A Holistic Approach to Your Affairs
For many people, especially those approaching middle- or retirement-age, know they should put together a plan for their estate, but feel overwhelmed by the details and options. They continue to put off estate planning for “another day” until, often, it is too late. Younger people also should consider their affairs, because there is no time like the present and because tomorrow is never guaranteed.
In fact, putting together a comprehensive estate plan, whatever your particular situation in life, is easier than you think. There are five major components of any estate plan, addressing both medical care at the end of life and the disposition of one’s property.
Three Options During Life
While handling the affairs of someone who dies intestate—without a will—can be difficult, costly, and time-consuming, some of the most difficult choices facing families are those around medical care and end-of-life decisions. By providing specific and well-documented directives about your care, you can spare your family such agonizing decisions like whether or not to discontinue life support. By making plans, you can ensure that your wishes are followed, giving you peace of mind, and allowing your family to rest easy knowing they have done what you would have wanted.
There are three legal vehicles by which to specify your healthcare and end-of-life decisions:
• A Living Will: In contrast with a typical will, which deals with property division after one’s passing, a living will guides your family in healthcare decisions while you are still alive but not able to communicate. For instance, a living will may specify that you never want to be put on a ventilator, or only want to be put on a ventilator if there is a reasonable chance of you being able to breathe on your own again. Knowing, incontrovertibly, that they followed your wishes allows family to process their grief without unnecessary regret or guilt.
• Power of Attorney: This document allows a person you specify to act on your behalf when you are not able to communicate. While a living will specifies your choices, power of attorney allows the designee to make those choices on your behalf. These choices can include not only medical decisions—particularly those not provided for in a living will—but also the care and sale of assets like a home or other real estate.
• Healthcare Proxy: A healthcare proxy designation is similar to power of attorney, but with a much narrower scope. True to the name, a healthcare proxy can only make decisions regarding your medical care, whereas someone with power of attorney may also handle property and assets.
Protecting and Passing On Your Assets
There are two major legal instruments for distributing your assets as you would want after your passing:
• A Will: This is the estate-planning document most familiar to the general public. A will allows you to distribute your assets that are not already contained in another legal instrument (i.e. a trust). A will names an executor to distribute the assets listed within according to your instructions.
• Trusts: Trusts often act as a supplement to a will and have the benefit of a more structured, guaranteed means of distributing assets after your death. Additionally, trusts can reduce estate tax liability by removing a portion of your assets from your direct control. While the federal estate tax taxes fortunes over five million dollars, Massachusetts tax liability begins at a much lower income bracket, meaning many Bay Staters could benefit from a trust in their estate planning.