Essential Estate Planning Documents
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Trying to wade through the options and the terminology when thinking about your estate plan can be daunting. It is overwhelming enough to start thinking about estate planning. To help you get started, we have outlined the essential estate planning documents in the five major stages of your life and financial situation. You may also want to read about certain special circumstances that may require different planning tools to achieve your objectives. At each of these stages in life, it is also important to remember to review and update your beneficiary designations on things like life insurance policies and retirement accounts.
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Ready to Get Started on Your Plan?OR
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Estate Planning for the Young Adult
Anyone over the age of 18 should have a basic estate plan that includes a will, a health care proxy, and a power of attorney. Here's why.
A health care proxy, sometimes called a health care agent or a health care power of attorney, identifies the person who will make medical decisions for you if you are unable to. This isn't only for the old and sick. You could be injured and temporarily unable to participate in your medical care.
A power of attorney identifies someone who can make financial decisions for you if you cannot. Especially if you are not married with joint debts and bank accounts, it is important to have a person with financial power of attorney to make sure your bills are paid and important documents dealt with. Most often people recommend a durable power of attorney instead of a springing power of attorney for your estate planning needs.
A will may seem unnecessary to you right now. If you don't own much at this stage in life, why should it matter who gets your assets? Remember that you always own something. Even if it is just your digital footprint- your social media accounts and online identity- a will can give you the ability to put someone in charge of what to do with all that information. Chances are you have more than that, though, and these are the years in which you are going to start building on what you own. Better to get something in place so that you don't have to worry about it later.
A health care proxy, sometimes called a health care agent or a health care power of attorney, identifies the person who will make medical decisions for you if you are unable to. This isn't only for the old and sick. You could be injured and temporarily unable to participate in your medical care.
A power of attorney identifies someone who can make financial decisions for you if you cannot. Especially if you are not married with joint debts and bank accounts, it is important to have a person with financial power of attorney to make sure your bills are paid and important documents dealt with. Most often people recommend a durable power of attorney instead of a springing power of attorney for your estate planning needs.
A will may seem unnecessary to you right now. If you don't own much at this stage in life, why should it matter who gets your assets? Remember that you always own something. Even if it is just your digital footprint- your social media accounts and online identity- a will can give you the ability to put someone in charge of what to do with all that information. Chances are you have more than that, though, and these are the years in which you are going to start building on what you own. Better to get something in place so that you don't have to worry about it later.
Estate Planning for Young Families
You should still have the basic combination of a will, a health care proxy, and a durable power of attorney. Now that there are minor children involved, there are additional things to consider.
Your will should include a provision identifying a guardian for your children if something happens to both you and your spouse. The last thing anyone would want at such a terrible time would be for your family members to have to work that out among themselves. There could be differences of opinion and conflict. There would also need to be probate court approval of the guardianship.
This is also the time to think about managing a legacy over the long run for your children. If you die without a will at this point, the state will give all of your assets to your spouse, assuming all of your children are also your spouse's children. Most people want their surviving spouse to be taken care of. The problem is that unless you do something additional, you have not guaranteed any kind of legacy for your children.
This is why most families with minor children should also have a trust in place. Either a revocable living trust that you put assets into during your lifetime or a trust you create in your will to receive your assets can do what you need it to do.
The basic idea is that your assets go into trust for your spouse's benefit during his or her lifetime, but ultimately go to your children. This can help ensure something goes to them even if your spouse remarries and has other children.
Why not simply give your children a share in your will? You can absolutely do that. It is a less flexible way of including your children than a trust. Also, as long as they are minors they can't inherit assets directly, and someone would have to go to court and get a conservator appointed to manage their assets. With a trust, you can be the one who decides the terms and the trustee.
Your will should include a provision identifying a guardian for your children if something happens to both you and your spouse. The last thing anyone would want at such a terrible time would be for your family members to have to work that out among themselves. There could be differences of opinion and conflict. There would also need to be probate court approval of the guardianship.
This is also the time to think about managing a legacy over the long run for your children. If you die without a will at this point, the state will give all of your assets to your spouse, assuming all of your children are also your spouse's children. Most people want their surviving spouse to be taken care of. The problem is that unless you do something additional, you have not guaranteed any kind of legacy for your children.
