Wills and Testaments

- You Don't Get the Last Word -
This is not legal advice.

This page was last updated on Saturday, November 24, 2012

I always thought that a person’s separate property was their own and that they could do any legal thing they wanted with it. We will all die and before that time, we can write a will that deposes our own property as we wish. That is the problem. It seems that the states have established rules about what a person may do with their property. I was thinking about a burning funeral barge set free in the sea while men and women wore terrifying helmets with horns. In this din they would sing quiet dirges and Gregorian chants in the midst of a great downpour.

Nevertheless, some people might not want me to have that kind of funeral so I considered an ‘in terrorem’ clause. The ‘in terrorem’ clause is a provision in a Will that threatens that if anyone challenges the legality of the will or any part of it. The threat is that instead of receiving the full gift provided in this legal paper, the disinherited would receive only a dollar. So the reason for this clause is that the donor wants to discourage any interloper and the beneficiaries from causing a legal ruckus after the benefactor has died.

If someone challenges the document and the courts invalidate it, then such a clause also fails. So a challenger takes their chances. Most Wills contain a clause that instructs the executor of the estate to pay all bills and expenses. If this clause is missing, the courts have ruled that merely putting in a claim for moneys due from the estate is not a legal challenge to the document itself. So a claim such as this is permissible without losing the gift.

The point is this. Some people have the attitude that they are entitled to another person’s things, especially if they were married to each another at some time. Imagine a woman who abuses her husband and then wants all of his property for herself. By adding a no-contest provision, that can keep the gold diggers away. This is how it works. Include a provision in your Will that ‘deems’ any potential beneficiary that objects to your wishes to have had ‘predeceased’.

When a person dies without a valid will, their property passes to their immediate family members. These beneficiaries always have the right to refuse those assets. Then other beneficiaries more removed in the lineage, would be contacted. If no suitable party can be found to receive the assets, the executor will transfer those assets to the government for disposition. Since some people have many debts and assets, this can complicate the situation.

The debts of the deceased are not directly inheritable but the debt must be payed from the gross proceeds of the estate. This usually diminishes the net proceeds that an heir or another person may receive from the estate. So the usual procedure is to sell the assets, pay off all creditors, and then distribute the remaining cash or property to the beneficiaries.

Sometimes, the beneficiaries prefer to pay the creditors themselves to prevent the liquidation of inherited property. If a person inherits the family home and but their parent(s) owes money, it might make more sense to pay the money out of pocket and keep the home. Nevertheless, if the debt of the deceased is greater than the value of the inherited assets, then the beneficiaries usually sell the assets and pay the creditors with the proceeds.

If the deceased is not a parent or a more distant relative but is instead a spouse, different rules may apply. When the beneficiary lives in a joint-property state and the debt accumulated during the marriage, it (the debt) is the responsibility of the surviving spouse but certain exceptions do apply. For an example, a business debt may not be a joint responsibility depending on the type of business entity. So the "innocent spouse" rule may exempt the surviving spouse from certain liabilities.

However, if a person is a cosigner on the debt of the deceased, then the entire amount due could be (or will be) that person’s financial responsibility. This can be devastating especially when the person's will excludes the cosigner from the estate. This means that they may have to pay the debt without receiving access to the inheritable properties or cash.

A reverse mortgage allows a person to convert their home equity as collateral into available funds with interest. That availability is usually as a line of credit, cash advances, or periodic payments. When the borrower dies, the bank may evict the occupant because the bank owns the home. Beware of loans that have variable interest rates determined by how much money that a person owes. The industry calls these loans inverse plans because the customer pays a greater interest rate as their balance declines. This prevents the customer from paying off the loan because they will always be indebted to the lender. It is much like "Sixteen Tons" where the miners owed their souls to the company store.

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