Overview of the 4 Essential Estate Planning Considerations
Consideration 1: Control of Property
If you wish to leave gifts to family members, friends, charities, etc. then you need to control how your assets are handled when you die. The only way to effectively do this is with a legally sound estate plan. Without an estate plan, your money, real estate, and any other assets you have, will be distributed by the probate court in accordance with your state’s Intestacy Statute, which may or may not be consistent with your wishes.
An estate plan also allows you to appoint your own Personal Representative (previously known as an Executor). Your Personal Representative is the person who will be responsible to oversee the distribution of your property to the individuals you designated. Without an estate plan the court will appoint someone of their own choosing. You may or may not have a perfect person in mind, but it is still better to pick someone rather than leave it up to your family or the court to decide.
Consideration 2: Estate Tax Planning
If your total estate is under $1,000,000, and there is no risk that it will go above that, you need not plan to avoid any estate taxes in Massachusetts. However, if you have property in excess of $1,000,000, and you live in Massachusetts, an estate plan will minimize the taxes your family will have to pay upon your death. For estates over $1,000,000, Massachusetts imposes a tax on the entire estate at a graduated rate of up to 16%.
Some states, such as New Hampshire, do not impose an estate tax. However, estates valued at over $11,200,000 for individuals or $22,400,000 for couples (in 2018), may be subject to a Federalestate tax. The American Taxpayer Relief Act of 2012, which was signed into law on January 1, 2013, raised the maximum Federal estate tax rate to 40% (from 35% in 2012). This tax is imposed in additionto the state estate tax.
Please note: If you are married, it is important to consider tax planning BEFORE either spouse dies!
Consideration 3: Long-term Care Planning
If you are concerned that your property will have to be sold or spent down to pay for long-term care, and that nothing will be left to pass on to your heirs, an estate plan may protect you. The cost of privately paying for care in a nursing home, assisted living facility or for in-home care can easily be as much as $12,000/month. If you or your spouse have a long-term disabling injury or condition, your property might be used up by these costs, before you end up requiring Medicaid Long-term Care coverage. One goal of an estate plan, with regard to long-term care planning, can be preserving as much of your assets as possible while qualifying for Medicaid financial support.
Consideration 4: If you are Incapacitated
If you are disabled by an accident or a debilitating disease or condition, you need people to make medical and financial decisions on your behalf.
A Durable Power of Attorney provides you with the security of having designated a person you trust to take care of paying your bills, depositing or transferring funds, continuing a course of giving, or handling other estate planning needs for you. Without a Durable Power of Attorney, if you were disabled by an accident, injury or illness and could not manage your finances, a probate proceeding would have to be started, and that is usually very costly and time consuming.
A Health Care Proxy allows you to designate a spouse or family member to discuss your health care with your medical providers, and to direct what emergency measures may be used for your care. A Health Care Proxygives your doctors and other health care professionals the legal flexibility to manage your care with the person you designated to make decisions on your behalf.
There are a lot of things to consider in putting together your goals for an estate plan. At McHugh Law we can help you assess your needs and put a legally sound estate plan in place to protect your family and preserve your assets.