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Boston Elder Law Blog

Powers of attorney are essential parts of estate planning

Most Massachusetts residents focus on what will happen after their deaths when creating estate plans. However, it is just as important, if not more so in some cases, to plan for what will happen in the event that they are not able to care for themselves at some point. This is where powers of attorney become essential.

No one can predict whether he or she will be involved in a serious accident or contract a debilitating illness. During those times, it might not be possible for you to make decisions regarding your health care or your finances. A health care power of attorney allows someone you trust to make decisions on your behalf regarding the medical care you receive. This document is most effective when coupled with a health care proxy that outlines your wishes, which can then be enforced by your medical agent.

Incapacitation and powers of attorney

Estate planning is more than just providing for the distribution of property after death. Powers of attorney are an integral part of an estate plan since they determine who will act on a Massachusetts resident's behalf if he or she becomes incapacitated. Choosing the right people to make these decisions is crucial.

Advance directives advise medical personnel of an individual's wishes regarding health care when they are unable to voice them. However, this document might not be sufficient on its own. Therefore, it is also a good idea to execute a health care power of attorney, which appoints someone else to make medical decisions on that person's behalf when needed. At the very least, the agent should have an understanding of what the individual would want under a variety of medical circumstances.

Ensuring that Massachusetts residents' wills are valid

Every Massachusetts resident has the right to determine who will receive his or her assets after death. As part of any estate plan, a will is executed that alerts the court and family members that a plan is in place for the disposition of an individual's property after death. However, if wills are not properly executed, they might not be valid when they are needed.

Every state, including Massachusetts, has certain rules and laws regarding how wills need to be executed. First, the testator, who is the person making the will, needs to be an adult. It is also crucial that the individual fully understands the contents of the will. The document needs to be signed in front of witnesses who could be called upon later to testify that it was not signed under duress and the testator was not coerced into signing it. The signature must also be notarized for the same purpose.

Knowing how wills in fit into estate planning

The state of Massachusetts provides for the disposition of a resident's property after death in the absence of an estate plan. However, that does not mean that the property left behind will go to the surviving family or friends that the individual would have chosen. This is the primary reason that wills are part of every estate plan.

In fact, a will is considered the cornerstone of every estate plan. This document lets the state of Massachusetts know that the decedent made arrangements for his or her estate prior to death. It also lets surviving relatives know who is to receive what assets from the estate. The individual will also need to choose someone to be the executor of the estate. The executor is the person who makes sure that the wishes expressed in the will are carried out.

Where to start to protect assets after death

Statistics show that approximately 64 percent of the people in the United States do not have a will, let alone a comprehensive estate plan. Undoubtedly, many of these individuals are Massachusetts residents. Part of the reason why at least some of them have yet to take the necessary steps to protect their assets after death is because they are not sure where to start.

Some Massachusetts residents might also not know when to start. Estate planning is often seen as something that people do later in life. However, the fact of the matter is that everyone is going to die, it is just a matter of when. Being prepared for the inevitable as soon as possible can put the minds of everyone at ease. Even young adults can benefit from having basic estate plans.

Facing mortality is necessary to protect your assets for heirs

Like most people around the country, Massachusetts residents do not want to contemplate their own mortality. This often stops them from protecting their assets so that their chosen heirs ultimately inherit them. Without some estate planning, those assets could unintentionally end up with some family members while other loved ones, friends and charities receive nothing.

Furthermore, without some planning, an estate can be significantly diminished by taxes and other financial obligations that could exist when an individual passes away. In addition, surviving loved ones will be left to deal with everything without any instructions or preparations. Under these circumstances, the probate process can quickly become time consuming, frustrating and expensive.

Too few engage in long-term health care planning

Based on the information gathered by the U.S. Administration on Aging, approximately 70 percent of the country's population that is already or will be turning 65 could need assistance with day-to-day activities as they age. In contrast, only around 40 percent of the people polled believe that they will need long-term care, and at least some of them could be here in Massachusetts. Therefore, too few people are engaging in long-term health care planning.

One source estimates that the cost of one year of long-term care ranges between $17,680 (adult day care) and $92,000 (nursing home private room). Many Americans are confident that they will be able to afford long-term care based on arrangements they have already made. Even so, one woman who purchased a long-term care insurance policy in the 1990's now realizes that the benefits will be woefully inadequate.

Dealing with debts during the probate process

In 2013, it was reported that the median amount of debt held by people over the age of 60 in the United States -- including many here in Massachusetts -- is approximately $40,900. It is possible that amount has risen in the last three years, which means that an individual's assets could end up being used to pay off debts during the probate process. Therefore, any assets intended to go to heirs could be significantly diminished before any distributions are made.

Many people fear that they will be held responsible for the debts of their loved ones after they pass away. However, in most cases, surviving family members are not responsible. Even so, creditors and collection agencies may attempt to convince people that they are liable for the debts.

Protecting your assets from estate taxes

The estates of most people will not reach the threshold for the federal estate tax exemption, which is currently $5.45 million for an individual and $10.9 million for married couples. However, here in Massachusetts, the state estate tax exemption is well under that amount at $1 million. Fortunately, your estate plan can help protect your assets.

Under Massachusetts law, if your estate goes even one dollar over the exemption amount, the entire estate becomes taxable. The tax rates vary between 15 and 25 percent. However, the transfer of assets under your estate plan also need to be accomplished in a way to help eliminate -- or at least minimize -- any tax ramifications.

Having a will and a revocable trust is not enough

Massachusetts residents who engage in estate planning often feel that their job is done once they sign on the dotted line. However, having a will and/or a revocable trust is not enough to ensure that the assets will end up with the proper heir or beneficiary. The property needs to be properly titled and beneficiary designations on other accounts need to be in line with the rest of the estate plan.

Retirement accounts, such as 401(k)s and IRAs, require that a beneficiary be designated when they are opened. Regardless of what a will or trust might say, those accounts will be distributed to the person designated. Other accounts, such as bank accounts, could have payable on death (POD) or transfer on death (TOD) designations. Therefore, they need to be reviewed periodically or whenever a change is made to the remainder of the estate plan to ensure that the funds are still going to the intended person.

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