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The Way to a Workable Will

21st Century Estate Planning

Have you ever thought to yourself “I need to do a Will, but really don’t feel like it”? You finally take action after the death of someone in your circle or a calamitous event such as the tragic motorcycle crash in northern New Hampshire recently where 7 bikers died.

A Will is a good start in recognizing that you are mortal. We all know that death is inevitable. However, incapacity (e.g., stroke) is not inevitable but unfortunately a possibility. In fact, some might argue that a stroke or dementia is a fate worse than death. With that in mind, more is needed than just a Will. What you need is an estate plan. If you have a simple financial world, then a simple estate plan should do the trick. The more substantial and the more complicated your financial world is, the more complex your estate plan should be.

The basic documents of an estate plan are a Will, Power of Attorney (POA), and a Health Care Proxy. A Will determines who is in charge of your estate (assets) at your death and who inherits those assets. A POA determines who manages your finances while you are still alive but are mentally incapable of handling them. The POA is often the most important document in the estate plan.

A Health Care Proxy is similar to a POA except that the named agent makes medical decisions, rather than financial decisions while you are alive but incompetent. Massachusetts has a state-issued Health Care Proxy form.

Unfortunately, it fails to provide certain language that I include in my documents such as end-of-life decisions, placement authority, and treatment with certain medications. But it is certainly better to have the state form than none.

Massachusetts does not have a state-issued POA form (New York and Connecticut do). Beware of using the internet to create your own document. While having a POA created via the internet might be better than having none, why do a slipshod job when there might be so much at stake? I caution you because there are even attorneys out there who do not know what language should and shouldn’t be in a POA. I cannot over-emphasize how important this document is.

While a Will is nice insofar as determining who inherits your estate, there are easier ways to get your estate to your beneficiaries. Here are a few examples: deeding your house to one or more of your children while retaining a life estate. At your death the property passes directly to them without having to probate (process) your Will. It also transfers some of the equity out of your name to try to protect it from potential long-term care costs (nursing homes) in the future. But deeding your house to your children should not be taken lightly. It may backfire if the child becomes estranged, files bankruptcy, or ends up in a divorce. It happens, believe me.

You can transfer assets to a Revocable Trust which then distributes the assets to your beneficiaries upon your death. Such assets avoid probate. You can name beneficiaries of your retirement plan such as 401ks and IRAs. You can name TOD (transfer on death) beneficiaries of brokerage/stock accounts. You can also name contingent beneficiaries on all of these assets in the event the primary beneficiary has predeceased you. The process is the same with life insurance.

Some banks allow you to add a child (ren) as a beneficiary of your bank account. Note that I have not said to add them as a co-owner. That is a different animal, not to be taken lightly.

In the event you have a disabled child, do not leave assets directly to him or her. Create a Disability Trust that can be funded upon your death. This allows your child to retain government benefits (Medicaid, Social Security) they have due to their disability.

You should strongly consider buying long-term care insurance. It is a wave of the future. The government is tired of paying for long-term care for the middle class. It is closing many or the avenues elders have used to protect their assets such as gifting, Irrevocable Trusts, and the purchase of so-called Medicaid annuities.

Massachusetts Inheritance taxes (the death tax) are relevant only if you are a millionaire. Federal death taxes only apply if you have at least $11,400,000 at your death.

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