August is National Wills Month according to the American Cancer Society.  As estate planners we are always grateful when attention is brought to this crucial document, but an estate plan is more than just a Will.

An “ESTATE PLAN”….sounds complicated and a bit grand.  I can’t possibly have an “estate.”  Surprise, we all have an estate.  If we own our own home, a car, a bank account, a retirement account, a stamp collection, a piece of art, a pet, children, etc., those things make up our estate.

What an estate plan allows you to do is provide instructions to individuals designated by YOU as to what happens to your health, financial and legacy decisions, while you are here and after you’ve gone.  An estate plan takes into account an emergency now that may leave you unable to make decisions for yourself and what happens after you’ve gone.  

A basic estate plan may contain the following documents:

  • A Health Care Proxy (operates now);
  • A Durable Power of Attorney (operates now);
  • A Will (in effect only after we pass);
  • A Revocable Trust (not always) (in effect now and later)

Let’s take a general look at the Health Care Proxy first: 

Health Care Proxy:

A Health Care Proxy is a document that allows you (the Principal) to designate someone else (the Agent) to make healthcare decisions for you if you become incapacitated.   

In this case “incapacitated” is a condition that requires proof under current Massachusetts laws.  This document only “turns on” when you are not able to communicate your medical wishes (ex. general anesthesia) and it “turns off” if you subsequently regain your capacity.  Additionally, these documents may be revoked by you at any time.  You can also name an alternate Health Care Agent (only one Agent may serve at any time).    

Durable Power of Attorney:

The document that allows someone of your choosing to pay your bills and make financial and legal decisions for you is called the Durable Power of Attorney.  Anyone over the age of 18 and who has the capacity to enter into a contract can execute a Durable Power of Attorney.  

A Durable Power of Attorney takes effect immediately upon execution and does not require any finding of incapacity about you/the Principal.  It will not be revoked in the event you become incapacitated

The power for the agent under the Durable Power of Attorney terminates at the death of the Principal and at that time the Personal Representative (f/k/a Executor) takes over the financial and legal administration of your financial and legal affairs.

Last Will & Testament

A Last Will and Testament allows YOU to (1) express your wishes/desires and choose how you want your personal property/estate (house, car, monetary assets, jewelry, etc.) disposed of, (2) allows YOU to choose the person or persons in charge of this process, and (3) if you have minor children, name YOUR choice of Guardian and/or Conservator for your children.

Many people hesitate in making a Will because it seems overwhelming….how do I allocate ALL my property in this document.  Good news, you don’t have to.   A Will addresses only PROBATE property – property owned by you in your name only that does not have a beneficiary designation.  This property excludes Retirement Accounts and Insurance policies with appropriate designated beneficiaries; other forms of property are also excluded from the definition of probate property.  

If you die without a Will, you die “intestate.”  That means you die without a valid will.  Under an intestacy scenario, all your property and the person who distributes it must adhere to the Intestacy Laws of the Commonwealth of Massachusetts.   What this means is the distribution of your assets is not governed by your wishes, but by Massachusetts law and under that law can be distributed to parents (if living), spouse, children, siblings, cousins, etc., in percentages/amounts proscribed by law (depending on your circumstances).  It also means this process may not be handled by the person of your choice.  Intestacy will likely involve Court oversight, making the process more expensive and longer. 

So while we say a big “thank you” to the American Cancer Society, an estate plan is more than just a Will.

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