Why people do estate planning
You NAME a person to handle things
Your assets don't automatically jump from your (dead) name to another person. A person is almost always needed to assist. If you die having signed a will, your will contains that persons name. Or names.
In a Will, the person is called the 'Personal Representative'. Before 2010 MA law changes, this title was the 'executor.'
With a Will, the probate court actually makes the final selection. As we say, 'you nominate and the court appoints.' It's one aspect of Massachusetts probate law.
A MA revocable trust works differently
Differently, because in a trust you actually appoint the person to take over for you. That person is called the 'Successor Trustee'. When you use a Living Trust, there's no need for a probate court to appoint the person because you do it. Yourself. Without a court getting involved.
WHO gets your assets
As I wrote yesterday, if you die without leaving a will or a trust, MA law determines who will get your assets. This MA law is the 'Intestate Statute.' This law lists your nearest relatives. And that's where it goes.
Until 2010, Massachusetts law was that if you died married and had joint children, a part went to EACH. Not all to your spouse.
For many people, they didn't want it divided like this. Because the spouse needed it all. So, you could (and would) sign a will or trust to change from the default law. And it could all go to the spouse. The Will controls over the default law.
About 2010 the MA legislature changed the MA law.
Now, if you:
THEN it all goes to the spouse. That's the newer law.
BUT if either spouse had children that were not joint between them, a complicated set of rules now apply. This area of law has grown complex --- due to societal changes in marriage patterns and children.
By having a will or a trust, you can dictate who gets your assets, within some limits. By the way, the law continues to protect a spouse from receiving zero. But the law continues to allow leaving out a child on purpose.
You can say WHEN the beneficiary receives the assets
Some people you leave money to are decent at handling money.
But some beneficiaries are too young or too old to handle the assets you leave them. Or they may have issues or problems that may get in the way.
Instead of leaving zero to a loved one with a problem, you can add a trust clause to better handle the money. To direct the money be used for them over a period of time.
This provision is called a 'subtrust.' The subtrust is more detailed than you'll typically find in a simple will.
MA estate attorneys know how to do this. They do it everyday.
In a subtrust, you direct the Successor Trustee to hold the money for the beneficiary's benefit. The Trustee decides when and how much. And gives money from time to time to beneficiary. Or pays some bills for them - say roof over head. Think food. Think education. Think no drugs.
You determine how long this situation will continue. The subtrust terminates when a beneficiary reaches a milestone. Perhaps reaching an age of 30. Or sobriety.
The Successor Trustee then distributes it. Maybe to one person or more than one. No longer in trust. Life goes on.
If the first Successor Trustee can no longer function, due to their own death or disability, another one takes over. You can make a list in your trust of future trustees, in order.
Lowering costs after your death
Some people know that your family may need to complete a court process after your death.
It's called probate. It's the process by which a court declares your will official and effective. Probate means 'to prove.' Probate means to prove the will is valid.
Some people think it's too expensive, complicated, and time-consuming. They don't know why it exists. Probate can be a delay and sometimes a real problem.
Other times a delay is no big deal and not horrible. It depends on the situation.
Dealing with a probate court can be a hassle. Going inside a courthouse can raise tensions. People may associate a courthouse with legal fights. By the way, it's always easy to get through by phone to a probate court. Staff is extremely limited for the tasks they must do.
Most families can live without the added pressure. Particularly after a loved one's death.
Some people confuse the exactness and amount of details needed for a probate process with the real, more general need to gather details after death. Details needed with or even without a probate court process. We've handled about 200 post death engagements since 1993. We've been through both probate and no-probate cases. We've seen the difference between a will and living trust after death.
In sum, probate or not, there's details galore. But probate adds to it.
Yet 'avoiding probate' should not be the only reason to do estate planning. There are more, better reasons to get estate planning done.
Thanks for checking out my 6+day course on estate planning in Massachusetts. I'm Joel Bernstein, an attorney and founder of MA Wills and Trusts.
You'll get my perspective about estate planning.
If - at the end - you're still abit hazy, you're not alone. It's an area of life where it's better that another person tells you what you should know. (Like the humans we gratefully met on our hike in the woods yesterday. We were lost.)
What is Estate Planning? Estate planning is accepting the fact that we all die and... we can't take our assets with us.
But it's not all gloom.
For most people, this is a positive step in life. They finally deal with the procrastination that is infamous in this area of life.
It deals with a far off day. Your death. And, if you become ill and cannot handle those assets, who will care for you AND those assets during your illness?
So, having stuff is the good news and the bad news.
For most, their assets remain very modest. But, for some people, their assets grow to larger amounts. And along with those assets come a need to plan for their use and passing at death.
Yet, in fact, for most the total value of the assets is less important than saying who gets them.
And how the beneficiary is given the money in problem cases.
Some people never sign estate planning documents. In that case, Massachusetts state law will determine who gets it.
Only about 50% have a will or trust when we die.
I think that those without estate planning have not learned about its benefits. Or used the benefits of estate planning.
