June 6, 2014 | Share
DO I NEED MORE THAN A WILL? - What documents are generally included in an estate plan and why?
I often hear people say “I need to get my will done,” however, what these individuals do not understand is that a comprehensive estate plan is actually needed in order to obtain the peace of mind they wish to achieve. Each document within an estate plan serves different purposes, and together they help protect individual’s health decisions, assets and loved ones.
The most common used estate-planning documents and their purposes are as follows:
A will is a legal instrument that permits a person to make decisions concerning the management and distribution of his estate after his death. A will can also serve the purpose of naming a guardian for children under the age of 18. After the passing of a decedent, in order for the probate process to begin, the executor named in the will must file the will and death certificate with the court. Conducting a probate in Massachusetts usually takes a year but can last much longer if disputed and cost thousands in legal fees.
A living trust, unlike a will, allows for an individual to select specific property, that upon death, a person of his choosing would distribute to selected beneficiaries WITHOUT the need of probate. Avoiding probate court can save heirs a great amount of time and expensive legal fees. While the creator of the trust is alive there is no need to pay any special taxes, the assets can be sold or manage at anytime, and the creator of the trust can modify or dissolve the trust at any time.
Financial Power of Attorneys
A Financial Power of Attorney is a document that allows a competent person to give authority to another individual to make financial decisions and financial transactions on their behalf. In Massachusetts there are two different kinds: (a) a “present” durable power of attorney, in which the power is immediately transferred to the chosen agent; and (b) a “springing” durable power of attorney, which only comes into effect upon the principal’s lack of capacity.
Health care proxies
A health-care proxy is a document executed by a competent person to appoint another individual to make health-care decisions on his behalf. Once the document is drafted, the primary individual continues to be allowed to make health care decisions as long as he is still competent to do so. The agent only becomes empowered once it is determined, by the state of Massachusetts, that the principal lacks capacity to make or to communicate health-care decisions.
The Health Insurance Portability and Accountability Act (“HIPAA”) of 1996 protects the privacy of health data. A HIPAA authorization allows an individual chosen to have access to your medical and billing records. A HIPAA Authorization is essential for the agent of a health care proxy, without the right to have access to medical records informed health-care decisions are near impossible.
The Homestead Act is a law that protects Massachusetts’ homeowners from having their homes sold to pay off unsecured debts. The law applies only if the homeowner lives in the home. A homeowner's equity is automatically protected up to $125,000 by law. However, by filling a Declaration of Homestead with the Registry of Deeds, a homeowner can protect up to $500,000 in equity.
Posted in Estate Planning Information