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Estate Planning is not only the process by which you're able to guide and protect your family after death, but it is also the process by which you're able to protect your assets and independence during your lifetime in the event of a physical or mental incapacity,

ESTATE PLANNING ATTORNEY TO PROTECT YOU DURING YOUR LIFE

You may utilize Powers of Attorney and Living Trusts to help protect your assets and independence should you be struck with a physical or mental incapacity. This may avoid a costly court conservatorship proceeding. It may also avoid long delays of desired financial transactions and most importantly reduce stress and anxiety for your loved ones.

You may also utilize a health care proxy. This document may avoid a costly court guardianship proceeding. You may utilize a special irrevocable trust to protect some or all of the assets from an incapacity which may turn into a Long Term Care illness.

ESTATE PLANNING ATTORNEY TO PROTECT YOUR FAMILY AFTER DEATH

You may execute a Will to bequeath assets to specific individuals of your choice. This may avoid having the state determine which people inherit your assets. In addition, you can name Guardians for your minor children in your Will. This may avoid the court choosing a Guardian without your recommendation.

You may also utilize Living Trusts to help protect your family after death. This may avoid the costly probate process and will keep the assets confidential by avoiding have the public probating of an estate.

In many cases, federal estate taxes and state estate taxes can be reduced with credit shelter trust provisions and marital deduction trust provisions.

Finally, if you have children or a spouse with special needs, disabilities, or the inability to manage assets prudently, there is a variety of trusts, including special needs trusts, supplemental needs trusts, irrevocable trusts, and dynasty trusts, which may be drafted to protect your family members with special needs.

If you would like to schedule a free initial consultation, then please contact Attorney Heney (Bill@heneylaw.com), or call (978) 921-1050.

Trusts

A Trust is a fiduciary relationship with respect to property in which one person, the trustee, holds legal title to trust property subject to enforceable rights in another, the beneficiary. It is basically a device whereby one or more persons manage the property for the benefit of others. The trustee ordinarily has legal title to the property, while the beneficiaries have equitable title. There are two common types of Trusts (1) Revocable trust and (2) Irrevocable Trust. In a Revocable Trust the terms of the Trust Agreement may be altered or amended or the Trust may be revoked by the creator of the Trust. On the other hand, the terms of the Irrevocable Trust may not be altered or amended and the Trust, itself, may not be revoked. Whatever the form of the Trust, it is a private covenant for the management and disposition of property both during the creator’s life and after his or her death.

One of the most important and desirable features of a Trust is privacy. The Private Trust Agreement is not available for inspection by the general public as a Will is after it is filed for probate. The public will not be able to find out how much was dealt with or to whom the Trust property went. Privacy could be useful if there is a good deal of money in a family that wishes to maintain a low profile. Privacy can also be appropriate if the creator wishes to do something with respect to the disposition of his or her assets that is unusual or embarrassing to the creator’s family.

Another important feature of a Trust, if it is funded during the creator’s lifetime, is that it will reduce probate expenses. Assets put into a Trust during lifetime do not become part of a person’s probate estate upon death. These assets would pass to beneficiaries under the terms of the trust agreement without the need of probate and its inherent costs. In addition to the saving of probate expenses, the use of a Trust to distribute assets upon death also reduces the time it would take for the beneficiaries to receive the assets. The probate process can take months while the trustee under a Trust can distribute the assets almost immediately.

Durable Power of Attorney

A Power of Attorney is a written instrument by which one person, as principal, appoints another as his or her agent (attorney-in-fact) and confers upon that agent the authority to act in place of the principal for the purposes stated in the instrument. An ordinary (non-durable) power of attorney terminates upon the incapacity as well as the death of the principal. Unlike an ordinary power of attorney, a Durable Power of Attorney is effective notwithstanding the disability or incompetence of the principal. The Durable Power of Attorney permits the principal to exercise full control over his or her affairs until such time as incapacity occurs. Once incapacity or disability occurs, the attorney-in-fact exercises those powers granted him by the signed instrument. Attorneys-in-fact are commonly authorized to handle all ordinary aspects of the following matters for a principal:

1. Real Estate and tangible personal property

2. Securities and bank accounts

3. Taxes

4. Retirement plans, insurance policies, and their benefit

5. Litigation on behalf of the principal

6. Management of the personal affairs of the principal, maintaining the customary standard of living of the family

One of the main benefits of this type of arrangement is that the principal is free to select his or her own agent rather than to be forced to rely on the judgment of a court to make the selection in a guardianship proceeding. Using a durable power also avoids the costs associated with court proceedings.

Creating a Durable Power of Attorney is relatively simple and it terminates when it is revoked by the principal, upon the death of the principal, or when it expires according to its own terms.

Health Care Proxy

This document works much the same way as does a Power of Attorney. The proxy designates someone to direct your medical care in the event you are unable to do so yourself. The person designated proxy holder is directed to see that the terms of any living will are respected. The Health Care Proxy must be in writing and signed by the principal in the presence of two other adults who must sign as witnesses. The witnesses must affirm in writing that the principal appeared to be at least eighteen years of age, of sound mind and under no constraint or undue influence. The proxy itself must:

1. Identify the principal and the health care agent

2. Indicate that the principal intends the agent to have the health care authority

3. Describe the limitation, if any, which the principal intends to impose upon the agent’s authority.

4. Indicate that the agent’s authority is effective upon the incapacity of the principal.

The health care agent has authority to make any and all health care decisions on the principal’s behalf that the principal could make, including decisions about life-sustaining treatment, subject, however, to any expense limitations in the proxy. The determination that a principal lacks the capacity to make his or her own health care decisions is made by the attending physician and will be in writing. Once that determination is reviewed by the agent his or her authority commences.

