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Your personal estate encompasses all of your life assets, including cash assets, real estate, personal property (automobiles, jewelry, art, furniture, etc.), as well as items of sentimental value. In the past, estate planning traditionally focused on how best to align the distribution of one’s accumulated lifetime assets with one’s values and desires, and on making that process as efficient as possible. Modern estate planning involves more than just the distribution of one’s lifetime assets, however.

In today’s world, people live longer than ever before, accumulate a wide variety of assets, are interested in potential asset protection devices, and often seek to distribute their assets to their descendants in a more responsible manner. With rising life expectancy, estate planning must account not only for post-mortem distributions and decisions but also for the possibility of an extensive old-age period where incapacity and disability may render one’s health and financial well-being vulnerable to potentially destructive third-party decision-making.

The benefits of comprehensive estate planning are many, but they can be summarized as follows:

  • Accurate, timely, and customized distribution of one’s lifetime assets to chosen beneficiaries.
  • Where possible, ensure qualification for Medicaid
  • Asset Protection, if necessary
  • Probate Avoidance
  • Minimization of any applicable estate taxes
  • Choice of one’s favored decision maker in the event of incapacity
  • Choice of one’s favored healthcare decision maker in the event of incapacity or imminent death

There are four primary vehicles for establishing the provisions of a modern, comprehensive estate plan: a will, a trust, a durable power of attorney, and healthcare documents. In concert, these flexible vehicles enable you to plan for incapacity and death and to choose the representatives that you’d like to make decisions concerning your health, finances, and the maintenance and distribution of your lifetime assets.

Last Will and Testament

The Will is a crucial estate planning document that ensures the proper distribution of assets held in your individual name to your chosen beneficiaries. Your Will can also be used to name a legal guardian for your children, and to authorize care for your children and other loved ones.  Without a Will, your lifetime assets will be distributed according to the default intestacy laws of Massachusetts. Intestacy (dying without a Last Will and Testament) is usually best avoided, as the default distribution may not match your desire. For example, your intention may be to distribute a greater portion of your lifetime assets to one of your children who is a struggling artist, as your other children are perhaps more established professionally and would not benefit as much from the same assets. If you have not established a Will, however, Massachusetts intestacy rules apply, and your assets will be distributed in a formulaic manner to each of your beneficiaries.

A skilled estate planning attorney developing a comprehensive plan will take into account the fact that some of your assets may be held jointly, have a transfer-on-death designation, or have a specific beneficiary designation, none of which pass through your Will.  These assets include joint bank accounts, real property held in joint tenancy, life insurance proceeds, retirement accounts with specific beneficiary designations, etc.

Modern, comprehensive estate planning often incorporates Trusts into the Will for various purposes, whether to minimize estate tax liability, set up a distribution plan for children or to distribute assets while preserving public benefits for disabled beneficiaries.

Trusts – Customizing Distribution

Trusts are best understood as devices for helping to customize an estate plan to best serve a client’s goals. There is a multitude of Trust types, but at their core, Trusts are created by a Trustmaker (alternatively known as the Settlor or Grantor) and are controlled by a Trustee for the benefit of the Beneficiaries of the Trust (children, family, friends, a charitable organization, etc.). Importantly, in modern estate planning, Trusts – specifically Revocable Living Trusts – are often used as the vehicle for distributing one’s assets so as to avoid the Probate process after your lifetime, to shift control of trust assets to a chosen successor trustee in the event you are incapacitated during your lifetime, and to minimize estate taxes for married couples. Revocable Living Trusts can also be changed by the Trustmaker during their lifetime.

Why avoid Probate?  As long as all of your assets are distributed directly (the assets are titled such that they do not have to pass through the Will), are distributed through a Trust, or are exempt from probate, then you may be able to avoid going through probate. Avoiding probate is not always necessary as – depending on the circumstances – probate can go smoothly, but frequently, probate can be an inefficient, delayed, and relatively expensive process that frustrates your surviving beneficiaries and complicates distribution. In most cases, probate will delay distribution for at least one year and possibly much longer, which can put a great deal of strain on your surviving beneficiaries.

Trusts are highly customizable. There are Trusts available for a wide variety of estate planning circumstances. These include Revocable Living Trusts to avoid probate, Irrevocable Tax Avoidance Trusts to minimize one’s estate tax liability (in Massachusetts, there is an additional state-imposed estate tax on estates worth more than $1 million, which exposes many estates to substantial tax liability as compared to the federal estate tax imposed only on estates worth more than $5.43 million), Irrevocable Trusts for mixed-family situations to provide a livable income to a surviving spouse while preserving the principal for one’s own biological children, Irrevocable Asset Protection Trusts to protect your assets from a nursing home, Charitable Trusts which can also be used to minimize one’s estate tax liabilities, and Supplemental Needs Trusts to provide for a disabled loved one without affecting their eligibility for state and federal benefits. A well-designed, comprehensive estate plan will establish the specific trusts necessary in order to efficiently and effectively accomplish your estate planning goals. 

Healthcare Documents

Besides providing for the post-mortem distribution of your assets, a well-designed, comprehensive estate plan provides you with the tools necessary to make desired healthcare decisions during periods of incapacity. This can be accomplished through a Healthcare Proxy, HIPAA Authorization, and an Advanced Healthcare Directive, called a Living Will, in Massachusetts.

Suppose, for example, that you are involved in an automobile accident that leaves you in a deep coma and on life support. If you had a comprehensive estate plan, several processes would be in place to protect your interests during this time. Your signed Healthcare Proxy will provide for a trusted agent to make medical decisions for you during your state of incapacity. Without a Healthcare Proxy, your loved ones will have to file for an expensive guardianship. Your signed HIPAA authorization will ensure that your various representatives have access to necessary medical records in order to make informed healthcare decisions in your stead. Finally, your Advanced Healthcare Directive, or Living Will, provides instruction and clarification as to your desired treatment options. Perhaps you would prefer not to be kept on life support. If you wrote this preference into your Advanced Healthcare Directive or Living Will, then the appointed healthcare agent can direct your treating medical professionals to take you off of life support – as requested.

Your healthcare instructions can be written in a highly specific manner, indicating which medicines and treatment you are comfortable with (surgery, blood transfusion, etc.), whether transfer to a long-term medical care facility would be satisfactory in certain circumstances, and whether or not you choose to be an organ donor.

Durable Power of Attorney

The durable power of attorney is one of the most important tools in the comprehensive estate planning toolkit. Essentially, the power of attorney appoints an “Attorney-in-Fact” – in other words, a financial agent of your choosing – to manage your financial affairs. Your power of attorney document should establish an initial attorney-in-fact and successor attorneys-in-fact, in the event that one or more of your selected agents is incapacitated, dead, or is unable to serve as your attorney-in-fact.

The chosen attorney-in-fact will be authorized to manage your financial assets – to pay your bills, maintain your properties, and buy and sell assets as needed – through express provisions in the power of attorney document. Without a power of attorney, your loved ones will have to file for an expensive conservatorship.

A skilled estate planning attorney will ensure that your power of attorney document effectively grants the necessary powers to the attorney-in-fact. General, broad grants of power may not be effective in authorizing the attorney-in-fact to make decisions in specific transactions (such as long-term care planning and asset protection). Thus, basic, standardized power of attorney documents not only fails to take into account your specific needs, but are also quite a gamble – without the proper authorizations, your attorney-in-fact may not be able to make certain financial decisions in your stead.

To attend a complimentary educational workshop or schedule a consultation with a specialized, highly experienced Massachusetts estate planning attorney, call the Law Office of Julie Low at (978) 922-8800.