Why Do I Need A Plan?

Estate planning is about planning for the future, but the future is now.  While things like life insurance and retirement plans are designed to help care for you and your loved ones when the time comes, an estate plan can do the same.  Unlike other “long range” planning devices, however, some aspects of an estate plan are designed to assist you at many junctures of your life, not just at the end. 

There are many myths about estate planning, but perhaps the most common is that you need to have millions of dollars in order to need an estate plan.  Many people feel the main goal of an estate plan is to help save estate taxes.    While estate taxes do play a part, it is not the only purpose.  Proper planning can help your loved ones cope with the financial and emotional impact of your absence. 

Another myth is that an estate plan is only about what happens to your money when you die.  The truth is, however, that a proper estate plan can benefit you and those that you care about while you are still alive.  For that reason, we prefer to call these plans “Life Plans” for all that they can provide to you. Just some of the benefits of having a proper plan are:

- Making sure your asses go where you want them to go

- Controlling assets after death

- Making provisions in the event of your incapacity (even on a temporary basis).

- Minimizing the emotional and financial burden on your heirs and loved ones

- Minimizing feuding among your heirs over your assets.

- Maximizing assets in your estate (or reducing assets included in your estate).

- Avoiding the cost and delay of probate

- Providing provisions for a guardian of minor children or incapacitated dependants

The fact is, if you fail to put a plan in place, the state you reside in will decide how your assets are distributed.  They will also decide who oversees the administration of your estate.  In this case, all control is taken away from you and the end result may be nothing like you would have wished. 

In some cases, your incapacity can put an even greater strain on your loved ones.  Without a contingency plan in place.

When should I review my plan?

An estate plan should be considered an ongoing process.  It should reflect the changes and circumstances of your life.  A plan done years ago may no longer suit your needs or adequately provide for your loved ones.  Even a “recent” plan may no longer provide the protection you require if a recent life event has changed your circumstances. 

While it is a good rule of thumb to revisit your plan every few years, you certainly need to take an assessment whenever you experience a life change, such as:

- Marriage or divorce (the marriage or divorce of a child can also have an impact on your plan).

- Death of a beneficiary or family member

- Substantial change in your asset value (up or down)

- Death of an executor, guardian or trustee

- Birth of a new family member

- Move to another state

- Acquisition of new property

- Change in tax laws

While this is certainly not an exhaustive list, it should give you a good idea on when you should review your plan.  Certainly, any life event that causes you to question your plan is a good time to schedule a review.

A Basic “Life” Plan

No, there is no “typo” on the top of this page.  If you came to this page looking for the outline of a basic “Estate” Plan you have come to the right place.  Unfortunately, when most people hear the words “Estate Plan” they think that you need to be Warren Buffet or Bill Gates to worry about such matters.  The fact is EVERYONE needs to have an Estate or “Life” plan in place to deal with the inevitable stumbling blocks that life throws at us all.  If you are over the age of 18, even if you don’t own a home or think you have many assets, you should have the following documents drafted and in place.  If you are married or have children then a more “advanced” plan, including some trust work, may be necessary.

WILL

A will is a legal document that details where you want your estate’s assets (everything you own when you die) to go and who is to oversee the execution of the will.  It may also state who is to care for your minor children.  If you don’t have a will at the time of your death, the state in which you reside at the time of your death will decide where your assets go and who will oversee the process.  This is NOT always what you would have had in mind.  Whenever changes in your life occur, such as marriage, divorce, birth of child or grandchild, it is a good time to review your will and be sure that it reflects your current life situation and wishes.

DURABLE POWER OF ATTORNEY

A durable power of attorney allows you to designate a representative, such as a spouse, sibling, parent or adult child to perform certain actions for you should you become ill, incapacitated or otherwise unable to manage your affairs.  This power can be set up to become effective only when such incapacity takes place and can be revoked if and when the individual regains the capacity to handle their own affairs.  This is one document that anyone who rents,  owns a home, has a bank account, brokerage account or any other asset that would require legal authority for anyone to act on your behalf needs to have.  Even if you are young and feel “invincible”, you still need to have this document in place.  Just imagine how your problems would quickly compound if you were suddenly unable to handle your own affairs, even temporarily, due to an accident or illness.

HEALTH CARE DIRECTIVE

A health care directive is your written declaration of what life-sustaining medical treatments you would want in the event that you become incapacitated.  While not yet legally recognized in Massachusetts, the health care directive gives guidance to your health care proxy and family as to what your wishes are in such a situation.  Courts have shown a preference to rule along the lines of an individual’s wishes when those wishes can be clearly determined. 

HEALTH CARE PROXY

A health care proxy is a person that you designate to make medical decisions on your behalf, and to carry out your health care directive, if you were ever to become incapacitated.  This document should be reviewed every few years to be sure the person you designate continues to be the individual you want to speak for you in this situation.

Advanced Planning

In some cases, a basic plan will not provide the protection needed for an individual.  If your estate is more complex you may require additional protections beyond the basics outlined above. 

TRUSTS

Trusts are vehicles in which a person (Trustee) holds and controls assets for the benefit of a designated beneficiary (or beneficiaries).  Trusts are useful in many situations such as holding assets for the benefit of children or an incapacitated individual.  Placing assets into a Trust will allow for the proper oversight and use of the funds by a trustee you designate who you know will follow your wishes.  Trusts may also be a useful way to transfer assets to your heirs while avoiding probate.

OWNERSHIP OF ASSETS

Ownership of certain assets can affect how your estate is ultimately probated.  Some types of ownership do not go through the lengthy (and sometimes costly) process of probate.

PLANNING FOR SMALL BUSINESS

If you own a business it may be the biggest asset in your estate.  You may want to have a plan in place to ensure that the business survives your death and gets passed on to the individuals you want to inherit the business.

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