Course: Lesson 1 - Estate Planning in plain English

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 of us have loved ones (a future beneficiary) who has a problem.
• One that prevents them from being able to handle the asset. Maybe drugs. Maybe alcohol. Maybe lack of financial skills.

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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:

• WHO you want to receive assets
• WHEN you want them to get the asset
• HANDLED by the person you choose
• Getting it done at the LEAST COST, avoiding:

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1. Living probate
2. Death probate
3. Estate taxes

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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.

• The possibilities of misfortune go on and on. You know your own situation and maybe the more obvious issues that family members face.

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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.

Avoiding probate
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.