Tag Archives: will

I’ve GOT a will…

But I made it two spouses, three children, and two businesses ago.  When your life changes, your estate plan should ideally keep up with those changes.  You do not need to revise a will every time something changes in your life –many documents are drafted to take some changes into account.  However, as part of your financial planning, you should revisit your estate plan every 3-5 years, and definitely in the case of a divorce or marriage

Divorce:  In some states marriage or divorce nullifies a will, health care proxy or power of attorney.  In other cases it may not.  If you and your spouse are on good terms and you want him or her to make the decisions about your medical care, it is best to revise your health care proxy to make it clear that this is your desire.  Similarly, you may not want your soon to be former spouse to have the ability to write checks from your bank account, but even if divorce nullifies a power of attorney, simply being in the process of divorcing will not.  Revoke or change your health care proxy, will, and power of attorney if you realize that your spouse is no longer a trusted partner and you are heading your separate ways.

Wills, trusts, health care proxies and powers of attorney are powerful documents; take a look at them from time to time and be sure they are still relevant to your life.

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But Doesn’t Everyone Need a Trust?

I recently had a client explain that they wanted a trust because Suze Orman said that everyone needed a trust.  Now, in general, trusts meet many needs, and are often a good idea.  Especially if there are minor children, adult children who might do better with structured payments, or long term care planning concerns, trusts can fill a valuable need.  However, just as not everyone NEEDS a prenuptial agreement, not everyone needs a trust. 

Trusts help  you avoid much of the probate process, but there are other ways to do this, too.  If your assets are jointly held with your spouse, and one of you dies, the assets will go “by operation of law” to your spouse without going through probate.  In a similar way, anything with a beneficiary designation (life insurance, annuities, most retirement accounts) will go to that beneficiary directly.  The probate court will oversee any assets that pass through your will, and sometimes this can be a good thing.  It does take time to probate an estate, but if the assets are fairly limited, the cost of setting up a trust may not be appropriate.

Regardless of whether you do or do not need a trust, please call an advisor you trust before you make important estate planning decisions, I know that you aren’t cookie cutter clients, why should you have a cookie cutter estate plan?

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Capacity–Can she really make that decision?

Capacity Requirements

Proper execution of a legal instrument requires that the person signing have sufficient mental "capacity" to understand the implications of the document. While most people speak of legal "capacity" or "competence" as a rigid black line–either the person has it or doesn’t–in fact it can be quite variable depending on the person’s abilities and the function for which capacity is required.

One side of the capacity equation involves the client’s abilities, which may change from day to day (or even during the day), depending on the course of the illness, fatigue and the effects of medication. On the other side, greater understanding is required for some legal activities than for others. For instance, you need to have a higher and clearer amount of “capacity” to enter a contract than to write a will. 

Capacity to make a will was summed up by the Massachusetts Supreme Judicial Court:

Testamentary capacity requires ability on the part of the testator to understand and carry in mind, in a general way, the nature and situation of his property and his relations to those persons who would naturally have some claim to his remembrance. It requires freedom from delusion which is the effect of disease or weakness and which might influence the disposition of his property. And it requires ability at the time of execution of the alleged will to understand the nature of the act of making a will.

This is a relatively "low threshold," meaning that signing a will does not require a great deal of capacity. The fact that the next day the testator does not remember the will signing and is not sufficiently "with it" to execute a will then does not invalidate the will if he understood it when he signed it.

The standards for entering into a contract are different because the individual must know not only the nature of her property and the person with whom she is dealing, but also the broader context of the market in which she is agreeing to buy or sell services or property.  This is a more long range kind of understanding, and requires a more complex ability.

While the standards may seem clear, applying them to particular clients may be difficult. The fact that a client does not know the year or the name of the President may mean she does not have capacity to enter into a contract, but not necessarily that she can’t execute a will or durable power of attorney. The determination mixes medical, psychological and legal judgments. It must be made by the attorney (or a judge, in the case of guardianship and conservatorship determinations) based on information gleaned by the attorney in interactions with the client, from other sources such as family members and social workers, and, if necessary, from medical personnel. Doctors and psychiatrists cannot themselves make a determination as to whether an individual has capacity to undertake a legal commitment. But they can provide a professional evaluation of the person that will help an attorney make this decision.

Because you need a third party to assess capacity and because you need to be certain that the formal legal requirements are followed, it can be risky to prepare and execute legal documents on your own without representation by an attorney.

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Law meets Life–An occasional blog for North Shore Residents

Pet Round UP: Dogs on the Beach, Dogs in your Will.

The Manchester-by-the-Sea Town Meeting is April 4 and 5, 2011. One warrant item will be whether or not to further restrict dogs on Singing Beach. Did you know that if you vote on the issue that concerns you, and leave the meeting, that the warrant can later be amended and a vote re-taken? If there is a subject of interest to you on the warrant, be ready to stay for the entire meeting.

On another pet related note, Massachusetts just became the latest state to pass PET TRUST LEGISLATION. We now have a statute that allows you to leave a sum of money specifically for the care of your animal when you die. Thank you to Bruce Tarr for co-sponsoring this legislation. More info can be found here:  Pet Trust article

Do you have a great pet sitter, vet, groomer, or pet trainer that you’d like to recommend? Please send along their info, and I’ll do a listing in the next Pet Round UP.

P.S. Manchester residents: Dog licenses need to be obtained from Town Hall by March 31st.

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Putting a residence into Trust

First, a trust is a form of ownership that separates legal title from beneficial ownership.  So something held in trust is “owned” by trustees for the benefit, according to the terms of the trust, of the beneficiaries.  A trustee is a fiduciary, and is required to follow the terms of the trust.  Trusts have been around for centuries, and are used to serve several different purposes.

You might consider putting your home in a trust so that when you pass away it will go directly to the beneficiaries, without going through probate.  You might also put a residence into trust so that you don’t technically own it anymore, but you can still benefit from it in some way (you might be able to continue living there, for example).  Assets held by trusts often provide protection from creditors.  If your son is a beneficiary of a trust, a creditor or divorcing spouse typically could not reach the principal of the trust, as he does not technically “own” the assets.  People also put homes into trusts for Medicaid planning, or for estate tax planning.  These types of trusts need to be irrevocable and carefully drafted. 

Trusts take on-going work and administration once they have been created.  Irrevocable trusts, in particular, require their own tax ID number, and tax returns must be filed annually.

When you put a residence into trust, you take the title of the property from your name, and put it in the name of the trustees.  This is accomplished by drafting and executing a deed which is then recorded in the local registry of deeds. 

Trusts can be confusing or relatively straightforward; they can provide asset protection, a way of planning your legacy, or a way of protecting your family from unexpected events.  They’re an outstanding way of creating structure for a family member who has special needs, or unpredictable spending habits.  If you decide to do trust planning, choose your attorney carefully, and be certain that your advisor has experience working with the type of trust you need.

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What’s in a “Basic Estate Plan”

I know that lawyers hate to admit that there is any such thing as a basic, vanilla estate plan.  The truth is, there is such a plan and some people have a need for one.  Equally true, however, is that you should probably have some good advice before you decide that you are one of those people.  When I talk about “basic”, I’m talking about the following items (this is somewhat specific to Massachusetts residents).  In later posts, I’ll describe each in some detail and give tips for getting organized to create one.

— Will

— Trust (maybe)

— Health Care Proxy

— Power of Attorney

— Emergency Guardianship Proxy (if you have minor children)

— A complete review beneficiary forms

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