"Estate planning" is legal planning for future disability or death. It addresses financial decision-making, asset preservation, tax minimization, health care, and long-term care needs.  This checklist illustrates some of the important tools that every person should consider having.  For more information, contact the Law Offices of Kathleen J. Masterton, P.C.

DO YOU HAVE......

____     A Durable General Power of Attorney?  Everyone should have a comprehensive durable power of attorney in favor of one or more trusted persons. This enables those you designate as your attorney-in-fact to make financial decisions on your behalf, if and when necessary. A durable power of attorney is a critical part of a plan to protect and preserve your assets, and to avoid a Guardianship proceeding, which can be time consuming, costly, and emotionally devastating. The power of attorney should grant the authority to make and disclaim gifts, sign tax returns, and apply for government benefits, and should provide for successor agent(s), which can be helpful in implementing tax-saving and other important strategies.

____       An Appointment of a Health Care Agent?  This document, sometimes called a "medical power of attorney," names a trusted person to make health care decisions for you if you cannot do so.  Only one agent may be appointed to act at a time.  It often is combined with an Advance Medical Directive.

____       An Advance Medical Directive? This document, also called a "living will," states your wishes as to life sustaining treatment if there is no reasonable prospect of your recovery and guides your appointed health care agent as to your desires regarding extraordinary life sustaining treatment.  (Those who in poor health who have elected to forego heroic medical measures also should direct their physician to write a "Do Not Resuscitate" order, which should remain with the individual at all times).

____       A Last Will and Testament?A Last Will provides for orderly administration of your estate and distribution, after your death, of the assets in your probate estate.  It should address (i) your decisions as to distribution of your assets, (ii) appointment of fiduciaries such as Personal Representative and Trustee; and (iii) tax consequences based on the value of your probate and non-probate assets.  A surviving spouse is entitled to ignore the provisions of the deceased spouse's will and instead take a specific share, set by statute, of the decedent's estate. If the surviving spouse is on Medicaid, the government may make a claim against the deceased spouses estate for Medicaid reimbursement.  In anticipation of this possible claim, each spouse could at the present time waive the right of election against the will. As in any legal decision, this has consequences both good and bad; one potentially bad consequence is that a waiver of the right of election may be considered a "transfer" under transfer-penalty rules for Medicaid nursing home care.

Every person should have each of the documents listed above, reviewed at least every three years.  If you were unable to check off all four documents, you should see a lawyer at once to obtain the missing documents.  But this is just the start of a coordinated estate plan.

Have you considered....

Many people want to pass wealth on to others in a way that is private (outside the realm of probate), reduces taxes, lets the person retain some control of the asset, protects persons who are disabled or who cannot manage their own affairs, and/or maximizes the ability to qualify for Medicaid.  So, a complete plan also may include any of the following popular instruments, depending on your own circumstances. 

___     A Revocable Living Trust. A funded revocable living trust may ease asset management and financial decision making and avoid probate. You place your assets into the Trust, to be managed by Trustee(s) whom you choose (you, spouse and/or children, or others all may be chosen to serve as trustee), according to the Trust provisions. You may receive the income and/or principal from the Trust at your discretion; have direct access to its principal at any time; and retain a Power to alter, amend, or terminate the Trust at your sole discretion.  At your death, the Trust Estate is not subject to a probate proceeding of your will and is distributed according to your desires as stated in the Trust.  Reducing the assets that are subject to probate can save legal and filing fees and put assets into your loved one’s hands more quickly.  An RLT is especially useful for those who own real estate in more than one state; those who anticipate that the will may be contested; and those in poor health who want someone else to manage all their assets.  An RLT does not save on estate, inheritance or income taxes, nor may it be used to avoid creditors.

____         An Irrevocable (Income Only) Living Trust. A funded irrevocable income-only trust may be used for asset management and financial decision-making.  It lets you put certain assets into the Trust to be managed according to the Trust provisions by the Trustee (s) whom you choose. You may receive income from the Trust but would not have access to its principal. You may keep a limited Power of Appointment, exercisable by you under your Will, to alter the ultimate disposition of the Trust assets, if you wish.  If you don't exercise this power, then at your death the Trust Estate is distributed according to your desires stated in the Trust.  The assets held in trust are not subject to a probate proceeding of your Will.  Reducing the assets subject to probate can save legal and filing fees and put assets into your loved ones hands more quickly. An ILT may save on estate or income taxes, and may be used to avoid creditors.

____       A Pour Over Will.  If you use a Living Trust, then your will should provide for your tangible personal property to pass directly to your surviving spouse or children, and the balance of any other assets outside of your Trust to be paid to the Trust for ultimate distribution in accordance with the Trust provisions.

____       A Supplemental Needs Trust:  Planning for the Supplemental Needs of a Beneficiary?  All or part of your estate may be placed in a supplemental needs trust established pursuant to your Will.  The Trustee, whom you may name in your will, may be given broad discretion to spend income and/or principal for the supplemental needs of a beneficiary, such as a disabled family member, without affecting the beneficiary's eligibility for governmental benefits, such as Medicaid.

____         A Spendthrift Trust. During your lifetime, or via your will, you can provide for establishment of a trust to benefit persons who may not be able to manage or handle the funds.  All or some of your assets/estate may be placed in a "spendthrift" trust established pursuant to your Will.  The Trustee, whom you may name in your will, can be given broad discretion to spend income and/or principal for the needs of the spendthrift, and in general such trust may not be reached by creditors to satisfy debts of the spendthrift.

____       A Testamentary Marital Trust?  Each spouse in the marriage may provide in his or her will for a testamentary marital trust, for the surviving spouse's benefit, during the surviving spouse's lifetime.  This lets trustee(s), who may be named in the will (i.e., children), manage the trust assets for the surviving spouse's benefit to supplement his or her care, while protecting the assets from creditors and/or Medicaid reimbursement should the surviving spouse receive Medicaid assistance and possibly saving on taxes.  Ultimate disposition of the trust assets is to those you have named in the trust instrument, such as your children.

PROTECTING YOUR PRIMARY RESIDENCE

Protecting the residence is an important part of the overall estate plan.  Popular techniques include outright transfer to another, transfer with a retained life estate, and funding a trust with your residence.  Each technique has advantages and disadvantages, from the perspectives of Medicaid eligibility, capital gains and other taxes, rights to live in or transfer the home, et al.