Massachusetts Estate Planning

Layers to protect your family

Massachusetts estate planning documents such as Living Trusts and Wills are easy to understand. In short, Trusts accompany Wills because Trusts can often offer additional control distributing an estate and avoid the loss of time and money in settling an estate.

Identify your goals. If dependent children need named guardians, a related goal may be preventing beneficiaries from receiving life insurance money or profits from the sale of a house until an older age without the consent of your executors/trustees. Other goals may be avoiding probate, estate taxes and preventing an estate from being contested.

Determine which documents are right for you. Familiarize yourself with documents and common strategies. For legal advice, your legal, financial and insurance advisors can refer you to estate planning attorneys or try our free directory.

What happens without estate planning documents? Typically, should you become incapacitated, a court will appoint a conservator. If you pass intestate without a valid Will, the states typically begin by naming guardians for dependent children. If you are single, the intestacy laws typically distribute assets to the most closely-related living relatives: children, parents, siblings, etc. When assets are titled individually in a marriage involving children, without a Will a surviving spouse may lose up to half of the deceased spouse's assets to the children.

Start with Power of Attorney and Last Will documents Power of Attorneys make medical and financial decisions for you during an incapacitation. An accompanying Living Will declares life support instructions to doctors and family. The Last Will and Testament handles several critical duties: Naming guardians for dependents Appointing executors to manage and distribute your estate Declaring beneficiaries of your estate

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Probate's purpose

Probate is a court process, not a tax. This process verifies the Last Will and Testament's instructions are followed and ensures the estate's transition is handled correctly, such as repaying creditor debts and distributing assets to beneficiaries.

Probate can be simple for small estates but become complicated with larger estates or beneficiaries contesting the Will. When attorneys are introduced to the process, the cost of the probate process could increase. Typical costs are 3%-10% of the estate's value.

Some assets avoid probate. Assets with beneficiary designations on them, such as life insurance, retirement accounts and bank accounts avoid probate. Assets transferred to a revocable Living Trust prior to the person's passing also avoid probate.

What is a Trust?

Trusts and Wills can both provide estate distribution instructions. Trusts don't replace Wills, they are used in addition to a Will. The difference: while a Will is a piece of paper, a Trust can be thought of as a box to hold your assets during your lifetime and after.

Trusts typically stay intact the duration of the beneficiaries' lifetimes, allowing many basic estate planning objectives to be achieved, such as controlling when and how young beneficiaries receive their inheritance.

Living Trust benefits

Assets in a Living Trust can legally avoid probate. For both families with young children or adult children, quick access to assets may be necessary. Hence, avoiding probate which can take months or years is often an important goal. While Living Trusts are created before you pass, Testamentary Trusts are created after you pass by a Last Will and Testament. Assets in a Testamentary Trust do not avoid probate.

Trusts can hold assets until certain benchmarks are reached, typically a responsible age. Money (such as a life insurance payout) can be distributed prior to a designated age for reasonable education, health and support needs, as deemed by the Successor Trustees you appoint.

Trusts can maintain a residence for children & their guardians. Mortgages, taxes and expenses can be paid from your Living Trust until children finish school, at which point the property can be sold and distributed.

Trusts can maintain a residence for a spouse in a blended family until he/she no longer resides in the real estate owned by the trust.

A trust can help special needs beneficiaries receiving disability income. An inheritance may interfere with disability payments. A trust can withhold their share until a partial or full distribution is needed.

Married couples can double their estate tax exemption. If your estate (including life ins) is under $2M in 2008 or $3.5M in 2009 there's little worry for estate taxes. Portions of estates over that limit are subject to hefty taxes of nearly 50%.

Living Trusts are known for easily accommodating unique requests, such as estate planning for pets.

Trusts typically contain No Contest Clauses disinheriting anyone legally contesting the estate, which can freeze an estate for years and increasing the stress on the executor's job.

To work, assets must be in your Living Trust

Your trust can only control assets in its possession. Your goal is to transfer appropriate assets into your Living Trust while you are living.

You maintain control of assets in your Living Trust.

Assets typically transferred to a trust:  Property, bank accounts, vehicles and non-titled assets such as furniture, art, jewelry, etc.

Assets not in the trust but naming the trust as a beneficiary:  Life insurance, annuities

Assets kept away from the trust:  Retirement accounts, such as IRA's and 401k's. Consult your financial advisor.

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