Estate Planning
Probate — The legal process that follows the death of an individual is generally referred to as the probate process. It is during this probate process where the Last Will and Testament is presented to the Probate Court, the individuals designated within the will are appointed executor of the estate, and the assets of the estate are collected and the final bills and transfers detailed within the will are completed. Depending upon the value and complexity of the assets, the duration of the probate process can be anywhere from one to three years. The probate process is governed by the specific rules of the Massachusetts General Laws and the Massachusetts Rules of the Probate and Family Court.
Legal Documents — An individual does not have to establish an elaborate or an expensive Estate plan in order to legally protect them during their lifetime and to accomplish their goals and objectives with regard to disposition of their assets after their death. The following are some simple suggestions that every individual should consider and put into place for their own personal protection.
DURABLE POWER OF ATTORNEY AND HEALTH CARE PROXY — Plan for possible future disability, illness or incompetence, while healthy and competent.
Every individual, while healthy and competent should seriously consider establishing a Durable Power of Attorney and Health Care Proxy in order to appoint the persons they would personally select to make financial and medical decisions for them in the even of future incompetence. There are simple, inexpensive legal documents that protect an individual during their lifetime. A failure to execute these legal documents while healthy and competent could result in the Court appointing a Guardian for you, in the event you were to become incompetent in the future. The Guardianship process is a legal process requiring Court appearances and public notices that is costly, both financially and emotionally. The Guardianship process, in most cases, may be totally avoided by some simple lifetime planning accomplished while you are legally competent. Furthermore, a court-appointed Guardian could be someone you would not have personally chosen and could be a complete stranger, appointed by the Court.
LAST WILL AND TESTAMENT — Establish a Will that states your wishes and intentions regarding how your Estate will be distributed upon death and names the Executor of your choice to carry out your intentions.
The only way to assure that your intentions will be followed with regard to how your assets will be distributed after your death is to state your intentions in a Will, which is properly drafted and executed in accordance with the law while you are legally competent to do so. There is a common misconception that if you do not have a Will, the State will take your assets upon death. If you do leave behind any heirs at all (spouses, children, grandchildren, parents, siblings, aunts, uncles, cousins) it is not true that the State will take your assets upon your death. However, it is true that the laws of the State where you reside at the time of your death will control to whom and in what shares your assets will be distributed, if you should die without a Will. The State law may not reflect your personal intentions. For example, I find most folks commonly think that if they were to die without a Will and leave behind a spouse and children that their spouse would automatically inherit all the assets of the deceased spouse. This is not true. If you do not have a Will, your spouse will inherit only a portion of your Estate and your children will inherit a share as well. While most parents do want to provide for their children they commonly wish to do so only after their surviving spouse is properly protected and financially secure. Further, if you do not have a Will naming your own personal choice of an Executor, any legally interested person can petition the Court to be appointed and this may not be the person you would have chosen to handle your affairs.
In most cases a simple Will is sufficient to accomplish your objectives. On larger Estates, valued at over the Estate taxable level (currently $1,500,000.00 for year 2004), more elaborate Estate planning may be required. Also, sometimes more specific planning is necessary to protect a disabled spouse, child or grandchild during your lifetime, and / or after your death. For example, perhaps a disabled child is receiving social security disability benefits that would be lost if that child received even a small or insignificant inheritance. With proper planning, the child could be left the same assets, without risking loss of the benefits that they receive that are necessary for their support. Perhaps a spouse requires long-term medical care, while the spouse remaining at home in the community needs to preserve the couple's income and assets for their own financial security. With proper planning these issues can be addressed and a plan implemented to meet your personal needs.
DECLARATION OF HOMESTEAD — Protect the Real Estate that you own as your personal residence from creditors.
