Estate Planning Basics

Mortgage FAQ's | Mortgage Shopping Tips | The Mortgage Process | Additional Considerations

Mortgage Education

Considerations Beyond the Mortgage

Presented by John Spino, Esq.
781-213-3060
johnspino@gsallp.com

1. WHAT IS ESTATE PLANNING?

Estate planning is the process in which your counsel of professional advisors which includes your lawyer, accountant, financial planner, life insurance advisor, and mortgage broker assess your goals and concerns, your assets and how they are owned, and your family structure and work together to establish and implement a plan that covers the transfer of property at death as well as a variety of other personal matters and may or may not involve tax planning. The core documents most often associated with this process are Wills, Durable Powers of Attorney, Health Care Proxies, Living Wills and Trusts.

2. WHAT IS A WILL?

A will provides for the distribution of property owned by you at the time of your death in any manner you choose (subject to the forced heirship laws of some states). Your will cannot, however, govern the disposition of properties that pass outside your probate estate (such as certain joint property, life insurance, retirement plans and employee death benefits) unless they are payable to your estate.

Wills can be of various degrees of complexity and can be utilized to achieve a wide range of family and tax objectives. If a will provides for the outright distribution of assets, it is sometimes characterized as a simple will. If the will establishes one or more trusts, it is often called a testamentary trust will. Alternatively, the will may leave probate assets to a preexisting inter vivos trust (created in your lifetime), in which case it is called a pour over will. In either case, the purpose of the trust arrangement (as opposed to outright distribution) is to ensure continued property management and creditor protection for the surviving family members, and to minimize taxes.

Aside from providing for the intended disposition of your property to spouse, children etc., there are a number of other important objectives that may be accomplished in your will.

You may designate a guardian for your minor child or children if you have survived the other parent-and, by judicious use of a trust and appointment of a trustee, eliminate the need for bonds and supervision by the court regarding the care of each minor child's estate
You may designate an executor of your estate in your will and eliminate the need for a bond; in some states the designation of an independent executor will eliminate the need for court supervision of the settlement of your estate.
You may choose to acknowledge or otherwise provide for a child (e.g., stepchild, godchild, etc.) in whom you have an interest, an elderly parent, or other individuals.

3. WHAT IS A DURABLE POWER-OF-ATTORNEY?

An important part of planning is the Durable Power of Attorney. Valid in all states, these documents give one or more persons the power to act on your behalf. The power may be limited to a particular activity (e.g., closing the sale of your home) or general in its application, empowering one or more persons to act on your behalf in a variety of situations. It may take effective immediately or only upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself). The latter are "springing" Powers of Attorney. It may give temporary or continuous, permanent authority to act on your behalf.

The person named in a Durable Power of Attorney to act on your behalf is commonly referred to as your "agent" or "attorney-in-fact." With a valid Power of Attorney, your agent can take any action permitted in the document.

If you do not have a Durable Power of Attorney and become unable to manage your personal or business affairs, it may become necessary for a court to appoint one or more people to act for you. People appointed in this manner are referred to as guardians, conservators, or committees, depending upon your local state law. If a court proceeding, sometimes known as intervention, is needed, than you may not have the ability to choose the person who will act for you. With a Durable Power of Attorney, you choose who will act and define their authority and its limits, if any.

4. WHAT IS A HEALTH CARE PROXY?

A "health care proxy," sometimes called a "health care surrogate" or "durable medical power of attorney," is the appointment of a person to whom you grant authority to make medical decisions in the event you are unable to express your preferences. Most commonly, this situation occurs either because you are unconscious or because your mental state is such that you do not have the legal capacity to make your own decisions. Normally, a single individual is appointed as your health care proxy, though quite commonly one or more alternate persons are designated in the event your first choice proxy is unavailable. Medical professionals will make the initial determination as to whether or not you have the capacity to make your own medical treatment decisions. The health care proxy is a durable power of attorney specifically designed to cover medical treatment.

5. WHAT IS A LIVING WILL?

A living will is your written expression of how you want to be treated in certain medical conditions. Depending on state law, this document may permit you to express whether or not you wish to be given life-sustaining treatments in the event you are terminally ill or injured, to decide in advance whether you wish to be provided food and water via intravenous devices ("tube feeding"), and to give other medical directions that impact the end of life.

6. WHAT IS A TRUST?

The term trust describes the holding of property by a trustee (which may be one or more persons or a corporate trust company or financial institution) in accordance with the provisions of a written trust instrument for the benefit of one or more persons called beneficiaries. In some cases, a person may be both a trustee and a beneficiary of the same trust.

A trust created by your will is called a testamentary trust and the trust provisions are contained in your will.

Trusts are not only for the wealthy. Many young parents with limited assets choose to create trusts either during life or in their wills for the benefit of their children in case both parents die before all their children have reached an age deemed by them to indicate sufficient maturity to handle property. This permits the trust estate to be held as a single undivided fund to be used for the support and education of minor children according to their respective needs, with eventual division of the trust among the children when the youngest has reached a specified age. This type of arrangement has an obvious advantage over an inflexible division of property among children of different ages without regard to their level of maturity or individual needs at the time of such distribution.

Much has been written recently regarding the use of "living trusts" (also known as a "revocable trust" or "inter vivos trust") as a solution for a wide variety of problems associated with estate planning through wills. Some attorneys regularly recommend the use of such trusts, while others believe that their value has been somewhat overstated. The choice of a living trust should be made after consideration of a number of factors.

The term "living trust" is generally used to describe a trust (a) which you can create during your lifetime, and (b) which you can revoke or amend whenever you wish to do so. You can also create an "irrevocable" living trust, but that is permanent and unchangeable and is almost exclusively done to produce certain tax results beyond the scope of this summary.

A "living trust" is legally in existence during your life, has a trustee who is currently serving, and owns property which (generally) you have transferred to it during your life. While you are living, the trustee (who may be you) is generally responsible for managing the property as you direct for your benefit. Upon your death, the trustee is generally directed to either distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of your beneficiaries. Like a will, a living trust can provide for the distribution of property upon your death. Unlike a will, it can also (a) provide you with a vehicle for managing your property during your life, and (b) authorize the trustee to manage the property and use it for your benefit (and your family) if you should become incapacitated, thereby avoiding the appointment of a guardian for that purpose.

7. WHO CAN I TALK TO ABOUT AN ESTATE PLAN THAT IS RIGHT FOR MY FAMILY?

For an initial free, no obligation consultation, please contact:

John Spino, Esq.
Guida, Spino & Associates, LLP
Lakeside Office Park
599 North Avenue, Suite 7
Wakefield, MA 01880
Tel: 781-213-3060
Fax: 781-213-3061
Email: johnspino@gsallp.com

John is admitted to the Massachusetts Bar, the United States District Court for the District of Massachusetts, the United States Tax Court, and the Supreme Court of the United States. He received his J.D. degree from Suffolk University Law School, and his B.A. degree from Boston University.

John focuses his practice on Estate Planning, Estate Administration, Probate Law, Real Estate and Business Law. John was an attorney with two of Boston’s major estate planning firms and he has over eight years of experience working with individuals, families and with business owners.

IMPORTANT: All information provided is for informational purposes only and is not to be considered legal advise.