McLaughlin & Quinn, LLC - Providence | Boston

A commonly used definition of Estate Planning is: "I want to control my property while I'm alive, take care of myself and my loved ones if I become disabled, and give what I have, to whom I want, the way I want, and when I want.  Furthermore, if I can, I want to save every last tax dollar, professional fee, and court cost legally possible."

Assets can pass in different ways at death - and the method of transfer you choose is vitally important to your family.  A comprehensive estate plan can accomplish all of the above as well as streamline transfers, reduce administrative delays, reduce costs of transfers, avoid family conflict, minimize or eliminate taxes, protect a unique asset, preserve asset values, maintain privacy and eliminate court intervention. 

A Will, Durable Power of Attorney, Advance or Health Care Directives and Living Trust are the most commonly used estate planning tools.

A Will is a written document in which you state how you want your assets distributed after you die.  Typically, an Executor or Executrix is nominated to take charge of the administration of your Estate, and a Guardian is nominated in the event there are minor children.  A Will uses the courts to transfer wealth via the probate process. 

Traditionally, "The Last Will and Testament" was used as a means of transferring wealth at death.  In order to be effective, the Will must invoke the Probate court's jurisdiction at death.  Currently, many individuals have sought out alternative methods of wealth transfer due to concerns over court costs, privacy issues, administrative delays, etc. (Note: Wills do not govern the transfer of joint tenancy property or assets with beneficiary designations).

• You marry, divorce or separate, (marriage revokes a Will entirely, while divorce revokes the provisions concerning the spouse)
• A child or grandchild has been born
• You have sold or bought a house or other significant asset
• There is a change in tax laws
• Your assets have substantially increased or decreased in value
• Your relationship with a beneficiary has changed or a beneficiary's needs have changed

Certain assets pass automatically at death by virtue of "beneficiary designations."  Commonly, assets such as retirement accounts, insurance policies, and annuities carry "beneficiary designations."  While expedient, beneficiary designations require immediate transfer when it is often undesirable, and lack the flexibility necessary to provide for all possible contingencies.  Beneficiary Designations use form contracts to transfer wealth.

"Joint Tenancy with Rights of Survivorship" enables property to pass to the surviving "joint tenant."  However, when only one joint tenant remains, the asset will eventually be subject to probate.  Some people have concluded that adding another joint tenant will continue the "non-probate" descent of the property.  But strategy comes with a high price tag.  Continued joint tenancy may result in increased capital gains exposure - as well as the risk of loss to the other joint tenant's creditors.  Jointly Held Property uses "titling" to vest property in a "survivor."

When a person is unable, due to physical or legal incapacity, mental retardation or mental illness, to act for himself in areas of personal, medical and financial decision making a Guardian or Conservator may need to be appointed.  A Guardian would be appointed to make financial, medical and housing decisions while a Conservator is limited to financial decisions.  A Guardian or Conservator may be appointed by a Will or by court order.  An effective Durable Power of Attorney or Health Care Power of Attorney minimizes the need for the appointment of a Guardian or a Conservator.

When incapacity strikes, conservatorship or guardianship is almost inescapable, unless you plan ahead.  Preferred tools for incapacity protection include the Revocable Living Trust, Durable Power of Attorney, Health Care Power of Attorney and HIPAA Authorizations.  The Revocable Living Trust provides maximum asset management protection.  The Durable Power of Attorney addresses other financial, property and legal matters.  Health Care Directives control critical medical decisions and HIPAA Authorizations ensure family access to protected health care information.

• Identify the family members and other loved ones that you wish to receive your property after your death
• Ensure that your property will be transferred to those you have identified, as quickly and with as few legal hurdles as possible
• Mimimize the amount of taxes that will need to be paid in order for your property to pass to others after your death
• Avoid the time and costs associated with the probate process by utilizing specific estate planning documents
• Dictate the kinds of life-prolonging medical care you with to receive should you be unable to make your wishes known when the time comes

A Durable Power of Attorney is the document in which you name an "attorney-in-fact" (AIF) or "agent" to act for you in financial and legal matters.  Typically, your agent manages non-trust assets, files taxes, and acts as your legal representative.  Unlike the "successor trustee," your agent is not treated as the owner of assets for management purposes.  Consequently, the agent powers may be more constrained.

Advance or Health Care Directives include two documents:  the Health Care Power of Attorney and the Living Will.  The Health Care Power of Attorney or Health Care Proxy is the document in which you choose someone you trust to make medical decisions for you if you are not able to make them yourself.  The Living Will is the document in which you state your wishes about your health care if you are terminally ill or in a permanently unconscious state.

A Living or "Intervivos" Trust is a trust that is created during your lifetime. The Trust functions as a probate avoidance tool after death and as an asset management device during your life and in the event of your incapacity. It can help minimize the need for a Guardian or Conservator. You can amend or revoke a Revocable Living Trust at any time.

You are the maker or "Settlor" of the Trust.  When assets are held in trust, the "Trustee" becomes the legal owner of the property and has full power to manage and protect trust assets. While you are "alive and able," you serve as the Trustee. If incapacity strikes, your "Successor Trustee" seamlessly steps into your shoes and continues the management and protection of your trust assets for the benefit of the Beneficiary (ies).

HIPAA regulations strictly limit third party access to your protected health care information.  While HIPAA's regulatory goal is generally beneficial to you, it sometimes results in your family's inability to obtain important medical information.  To avoid problems, HIPAA Authorizations are necessary to designate "Authorized Recipients" of protected health care information.

The primary goal of many families is to protect their children.  "Inheritance" is more than just transferring wealth; it's also about protecting loved ones, transferring values, and leaving a lasting legacy.  Beneficiary Protection Planning may include nominating a Guardian for Minors, Spendthrift Trusts, Special Needs Planning, Incentive Trusts, or Lifetime Inheritance Protection Trusts.

The federal government may impose a Gift Tax on you if you give away or transfer something of value for less than it is worth. However, there is an "annual exclusion" and you can gift up to a certain amount tax free every year. Thus, a gifting program of small amounts may be helpful in diminishing your taxable estate and transferring assets to your loved ones during your lifetime.