Lesson P202.5 · Personal Finance 202: Lead Your Family
Wills, guardians and powers of attorney
4-minute read · No dated figures
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The short answer
If you have kids under 18, yes. A will is where you name the guardian you want for your children, and it says who gets what you own. Pair it with three more papers: a financial power of attorney, a health care power of attorney and a health care directive. Your state's rules decide what makes each one valid, so finish them with legal aid or a lawyer. This lesson is education, not legal advice.
What a will does, and what happens without one
A will does two big jobs. It says who receives your property, and, if you're the surviving parent, it names a guardian for your minor children. Without a will, your state's law decides who gets your property by default. And if both parents are gone, nobody has your choice of guardian in writing.
A will has to be signed in front of witnesses and meet your state's formalities, or it may not count. It also doesn't control everything. Life insurance, retirement accounts and bank accounts with a named beneficiary go to that person, and so does property owned jointly with survivorship rights (P202.4).
Example (made-up numbers). Tomas and Rosa have two kids, 6 and 9, about $8,000 in savings and a half-million-dollar term life policy on each of them. Their wills name Rosa's sister, Elena, as guardian, with Tomas's brother as the backup. They asked both first. Because a lot of money could go to young kids, they ask their lawyer how it would be managed for them, and the lawyer talks them through a trust.
Powers of attorney and a health care directive
A will works after you die. These papers work while you're alive but can't decide for yourself, after a fall from a trailer, a stroke or a long illness.
| Document | What it does |
|---|---|
| Financial power of attorney | Names someone to make decisions about your money and property for you |
| Health care power of attorney | Names a health care agent to make medical decisions when you can't |
| Health care directive (living will) | Says in writing what care you do or don't want |
Each state has its own laws for these papers, so write them under yours. Give copies to your family, your doctor and the people you name.
Choose these people carefully. Pick someone honest, organized, calm in a crisis and close enough to act. It doesn't have to be your spouse or your oldest child. Ask them first, and name a backup.
Aging parents: plan before there's a crisis
Talk with your parents while they're well. Ask where their papers are, who their doctors are, and whether they have a will, powers of attorney and a health care directive. It's an awkward talk on a good day and a much harder one in a hospital hallway.
If you're named as someone's agent, the CFPB's guides on managing someone else's money explain the job. For local services for older adults and the people caring for them, call the Eldercare Locator at 1-800-677-1116.
Your Move
Do this week
- Name a guardian and a backup for your minor children. Ask them first.
- Decide who should hold your financial power of attorney and your health care power of attorney, with a backup for each.
- Write your choices down and keep them with your important papers.
- Call legal aid, your state bar's lawyer referral service or a lawyer to make it official.
Log it: Named a guardian and chose our agents.
Common questions
What happens if I die without a will?
Your state's law decides who gets your property. And nobody has your written choice of guardian for your kids.
Can I write my own will?
Some people use forms. A will has to be signed in front of witnesses and meet your state's formalities, or it may not count. Legal aid or a lawyer can check it.
Does my will cover my life insurance?
Not if the policy names a beneficiary. That money goes to the person on the form, whatever the will says.
Watch out for
- Papers that are out of date after a divorce, a new baby or a move to another state.
- A will that wasn't signed and witnessed the way your state requires.
- Anyone pushing an older parent to sign papers in a hurry.
- One copy locked away where nobody can find it. Tell the people you named where your papers are.
Free help
- Free civil legal aid for low-income families: LSC legal aid finder
- Free legal information, forms and referrals in every state: LawHelp.org
- Your state bar association's lawyer referral service (ABA: about lawyer referral)
- CFPB: Guides for managing someone else's money
- Eldercare Locator: 1-800-677-1116
Free practice
Lesson check
5 questions on this lesson, one at a time, with the answer and the reason after each. Pass with 4 right, including every must-know question.
This is general education, not tax, legal, investment or insurance advice. Rules change and every situation is different. Check the sources below, and talk to a qualified professional before you act on it.
Sources
- American Bar Association: What happens if you die without a will?
- American Bar Association: Standing Committee on Lawyer Referral and Information Service
- CFPB: Guides for managing someone else's money
- MedlinePlus (National Library of Medicine): Advance care directives
- Legal Services Corporation: I need legal help
- Legal Services Corporation: What is legal aid?
- LawHelp.org: Free legal help
- Administration for Community Living: Eldercare Locator