What Do I Need in my Estate Plan?

Creating an estate plan was something my husband and I talked about doing for years. We knew it was important, yet kept pushing it further down on our to-do list since we were healthy, childless and had a hard time facing our mortality. When I became pregnant with my second son, we decided the time had come to create our estate plan.

What Documents do I Need for my Estate Plan?

A comprehensive estate plan includes the following:

• Durable Power of Attorney
• Health Care Proxy
• Trust
• Will

Durable Power of Attorney

A durable power of attorney names the person who will make financial decisions for you in the event that you are unable to do so. That person is referred to as an attorney-in-fact, while you, the person conveying the power, is the principal.

A durable power of attorney is effective as soon as it is signed by all parties and is typically valid until the principal dies, or revokes the authority granted. It is best practice to appoint an alternate person to serve in the event your first choice is unable to do so when the need arises.

One instance where a durable power of attorney can be helpful is if you are closing on a home while your partner is traveling. Provided your partner appoints you as attorney in-fact, you can sign all documents on their partner’s behalf.

Health Care Proxy

A health care proxy names the person who will make medical decisions for you if they are unable to make decisions on your own. There are several instances where a health care proxy may be required to step in. Assume you are in a persistent coma due to an accident and can’t make decisions about your care. It is recommended that you designate two people (primary and alternate) to be your proxy in case your first choice is unable to serve.

People often confuse a health care proxy with a living will, which sets forth your desire for medical treatment should you be suffering from a terminal illness or in a vegetative state and unable to share your wishes with your doctor. Living wills are not legally recognized in Massachusetts, however, it is important to discuss your wishes for medical care with your proxies so that they can make informed decisions on your behalf.

Will

A will is written documentation of how you would like to dispose of your property upon death. You will need to name a Personal Representative (formerly known as an “executor” or “executrix”) who makes sure your wishes expressed in your will are carried out. The Personal Representative acts in the best interests of your estate and will pay any outstanding debts, taxes and other obligations you have before your property is given to your beneficiaries.

The person receiving your property is called a beneficiary. You can name as many beneficiaries as you would like. They can receive equal shares, or specific items – it is up to you. The property passing in a will includes real property like a home, cash, stock and all other personal property such as the items in your home, care, etc. A will covers all of your property. If there are certain items, like special jewelry, that you would like a specific person to have, you can create a separate list that can be updated as you wish. Be sure to keep it with your will so the Personal Representative will be able to find it.

If you have minor children, I highly recommend designating a guardian (and alternate) in your will. A guardian will have legal responsibility for your children until they turn 18 years old. Ideally, the person you choose as guardian has a close relationship with your children – perhaps a grandparent, aunt, uncle or close family friend. If you don’t nominate a guardian for your minor children, the court will make the choice for you.

Trust

There are so many reasons why people might need a trust, and a different type of trust to meet those needs. A trust is an entity that holds property (money, real estate, or tangible property) for the benefit of your beneficiaries. Some of the advantages of establishing a trust are that the property transfers to the beneficiaries without having to go through probate, you can determine when your property passes to minor children, and it may reduce your estate taxes.

A trustee is the person who manages the asset that’s held in trust. A grantor is the person who gives the asset to the trust and a beneficiary is the person who can use the trust asset and/or eventually own it. The trustee you name depends on the type of trust. Sometimes it has to be someone other than the grantor and sometimes it can be the grantor. Trusts are tricky things, and if you think you need a trust (see: Do You Need a Trust?), talk to an estate planner.

Conversations with Friends and Family

It is important to start thinking about who you would like to have making important decisions for you and caring for your children when you are unable to do so. Be sure to have conversations with your loved ones about your wishes and ask them if they are willing to assume these responsibilities in the event of an accident or your death. It is a relief to know my husband and sister are prepared to make medical and financial decisions for me in the event tragedy strikes. Having a will and appointing guardians for our children brings us peace of mind that they will be well-cared for and endure minimal disruptions during an inherently tumultuous time.

Contact the office when you’re ready to get started, or have any questions we can answer. We offer flat rates, no surprise fees.