It takes some time and quiet to figure what you should do. And documents to use. Not to cause problems for those left behind.
We seek, through this course, to spread the word.
What Wills and Trusts BOTH aim for
You have a choice about which document you want to base your estate planning on.
On a basic level, these are a will or a trust. With either one, you should provide:
These are the prime goals of estate planning.
Estate planning starts with reviewing your family situation and your assets. To see which approach is better for all involved.
Trusts are right for some people. Others, can use a will.
Of course, this simplifies the process. Because there are other ways people own assets. Such as joint ownership and naming a retirement account beneficiary.
But it's a decent start.
WHO should get your assets?
For some people, it's obvious to whom they want to leave assets to after they die.
Many times (but not always), if you have children, you want them to get what you own. Or, another person like a spouse or partner.
Many times the spouse/partner will need the money to live on. Sometimes it's split between a spouse/partner and your children or others. But this splitting is not that common.
But, it can be more challenging for those without children or close relatives, or in a second marriage.
This hard question accounts for a lot of procrastination to get wills or trusts done.
Sometimes even having close family members doesn't make the decision making easy.
In fact, if you procrastinate too long, you may run out of time to complete this project.
If you wait too long, it's possible that you may become unable to legally sign a legal document. You must be what the law calls 'competent.' If your mental condition falls too much, you cannot sign legal documents.
In your own situation, lacking estate planning can either be irrelevant or misguided.
Irrelevant because SOMETIMES the law would supply the rules that mimic what your will would say.
Or misguided because you should tweak the otherwise applicable state law.
In short, you can do better than the default law if you want to. Estate planning is determining if you can improve on the rules that apply if no will or trust is present.
In the case of your illness, the misfortune is yours. But more likely a problem for those who survive you.
WHEN should the beneficiaries receive your assets?
Some people want to leave money to a person whom can't handle what you want to give them.
Maybe they are too young or too irresponsible. Maybe one has a serious problem with drugs or alcohol. Or their spending habits are out of control.
Likewise, maybe they're good candidates for bankruptcy. Or a pending divorce.
Leave an addict money, and you can guess what will happen! But most times it's not that dramatic. It's just a difficult situation.
If you have a beneficiary with a problem, you should know about how a trust provision can help. You can put one in either a will or trust, but these days a Living Trust is the more popular approach.
Adding a trust provision for a problem beneficiary can delay giving money to them. Or too much of it. You put another person in charge of their share.
WHO to put in charge
You can write down in estate planning who will handle your affairs after you die. This decision is important.
In a will they're called a 'Personal Representative'. The title is 'Successor Trustee' in a trust.
The named person must be fair to all people concerned. These are the persons named in the will or trust and to your nearest relatives, the heirs at law.
Roles are similar but different
The biggest difference is that a trust has an element of time.
A will tells the person in charge to distribute the assets after your death.
But, in a trust you can tell the trustee to hold the assets for a period beyond your death. It can be useful to do this. Even if the trustee is the same person as the beneficiary.
It is fine for the beneficiary to be the trustee. Many trusts provide this. Or, if the beneficiary cannot handle the money then another person is named the trustee.
Reasons for using a trust provision
A trust provision allows you to more precisely control the money than without including the trust text in the document. It's usually a few paragraph, maybe an extra page.
It can lower estate taxes in some cases. And help deal with minor beneficiaries or those with a serious problem, such as addiction, etc.
Estate tax savings with a trust provision
As I told you, a trust provision can lower estate taxes for the family. In fact, for centuries people have used trusts to lower estate taxes.
This is how it works.
Your survivor (spouse) doesn't become the outright owner of the money you leave them. So it's not taxed when the second spouse later dies.
The tax law says the survivor's estate is smaller. And so there is less estate tax.
But the survivor can enjoy the money - even though they are not the legal title owner of it.
Massachusetts levies an estate tax for wealth over $1 million. So many people in the state use trust provisions in their documents.
Finally, you should know abit about the probate court process. The law may require this process to be started before assets can be transferred after you die.
Because a will does not become a will when you sign it.
Instead, a will legally becomes 'a will' only after a probate court says so. The process is called probate.
The court involvement can involve extra time and money and can be frustrating. Some people want to avoid this process.
Differently, a probate court doesn't need to be approve a revocable living trust. The trust is effective when you sign it. This freedom from court involvement is different from wills.
In the next email, we'll go beyond wills and trusts. And start explaining the other documents in a modern MA estate plan.
Meanwhile, if you have any questions, please hit the reply button and drop me a line. I respond personally to every email.
And if you just want to get started on the estate planning process, call us 781 863-8606.
I'm Joel Bernstein, an estate planning attorney with over 30 years of experience. I use plain English to help you understand wills, trusts, and the other documents you need to protect your loved ones and your estate.
Most middle-aged people aren’t ready for their inevitable death. We make estate planning simple, affordable, and quick. So people can live in peace, knowing their affairs are in order.