The Components of a Basic Estate Plan
I often receive calls from people in the community who ask about wills. While I do draft wills, what these folks seem to be asking is if they can talk with an estate planning lawyer about their planning options.
Here is an outline of tools we use as part of a basic estate plan:
A will is a cornerstone of every estate plan. A will essentially does two things: states who you want to make decisions about your estate upon death and how to distribute property. A will must be probated in court, and the process is often time-consuming and expensive, typically lasting at least fifteen months in Massachusetts.
Trusts are private documents and avoid the time and expense of the probate process described above. They are also great tools for planning for incapacity because they avoid court involvement and allow another trustee to step in to manage assets for your benefit. My office typically also includes special needs trust provisions and Medicaid qualifying language by default in our revocable living trusts. For young families, trusts are more desirable than a simple will because children can legally inherit property at eighteen years old. It can be undesirable for an eighteen year old to inherit asssets. A trust allows another trustee to delay distributions to children until they reach certain ages. For instance, a trustee can apply funds for a child’s health, education, maintenance, and support, but delay distributions of principle to certain ages - let’s say 1/3 at 27, 1/3 at 35, and 1/3 at the age of 40. Trusts can help to reduce or eliminate estate taxes, as Massachusetts has one of the lowest estate tax thresholds in the country at $1 million. Trusts are also useful tools for protecting assets from creditors. Don't forget about your pets. We know that not all family members are equipped to care for a pet. Because a pet would pass through a will like any other property, a pet trust is an effective vehicle to ensure one's pet is cared for. Pet trust language can be included within a living trust.
Even with a trust, a will is necessary, but instead of a “simple will,” attorneys draft what’s called a pour-over will. The pour-over will allows any assets that haven’t been re-titled into the trust to go through probate and “pour” into the trust. Funding the trust during life is critical to avoid this probate process.
Health Care Proxy
Every competent adult in Massachusetts can and should execute a health care proxy. This is another document designed to avoid court intervention. A health care proxy allows you to designate agents to make medical decisions on your behalf in the event you’re unable to do so. The risk of failing to draft a health care proxy is that a medical facility will petition the probate court for Guardianship. Depending on the type of treatment being sought by the hospital, the person subject to the Guardianship petition is appointed a lawyer by the court. This could essentially result in strangers litigating one’s health care matters in open court.
Durable Power of Attorney
This planning documents allows one to designate an agent, called an attorney-in-fact, to act for one's benefit in financial and legal matters in the event one becomes disabled or incapacitated. A durable power of attorney document can be quite limited or very broad. The durable power of attorney can ensure continuity in paying bills and handling personal business, as well as assisting with planning and preventing loss of funds. Like the health care proxy above, it can avoid the need to go to court for appointment of a guardian or conservator. Many financial institutions won’t honor a durable power of attorney drafted by a lawyer, and while they’re useful for certain situations, a trust is a stronger tool for planning for incapacity.
A living will is an advance health care directive like a health care proxy, but a living will is used primarily for end of life decisions. While living wills are legally non-binding in Massachusetts, they can provide guidance for family and health care providers about one's feelings for end of life care.
Privacy rules prevent health care providers from sharing protected health information. HIPAA Authorizations provide advance authorization for health care providers to share information with family and friends.
There you have it, the components of a basic estate plan. Please don’t hesitate to email me at tim@tfranklaw, or call at 617-702-2449 if you’d like talk about your own planning goals.