No one likes to talk about death and few people like to talk about money, so it’s no surprise that misconceptions about wills and powers of attorney have materialized. If you’ve ever wondered if you need a will or what’s the difference between a power of attorney and a living will, this should answer your questions — and clarify six common law misconceptions we’ve heard at Horn Law Offices.
First, let’s start by defining a key term: probate. You’ve probably heard of the term but aren’t sure exactly what probate is and what it means. Probate is the legal process for paying your debts and distributing property after your death. When you die, your debts will have to be paid before your beneficiaries can inherit your property. Probate can take a few months to several years, depending on the size of the estate and whether anyone challenges the will.
Before we dive into the misconceptions, let me be clear: I am an Iowa attorney, so all of my clarifications below are based on Iowa laws. To learn more about probate, wills, and power of attorney laws in your state, please contact a lawyer in your area.
Misconception 1: Only elderly people have to worry about creating a will.
Older people tend to have more property to pass through their will upon their death, but young people have something more valuable to worry about — custody of their minor children. A will allows parents to name the person(s) they want to raise their children in the event of their death. The court gives great weight to the people nominated by the parents in their will and will usually follow the parents’ wishes as long as the people are fit to have custody.
Misconception 2: A power of attorney and a living will are the same thing.
Let’s define a couple more legal terms before we explain the difference between a power of attorney and living will. The person who grants authority to someone under a power of attorney or living will is the “principal,” and the person who is given the authority to act is the “agent” or “attorney-in-fact.”
Principals can grant two types of powers of attorney: medical and financial. A financial power of attorney allows the agent to make decisions regarding the principal’s money. A medical power of attorney allows the agent to make medical decisions if the principal is incapable of making decisions on his own behalf.
A living will is a slang term for an advance healthcare directive, which allows you to make sure your wishes are carried out in the event you’re placed on life support. An advanced healthcare directive states that you do not want to be kept alive on life support if there is no medically reasonable chance of recovery. The directive overrides the wishes of the agent in the event of a disagreement.
Misconception 3: Creating a will avoids probate.
This common misconception was probably started with wishful thinking, but creating a will does not avoid probate. A will is the foundation for probate. It tells the court and your executor — the person appointed by a will to act on the behalf of the estate — what you want to happen to your property, who you want to oversee the process, and what authority you’re giving them.
There are ways to avoid probate, such as creating a trust or owning property as joint tenants with full rights of survivorship. Joint tenancy with full rights of survivorship is when two or more individuals own a piece of property and the surviving tenant immediately becomes the owner of the whole property upon the death of the other tenant.
If avoiding probate is your goal, talk with an attorney in your area about your options.
Misconception 4: If I don’t have a will, my family will get nothing, and my property will go to the state.
This is not true. If you die without a will, your property will pass through what is called “intestacy,” which means your property will be passed according to state law.
Generally, when a person dies, the property is passed to the spouse. If the spouse is dead, the property is passed to the couple’s children. If the children are dead, the property is passed to the grandchildren, etc.
If there are no children, the property will go to the deceased’s parents if they are still living. If the parents are dead, the property is passed to siblings. If the siblings are deceased, the property will go to nieces and nephews.
In short, if you die without a will, your property will go to blood relatives if they are alive and can be located. The order may vary from state to state, so check with an attorney in your area for details.
Misconception 5: A power of attorney gives the agent unlimited power, even after the principal’s death.
The power of attorney can grant the agent a great deal of power, but it has limits. A financial power of attorney only allows an agent to make financial decisions. A medical power of attorney only goes into effect when the principal can no longer make medical decisions.
All powers of attorney end upon the principal’s death, and control is transferred to the executor of the estate. Often it is the same person, but the executor has to be appointed by the court before they have the power to act. If the deceased has named a preferred executor in the will, that’s seen as a nomination until the court officially appoints that person.
Misconception 6: My life insurance will be disbursed as I have requested it in my will.
A life insurance policy will not be overridden by what is in a will. Life insurance is a contract between you and the insurance company. Upon your death, the life insurance company will pay the money to your named beneficiary pursuant to the terms of the policy. So, if you leave everything in your will to your spouse, but the life insurance policy lists your kids as beneficiaries, the life insurance will be paid to your children.
On the plus side, life insurance is usually paid quickly, whereas a will can take several months to go through the probate process.
If you need to create a will, power of attorney, or advanced healthcare directive, please schedule a free initial consultation with Horn Law Offices by calling (515) 283-2330, emailing michael.a.horn@gmail.com, or submitting a contact form on our website.
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