Key Estate Planning Elements
Understand Key Estate Planning Terms |
Though the specifics of your estate plan should be based on your individual circumstances and goals, there are a few key elements common to most comprehensive and effective estate plans that you should understand when speaking with your estate planning lawyers. You may have heard phrases like "wills and trusts-" it is important that you understand what those terms mean.
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What is a Will?
A will, or Last Will and Testament, is the document in which you identify how your assets are distributed after you die. If you die without a will, your assets will be distributed by the probate court according to Massachusetts law, which will either distribute all assets to your surviving spouse or divide among spouse, children, and other potential heirs, depending on your family situation. Even if this is what you actually want to happen, without a will you lose the opportunity to determine which assets go to which of these beneficiaries. For example, you may want your estate evenly distributed like this in terms of value, but hold certain assets that you would prefer to go directly to your children. With a will, you can specify that the piece of land that has been in your family for generations go directly to your children, and leave larger portion of some other asset to your spouse to even things out. You can also specify in your will who you want to care for your children if both you and the other parent are deceased, who you would like to be responsible for administering your estate, and authorize that person to shut down or manage your social media and other aspects of your "digital footprint."
What is a Trust and How Are Trusts Used?
Trusts are a common tool in estate planning that allow you to direct some or all of your assets to a trust for the benefit of your heirs instead of directly to them. Trusts can avoid the process of probating your will in court, which can be costly, provide for children or adults with special needs without disrupting government benefits, protect the assets you leave behind from creditors, and, in some cases, protect your assets during your lifetime if you need long term care. A trust can also allow you to take care of the financial needs of your surviving spouse while preserving the core assets for your children when that spouse dies. Within the trust, you can identify a trustee, who will have discretion to administer the trust, but you can provide specific guidance to that individual about how you would like those decisions to be made. A trust can be revocable (you can change your mind),or irrevocable (you can't change your mind). In some circumstances it is required that the trust be irrevocable in order to achieve your asset protection goals. It is important for you to understand that both wills and trusts are part of a comprehensive estate plan.
Durable Power of Attorney and Health Care Proxy
Not all of your estate planning is about what happens after you die- you can also avoid family disputes, dissipation of assets, and needless heartache by planning for a time during your life when you may be unable to make decisions for yourself. A power of attorney allows you to name someone you trust to access your assets and make financial decisions on your behalf if you become incapacitated. The person who holds your power of attorney could pay your children’s tuition, pay your mortgage, obtain a loan on your behalf, and otherwise make all of the day to day decisions that you are unable to make. A health care proxy designates a person to make health care decisions for you if you are unable to do so yourself. You can give that person instructions on what your wishes are, including whether you wish to be placed on life support. You can also include what kind of treatments you do or don't want under various circumstances. These documents are not required to accomplish the other goals of your estate planning (asset protection,avoiding probate, minimizing tax liability, etc.), but they can be vitally important in giving your family and your health care providers a clear path in the event that you become incapacitated.
Don't Forget the Conversation
Thinking about your estate planning provides an invaluable opportunity for you to communicate with those closest to you about your wishes and intentions. If you have young children, that conversation may be with your spouse and/or your siblings; if you have grown children, or other individuals who are important in your life and your planning, you may want to bring them in on your planning while you have the ability to communicate clearly. If the people closest to you understand why you have set things up the way that you did, there are less likely to be hurt feelings and disputes, and you are better positioned to leave your loved ones with your financial and personal legacy intact.
Thinking about your estate planning provides an invaluable opportunity for you to communicate with those closest to you about your wishes and intentions. If you have young children, that conversation may be with your spouse and/or your siblings; if you have grown children, or other individuals who are important in your life and your planning, you may want to bring them in on your planning while you have the ability to communicate clearly. If the people closest to you understand why you have set things up the way that you did, there are less likely to be hurt feelings and disputes, and you are better positioned to leave your loved ones with your financial and personal legacy intact.