This is why most families with minor children should also have a trust in place. Either a revocable living trust that you put assets into during your lifetime or a trust you create in your will to receive your assets can do what you need it to do.
The basic idea is that your assets go into trust for your spouse's benefit during his or her lifetime, but ultimately go to your children. This can help ensure something goes to them even if your spouse remarries and has other children.
Why not simply give your children a share in your will? You can absolutely do that. It is a less flexible way of including your children than a trust. Also, as long as they are minors they can't inherit assets directly, and someone would have to go to court and get a conservator appointed to manage their assets. With a trust, you can be the one who decides the terms and the trustee.
Estate Planning in Middle Age
In your forties and fifties, your estate planning needs often change significantly. Your children may now be adults, and your need to plan for them different. You have most likely accumulated more assets, like equity in your home. This is also the stage of life when your own parents may be aging and passing, and your own asset picture could change quickly with an inheritance.
If your will already carves out a portion of your assets for your children, you may not need to change anything in the will itself.
The primary change that most people are considering at this stage is planning for estate taxes. Under federal law, you do not have to worry about estate taxes unless you have $11.2 million in assets. In Massachusetts, that threshold is only one million. When you count equity in your home, life insurance proceeds, and retirement savings, most people at this stage of life are closer to that number than they think.
If you are married, a simple step is to create a trust for each of you and your spouse that essentially allows you to pool your exemptions. This means as a family you have a $2 million threshold when the first spouse passes.
If you are not married, or need to protect more than $2 million in assets, there are other kinds of trusts and annual giving strategies that you should discuss with your estate planning lawyer to move as much as possible out of your taxable estate.
If your will already carves out a portion of your assets for your children, you may not need to change anything in the will itself.
The primary change that most people are considering at this stage is planning for estate taxes. Under federal law, you do not have to worry about estate taxes unless you have $11.2 million in assets. In Massachusetts, that threshold is only one million. When you count equity in your home, life insurance proceeds, and retirement savings, most people at this stage of life are closer to that number than they think.
If you are married, a simple step is to create a trust for each of you and your spouse that essentially allows you to pool your exemptions. This means as a family you have a $2 million threshold when the first spouse passes.
If you are not married, or need to protect more than $2 million in assets, there are other kinds of trusts and annual giving strategies that you should discuss with your estate planning lawyer to move as much as possible out of your taxable estate.
Essential Estate Planning Documents in Your Sixties and Seventies
In addition to the combination of documents already described, now is the time you may want to consider planning for the cost of long term care. An asset protection trust is an irrevocable trust, meaning once you put assets into it you cannot take them back during your lifetime. For this reason, most people don't want to do this until they are past paying the most expensive bills of raising children, and have built up sufficient assets to be able to support themselves if some are placed into trust.
But you don't want to wait too long, either. When you get to the point of wanting assistance with long term care, the state has a five year "look back." This means anything you gave away or put into trust within five years of applying for Medicaid will be considered yours and it will delay eligibility for benefits.
But you don't want to wait too long, either. When you get to the point of wanting assistance with long term care, the state has a five year "look back." This means anything you gave away or put into trust within five years of applying for Medicaid will be considered yours and it will delay eligibility for benefits.
Estate Planning After Age Seventy
If you have already created all of the legal documents described above, you may not need to change anything about your essential documents. If you still have assets that are unprotected from estate tax, now is a good time to talk to your estate planning attorney about an annual giving strategy to reduce your taxable estate and still take care of your loved ones. If you do this systematically, giving away up to $15,000 a year to each of your children, grandchildren, or other people you want the assets to go to, you can move assets out of your estate without paying gift taxes.
This is also a good time to revisit your health care proxy and power of attorney. The individuals you named are also getting older, and may no longer be available. You are also at greater risk of incapacity, and should make sure your durable or springing power of attorney still reflects your wishes.
This is also a good time to revisit your health care proxy and power of attorney. The individuals you named are also getting older, and may no longer be available. You are also at greater risk of incapacity, and should make sure your durable or springing power of attorney still reflects your wishes.
How Our Estate Planning Lawyers Can Help
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We are ready to help. We understand this can be a difficult issue to tackle, so we have designed our process to make it as easy as possible for you to get the plan in place that protects you and your family and accomplishes your goals. You can use the button below to schedule a free information call, or simply give us a call at 781-784-2322.
