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What Are the Different Documents I Need to Protect Myself and My Estate in Massachusetts?

There are 4 main documents that one needs in Massachusetts to cover a basic estate. A basic estate is one that involves total assets of less than $1 Million dollars. If you have a basic estate, you will need a will, durable power of attorney, health care proxy and health care directive.

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What Is a Will and What Does It Consist of?

A will is a document that you sign in front of at least 2 witnesses and notarized, that specifies your wishes as to what happens to your assets (house, car, bank accounts, and other personal items) after you pass away. The first part of a will usually is the place where you designate an executor. An executor is the person of your choosing that will handle the administration of your estate after you have passed away. It is important that you pick a reliable and trustworthy person to be your executor since that person has broad powers over all your assets. After appointment of the executor is usually the part where you list individual items you want to give to individual people. You can leave anything you own to anyone you want given that the item is part of probate. Lastly, the last section usually deals with taxes, debts and expenses that must be paid by your estate and where that money comes from.

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What Types of Things Are Part of Probate?

Only probate items will be included in your will. It is easier to define non-probate items and everything that is not a non-probate item is a probate item. A non-probate item is anything that passes by operation of law or contract. Things that pass by operation of law are items that are held jointly (either by tenancy by the entirety or joint tenants), such as homes or bank accounts. If these items are held jointly with someone else then your share of the property automatically goes to the other person and doesn't pass through your will. Things that pass by contract are items such as life insurance policies or retirement accounts. The general rule is that anything that has a beneficiary designation attached is an item that passes by contract and therefore is not probate asset. If something is a non-probate asset, such as a home owned jointly, but yet you put a provision in your will for it, that provision in the will is ignored.

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What Is a Durable Power of Attorney and Why Do I Need It?

A will tells people what happens to your things after you've passed away. The part of planning that people often overlook is what happens during your lifetime if you were to become incapacitated. That is where a durable power of attorney (DPOA) comes in. A DPOA is a document that you give to another person giving them the right to act on your behalf. Essentially, anything you can do, your attorney-in-fact (the person holding the power of attorney) can do. A DPOA controls finances associated with your estate. So for instance, if you were to become incapacitated, your attorney-in-fact can act as your representative to withdraw money from your bank account to pay for your hospital bills and pay your mortgage. A DPOA is crucial to a successful estate plan because without someone who can act on your behalf in finances, you might not have access to resources that you would need when you need it. You need to choose a person whom you trust completely to act as your attorney-in-fact.

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What Is a Health Care Proxy?

A health care proxy (HCP) is similar to an attorney-in-fact, but instead of controlling finances, a HCP makes medical decisions on your behalf if you become incapacitated. Choosing a responsible HCP is important since you want your HCP to do as you would do. In some cases, a family member is not the best choice for a HCP because they might impose their own will as oppose to following your wishes.

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What Is the Health Care Directive?

A health care directive (HCD) is also known as a living will. This document is the only document in the basic estate planning package that has no legal power or effect. A HCD is a document that you put together to guide your HCP. You can list what types of treatments you want and what types of treatment you want to refuse. Since some people would not want to live in a persistent vegetative state, the HCD is the place to tell your HCP your wishes. Since the HCD isn't a legally binding document in Massachusetts, your HCP can override any provisions of your HCD. However, it is useful to have as a guiding tool for the doctors and your HCP.

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What If I Have More Than a Million Dollars in Assets?

If you have more than a million dollars in assets, then you should probably look beyond the basic estate plan and possibly consider tax planning. Massachusetts has an estate tax on estates that exceed a million dollars. With proper tax planning, even if your estate exceeds a million dollars, it might be possible to escape the estate tax altogether. Tax planning and advance estate planning usually involves the use of different types of trusts. A basic estate plan consisting of all the documents outlined above is still necessary on top of any additional needed trust instruments.