Execute a Declaration of Homestead to protect your home from creditors during your lifetime. The Homestead document is recorded at the Registry of Deeds. A Homestead Declaration provides you with protection against creditors of up to $300,000.00 in equity in your home. In the event of a lawsuit against you, the Homestead prevents an attachment and possible forced sale and loss of your home to a creditor. After age sixty-two (62), you are eligible to execute an elderly Homestead which provides $300,000.00 of protection for each over sixty-two (62) owner of the real estate. Thus, a joint Homestead for two (2) owners over age sixty-two (62) provides $600,000.00 of protection. A joint Homestead is not permitted for persons under age sixty-two (62). The Homestead will not protect your home for purposes of Medicaid planning.
In summary, the simple legal documents discussed above provide valuable protection for all individuals. Remember each person's situation and objectives are personal and unique to that person. The facts and family issues that apply to your situation are unlikely to be identical to that of your friends and neighbors. The importance of obtaining competent legal advice for your own personal situation before establishing a personal Estate plan cannot be overstated.
Frequently Asked Questions
Do I really need a will?
Whether you are married, single, have minor children or own even a nominal amount of personal assets or property, you should have a will. In fact, every eligible adult should have a will or other means to control the disposition of his or her assets. Even people that have living trysts should also have a will because, without a will, any property not named in the trust will pass according to state law, not necessarily in accordance with a person's wishes. The remaining issue is who is eligible to have a will? The legal requirements are quite simple, you need to be "of age" and of "sound mind" to enter into a will.
If I do not have a will at death, will the State take my property?
There is a common misconception that is you do not have a Will, the State will take your assets upon death. If you do leave behind any heirs at all (spouses, children, grandchildren, parents, siblings, aunts, uncles, cousins) it is not true that the State will take your assets upon your death. However, it is true that the laws of the State where you reside at the time of your death will control to whom and in what shares your assets will be distributed, if you should die without a Will.
Who will care for and make decisions for my children in my absence?
If you have minor children, your greatest concern may not be who gets your assets, but rather, who will take care of your children. The courts are given broad discretion to determine who will take care of minor children if both parents die or if the surviving parent is unavailable. Even though the court has the ultimate authority to appoint a guardian, a will is the only way to tell the court who you want to raise your children.
Further, a will should set forth what assets your children will receive, how the assets will be distributed, and who will manage the assets until such time as your children as able to manage the assets themselves. Fortunately, a will affords you many options to control the disposition of assets to your children if you should meet with an untimely death. Through a will, you can leave instructions on how the property will be held and who will act as the guardian, trustee or custodian of that property. By establishing a trust for your children either inside or outside of your will, you can even condition when and how they will receive benefits.
Can I sign documents on behalf of my spouse?
Should you or your spouse be too ill to sign legal documents can your husband or children help? Unfortunately, the answer is no. No one else is automatically authorized to handle your finances. A power of attorney can give the agent either specific, limited powers or broad powers. For example, it can authorize someone to sign the deed to sell your house when you are out of town or to endorse checks, pay bills or make withdrawals from your accounts. What happens if you become incapacitated without having given anyone a durable power of attorney? Typically, your financial affairs would have to be managed by a guardian appointed by the probate court—a more expensive and more complex procedure than a durable power of attorney.
Should I transfer the title to my home to my children before it's too late?
Although lifetime gifting of assets can prove to successfully accomplish one's goals of passing property to one's children, however, such lifetime transfers may have unintended financial and tax consequences. In some cases, a lifetime gift of one's home, which has significantly appreciated in value during the term of ownership, may create capital gains taxes for one's children. Lifetime transfers of one's home may also unintentionally expose the home to potential claims of the children's creditors or spouse in a future divorce proceeding.
What is the best way to hold title to our home?
Generally, for most married couples, the optimal form of ownership of the principal residence is the tenancy by the entirety. This form of ownership affords in many circumstances excellent protection against creditors for married couples. Consulting with an attorney should provide a comprehensive analysis if this form of ownership is best for you. There are many more sophisticated weapons for a savvy person to protect his or her assets from creditors.
