone who is willing to make tough decisions in line with what you want, not what he or she wants, and who will not be easily pressured by family members who may want a different path chosen. It is also generally preferable that your POA live nearby, as you would no doubt have them manage your health care crisis in person.

You can give your agent as much or as little power as you desire, keeping in mind that if you can’t make decisions, someone will make them for you. Since you have the opportunity to pick the person you trust most when selecting your agent, it is logical to invest that person with comprehensive power to make decisions.

Some of the powers your agent might exercise include:

Consent or refuse consent to any medical treatment
Make decisions about the best medical facilities for you
Hire or fire doctors or other medical personnel
Visit you in the hospital or other facility even when other visiting is restricted
Go to court to force doctors or hospitals to treat you in the manner you wish
Review and disseminate medical records and other personal information

Your agent may not, however, violate your express withes as stated in your living will. You may revoke your health care POA in writing at any time.

Mental Health Power of Attorney

Your mental health POA is similar to your health care POA, except it makes clear your wishes with regard to mental health treatment. The separate POA is preferable because of the different nature of mental illness, and the different types of treatment contemplated by mental health care as opposed to physical care. Incapacity due to mental health reasons involves a different set of considerations than physical incapacity. Mental health incapacity can be transient, and is subject to treatment with medications. It can onset rapidly, such as when a mentally ill person stops taking medications, or a person has a breakdown. When a mental health episode becomes a legal incapacity is a question prone to debate and court action. Because of the many differences in physical and mental incapacity, it is a good idea having a separate power of attorney demonstrating that you have intentionally delegated the right to make mental health decisions to your agent. Your mental health POA will permit your agent to:

Consent or refuse consent to any mental health treatment
Make decisions about whether to place you in a mental health facility
Hire or fire mental health personnel
Consent to the administration of any psychiatric drugs
Review and disseminate medical records and other personal information

You may revoke your mental health POA in writing at any time, except during times you are under incapacity.

Do Not Resuscitate Orders

Also known by its more euphemistic name “Prehospital Medical Care Directive,” this document lets doctors know what to do in the event of a stroke or heart attack, or some other potentially life-ending medical event. For most people, the answer is “Restart my heart, now please.” That is the choice you will want to make if you are still younger.

Consider, however, if you already had a terminal condition, or if you are elderly and the efforts to resuscitate you would cause you great suffering, or if the likelihood of a recovery is such that you may remain alive, but paralyzed or bedridden. Under certain circumstances, some people would prefer to let nature run its course.

A DNR order differs from a Living Will and Medical POA in that it must be presented to the medical personnel while the emergency is happening, otherwise the doctors are most likely going to do everything they can to revive you.

ESTATE PLANNING ACTIONS YOU CAN DO YOURSELF

Not all property has to pass through probate. There are some safe, do-it-yourself estate planning steps you can take to avoid probate for some of your more significant assets.

Payable-on-Death Bank Accounts

Walk into your bank and tell your banker you’d like a P.O.D. form to fill out for your bank accounts. This form basically allows you to designate who to release the funds in your account to should you die. All the designee would need to do is come in with a death certificate and the account would be handed over. While you are alive, the person you designate has no rights to the account. If the account is a joint account with your spouse (or anyone else for that matter), the account will automatically default first to the co-owner of the account.

Most states allow a similar procedure for securities and brokerage account. Request a Beneficiary form when you open the account.

Retirement Accounts

If you remember when you signed up for your company’s 401(k), you were asked to name a beneficiary. The same is true for any retirement account, including IRAs. This may have been your first foray into estate planning. When you die, the person named as the beneficiary will receive the proceeds of the retirement account directly. The funds do not pass through your will or go through probate.

There are limits. If you are married, your spouse is entitled to inherit your 401(k) unless he or she agrees in writing to your choice of someone else. Also, if you live in a community property state such as Arizona or Wisconsin, half of the part of your retirement account you earned while married belongs to your spouse.

Joint Ownership

Joint ownership simplifies the transfer of assets. If your home is deeded in the names of you and your spouse, then you become the sole owner should your spouse die. Joint ownership works equally well with cars, bank accounts, and other valuable assets.

Joint ownership seems like a simple estate planning tool, but it has its drawbacks. It is simple to get property titled jointly, and simple to transfer on death, but requires agreement of all owners to change during life. Since many unions end in separation or divorce, the need to change the deed to the property arises with some frequency. And, because often a great deal of time passes between separation and final divorce, there is a risk that you could die during the proceedings and your most valuable assets will automatically pass to the partner from whom you are separating.

Gifts

You don’t have to wait till it’s all over to give your stuff away. Making gifts is a simple way to avoid probate. Plus, you get to see the gratitude. Currently, if you give away more than $12,000 to any one person in a year, you will be subject to gift taxes. Subject to that limitation, give till your heart is content.