Attorney Suzanne Sayward discusses the importance of updating your estate plan during life’s happy moments, for this edition of our Smart Counsel for Lunch Series. Please watch and if you have any questions or want to learn more please call us at 781 461-1020.
Updating your Estate Plan
There’s nothing like a pandemic to make people worried about dying – that’s something we learned all too well during the past year. Here at Samuel, Sayward & Baler, we were grateful that we all remained healthy and able to help our clients – both old and new – create and update estate plans that gave them peace of mind.
Now that the end of the pandemic is in sight, consider this a friendly reminder that reviewing and updating your estate plan is not something that should only happen when you are in pandemic-induced lockdown. It’s something you should do on a regular basis – review things once a year, and meet with your estate planning attorney to review things (whether you think you need to or not) every five years or so, or sooner if you know changes are needed.
Updating your plan is important for any number of reasons. Here are some things you should ask yourself when reviewing your existing documents:
- Are the people named in your Power of Attorney and Health Care Proxy to make financial or health care decisions for you still trusted people you can count on to be there if you are not well?
- Is your Executor/Personal Representative named in your Will and the Trustee of your Trust still a trusted individual you can count on to settle your estate and administer your Trust fairly and efficiently at your death, working with your attorney, accountant and financial advisor?
- If the people you have named are getting older or are not well, do you have appropriate alternates named to take their place if they cannot (or do not wish to) serve in those roles when the time comes?
- Do your documents still reflect your current wishes about the distribution of your assets at death? Does your Will or Trust refer to assets, such as real estate or a business, that you no longer own?
- Have you recently been divorced? Melinda Gates is updating her estate plan in light of her divorce, and you should too!
- On a happier note, have you recently been married, had a baby, won the lottery or received an inheritance? Those type of events should also prompt a review and update of your estate plan.
In addition to the things you know should be changed, there may be other provisions of the documents that need to be updated as well. For example, provisions of your Will and Trust regarding how estate taxes will be paid may not operate as intended if certain assets are no longer owed, or if beneficiaries have been changed. The federal estate and gift tax laws, laws governing inherited retirement accounts, and Massachusetts probate or trust laws have all changed within the last ten years, making many provisions of older documents out-of-date.
Unfortunately, this past year has taught us that life and health are unpredictable. Although having an estate plan is an important first step, keeping that plan up-to-date is just as important, as a plan that’s out-of-date can often create more issues than no plan at all. Make it a priority to review your plan today, and sit down with your estate planning attorney to discuss any necessary updates. They will be happy to see you alive and well and keeping your estate plan up-to-date, since it will make their job easier when you are no longer around.
As we fly at lightning speed through the month of August, we are reminded as estate planners and New Englanders that evvvvverybody is going on vacation! Some are off to the Cape or the Islands for a week, others to visit family and friends across the country and some especially lucky ones on that long-awaited riverboat cruise in Europe!
Inevitably, I hear the same shared concerns from clients as they put together their to-do list before they leave for vacation. The conversation goes about something like this: “I’m embarrassed to say this but my husband and I don’t have current wills. In fact, we haven’t looked at them since our kids were little. Now we are going on a big trip together and I am sure we need to make some changes because it’s really old. We leave on August 20th. Can we get everything done by then?”
The truthful answer is: “No, not well.” A properly crafted and executed estate plan involves far more than signing a couple of documents before you board an airplane. Sure, as estate planning and elder law attorneys we are sometimes called upon to put together a last minute plan for an ill client or assist someone with a game-time Medicaid qualifying plan, but the far better advice is to plan ahead. While this may seem like little comfort as you pack your bags for that big end of the summer trip, use this opportunity to be sure your estate plan is in a better position for your next expedition rather than cramming in an update on the fly.
Here is a quick list of reasons why it’s never a good idea to put together a last minute estate plan.
- Most people do not think clearly under pressure. Even if you are positively certain in that moment that you want to name your baby sister as the guardian of your children or leave all of your assets to one of your three children, these are some of the most important decisions you will ever have to make and they deserve the thoughtful consideration you would give them if you weren’t operating under the gun. On the other side, even the best estate planners need time to process and draft a perfect plan. Unrealistic timeframes and pressure can result in mistakes—on your part and ours!
