Navigating Estate Planning

At Howland Capital, we hold a steadfast belief that a well-structured estate plan is not just a financial necessity, but a testament to your care for the future. In this ever-evolving journey through life, we emphasize to every client the critical importance of maintaining an updated estate plan.

Guiding us through this intricate landscape of estate planning is our Chief Fiduciary Officer, Pam Halter. In this article, Pam discusses the foundational pillars of an estate plan.

Primer on Basic Estate Planning Documents

Estate planning is a process involving the guidance and counsel of professional advisers who are familiar with your goals, your assets, and your family structure. Outlined below are the documents that make up a typical estate plan and some general information on each.

I. Last Will and Testament

A Last Will and Testament provides for the orderly disposition of your estate upon your death. When implementing a Last Will and Testament, you should consider the following:

  • Choice of Personal Representative (formerly referred to as Executor). The Personal Representative’s function is to oversee the administration of any probate assets with the state court as well as the filing of tax returns with the federal and state taxing authorities.
  • Choice of Guardian and Conservator (if you have minor children). The guardian’s function is to serve in your place regarding decision-making for your child’s housing, clothing, feeding, education, etc. The conservator’s function is to serve in your place regarding managing your child’s finances.
  • Bequests of Tangible Personal Property.  If you have any specific items of tangible personal property (such as household effects, jewelry, antiques, collections, etc.) that you would like to leave to one or more individuals, you may specify those bequests in your Last Will and Testament. Alternatively, your Last Will and Testament may reference a memorandum that outlines such bequests.

II. Revocable Trust

A revocable trust is established during your lifetime and may be revoked or amended at any time prior to your death. The creation of the revocable trust is not a taxable event for income or estate tax purposes because you are considered the owner of all the trust property for tax purposes. Upon your death, the trust will be drafted to take advantage of your federal estate tax exemption (currently $12,920,000) and your Massachusetts estate tax exemption (currently $1,000,000).  Property held by the trust at the time of your death avoids the delay, expense and publicity of the probate process. Issues you should consider when creating a revocable trust include:

  • Choice of Trustee. The Trustee’s role is to oversee the management of the trust assets and the distribution of trust property to the beneficiaries.
  • Distribution to Beneficiaries. You should choose which individuals and/or charities you wish to be beneficiaries of your trust. For younger individuals, you may designate the age in which they will receive trust assets. You may also include special provisions regarding the distribution of the trust property to the trust beneficiaries.
  • Contingent Disposition Provision. In the event there are no surviving trust beneficiaries, you should name individuals or charities to receive the trust property.

III. Power of Attorney

This document allows you to name an agent to handle your financial and legal affairs, with the exception of health care decisions. It is a powerful tool, and you should exercise extreme care when appointing an agent. The power of attorney can be structured as “durable” or “springing”. A durable power of attorney becomes effective immediately upon signing the document and the agent’s powers continue through any periods during which you are disabled. A springing power of attorney only becomes effective upon incapacity, which typically must be signed off on by at least one doctor.

IV. Health Care Proxy, HIPAA Authorization, and Living Will

The Health Care Proxy allows you to name an agent for purposes of making your health care decisions in the event that you become disabled or incompetent and are unable to make health care decisions for yourself. The HIPAA Authorization allows your agent to access your medical records. The Living Will is typically a general statement to your healthcare agent of your wishes regarding life-sustaining treatment.

Having a comprehensive estate plan can be a wonderful gift to give your family, so please join us next month for a webinar with Pam Halter, discussing the above documents in more detail as well as a general overview of the estate tax laws and probate process. Click Here to be invited via email.

In the meantime, please reach out to your Howland Capital team with any questions about your specific situation.

Please note that while the information herein is about legal issues, it is not legal advice or legal representation.

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