A Health Care Proxy may be revoked by the principal by notifying the agent or a health care provider orally or in writing or by any other act evidencing a specific intent to revoke the proxy. The proxy is also revoked upon the execution by the principal of a subsequent proxy or on the divorce or legal separation of the principal and his spouse where the spouse is the health care agent.

Declaration of Homestead

Under Massachusetts law, the purchase of a home by buyer(s) who intend to occupy the property as their principal residence automatically gives rise to a homestead protection of $125,000 for the buyer(s) individually and for the other members of their family who also occupy the property. Furthermore, by recording a Declaration of Homestead with the appropriate Registry of Deeds, the homestead protection is increased to $500,000. There are two types of Declarations that may be filed: a “regular” Declaration protects the individual filer(s) and their family, and an “elderly” Declaration protects only that individual.

All varieties of these Homestead protections allow the homeowner(s) to protect up to the specified amount of equity in their home from subsequent attachment, seizure, execution on judgment, or levy and sale, for the payment of most debts. The proceeds of any sale or casualty are also protected up to the specified amount, with some exceptions.

Life Insurance Trust

The Irrevocable Life Insurance Trust (ILIT) has, as a principal purpose, the avoidance of estate taxation on the proceeds of life insurance. It can be drafted in such a way that the trust assets, including policy proceeds, will be excluded from both the estate of the insured and the estate of the insured’s spouse. This can be accomplished even though the spouse of the insured benefits from the trust assets while alive. This advantage would not be available if the insured or the spouse owned the life insurance policy. The popularity of this type of trust is due additionally to the relatively low gift tax cost of life insurance and the flexibility which the trust format can provide. This type of trust has become a very important estate planning tool for use in solving a variety of estate planning problems (e.g., estate liquidity, providing income for minor or disabled children, etc.).

The irrevocable insurance trust is typically established by the insured when the insured either irrevocably assigns to the trust an existing life insurance policy on his or her life or “purchases” a new life insurance policy with the trust as the initial applicant and owner. Irrevocable Insurance Trusts are categorized as follows:

1. FUNDED - This is a trust where the grantor, at the trust’s inception, either irrevocably assigns to the trust both an existing insurance policy and the assets sufficient to fund the premium payments required to maintain the policy, or transfers to the trust the assets sufficient to both purchase a new insurance policy and make the premium payments required to maintain the policy.

2. UNFUNDED - This is a trust where the grantor, at the trust’s inception, assigns only the insurance policy (or the funds necessary to purchase the policy). The funds necessary to pay the premiums are transferred in future years as premiums come due.

While the irrevocable insurance trust has much merit, it is not without its drawbacks. The primary disadvantage is the grantor’s loss of control over the policy, including loss of the right to borrow against or make use of the policy’s cash surrender value. Another disadvantage is that the trust is irrevocable. Once the grantor establishes the trust, he or she gives up the power to make changes. The trust will need to be irrevocable in order to obtain the desired estate tax savings.

The Will

The most common and well-known estate planning device is a Will. The Will is a written instrument by which a person (testator/testatrix) is able to distribute his or her assets upon death. During the individual’s life the Will is not operative and may be changed or revoked at any time. At the individual’s death the Will becomes operative and directs which assets go to which beneficiaries.

The most important benefit of creating a Will is that the individual is able to direct the distribution of his/her estate upon his/her death in whatever manner he or she desires. Absent a Will, a person’s assets will be distributed according to the intestacy laws of Massachusetts. In that case, assets would pass to the heirs and spouse of the decedent in a manner and amount determined by statute instead of according to the wishes of the decedent.

The manner in which property is held during a person’s lifetime will have a bearing on whether it will pass under the Will. For instance, property held jointly, as joint tenants, and property held as tenants by the entirety will not be distributed under the terms of the Will (this property will “avoid probate”). If property is held jointly it will pass automatically to the surviving joint owner or owners upon the death of the other joint owner. If property is held as tenants by the entirety, the property will pass automatically to the surviving spouse.

Real property (real estate) is not the only asset that may avoid probate. In most instances, assets held in an IRA, annuity, or life insurance (the proceeds, or death benefit, as well as the cash value portion of cash accumulating policies) are transferred to the beneficiaries by contract, and thus are generally not transferred under the Will.

In order for a Will to be valid, the testator/testatrix must have the intention to make the particular instrument his or her Will and must have the requisite mental capacity. For a formally attested Will (the usual kind) to be valid in Massachusetts, the following requirements must be met:

The testator/testatrix must be at least eighteen years old.
The Will must be in writing.
The Will must be signed by the testator/testatrix or someone else must sign for him/her in his/her presence and at his/her direction.
The testator/testatrix must sign in the presence of two attesting witnesses.
The witnesses must sign the Will in the presence of the testator/testatrix.

For more information about Estate Planning, please contact Attorney Heney (Bill@heneylaw.com) or call (978) 921-1050.