Why do I need an estate plan?

An estate plan gives you the power to make decisions regarding your health and finances both during life and after death. It can provide protection and guidance to your heirs, and can also reduce taxes, probate costs, and other fees and expenses of your estate. In some cases, it can be used to protect your hard-earned assets from health care costs and other liabilities. Without an estate plan you leave these important decisions up to the state and courts, and often end up significantly reducing the value of your estate. More information is available in our articles “Why You Should FINALLY Get Your Estate Planning Done” and “The Right Estate Planning Can Protect Your Assets.”

Will my estate have to pay a federal or Massachusetts estate tax after I die?

The federal estate tax exemption is currently $5,000,000, however estates greater than $1,000,000 (including all accounts, investments, home equity, and life insurance) must pay an estate tax in Massachusetts of up to 16%.

How can I reduce or eliminate my estate tax liability?

Couples in Massachusetts with taxable estates should at least have an A/B trust to double their exemption. In many cases, this will completely eliminate estate tax exposure. Other strategies to avoid an estate tax include creating a gifting plan, life insurance trusts, and qualified personal residence trusts (QPRTs). This blog talks more about the state estate tax: “Using a Trust to Limit Massachusetts Estate Taxes for Couples.”

What is a living trust and do I need one?

A living trust is a revocable legal entity in which a trustee (generally also the person who set up the trust) controls the trust assets to achieve estate planning goals including probate avoidance, disinheriting an heir or providing oversight for minors, limiting or eliminating estate taxes, and planning for blended families or second marriages. For more information about a living trust, read our blogs “How a Trust Can Strengthen Your Estate Plan” and “What is the Difference Between a Trust vs. a Will?

What is probate?

Probate is the public legal process of proving the validity of an individual’s Last Will & Testament and appointing a personal representative to manage the estate, including distributing the assets per terms of the will, settling any debts of the estate and filing state and federal estate tax returns, if necessary. If there’s no will, a court-appointed administrator will distribute the estate according to the laws of intestacy, possibly resulting in undesired distributions. To learn more about probate, read our blog “Probate Administration (and How We Can Help).”

Does all property have to go through probate when a person dies?

No. Property jointly owned with another passes to the survivor automatically upon the death of the first. Also, bank accounts with a named beneficiary or “POD” don’t pass through probate. Finally, any asset owned by a trust doesn’t pass through probate. For more information, read our blog “What Are Probate vs. Non-Probate Assets.”

What happens if a die without a will?

If you don’t make a will or use some other legal method to transfer your property when you die, state law will determine what happens to your property. Generally, it will go to your spouse and children or, if you have neither, to your other closest relatives. If no relatives can be found to inherit your property, it will go to the state.

In addition, in the absence of a will, a court will determine who will care for your young children and their property if the other parent is unavailable or unfit.

If you’re part of an unmarried same-sex couple and do not have a will, your surviving partner won’t inherit anything.

Should I use a will to name a guardian to care for my young children and manage their property?

Yes. Many people first do a will when they have children. In the will you can appoint a guardian to be responsible for your children. You can also name an individual (who can be the same or different than the guardian) to manage money for the children. This individual is called a trustee. The trust can be set up to provide that the trustee can use the money for health, maintenance, education, and support without the money going directly to the children until they reach a pre-determined age. More information is available on our blog “Protecting Your Kids Through Proper Estate Planning.”

Can someone challenge my will after I die?

If your will needs to be admitted to probate upon your passing, any interested party can object. Interested parties include anyone named in your will as well as close family members not in the will. Using probate avoidance strategies, such as trust planning, alleviates this concern.

What is the cost of long-term care?

The cost of long-term care in Massachusetts can be extremely expensive, ranging typically from $8,000-$15,000 per month. Home health aides can cost $1,000-$5,000 per month. Assisted living facilities can cost $3,000-$5,000 per month. With proper planning, government benefits can assist with these costs and reduce the burden on your family significantly while protecting hard-earned assets.

Will Medicare pay for long-term care?

Medicare pays for a limited amount of the costs when in short-term rehab or the cost of a home health aide for a limited period of time. When these benefits expire, you’ll need to pay privately or seek other alternatives, such as Medicaid.

Will Medicaid pay for my long-term care?

Medicaid, called MassHealth in Massachusetts, is a joint federal and state program that pays for a home health aide or nursing home for qualifying individuals. Becoming qualified often requires careful planning to meet the program’s strict asset and income limits. More information about MassHealth eligibility and the need to plan ahead can be found on these blog articles: “What Assets and Income Count Toward MassHealth Eligibility?” and “Why You Should Plan Ahead for MassHealth Eligibility.”

Mom or Dad requires more care than I can provide but do not want to enter a nursing home. Are there any options for us?

Yes. MassHealth pays for long-term care for eligible seniors, but there are many other MassHealth programs that will pay for home care services, allowing frail seniors to remain in their own home or the home of a loved one. Some programs will even pay family members to care for their loved one. By creating an effective estate strategy, many Massachusetts seniors and their families can benefit from these eligibility-based care programs.