Wills, trusts, estates — do you know the basics? Here’s a primer

Saturday, Aug. 1, 1998 | 4:41 a.m.

Are you prepared to die?

Not in the sense of having accepted your fate or eaten your last meal, but in terms of simple logistics. Do you have a will, even if it's only scribble on a legal pad? Is it where your heirs can find it, or is it in a stack of papers, perhaps in the hutch? Say, who gets the family credenza? Who has power of attorney? And what happens if you're lingering in a coma -- does your family know whether you want the plug yanked?

If you're like most of us, you've thought a lot about such matters and done absolutely nothing to address them. "I don't think enough people plan," says Carolyn Blitch of Affordable Alternatives, a paralegal service. "One, it's a gloomy thought. Another thing is, they think, 'I can do it later.' People are very busy these days."

"That, and it creates all kinds of fights," says Las Vegas attorney Randall Pike, who's handled a fair amount of family law and seen some bitter struggles over estate disposition. "I've had 'em just storm out of here," he says.

Family Concerns, a family planning consulting firm based in Texas, estimates that $10 trillion in assets will be passed on through inheritance in the next decade, underscoring the growing need for putting one's affairs in order. Of course, putting one's affairs in order can mean anything from deciding who gets the kids to preparing to see grandma through her declining years.

Usually, though, it means establishing a will.

Will-ful intent

Who should have one? "Anyone who can rub two nickels together," Blitch says. Otherwise, your family may spend those nickels in ways you wouldn't agree with. "If you don't have a will," Pike says, "nobody knows what you want."

There are several types of wills. One is the formal will, a standard legal document witnessed by two people attesting to your competency, that you realize what your assets are and who your heirs are.

Then there's the holographic will, which dispenses with such niceties as witnesses and notaries. It's written in the subject's own handwriting and signed and dated by him. Wait, a hastily scrawled scrap of paper ... "It's a legal will," Pike affirms.

Finally, there's the oral will, usually a deathbed blurt in the presence of witnesses regarding the disposition of a single item.

"Probably the most important thing people do in a will is name a guardian for their children," Pike says. To that end, they also set up trusts within wills, encumbering assets to be used only for specific purposes relating to the kids (typically college tuition or buying a house).

A formal will is generally sturdier than a holographic will, which in turn is preferable to an oral will. People who handwrite their wills "don't know the legal niceties," Pike says. For instance, some people think that by excluding a family member, they're cutting him out of the will. Not necessarily. According to Pike, that can open the door for the family member to argue in court that the deceased wasn't competent enough to know all his inheritors. Formal wills, meanwhile, commonly have fail-safe clauses covering the appearance of unnamed or unforeseen heirs.

"Holographic wills tend to be less articulate, less complete," Pike says, "and I rarely suggest them except for emergencies (say, if someone is in a hurry or going on vacation and there is one specific thing they want to protect)." Oral wills are even more restricted; they're only valid regarding assets of $1,000 or less.

What if you sit in front of your videocamera and divide your property as the tape rolls? There's a bit of grayness here, according to Pike. As many of the laws governing estates have been on the books for decades without significant revision, they haven't necessarily kept pace with changing technology. After fruitlessly searching the Nevada Revised Statutes, Pike concluded that the law doesn't deal specifically with video wills. A statute first penned in 1915 states that no will is valid unless it's in writing. However, it might be argued that a video will is equivalent to a holographic will, Pike says. "I guess I'd argue that it is permanently affixed to the tape" instead of being written.

Even more complicating than new technology is divorce and remarriage, Pike says, particularly among the elderly. When two people with established assets and their own heirs marry and combine estates, then one dies, the entire estate can be consolidated under the surviving spouse. When he or she dies, his or her children may get both sets of assets. "One side of the family can be completely eliminated." A clear will can maintain lines of inheritance, as can a solid prenuptial agreement.

"I get called on an awful lot to combine two estates so that when the surviving spouse dies, the estate goes to both sets of children," Pike says.

And, of course, there's always greed. Pike recalls a case in which a man suffering from a brain tumor vacationed with his girlfriend in California. He slipped into a coma and died. The girlfriend surfaced with a new will, signed with an X, giving her 90 percent of the man's assets. His wife and daughter got practically nothing. He'd come out of the coma long enough to approve the new will, she claimed. Representing the family, Pike learned that in fact he'd never revived, and that the girlfriend had manipulated his hand to sign the X.

If you die without a will in Nevada, the estate goes into probate proceedings. Community property goes to the spouse, while separate property (gifts or inheritances owned solely by the deceased) is distributed among heirs according to a formula laid out by law, depending on the heirs' relation to the deceased.

The ordeal of probate court is a strong incentive to put one's affairs in order beforehand. "A will is a way for people to make sure that what they wanted done in their lifetime is done after their death," Pike says.

Other matters

A will isn't the only instrument of family planning.

A living will typically makes clear your instructions about what to do if you're medically incapacitated. Pull the plug or go for broke to keep you alive? It's a decision the survivors want made for them ahead of time.

A revocable trust is a trust account that you can change during your lifetime; with an irrevocable trust, "your control is gone," Pike says. "The trust must accomplish its purpose."

These aren't pleasant topics to ponder, which explains why so many people put them off. "With Baby Boomers, it's a denial issue," Steve Edwards, president of Family Concerns, says. "They have kids, sometimes parents to take care of, and they don't want to deal with it. On the senior side, it's fear: 'I don't want to think about it.' "

Yet, from his years as a minister and social services worker in Texas, he's seen the family battles, financial crises and emotional wreckage that result when the family is forced to make "reactive decisions" about a loved one's medical standing or estate. "You see that over and over where people don't have their legal documents in place."

Edwards has two grown daughters and one remaining parent, and the time came when "I started thinking, I have no clue who their insurance carrier is ..." So much of his family's vital information was a blank spot to him.

To counter that, Family Concerns has developed "Don't Leave Me Hanging," a workbook meant to consolidate such information into one place. "What we're talking about is dealing with organizing your affairs," he says.

The workbook calls for lists of a family's personal, financial and medical information, insurance carriers, friends and extended family. "This doesn't take the place of a will," Family Concerns partner Carl Beach says. "It organizes vital information.'

It also points out holes in your legal documentation, and, if nothing else, brings important issues to the family forefront. "One of the most valuable things about the book is that it's sparking conversations on these issues," Edwards says. ("Don't Leave Me Hanging" is only available by calling 1-800-460-2830.)

"Whether they use our book or someone else's," he adds, "all ages of people ought to do this, as an act of respect for each other. As an act of support."

Scott Dickensheets' column will return Tuesday.

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