The Four Key Documents of an Estate Plan

By Gina Barry

Consider this — tomorrow, you take a terrible fall.

You are injured to the point that you cannot communicate, or worse yet, you pass away. No one expected this to happen. Your loved ones are reeling. They are in shock and not thinking clearly.

By Gina M. Barry, Esq.

They are now immediately called upon to act on your behalf. Do you know who will handle your affairs? Have you given that person the legal authority they would need to do so without added cost, time, and administrative difficulties? If your estate plan is in place and up to date, your affairs can be handled efficiently and effectively, leaving your loved ones to grieve the tragedy without all the added stress of navigating your affairs blindly and without authority.

Thus, every adult should have an estate plan in place. Fortunately, a basic estate plan is quite simple to establish. It requires four documents:

Last Will and Testament

The will is the document most people think of when contemplating an estate plan. Your will directs how your probate assets will be distributed after you pass away.

When you die, your probate assets are those assets held in your name alone that do not have a designated beneficiary. If you pass away without a will, your estate will be distributed in accordance with the Commonwealth’s intestacy laws, which may not be as you would have wanted.

A common misconception is that a will is not needed unless you have a lot of assets; however, a will can do much more than simply distribute assets. A will is necessary for you to name a personal representative (formerly known as executor), who will carry out your estate. Your personal representative will gather your probate assets, pay valid debts, and distribute the balance as set forth in your will.

Further, if you leave behind minor or disabled children, a guardian can be named in your will to take custody of these children. Likewise, a trust can be established in a will to provide ongoing protection for minor or disabled children as well as for other beneficiaries who should not receive their inheritance outright, usually due to spendthrift concerns. When there is no will in place, your power to make these designations and to direct the distribution of your property is forfeited.

Many also believe that, if every asset is jointly owned or has a designated beneficiary, a will is not necessary. For such a plan to be successful, the joint owner or beneficiary must survive you. If they do not survive you, your estate will need to be probated, which is when your will would direct the distribution of those assets.

Further, there are some instances where joint ownership cannot carry out your wishes, such as when you have more than one child, but cannot add all of their names on the same account due to the financial institution’s practices or because one or more of your children cannot be trusted to have access to your account as a joint owner during your lifetime.

Healthcare Proxy

A healthcare proxy is a document that designates a healthcare agent, who would make healthcare decisions for you if you were unable to make them for yourself.

Your healthcare agent would step into your shoes and make your decisions as you would if you were able. For example, your agent may decide whether a certain medication should be taken, a certain medical procedure should be done, or an admission or discharge from a medical facility should occur. Should you lose capacity and not have a healthcare proxy in place, your loved ones would need to petition the Probate Court to become your guardian, which is a lengthy, expensive, and public process that most would rather avoid.

‘Living-will’ language is normally included within the healthcare proxy, as it addresses your end-of-life decisions and generally sets forth that you do not want extraordinary medical procedures used to keep you alive when there is no likelihood of recovery. This can be a difficult decision to carry out; therefore, care should be taken to name someone who would be able to honor that decision.

If you have a terminal illness or are of advanced age, you also should consider establishing Medical Orders for Life-Sustaining Treatment (MOLST) in addition to your healthcare proxy. A MOLST is a form completed by you and your physician that relays instructions about your care. A MOLST would eliminate the need for living-will language in a proxy, but the best practice would be to reference the MOLST in your proxy.

Durable Power of Attorney

A durable power of attorney is a document that designates someone to make financial decisions for you. This document is usually in full force and effect when it is signed, but it is expected it will not be used unless you want help with or are unable to handle your own financial affairs.

It is also possible to grant a springing power that does not take effect until incapacity arises. Should you lose capacity and not have a durable power of attorney in place, your loved ones will have to petition the Probate Court to become your conservator, which, just like the guardianship process, is also lengthy, expensive, and public.

The durable power of attorney is a very powerful document with authority that is as broad as the powers granted within it. It gives power to the person you name to handle all your financial decisions, not just pay your bills. In most cases, the person named will be authorized to handle your real estate, life insurance, retirement accounts, other investment accounts, bank accounts, and any other matters involving money, such as tax returns and applications for public benefits.

As such, the person chosen to serve in this capacity should be someone with financial savvy who can be absolutely trusted to use your assets for only your benefit.

Homestead Declaration

For Massachusetts homeowners, a homestead declaration, once properly recorded in the Registry of Deeds, will declare your principal residence to be your homestead. The homestead declaration protects the equity in your primary residence up to $500,000 from attachment, seizure, execution on judgment, levy, or sale for the payment of debts.

In some cases, such as advanced age or disability, the equity protection can be up to $1 million. If a homestead declaration is not recorded, there is an automatic $125,000 of equity protection. It should be noted that, in addition to some other specific exceptions, a homestead declaration will not protect your real estate from nursing-home costs or tax liens.

Conclusion

While incapacity and death are not the most joyous of topics, when faced with them, most people would prefer to have a plan in place to ensure their needs and goals will be met.

You can help your loved ones avoid expensive legal hassles related to your ongoing care and your estate. Individuals with more complicated estates may require different or additional documents to fully protect their interests, but for most, an estate plan is only four documents away.

Gina Barry is a partner with the law firm Bacon Wilson, P.C. She is a member of the National Assoc. of Elder Law Attorneys, the Estate Planning Council, and the Western Massachusetts Elder Care Professionals Assoc. She concentrates her practice in the areas of estate and asset-protection planning, probate administration and litigation, guardianships, conservatorships, and residential real estate; (413) 781-0560; [email protected].