Estate Planning in Massachusetts

Creating a comprehensive and valid Estate Plan is an important process that allows you to decide how your personal and financial affairs will be managed in the event that you become incapacitated and how your assets will be managed and distributed upon your death.

There are several estate planning documents that are prepared to ensure that your wishes are carried out in the event of your death or incapacity.

The tools that we use include:

1. Last Will and Testament

A Last Will and Testament, generally referred to as a Will, is a legally binding document that clearly states who will receive your assets upon your death.  A Will also appoints a Personal Representative who will be responsible to gather your assets, pay off any debts of your estate and distribute your assets to the individuals or entities that you have chosen.

A Will can also set forth who you would want to be responsible for the day-to-day care and finances of any minor children in the event of your death.

Often people believe that having a Will avoids the probate process and that being named as a Personal Representative in the Will is sufficient to have control of the deceased person’s finances.  This is not accurate.  The Personal Representative must be appointed by the Probate Court in order to have any authority to access, manage or distribute your assets.

As long as you remain competent to do so, a Will may be updated, amended or revoked at any time.  It is important to update your estate plan following important life events, such as marriage, divorce, birth of a child or death of a spouse.

2. Durable Power of Attorney

A Durable Power of Attorney (POA) is a document that allows another individual to act on your behalf with regard to financial matters.  A Durable Power of Attorney provides a specific list of activities that the designated party may complete on your behalf.  It is important to choose an agent carefully, as they typically have broad powers over your financial affairs, including transferring or selling assets.

These powers go into effect at the time that the document is signed, but the power can be amended or revoked at any time, as long as you have capacity.

3. Health Proxy / HIPAA Release

A Health Care Proxy (HCP) allows you to appoint an individual to act as your agent with regard to medical decisions.  A Health Care Proxy does not take effect unless or until a physician determines that you are incapacitated and unable to make medical decisions for yourself.  In the event that your regain the ability to make your own medical decisions, the agent’s authority ends.

The Health Care Proxy can be amended or revoked at any time, as long as you have capacity.

A HIPAA Release is a document that given your medical professionals the ability to disclose your medical information to another party.

4. Revocable Trust

Any trust is a legal entity that can hold property.  A Revocable Trust, of Living Trust, is created by you, the Grantor, during your lifetime that you can change or terminate at any time prior to your death.  A Revocable Trust allows you to maintain complete control over the assets held in trust.  Often the Grantor also serves as the initial Trustee during his or her lifetime.

The most common reason to create a Revocable Trust is to avoid the probate process.  Any assets that are transferred to the trust during the lifetime of the Grantor will pass automatically on their death according to the guidelines set forth in the trust. There is no need for involvement with the probate court.  This can often save money on legal fees, allow assets to pass more quickly and limits the availability of certain creditors to access the assets.  However, this type of trust does not protect assets for Medicaid purposes.

Another reason to create a Revocable Trust is to limit the ability of those omitted from inheriting to challenge the terms of distribution.

5. Irrevocable Trust

An Irrevocable Trust cannot be changed or terminated after it is created.  Any assets that are transferred into the trust can only be distributed to the beneficiaries pursuant to the terms of the trust.

This type of trust does provide some protection from Medicaid recovery and, if drafted properly, will protect assets against the cost of nursing home care. However, the Grantor gives up the right to control and use the assets and is often limited to use of trust income only.

6. Testamentary Trust

Unlike living trusts, testamentary trusts are only established after your death.  However, they do require the Will to be probated in order to be valid. The trustee may be required to submit a report annually until such time as all assets have been distributed.

It is similar to other trusts in that it allows you to determine and control how the trust assets will be distributed after your death. These trusts are often used to control when minor children would receive assets, such as after their 18th birthday or upon graduation from college, to assure that the funds are used in a responsible manner.  Another advantage of these types of trusts is that they can be funded through life insurance proceeds.

In addition to the tools discussed above, there are additional tools and steps that we can discuss with you to limit or avoid the probate process entirely.  These include the use of joint tenancy or rights of survivorship on certain types of assets, gifting, life insurance, annuities and transfer of assets through beneficiary designation or creating “paid on death” accounts.