- Having the signed documents before your trip does not necessarily mean that your wishes will be carried out. A Will only controls assets owned in your sole name and a trust only controls assets that have been retitled into the name of the trust or where the trust is the named beneficiary. Even if you and we do our job quickly, financial institutions often require significant paperwork to retitle assets. This is a process that must be handled with care and attention. Having the signed documents alone is often only fifty percent (or less) of the tasks required to create a proper estate plan.
- We need time to consider all of the variables and issues to put together the proper plan for you. Some clients come to see us to avoid probate, others to minimize estate taxes. Some come for long-term care planning, others to protect minor children. Some clients have a disabled child who receives public benefits and other have a wealthy child who has a significant estate of their own. More often than not, a client will have more than one of these issues to address in their estate plan. All of these issues must be reviewed and considered in detail before any kind of an estate plan can be recommended. A shot-gun estate plan does not lend itself to this level of proper consideration.
- A last-minute “vacation plan” gives our clients a false sense of security. For all of the reasons mentioned above, an estate plan done under the wire in contemplation of a big trip lets our clients off the hook to some degree. They can “sleep at night” knowing that they have “something in place” before they go on their trip. However, we find that despite our insistence that they come back in and reevaluate or do necessary follow-up tasks on a last minute, pre-vacation plan once they have returned, they rarely do and are left with an inferior plan that doesn’t cover all of the bases. This result is far worse than having made the appointment for the week after you have returned from vacation!
Before you board that plane or boat or train this August, please call to set up an appointment with one of the attorneys at Samuel, Sayward and Baler to review your plan when you return! Channel all of your motivation to update that plan this fall so that when you head off to warmer weather when the temperature dips below freezing in January and February, you can go off with a clear head! Of course, if you have any questions before your trip, please feel free to call and check in with one of us!
Have a safe and enjoyable vacation!
Pamela B. Greenfield
Although many people would prefer to sign their estate plan documents, file them away and never look at them again, the reality is that your estate plan is always a work in process. Family situations change, financial situations changes and laws change. In order for your estate plan to effectively achieve your goals, your plan needs to change periodically to address your current priorities. The estate plan you created when you were 30 years old is no longer appropriate at age 50.
How do you know when it’s time to create an estate plan or update your existing plan? Here are five stages of your life when reviewing and updating your plan is important:
- Stage One – Engaged and Newly Married Couples. If you are planning to marry, meet with an estate planning attorney to get advice about whether or not a prenuptial agreement is appropriate for your situation. These agreements can ensure that assets owned by you prior to marriage, or inherited during the marriage, will not be part of the assets that are subject to division by the Court in the event of divorce. If you are newly married, remember that if you do not create a Will that contains your instructions about what happens to your assets at death, the laws of the Commonwealth provide one for you. If you die when you are married but have no children, your assets may be divided between your surviving spouse and your parents. Creating a Will is the only way to ensure your assets pass exactly as you intend. You may also wish to create or update your Power of Attorney and Health Care Proxy so that your new spouse has the authority to make decisions for you if you become incapacitated. Finally, it is important to review and update beneficiary designations on life insurance and retirement plans to ensure those assets pass as you wish in the event of your death.
- Stage Two –Married Couples with Young Children. If you have young children, your estate plan needs to do two important things: address the care and custody of your children and address the management and distribution of the assets you will leave for your children. Your Will is the document in which you will name a guardian for your minor children. The guardian is the person who will care for your children in the event of your death. The guardian will decide where your children will live and attend school, what type of health care your children will receive, and make other day-to-day decisions regarding your children’s care and upbringing. If you do not have a Will naming a guardian, family members or others may “petition” the Court to appoint them as your children’s guardian, and the Court will have the difficult job of choosing among those who ask to be appointed without the benefit of your input. There’s a good chance someone you would not choose may be appointed. Don’t lose the opportunity to put your children in the right hands. After you have made sure that the right people will be raising your children in the event of your death, you need to make sure that the inheritance you leave them is preserved and protected for them. Creating a trust that sets the “rules” for managing assets for your children and names a trusted person to oversee the funds for them is the best way to do this. Trusts are not just for those with millions of dollars. Think about the assets your children would receive if you passed away – consider your home, your life insurance, your retirement accounts, your savings and investments. Then think about how you feel about your children receiving those assets at age 18. If this makes you uncomfortable, a Trust should be a part of your estate plan. A Trust allows you, rather than the state, to specify at what age or ages your children will be entitled to receive those assets. While funds are held in trust for your children’s benefit, the Trustee can use them for a child’s education, living expenses, health care expenses, or for other purposes you specify.
