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3 Estate Planning Documents Everyone Must Have

Common mistakes people make with their estates in Massachusetts

Estate planning is about three things, says Deborah Manus, an estate and trust attorney at Nutter McClennen & Fish in Boston: “You, your stuff and your people. It creates a guide that helps others navigate what should happen if you’re not around.”

Unfortunately, fewer than half of U.S. adults have one.

“Pretty much everyone should have three documents,” says attorney Eric Correira, who specializes in estate planning and administration at Correira Law in Boston. One, a healthcare proxy stating who can make medical decisions; two, a power of attorney stating who can make legal and financial decisions; and three, a will stating how assets should be disbursed, as well the executor responsible for settling your estate and the guardian of any minor or special-needs children. 

Too many people procrastinate due to analysis paralysis and the fear of facing their own mortality, Manus says. “People think they have to get it absolutely perfect.” 

Instead, she recommends you view planning as iterative—to be revisited every five years or when family circumstances or laws change. “Whatever you do is going to be better than doing nothing,” she says.

And the earlier you start, the better. This is particularly true when planning for potential nursing home expenses, which can quickly wipe out a lifetime of savings. To qualify for Medicaid, individuals must spend down more or less all of their assets, says Correira, leaving little for heirs.  

An irrevocable Medicaid trust protects assets by transferring them out of an individual’s name and excluding them from insurance eligibility calculations. Timing is crucial, though, as the trust must be created and any transfers completed at least five years before submitting a Medicaid application.  

An estate plan should consider a family’s dynamics. For example, if a spouse has remarried and there are children from the first marriage, “it might be a good idea to create a trust for the surviving spouse, but it would be a terrible idea to make the kids of the prior marriage trustees,” says Manus. “People don’t think about things like that.”

A tax strategy is important too. While the federal estate tax doesn’t kick in until assets reach more than $11 million, thresholds are much lower at the state level. In Massachusetts, estates over $1 million are subject to a progressive tax rate of up to 16%, a valuation that is easily achievable if you have a retirement account and own property in or around Boston.   

Most states do not have an estate tax, so establishing residency elsewhere can help you avoid the Massachusetts estate tax, says Correira. 

“If you die without a will, your assets will pass under the laws of intestatcy,” says Manus. “This is basically the state deciding how your property will be distributed. In most states, those rules direct the assets to a spouse first—even if you are separated—then to children, then to next of kin. That may be what you want, but it may not be. 

“If you die without a will, state laws can also create an order of priority of people who can be appointed to administer your estate,” adds Manus. “Under those rules, your creditors may have standing to petition for appointment as the fiduciary of your estate. Who would want that?”

Settling an estate can be a cumbersome ordeal, and it can take more than a year. Attorneys say people frequently select a family member or friend for this role; however, there are other fiduciaries, like banks, trust companies and some attorneys, who can fulfill these duties too. A blended approach, where both a family member and professional serve jointly, is another popular option.  

Just don’t keep everyone in the dark. “At a minimum,” says Correira, “the named executor should be [given] basic instructions, including who to contact if something happens, and the law firm where the estate plan is located.”

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