Wills, Powers of Attorney, and Estate Documents

Key Principle

A will is the primary instrument for controlling asset distribution at death, but roughly 70% of Americans have no valid will (p. 516). Dying intestate surrenders all control to rigid statutory formulas that ignore relationships, charitable intent, and tax optimization. Even a valid will fails if it ignores assets passing outside its limits -- joint property, beneficiary designations, and trusts all bypass the will entirely (p. 517).

Why This Matters

Estates erode by default through five independent forces: death-related costs, inflation, illiquidity, improper transfer vehicles, and disability (pp. 513-514). "Quite often, when people die their estates die with them -- not because they've done anything wrong, but because they haven't done anything" (p. 513). The complete estate planning document suite -- will, letter of last instructions, durable POAs, living will, and ethical will -- is the countermeasure against these forces.

Eight Sections of a Will

Per Exhibit 15.5 (p. 518):

1. Introductory clause -- Name, domicile (sets tax jurisdiction), revocation of prior wills
2. Direction of payments -- Debts, last illness, funeral expenses
3. Disposition of property -- Specific and residual bequests
4. Appointment clause -- Executors, guardians, trustees
5. Tax clause -- Designates which portion bears the tax burden; prevents accidental redistribution
6. Simultaneous death clause -- Presumes spouse survived to enable marital deduction; 30-60 day survivorship prevents double probate
7. Execution/attestation clause -- Testator's signature; initial each page
8. Witness clause -- Two witnesses required in all states; sign in each other's presence

Three Requirements for Will Validity

1. Mental capacity -- Know what a will is, understand relationships and assets, decide distribution. Capacity is presumed; challenger bears burden of proof via clear and convincing evidence. (p. 520)
2. Freedom of choice -- No undue influence, threats, misrepresentation, or coercion. (p. 520)
3. Proper execution -- Written, signed at logical end, meeting state wills act requirements. Age: 18 most states, 14 Georgia, 16 Louisiana. (p. 520)

Intestate Succession Hierarchy

When no valid will exists, state law distributes assets via cascading priority (Exhibit 15.4, p. 517):

1. Spouse + decedent's children from another relationship -- first $50,000 + 50% of balance to spouse
2. Spouse + no children (or all shared) -- 100% to spouse
3. No spouse, descendants exist -- per capita at each generation
4. No spouse, no descendants -- to parents, then siblings, then grandparents
5. No qualifying survivors -- estate escheats to the state

Complete Estate Planning Document Suite

Good Examples

• The tax clause as architecture: Without it, state apportionment statutes determine who bears the tax burden, causing "an inappropriate and unintended reduction of certain beneficiaries' shares" (p. 518). Structuring the clause correctly routes tax liability to the intended payer.
• The simultaneous death clause as tax optimization: Presuming the spouse survived enables the marital deduction (unlimited tax-free spousal transfers) while the 30-60 day survivorship requirement prevents double probate of the same assets. (p. 519)
• The durability trap for POAs: The document must explicitly state that authority continues during incapacity. "Just labeling the document a 'durable power' is probably insufficient" (p. 524). Without proper language, the agent's authority terminates exactly when it is needed most.

Counterpoints

• A will that ignores non-probate assets is ineffective. Jointly held property, beneficiary designations, and trust assets bypass the will. Failing to coordinate these produces fragmented outcomes. (p. 517)
• Joint tenancy eliminates testamentary control. "The key disadvantage of joint tenancy is the inability to control jointly owned property by a will" (pp. 525-526). The first to die cannot direct disposition or management.
• Ethical wills can backfire. If interpreted as contradicting the formal will, an ethical will becomes a weapon for challengers. Must be reviewed by estate attorney for consistency. (p. 525)

Key Quotes

"Quite often, when people die their estates die with them -- not because they've done anything wrong, but because they haven't done anything." (p. 513)

"Will drafting, no matter how modest the estate size, should not be attempted by a layperson." (p. 518)

"Having a valid will -- regardless of the estate's size -- is a critical element in the personal financial planning process." (p. 516)

"To make it durable -- that is, effective even when you are incapacitated -- the document must clearly state that your agent's authority to act on your behalf will continue during your incapacity." (p. 524)

Rules of Thumb

• Review estate plans every 3-5 years minimum; life insurance every 2 years (p. 516)
• Trigger reviews for: death/disability in family, state relocation, marriage/divorce, new children, new assets, income/health changes (p. 516)
• Will preparation costs: $150 (simple) to $1,500+ (complex) (p. 517)
• Beneficiaries should not serve as witnesses -- about 60% of states penalize this (p. 520)
• Keep prior wills to prove "continuity of testamentary purpose" if the new will is challenged (p. 521)
• Experts advise having both a living will and a health care POA (p. 525)

Related References

• Trust Types and Strategies - trusts solve problems wills alone cannot: probate avoidance, incapacity management, multi-generational planning
• Federal Gift and Estate Tax System - will tax clauses interact with federal estate tax computation