I routinely come across young individuals, whether married or single, with minor children who do not have any estate planning documents in place. These individuals state that they are young, healthy, and why would they ever need to spend money for a will or an estate plan. But when I ask them who is going to take care of the child if something happened to them and/or their spouse, or if they really trust their 16 year old child to be responsible with all their assets, they do not have a response. It can be hard for a young couple or young individual to contemplate death, or to contemplate not being around for their child. However, it is my experience that it is the couple or individual with a minor child who is in most need of a proper estate plan. The below information is a brief overview of an estate plan. This plan summarizes the most routine items of a proper estate plan. The below information does not take into account an estate that may be taxable.
A married couple or single individual with minor children likely need the following documents concerning their estate plan:
Last Will and Testament;
Family Trust;
Health Care Proxies;
Advance Directives;
HIPAA Releases; and,
Parental Appointment of Guardian
Last Will and Testament
The most fundamental of estate planning documents, the last will and testament is the foundation document of a proper estate plan. A will provides for the orderly transition of probate property to ones’ beneficiaries, appoints a personal representative to oversee the transition, and nominates a guardian for minor children.
A last will and testament allows an individual great flexibility concerning asset transfer. Any asset that does not pass by operation of law upon the death of an individual (the decedent) will transfer via a valid will or if there is no will the intestacy laws. A will allows an individual to make specific devises of property to specific individuals, and allows for the residuary of the estate (the property that was not specifically devised) to pass in accordance with the wishes of the decedent. Additionally, a will allows an individual to nominate a personal representative to oversee that the will is followed, and allows for the individual to name a guardian to care for minor children.
For a married couple it is routine for the couple to have “Rome/Juliet” wills, or “I Love You” wills. These wills leave the decedent’s entire estate to the surviving spouse after any specific devises are taken into account. The residuary clause of the will provides that if the decedent is the second to die of the couple, that the estate assets be transferred into a family trust, discussed below, for the benefit of the minor children. Thus, upon the death of the first spouse the surviving spouse will retain the majority of the estate. It is upon the passing of the second spouse that the family trust would be funded.
For a single individual, the will typically is drafted to have specific devises followed by a residuary devise to a family trust for the benefit of the children.
Family Trust
The purpose of the family trust, generally, is to hold and manage assets for the benefit of the children until the children reach the age at which they are considered mature enough to receive full distribution of the trust funds. The family trust is considered a “pour over trust”, because the trust is funded once the estate assets pour over upon the death of the surviving spouse, or the single individual.
Family trusts give individuals more flexibility. The trust can be initially funded and then divided into separate trusts for the benefit of each child. The trust could also be one large pot that is managed for the benefit of all children. Additionally, individuals have flexibility when determining the distribution of trust assets. The trust can distribute assets at the time each child reaches a certain age, only upon the youngest child reaching a certain age, or percentages of the trust can be distributed at certain intervals. For example, a family trust could have language that states that at the age of 18 a child is allowed to withdraw 10% of the trust assets, at the age of 25 the child can withdraw an additional 15% of the trust assets, and at the age of 30 the remaining 75% of the trust is to be distributed.
Further, the individuals will nominate a trustee to oversee the trust. The trustee is also, normally, provided discretion within the trust to make earlier distributions for the benefit of the children if it is in the best interest of the child for the health, education, maintenance, or support of the child. This way an individual can feel confident that if something unexpected were to occur, a trustee would have the ability to access funds.
Health Care Proxies/Advance Directives
A health care proxy gives a nominated health-care agent the authority to make health care decisions on the principal’s behalf. Such authority is only triggered in the event that the principal is unable to make these decision for himself. Couples routinely name each other as the initial health-care agent, and then nominate at least one successor agent.
An advance directive, or living will, is a device that states the principal’s wishes regarding lifesaving procedures and artificially prolonging the principal’s life. Massachusetts does not acknowledge advance directives as legally binding. However, the language of an advance directive can be implemented within a health care proxy. Such wording will provide the nominated health-care agent with guidance concerning the principal’s wishes and feelings concerning lifesaving procedures. An advance directive is often valuable evidence of the principal’s wishes, especially in the event there is a family dispute concerning the care for an incapacitated principal.
HIPAA Release
This document allows for a nominated individual to receive the principal’s protected health information. A HIPAA release does not provide a nominated individual with any medical decision-making authority. Medical decision-making authority is conferred to the health-care agent authorized in the principal’s health care proxy.
Parental Appointment of Guardian
This document acts in a temporary capacity to nominate a guardian to care for minor children upon the death and/or capacity of both spouses. The purpose of the document is to ensure that the minor children have an adult guardian caring for them while the last will and testament is being presented to the court for approval. Routinely this document will name the same guardians as named in the will. Once a will is approved by the probate court, the named guardian within the will would be appointed as guardian for the minor children.
Lake Shore Legal, LLC
Contact Lake Shore Legal today to discuss estate planning options. Our attorneys can assist you in preparing an estate plan customized to your wishes. Estate planning can provide you with flexibility concerning transfer of your assets, care of your child, and nomination of fiduciaries. Contact Lake Shore Legal today. info@lakeshorelegalsolutions.com; (508) 943-7800
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