A basic estate plan includes a will which contains specific information on who receives assets, who will serve as guardian for your children and who will serve as the executor responsible for closing out your estate. Other documents include a durable power of attorney and a health care power of attorney which permits an agent to make financial and medical decisions when you are unable to.
Having none of these documents is a major estate planning mistake. Without a will, Massachusetts courts will determine who will receive your assets and appoint guardians and executors which may not reflect your preferences. Failure to have powers of attorney can cause turmoil when quick decisions are needed.
Many people mistakenly believe that heirs named in the will are entitled to these assets such as retirement accounts and life insurance policies and. But a specific person or trust identified as beneficiaries in these accounts is entitled to these assets regardless of who is named in a will.
Failure to update beneficiaries can lead to unwanted situations such as a person’s ex-spouse obtains the account instead of their current family.
There are two types of joint titles. Joint tenants with rights of survivorship automatically passes property, such as a house, to the person’s spouse or partner and bypasses the will. A tenancy in common provides that each joint owner has a separate transferable portion of the asset and their will governs who will receive their share.
But a person who intends to transfer their portion of an asset for a specific purpose, such as funding a trust, must title the asset as a TIC. Otherwise, under a JTWROS, the surviving owner will control the property.
Not funding a revocable living trust
Under a living trust, a person places their assets in the trust and may remove and replace them in their lifetime. Upon death, assets may be distributed to beneficiaries or remain in the trust which eliminates probate and keeps confidentiality. But these advantages are lost if there is a failure to retitle or transfer asset ownership to the trust.
These matters may be addressed with legal planning. An attorney can help assure that a person’s plans are carried out.