Keith W. Michon, P.C. Estate Planning
Questions Frequently Asked About Estate Planning
One way of introducing estate planning is to answer some questions clients frequently ask us. We believe that these questions and answers are important enough to include here, and we hope you find them informative.
- What happens if I die without a will?
- What is a Personal Representative or an Administrator?
- What is "administration" of my estate?
- What is a trustee?
- What is a durable power of attorney?
- Why should my Will be more than one page long?
- What property will not pass under my will?
- What is a Health Care Proxy?
A. If you fail to plan your estate and die without a will, the laws of the Commonwealth of Massachusetts will create an estate plan for you. The entire system of "intestate" succession or "descent and distribution" is set forth by statute and is too complex for a detailed discussion here, but some surprising and frequently undesirable results can occur. The law prescribes both the persons to whom your property will pass and the division of your estate among those persons. The distributions provided by law are inflexible and may not satisfy your desires as to distribution of your estate.
A. Your Personal Representative or Administrator is the court appointed fiduciary who will serve as the primary representative of your estate. A "Personal Representative" is appointed if you have a will. An "Administrator" is appointed if you do not have a will.
A. Administration of an estate involves the collection of assets, payment of liabilities, and distribution of properties to the beneficiaries or heirs. Administration of an estate is conducted under some degree of probate court authority and supervision, but different procedures are available. If you hold less than $15,000 in probate assets (essentially assets that are in your name alone at your death), plus an automobile (regardless of value) and if you do not own an interest in real estate, then there is a simple procedure known as voluntary administration available. Essentially the entire probate process is completed with the filing of a probate petition, the will (if there is one), a death certificate and a filing fee. If you own more than that in probate property at your death the probate process is more formal and extensive. In most instances it will take more than one year to complete a probate proceeding.
A. A trustee is one to whom property is transferred for the benefit of someone else (the beneficiary). A trust can be designed to produce almost any result desired by the client if the client gives the trustee sufficient funds with which to work. We usually recommend that trustees be given very broad and adaptable powers to provide flexibility for future events. The trustee should be empowered to do what is best for the beneficiary, without being curbed by inappropriate restrictions. If a trust appears suitable for your estate plan, you will need to exercise care in the selection of a trustee. The family member who comes to mind as a logical first choice may prefer not to deal with the management of your properties. If a corporate trustee appears appropriate, we will suggest that you have a conference with the representative of your bank's trust department.
Several years ago a new law was passed. It allows you to authorize another individual or entity to manage your affairs. It allows you to draft a relatively simple document known as a durable power of attorney. A durable power of attorney is a written document in which you, as the principal, designate someone you trust, such as your spouse, another family member, a friend or a professional, as "your attorney in fact" or "agent." Your attorney in fact is authorized to perform certain acts on your behalf. You may give as much or as little power to your attorney in fact as you desire. For instance, you may authorize your attorney in fact only to have the power to transfer your assets to a trust set up for your benefit, or the powers could be very broad and authorize the attorney in fact to do anything with respect to your assets, including for example, have access to your safe deposit box, manage your investments, run your closely held business, sell and transfer your assets. The powers you give your attorney in fact will be in effect when the document is signed. Generally, a power of attorney terminates on the disability of the principal. If the power of attorney is "durable," it will not be affected if you become disabled or incapacitated. Not all powers of attorney are durable.
Who should be the attorney in fact? In view of the significant authority and discretion conferred by a general durable power of attorney, the attorney in fact must be someone in whom the principal has complete trust and confidence. If the durable power of attorney is a springing durable power of attorney (that is, one that is effective only when the principal becomes disabled or incapacitated) the attorney in fact should not also be the person who determines the incapacity of the principal.
A. Your will could be drafted to be no longer than one page. Indeed, any lawyer could produce an abbreviated will for a relatively small fee. The problem, however, is that such a will may not accomplish your objectives for your beneficiaries. We prefer to draft wills to cover all the various factual and legal situations that reasonably may be expected to arise. The alternative is to hope that, by coincidence, the will may fit the facts at your death. Accordingly, the will that we draft for you may be a lengthy document. The burden to you of reviewing and approving a long will may be a blessing to your family when they later find that you have anticipated and resolved what might have been cumbersome problems.
A. Proceeds from life insurance policies and retirement benefits will pass in accordance with the beneficiary designations. In addition, property held in certain joint tenancies with a right of survivorship (e.g. joint bank or brokerage accounts with a right of survivorship) will pass to the surviving joint account holder. Therefore, you should review the beneficiary designations and account agreements to be sure they are coordinated with your will.
A. A health care proxy is a document in which you may designate an individual to make decisions concerning your health care. While you are competent you are in charge of decisions which pertain to your health care.
Previous Estate Planning Instruments
We will need to know whether or not you have previously developed an estate plan. If so, those instruments could have an impact on our recommendations to you.
Personal Financial Information
The sources of your income and the nature of your assets will have significant impact on our recommendations. Your assets may raise special problems of transfer at your death, and the assets may suggest a number of options with regard to income, estate, and gift tax planning. The nature of your assets also may influence the selection of the person or institution that should serve as a personal representative or trustee of your estate. This information also will enable us to give you an estimate of your potential estate tax liability and to estimate how that liability would be changed by alternative estate plans.
You may want to make specific arrangements for your pets.
Cremation or Burial
You should also give some thought to your wishes for cremation or burial. These directions can be included in your Will, and should also be communicated to family members in a separate personal memo. Your instructions can be as detailed as you want them to be.