When There's No Will -

There's no excuse for failing to plan for your family. -

In February 1997, Patricia Powell was killed in a car accident. Her husband Ray, an alcoholic who'd been sober for 12 years, fell apart and started drinking. A year later he died of liver disease. They left three children, a modest Maryland house and a $100,000 life insurance policy. But they named no guardian and they left no will.That, I suppose, shouldn't come as a surprise. According to a landmark Consumer Reports survey, 70% of the people in this country don't have wills. That unfortunate statistic includes an awful lot of parents--and more of my friends than I care to count. What followed in the Powell case, however, was wildly unusual. With the help of an attorney, the middle child, Shawn, age 10, filed for bankruptcy in August. It was a gambit to prevent foreclosure on the house. The family had no savings and no rich relatives. And until a court-appointed guardian was in place to receive a check, the life insurance company wouldn't pay. It was a nightmare, says the attorney, Brett Weiss. And it could have been avoided, with Estate Planning 101.

There are several documents that parents--and anyone else who wants to control the disposition of their assets--must have. They're not costly. Having a lawyer prepare them runs around $500. Or you can do it yourself with software like Nolo's Willmaker ($69.95). Don't let the year end without making sure your kids are taken care of. Here's what you need:

1. A will. It can be quite basic, one that passes everything to your spouse (or whomever) and then--for families--into a trust for minors. It should name an executor to transfer the title of your assets and a guardian to raise your kids. They don't have to be the same person, but attorney R. Daniel Brady of Raleigh, N.C. cautions against naming a couple as guardians: "In case of divorce, that's asking for trouble."
2. A durable power of attorney. This gives someone the ability to handle your finances--write checks, sell stocks and so on-if you're incapacitated. The person you choose may double as your executor but, again, it's not a must.
3. Advanced directives. You need a living will that specifies whether you want life support and a health-care proxy that gives another person the right to make health-care decisions for you if you can't. (Doctors sometimes ignore living wills, but having one can help guide the person with the proxy.) Parents should also ask about an authorization for health care for a minor child, which gives your delegate the right to consent to medical care for your kids. That's an especially good idea if you travel without them.
4. A family trust. Parents' wills should dictate that assets flow into a family trust rather than directly to minors. You name a trustee who can spend the money for things like health care and education. Then, typically when the kids turn 25, the money is parceled out in chunks. Notes Brady: You may be tempted to split the assets equally among your kids from the moment the money arrives in the trust. Don't. Lumping the funds together gives your trustee the ability to use discretion as a parent might. As for the Powell kids, the attorney says it looks as if they'll keep the house, mostly because their parents did one thing right: They purchased life insurance. "If it hadn't been for that, we might have been able to delay the inevitable," he says. "But that would have been all we could have done."

This article was reprinted from Money Magazine, contributor, Jean Sherman Chatzky, 1998 Year-End Financial Guide Special Issue Vol. 27 No. 13 and was provided to us by: Mark Writer of Prepaid Legal Services

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