Basic Estate Plan: “All I need is a Will, right?”

I am often asked to prepare a single document. A will, a living will, a healthcare proxy or a revocable trust. Most often, clients are trying to save money. While, individually, each of these documents are important, it is crucial that these documents work together and be part of a plan. This plan can be very basic and inexpensive, yet still very important. For instance, a will is only operative on death. How will your affairs be handled if you are incapacitated? Most people will face some sort of incapacitation prior to death. There will be many financial and health related issues. Who will deal with them for you while you are incapacitated. Who will take care of your affairs after you have passed?

Estate planning is the process where an individual or family arranges the transfer and protection of their assets in preparation of both death or incapacity. A proper plan also addresses health care, guardianship of minor children and business planning. Two major goals of an estate plan are to preserve the maximum amount of wealth possible for the intended beneficiaries/heirs and to provide ease and flexibility in the handling of one’s affairs prior to and after death or incapacity. Estate planning is also effective for implementing important wishes and desires, such as end of life decisions and charitable donations. Estate planning involves the services of not just your attorney, but can involve the services of other professionals, including your accountant, financial planner, life insurance adviser, banker or mortgage broker.

A basic plan will include a will, durable power of attorney, health care proxy, HIPAA release form and advance directive which is sometimes called a living will. Depending on one’s assets, family and estate tax situation, the plan might also include revocable or irrevocable trusts, homestead declarations, buy-sell agreements, and life insurance or pet trusts. Estate planning not only involves the creation of the proper documents, but also involves how one holds title to their assets such as real estate and bank accounts. The appropriate beneficiary designations on your retirement accounts and other financial products, such as life insurance, are crucial to the effective implementation of an estate plan and probate avoidance.
Today we rely on the internet for a wealth of information and we are truly fortunate to live in such a wonderful age of dynamic communication. However, as powerful a tool as this information can be, it must be used prudently and cannot replace the experience and education of a trusted professional.

Please feel free to direct any questions to the comment section or contact us today for a free consultation.


Don’t Sign That Offer Before You Talk to an Attorney

An issue I see all too often in the residential real estate transaction: Involving Your Attorney AFTER Entering A Legally Binding Contract.  In Massachusetts, a Buyer will usually submit an offer to purchase on some version of a standard form “Offer to Purchase” created by one of the local or regional Realtor associations like the Greater Boston Real Estate Board.  In most cases, once the Seller accepts the offer, the material terms of the contract have been set and the parties are bound to the Offer and the conditions agreed upon.

Contained in the Offer to Purchase is: a description of the property; the purchase price; the deposit and the conditions under which the deposit becomes the property of either of the parties; the expiration date of the offer; the manner in which the offer may be accepted; the nature of the title to be conveyed; the items of personal property and fixtures that are either included in or excluded from the transaction; and the time and place for the delivery of the deed.  These forms will also contain language similar to “NOTICE: This is a legal document that creates binding obligations. If not understood, consult an attorney.”

One of the conditions, contained in the Offer to Purchase is that the parties will execute a Purchase and Sale Agreement that is agreeable to both parties.  This is the point where many Buyers and Sellers will first involve their attorneys.  It is very important that the parties use an attorney in the negotiation of the Purchase and Sale Agreement.  However, for numerous reasons, it is prudent to have an attorney review the Offer to Purchase before the material terms are set.  In a future posting, I will discuss in detail why an attorney is needed in the negotiation of the Purchase and Sale Agreement.

For the Buyer, I like to include a valuation contingency, so that if the property does not appraise for the sale price, the Buyer has the opportunity to either renegotiate the sale price or back out of the deal and receive their entire deposit back which can be as high as five percent of the sale price.  Additionally, I like to add some warranties and representations to the Offer to Purchase.  For the Seller, it is important that they identify personal property that they may be leaving behind or fixtures, such as chandeliers, that they intend to take with them. If you want to take your Mother’s prized cherry tree with you when you sell, it better be in the offer.

There is no such creature as the “routine” residential real estate transaction. Each parcel of real estate is unique and each party to the transaction has individual needs and desires. For both parties, it is always a good idea to have a trained, experienced set of eyes review the terms and make sure the client’s interests are best represented and that the client fully understands the implications of the documents they are signing.

Even on weekends, there is enough time to have your attorney review the offer before it needs to be submitted or accepted.  In my practice, I charge a flat fee for representing Buyers and Sellers and that fee includes the review and/or drafting of the Offer to Purchase and all other documents a Buyer or Seller would need to sign from broker disclosures to listing agreements.  I can even help explain and compare different mortgage quotes for my Buyers.  For most Buyers and Sellers, this is one of the biggest transactions in their lives.  I strongly recommend any Buyer or Seller to talk to an attorney as early on in the process as possible.

The Living (Revocable) Trust

There are material benefits to establishing a living trust, or as I like to call them, revocable trusts. These trusts are much like wills, but more powerful.  While a will only concerns your affairs after you die, a revocable trust is created during your lifetime. It allows you to make changes and provides peace of mind. You also will have more control of when and to whom your assets should be distributed when you pass away.

Since the revocable trust is effective during your lifetime, it is particularly beneficial should you become incapacitated and unable to handle your own affairs. In the instance where you are unable to handle your own affairs, a revocable trust appoints an individual or corporate trustee who will act on your or your beneficiaries’ behalf. Without the revocable trust, a family member or other interested party might have to file a petition in probate court, asking a judge to appoint a conservator. The judge will have to weigh the medical issues, as well as, deal with family members who disagree on the appointment of the conservator. This can be an expensive process and may not be consistent with your wishes or the wishes of your family.

The revocable trust can also eliminate or significantly reduce the expense of probate, which involves a public court process, of handling your affairs.  The trust addresses important issues, such as, paying your funeral expenses and debts, as well as, the distribution of your assets  . The process would also involve the distribution of your assets to your heirs. This is often a long process before any assets are distributed. Once again, the process could also be quite expensive.

The matter can be further complicated if you own real estate, especially, outside of Massachusetts. In addition to the revocable trust, non-probate assets, such as, joint accounts, retirement plans, life insurance policies and jointly owned real estate would pass directly to the beneficiary or joint owner without the need for probate.  Probate avoidance also provides the privacy many clients desire.

If you have minor children, the revocable trust would provide a distribution mechanism of your assets to your children. You do not want to relinquish control of your assets prior to your children achieving an age greater than 18, such as, 25 or 30. These are ages where most young adults have advanced their maturity to use prudence in their financial decisions. These trusts typically allow for discretionary items, such as, health, education and other needs the children or guardian might encounter.

There are many possibilities, too many for our discussion here. The revocable trust cannot provide tax protection nor can it protect the elderly from MassHealth estate recovery.  Additionally, I do not recommend making a choice of a trust or will.  They are complementary and necessary for most planning purposes, as well as other financial and health care documents.  For this and many other reasons, the revocable or any other trust cannot be left to a do it yourself website. There are many complexities and the involvement of an experienced attorney specializing in estate planning and trusts is essential. Please feel free to direct any questions to the comment section or  contact us today for a free consultation.