The Badger Law Group, Articles, What you need to know as a beneficiary

ESTATE PLANNING - FAQs

What happens if I don’t have a will?
Can I write my own will?
How much does a will cost?
What does an executor do?
What is a trust?
What is a “living trust?”
What does a trustee do?
What is a guardian?
What is a power of attorney?
What is a health care proxy?
What is a living will?
What do I need to do to prepare to meet with a lawyer?

What happens if I don’t have a will?
If you die without a will, the laws of the state where you live at that time will determine how your assets will be distributed. Generally, things you own jointly with another person, such as joint bank or investment accounts or real estate, will become the sole property of that other person. Similarly, assets like IRAs, 401(k)s, annuities and life insurance proceeds will go to those persons whom you have named as the beneficiaries. But for those assets you have in your own name alone, the state laws will say to whom those assets will pass.

In Massachusetts, if you are married, then one-half of your individually owned real property and one-half of your personal property will pass to your spouse and one-half to your children. If you have no children, and leave no parents or siblings, then your spouse will inherit everything. However, if you have parents or siblings, then your spouse will inherit the first $250,000.00 of your assets and one-half of the balance of your assets.

In New Hampshire, if you are married and your spouse is the parent of your children and your spouse has no other children, then your spouse will get the first $250,000.00 of your assets and one-half of the balance. Your children will get the rest of your assets. But if your spouse has other children who are not also your children, then your spouse will receive the first $150,000.00 of your assets and one-half of the balance. And if you have children who are not your spouse’s children, then your spouse will inherit the first $100,000.00 of your assets and one-half of the remainder. There are different rules that apply if you have no children but your parents or siblings survive you.

Can I write my own will?
Everyone can write their own will, if they wish, and there are forms available in stationary stores, on-line and in software programs. However, without an attorney, most people who have attempted to write their own wills generally create problems for their families - problems that unfortunately do not surface until after death, when it is too late to fix them. In our experience, forms and software programs do not take your own family situation into account. What happens then, after your death, is generally a complicated probate and oftentimes litigation, which is costly for your estate and thus for your family.

How much does a will cost?
For one thing, there is no such thing as a simple will. Each person’s situation is unique, so each will is actually very unique and should be tailored to your own situation and your own needs and wishes. Generally, a will for a married person with adult children and without specialized assets such as business interests or having to take estate taxes into account can be prepared for about $800.00 But that is not a fixed price. Much depends on how prepared you are, with a list of your assets, and the names and addresses of the beneficiaries and executor, as well as having thought about how you want to leave each of your assets.

If you have children under age 18, then you need to consider who will be a guardian for them, as well as the possibility of a trustee to manage assets for them until they are mature enough to handle funds themselves. In addition, you will need to consider how to handle different kinds of assets for them, such as whether your home should be sold, how your retirement accounts or life insurance should be treated. Talking about these matters with an attorney will take time and will increase the cost of a will. But it is money well spent since discussing these matters will insure that the will you finally have meets your needs and takes care of your family as you wish, avoiding unanticipated situations and saving your family unexpected costs and possible delays after you are no longer around.

Generally, a comprehensive estate plan for a married couple, including a trust, a will, a health care proxy and a power of attorney, will cost between $2500 and $3000.

What does an executor do?
An executor is a person named by you in your Will to manage the assets you own in your own name (not jointly with another) after your death. An executor has no authority, however, until a court accepts your Will for probate and appoints the person you have named to serve as executor. The job of executor can be a lot of work, especially if the executor decides not to hire a lawyer to assist with his/her duties, but the executor is entitled to be compensated from your estate, although the amount of compensation must be approved by the Probate Court. The fees an executor receives are taxable income and must be reported on the executor’s own income tax returns.

It is the job of the executor to do the following:

Gather all documents, such as your Will and any trust documents.
File the original of your Will with the Probate Court together with a petition asking the Court to accept your Will for probate and to appoint the executor of your estate.
Notify the persons and entities named in your Will as your beneficiaries and any other people who may be your legal heirs, whether they are named in your Will or not, that the Will has been filed with the Probate Court.
Notify any known creditors of the fact of your death which can be done by a notice published in a local newspaper.
Assemble and value your assets, including jointly held assets, annuities, life insurance policies and your retirement funds.
Determine whether a state and federal estate tax return will need to be filed. If an estate tax return is required (for estates over $1 million), it is the executor’s duty to prepare and file that return and pay any tax that may be owed.
Prepare and file your final income tax returns and pay any taxes that may be owed or collect any refunds to which you may be entitled.
Pay any debts or bills that are outstanding, including funeral expenses and medical bills and make arrangements with creditors to settle their claims, if valid.
Keep very accurate records of everything he/she does.
Prepare and file with the Probate Court an Inventory of the assets you own in your own name, with their values as of the date of your death, within 90 days after being appointed.
Follow the instructions you have left in your Will for the distribution of your assets.
Insure that the persons named as beneficiaries on your retirement accounts, life insurance policies and annuity contracts file the appropriate claim forms and obtain those assets.
Prepare and file any income tax returns for your estate, reporting any income your estate earns after your death.
Prepare and file with the Probate Court an accounting of how all of the assets you owned at your death were handled, including showing the court what was distributed to your beneficiaries, as you specified in your Will.

