The 3 Essential Estate Planning Documents
An estate plan should be customized for each individual, taking into account financial, familial, and personal factors. Therefore, it is important to discuss your estate planning needs with a professional, who will guide you through the process. Even if your circumstances call for more advanced planning techniques—whether it be an irrevocable trust, a life estate deed, or a gifting strategy, for instance—there are three basic estate planning documents that every individual should have in place at all times: The Health Care Proxy, Durable Power of Attorney, and Last Will and Testament.
1. Health Care Proxy
A Health Care Proxy is a document you sign in the presence of two witnesses, appointing an “agent” to make medical decisions for you if/when you are unable to do so. A physician must activate the document by certifying that you are indeed unable to make your own informed medical decisions. As long as you are able to make your own informed medial decisions, your agent has no authority. The key to is appointing an agent now, while you are healthy, to ensure that someone you trust will be responsible for making the best decisions on your behalf.
Massachusetts does not recognize a “living will” or “advanced directive” as legally binding. These documents, which allow you to list specific treatments and procedures you would elect/refuse, are often confused with a health care proxy. While not legally binding in Massachusetts, it is good practice to include any treatment details you feel strongly about, such as end of life care, Do Not Resuscitate orders, preferred comfort measures, etc., as a guide for your appointed agent. It is also advisable to discuss your wishes with your appointed agent while you are healthy and well, and let your agent keep a copy or know how to access your document. A copy should also be on file with your primary health care providers.
A common misconception is that your spouse has automatic authority to step in as a decision-maker on your behalf. Unfortunately, this is not the case. If you lose your ability to make your own medical decisions, without a valid health care proxy, the court must appoint a guardian for you. It is very frustrating for families to deal with the court process of appointing a guardian for a loved one. The guardianship process takes time, incurs court and legal fees, and triggers court oversight over very personal matters— all consequences which were otherwise avoidable, had you executed a short and simple document. Moreover, if you do not have family willing to be appointed as your guardian, the court will appoint a professional (usually an attorney or social worker) who you have never even met, to act as your medical decision-maker. If you don’t have anyone to appoint, let your attorney know, and he/she should be able to advise you.
2. Durable Power of Attorney
A durable power of attorney is a document you sign in the presence of a notary public, which appoints someone you trust, your “agent”, to handle your financial affairs when you are no longer able to do so. The powers can be broad or limited, but typically you would want your agent to have authority to deal with all financial institutions for any transactional purpose (bank accounts, insurance, real estate, stocks, bills, debts, etc.) There are instances, where you may have reason to limit your agent’s authority, and the document can be drafted accordingly.
The “durable” aspect is important, because it means that the authority you grant to your agent is not affected by your subsequent disability—the point being to line up someone now, who will be authorized to conduct transactions for you later, when you can no longer do so you. Most often, the documents are written to be effective immediately, so your agent can act as soon as necessary, without undue delay, if something happens to you. However, this also means that they could technically act immediately after you execute the document, before you would want them to. This is why it important to choose someone you trust. If you are uncomfortable with this immediacy aspect, the document can be drafted with certain protocols in place to “activate” the powers when necessary only.
Your agent’s authority terminates upon your death. Therefore, when you die, your agent under the Power of Attorney can no longer handle your accounts, bills, and other financial affairs, and the Personal Representative of your estate will have to step in with the authority to manage your estate assets. Often times, the same person is appointed in both roles.
3. Last Will and Testament
While your health care proxy and durable power of attorney documents will ensure your health and finances are in capable hands during your life, your Last Will and Testament (“will”) ensures your wishes will be properly carried out after your death. Your will appoints a Personal Representative (formerly referred to as “Executor” or “Administrator”) to handle your estate. Your Personal Representative has no authority during your life. Your will should also include a list of your beneficiaries, what each beneficiary will receive, and what powers and duties your Personal Representative will have. If you have minor children, you can nominate a guardian and direct how their inheritance should be managed.
A common misconception is that your will directs what will happen with all your assets. Your will only pertains to probate assets (assets titled in your name, without a beneficiary designation attached). Assets transferred to a trust, or an asset with a proper beneficiary designation will pass outside of your will as directed in the trust instrument or directly to a named beneficiary. Similarly, any assets owned jointly (as joint tenants) with another, will also transfer directly to the joint owner. Without a will, your probate assets will pass to your heirs at law in accordance with Massachusetts intestacy laws, which may not be in line with your wishes.
Even if you have a more advanced estate plan with a trust document or joint ownership as your primary planning tool, a basic will is important to catch any probate assets that you failed to transfer into your trust, change ownership title, etc. You can also use your will to “pour-over” probate assets to a trust you have already established, by naming the trust as your beneficiary.
A will must be signed in the presence of two witnesses and notarized. After a will is executed, any changes must be made with a properly executed amendment.
So if you have no estate documents in place, start with these three documents. If your circumstances change, your estate planning needs may also change and amendments can be made—but the benefits far outweigh the otherwise avoidable costs associated with doing nothing.
Senior Solutions LLC, Attorneys at Law, is an elder law firm serving the Greater Boston area. We help clients with estate planning, from basic to more complex. We are also available to serve in a fiduciary capacity, as health care proxy, durable power of attorney, or personal representative for clients that don't have friends or family available to serve in this role. If you are interested in finding out more, please call us at 617-489-5900 or email firstname.lastname@example.org.