No one likes to think about their death. However, planning ahead can help your family avoid unnecessary complications, delay and expense. This may be done through wills, trusts, joint ownership and life insurance. In addition, estate planning today also includes “life” planning through powers of attorney and health care proxies. These enable someone else to act for you in the event you are incapacitated. Understanding the following terms is a good first step towards planning your estate. However, no estate planning steps should be taken without consulting a qualified professional.
- Durable Power of Attorney
- Under a durable power of attorney you may appoint someone else to act for you when you are unable to do so yourself. Reasons to use a durable power of attorney may include mental incapacity or inability to be somewhere when needed. Traditionally powers of attorney expired upon the grantor’s incapacity, but “durable” powers of attorney continue until death.
- Health Care Proxy
- Similar to a power of attorney, through a health care proxy you may appoint someone else to act as your agent – but for medical instead of financial decisions. Unlike a power of attorney, the health care proxy does not take effect until your doctor determines that you are incapable of making decisions for yourself. Before that decision, your agent may not make decisions on your behalf. You may include in your proxy a guideline for your agent to use in making decisions. These may include directions to refuse or remove life support in the event you are in a coma or a vegetative state or to use all efforts to keep you alive, no matter the circumstances.
- Your will is a legally-binding statement of who will receive your property at your death. It also appoints a legal representative to carry out your wishes. The will only covers probate property, not joint property, trust property or life insurance proceeds.
- This is the name for the process in the Probate Court through which the ownership of your assets passes to your heirs. It includes the collection of your assets, the payment of your bills and the distribution of your estate. It only covers what you own outright, not joint property, trust property or life insurance.
- Estate Tax
- The estate tax applies to both the probate and non-probate property of the individual who has died. For the federal government, the amount free from taxation is currently 5 million dollars. Massachusetts estate taxes are separated out from the federal tax. As a result only individuals with estates in excess of one million dollars will pay a Massachusetts estate tax. Regardless of the size of an estate, there is no estate tax owed when the first spouse dies, assuming that all of the estate is left for the benefit of the surviving spouse.
- A trust is a legal entity under which one person (the “trustee”) holds legal title to property for the benefit of others (known as the “beneficiaries”). The trustee must follow the rules provided in the trust instrument. An irrevocable trust is one that cannot be changed after it has been created. A revocable trust is one that may be changed or rescinded by the person who created it. Trusts are often used for tax planning, to provide for someone who is disabled, or to shelter assets to protect them from creditors or for long-term care planning.
The information provided here is a summary only and does not take into account your individual situation. Please contact me at North Shore Elder Law & Estate Planning to learn more about the estate planning process.