What is a trust?
A trust is simply a written agreement between you as the creator of the trust and the person you select as trustee. You can be the trustee yourself during your lifetime but you will need to name someone to take over the management of the trust after your death. In the trust document, you direct how you want whatever assets you have or want to put into the trust will be taken care of. The trust can be a substitute for a will, providing for the distribution of your assets in the same manner as a will would. In some cases, the will can merely say that all of your assets are to go to the trustee, which keeps your wishes private. A will is a public document, available to anyone who goes to the Register of Probate’s office. A trust, however, is private and is not available to the public.

You can transfer assets to the trust during your lifetime or you can provide for that transfer under your will. A trust can continue after your death to provide for minor children or for a spouse or other loved ones. Or, a trust can end at your death and all assets can be paid over to your heirs at that time. A trust can provide substantial estate tax savings and should be considered if you have assets over $1 million. A trust also provides for the management of assets for a loved one who cannot manage assets for himself or herself, due to a disability, age, incompetence or just lack of ability. If you think that you may have difficulties managing your own assets, then a trust that is funded by you while you are still able to manage your own affairs can provide you with protection if the times comes when you no longer are able to do so.

What is a “living trust?”

A “living trust” is simply a trust you create during your lifetime, whether you transfer assets to it while you are alive or not.

What does a trustee do?
A trustee is responsible for following the instructions you have given in the trust document for how the assets in the trust are to be managed. You may specify that your spouse is to receive all of the income from those assets and a certain amount of principal, e.g., for medical expenses, general support, to maintain a certain standard of living or other purposes. It is the trustee’s responsibility to invest the trust assets to produce sufficient income to meet the beneficiary’s needs and to insure that the principal remains intact or appreciates in value. In addition, the trustee has to manage the trust assets so that the purpose for which you established the trust is met, for example, to provide for the college education of grandchildren, or the support and education of your minor children.

“Income” means the earnings from the trust assets, such as dividends, interest, royalties or rental payments. “Principal” means the trust assets themselves, such as stocks, bank accounts, bonds, CDs, real estate and the like. When assets are sold, the capital gains is generally considered to be principal, not income. However, you can specify in your trust document how you may want these categories to be defined.

What is a guardian?
A guardian is a person appointed by a court to take charge of the person and the assets of a person who is either a minor (under age 18) or incapable of managing assets for himself. The person for whom a guardian is appointed is called a “ward.” A guardian determines where the ward lives, handles medical care, and has the control of the ward’s assets, such as bank accounts, real estate or other assets. The guardian is required to report to the court periodically on the condition of the ward and the management of his or her assets.

What is a power of attorney?
A power of attorney is a legal document you sign that gives another person the authority to do certain things on your behalf, just as you would be able to do for yourself. The document can be limited to certain actions, such as to sign a deed or manage a particular bank account, or it can be broad and general in nature, to include everything you could do for yourself. The authority of the person you name as agent you name ends on your death so a power of attorney does not take the place of a will.

What is a health care proxy?
A health care proxy is a legal document you sign that gives another person the right to make medical decisions for you. Massachusetts law requires that your treating physician certify in writing that you cannot make these decisions yourself or that you are unable to communicate your decisions. Until that certification occurs, the person you name cannot make any health care decisions for you.

What is a living will?
A living will is a legal document that clearly specifies your wishes regarding end of life care, such as if you are terminal, in a coma and cannot speak for yourself about such things as artificial feeding and heroic measures.

What do I need to do to prepare to meet with a lawyer?
Before you meet with a lawyer to prepare estate planning documents for you, you should gather all of your financial information, showing what you own, how you own it (e.g., in your own name alone, jointly with someone else), where it is located and an approximation of the value of each of your assets. This would include: real estate, bank accounts, stocks & bonds or investment accounts, life insurance, annuities, retirement accounts, and your personal property (jewelry, artwork, collections such as coins or stamps or other items of value). For assets like retirement accounts, life insurance and annuities, be sure to indicate who the beneficiaries are.

You should also make a list of the persons you want to inherit each of these assets and a list of those people or charities you want to leave some assets or money to. You should indicate the full name, address and relationship to you for each of these individuals. If you want to leave something to a charity, you should indicate the full legal name of the charity and where it is located.

Finally, you should bring with you all of your personal information, including your full legal name, any other names you may be known by, your Social Security number, date of birth and date of marriage. If you have been divorced, you should also bring with you a copy of any divorce agreement. If you have a prenuptial agreement, your lawyer will need a copy of that as well. There may be benefits which you are entitled to at your death if you served in the U. S. Armed Services so if you have any paperwork showing your service number and date of discharge, that would be helpful for your attorney to have. Finally, if you are a naturalized citizen, a copy of your naturalization papers should be provided to your lawyer.

Nothing stated herein can be considered legal advice and should not be relied upon without consulting an attorney.

This document is provided for reference purposes only. Any use of this document does not establish the existence of an attorney-client relationship. If you have any questions about his document, please call or email us.

Pursuant to IRS Circular 230 disclosure requirements, any information on this website (or any link contained herein) is not intended or provided for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed therein.