A will is the backbone of any estate plan, and is included in all our estate planning packages. If your plan includes a Trust, your will is typically referred to as a “pour-over will” because it ensures that your assets will “pour over” into a previously established trust.
Contrary to popular belief, wills do not avoid probate.
Wills are a matter of public record and afford little to no privacy.
In your will you, among other things, name your executor/personal representative of your estate, appoint guardians for your children, and direct to whom you wish your assets be distributed.
Trusts are documents establishing a fiduciary relationship in which a trustee holds assets of the grantor (the person funding the trust) for the benefit of the beneficiaries.
Trusts generally come in two forms: revocable or irrevocable.
Depending on the specifics of one’s estate, and their goals, trusts can be used, among other things, to:
- Hold property during lifetime;
- Receive property upon death;
- Plan around estate taxes;
- Plan for Medicaid/MassHealth (nursing home) needs; and
- Ensure a level of privacy greater than a will as the schedule of beneciciaries of the trust usually remains private, with exceptions.
The beneficiaries of a trust receive the property pursuant to the terms of the trust as desired by the grantor, and any property distributed through a trust WILL avoid probate, though it may still be necessary to file a probate for such an estate for different reasons.
A revocable trust, often times referred to as a “living trust” or “revocable living trust,” is a trust that can be amended or revoked by the grantor at any time during the grantor’s lifetime.
Revocable trusts are often used to hold, manage, and distribute assets and property to, and for the benefit of, the beneficiaries.
An irrevocable trust is a trust which cannot be amended or revoked by the grantor. These trusts are generally reserved for MassHealth/Medicaid planning in order to remove assets from an individual’s name so that they are not “countable” – meaning Medicaid/MassHealth will not lien the property or otherwise require it to be used to pay for nursing home care. Timing is important with this planning as there is a five year lookback period.
Irrevocable trusts may also be used to provide some creditor protection for the grantor, and further, with larger estates, to try to minimize, or otherwise eliminate, estate tax exposure.
Power of Attorney
A Power of Attorney (“POA”) is a legal document in which a person (“Principal”) appoints an Agent or Attorney-in-Fact to handle financial, legal, and sometimes medical, responsibilities on behalf of the Principal. Effectively, the Attorney-in-Fact steps into the shoes of the Principal. A Principal can also appoint a Guardian and/or Conservator should the need for one arise. It is important to make sure the POA is made “durable,” meaning that the Power of Attorney will remain in effect until the death of the Principal, otherwise the Agent’s/Attorney-in-Fact’s power is immediately revoked upon the Principal’s incapacity or incompetency. Other considerations revolve around whether the power immediately goes into effect, or whether it is “Springing,” which means the POA only takes effect upon the incapacity of the Principal
Typically, we recommend a POA become effective immediately because in emergency situations when it is necessary for an Agent to use the POA, a delay will occur due to the need for doctor verification of incapacity, and because many financial institutions will not accept a springing POA because they do not want the responsibility of determining whether the Principal is actually incapacitated, even with a doctor note, or the exposure that may come from making the incorrect determination. This is why it is extremely important to appoint someone trustworthy as an Attorney-in-Fact.
Health Care Proxy
In a Health Care Proxy an individual (“Principal”) appoints an agent to make medical decisions on their behalf when they are incapacitated and/or when a doctor determines that the Principal is unable to make or communicate medical decisions on their own.
Some of the powers typically conferred upon a Health Care Agent include, but are not limited to, the power to:
- Obtain and review medical records and information;
- Talk to doctors about the Principal’s medical condition(s);
- Authorize admission and discharge from medical facilities;
- Consent to or withhold certain medical procedures and treatments; and
- Do anything Principal could do as if it were the Principal themself.
A living will is a document which outlines your end-of-life health care wishes if you are to fall terminally ill, and cannot make these decisions on your own. Living Wills detail which treatments you want, and those you do not, including whether you want your life to be artificially prolonged, when a determination is made by your doctors and/or other health care providers that you are in a permanent vegetative state and are unlikely to recover, or you are at the end of a terminal illness.
Although Living Wills are not legally binding in Massachusetts, meaning that doctors and medical professionals are not legally required to follow their instructions, they are nevertheless an essential part of an estate plan because they provide your health care agent, family, clergy, doctors, and other health care providers, with clear evidence and guidance of the treatment methods you desire, and those you do not. These documents are highly customizable, and as such, can be tailored to say almost anything someone may want.
Living will language may sometimes be added into a Health Care Proxy, but we have found that most individuals prefer to keep these advance directives separate from their Health Care Proxy as they may wish to change their minds later, and not have these directives on file at their medical facilities at all times.
Guardianship and Conservatorships
A Guardian and/or Conservator is a person appointed by the court to care for an individual when they are determined to be permanently or temporarily mentally or physically incapacitated (the “ward”). A Guardianship/Conservatorship of a minor would be appointed when there is need for an adult to watch over them, or to manage their property and assets if their parents are unavailable. A Guardianship and Conservatorship can be either full or limited and tailored to the specific needs of the individual.
Guardians make the personal day-to-day decisions for the ward concerning their education, general well-being, medical care and insurance, ensuring they are fed and clothed, among other things. A Guardian, however:
- Cannot remove a Health Care Proxy;
- Cannot spend or give out the incapacitated person’s assets or income;
- Isn’t personally responsible for the incapacitated person’s expenses.
On the other hand, a Conservator handles the financial matters for the ward, including, among other things:
- Paying bills;
- Handling taxes;
- Managing bank and investment accounts; and
- Dealing with social security, pensions, disability, and other benefits.
Guardians and Conservators are appointed by the court. Typically, however, an individual can name the person they want to serve as Guardian/Conservator through a temporary appointment form, and/or otherwise name a permanent Guardian in their Power of Attorney and/or Health Care Proxy. More often than not, absent extenuating circumstances, the Court will defer to the wishes of the ward. Similarly, two such ways parents can name a Guardian/Conservator for their children is through drafting a temporary appointment form, and by naming the same individual(s) as Guardian for their children in their will. This ensures that should there be a situation where both parents are unavailable (or worse), even temporarily (vacation, medical procedures, etc.), that the person they want to watch over their children will be appointed, as the court will generally defer to the wishes. This is a particularly important point for younger parents who think an estate plan is not necessary for them because they believe do not have any assets, or are too young to think about creating one. Naming a guardian for their children to ensure the person they want to effectively raise their children, is important to avoid potential family conflict, and leaving that decision up to a judge.