- Stage Three –Married Couples with Teens and 20-somethings. Trust planning is a crucial component of a good estate plan when you have teenagers or young adults as well. No matter how mature your 20-somethings may be, they may still fall victim to the bad judgment or hair-brain schemes of others. Trusts can very effectively protect inherited assets from so-called “creditors” and “predators.” Young adults may spend money irresponsibly or make loans to ‘friends’ that are never repaid. Young adults are more likely to have car accidents or get into other types of trouble that create liability. They may marry young and have their marriage end in divorce. All of these potential issues put inherited assets at risk, and are all possibilities that a good estate plan can address if your plan is updated as your children age. Finally, this is a good stage to introduce the concept of estate planning to your child who, at age 18, is considered an adult in Massachusetts. Have your adult child sign a Health Care Proxy and Power of Attorney so you can assist them with decision-making if your child has a serious illness or disability.
- Stage Four –Married Couples Approaching Retirement Age. Just because your children are out of the house and perhaps married with children of their own does not mean you should not keep your estate plan updated. If you have a child with a disability or other issues (such as substance abuse), your estate plan should address lifelong planning for that child. At this stage in your life, the value of your estate (home, bank accounts, investments, retirement accounts and life insurance) is likely as large as it will ever be. Review the value of your estate with your estate planning attorney and discuss whether estate tax planning is advisable. This planning will reduce the amount of estate taxes your children will pay following your death. If you have grandchildren, consider planning that leaves some assets directly to your grandchildren or in trust for them, both to leave a legacy to the younger generation and also to save estate taxes in your children’s estates. Finally, have a conversation with your estate planning attorney about long-term care planning and discuss the advisability of purchasing long-term care insurance. Make sure your health care documents and powers of attorney are up-to-date so that if an unexpected illness occurs, people you trust can act for you, last-minute planning can be done, and the expense of Court involvement can be avoided.
- Stage Five –Enjoying Your Golden Years. You made it! But no rest for the weary when it comes to estate planning. This can be the stage of your life when your estate plan does the heavy lifting, and it’s more crucial than ever to make sure that your plan is appropriate to your current situation. Review your powers of attorney and health care documents (again) with your attorney and make sure they are up to date and the people you have named to make decisions for you are still appropriate. Review long-term care options and planning issues. How is your health? Do you intend to stay in your home for the long term? What are your options for housing and care if you are not able to remain at home? What do they cost? How would you pay for them if needed? Will it be possible or necessary for you to qualify for public benefits, and if so are there steps you should take to make that easier if and when necessary? If you or your spouse is diagnosed with a chronic illness or condition (i.e. Parkinson’s disease, Alzheimer’s disease, dementia), see your estate planning attorney immediately and make the necessary changes to your plan before the ill spouse is no longer competent to participate in planning. A different type of planning may be appropriate to ensure that if the spouse who is not ill predeceases the ill spouse, assets will be available to care for the ill spouse. If protecting assets for children against liability for long-term care is one of your planning goals, it is important to discuss this early on, before any care is needed, and decide if protecting assets is appropriate and possible given your particular situation.
Recently, I received a call from a child of clients for whom I had done estate planning when my clients were in their 40’s and their children were young. Now, one of my clients was in a nursing home and the other had recently died. Although we had sent these clients reminders every year to review and update their plan, they had not done so. Unfortunately, an updated plan could have left their children and my surviving client in a better position than they now find themselves.
Good estate planning attorneys maintain relationships with their clients throughout their lives and encourage their clients to review and update their plans periodically. Next time your estate planning attorney reminds you to review your plan, listen to her and set up an appointment if it’s been awhile since you’ve reviewed your plan. You, and your family, will be glad you did.