Power of Attorney, Trusts, and Beneficiaries with an Estate Planning Attorney

We held an interactive session on estate planning with Robin Gorenberg, Esq. With over 35 years of experience, Robin simplifies complex topics like choosing trustees, executors, and asset protection. Robin assists a diverse range of clients, from young parents to high-net-worth individuals, and provides support through probate and trust administration.

Understanding The Basics of Estate Planning

Estate planning isn't just for the wealthy or the elderly. It's about making decisions regarding your assets and healthcare, both during your life and after your death. Essential components include creating a will, appointing guardians for minor children, and naming individuals to make financial and medical decisions on your behalf if you're unable to do so.

Key Documents Everyone Should Have

Will: This document specifies how your assets will be distributed upon your death and names a personal representative (executor) to manage the process. If you have minor children, it's crucial to name guardians for them in your will.
Power of Attorney: This document names someone (and an alternate) to make general and financial type decisions and to have access to financial accounts during your lifetime. The name of the agent is “attorney-in-fact”. There are two types: immediate and springing. Immediate power of attorney is effective upon signing, while springing power of attorney becomes effective only upon your incapacity.
Healthcare Proxy: Similar to a power of attorney, this document appoints someone to make medical decisions on your behalf if you're unable to do so. It usually includes HIPAA authorization, allowing your proxy to access your medical information, and can include a living will to specify your wishes regarding life-sustaining treatment.

Types of Trusts

Single Revocable Trust: Useful for managing assets for beneficiaries who are young or not financially savvy and for avoiding probate.
2 Revocable Trusts: Can help married couples manage their estates efficiently, potentially reducing state estate taxes if their combined estate exceeds the state threshold. They also avoid probate and ensure later distributions to chosen beneficiaries, similar to a single Trust.
Irrevocable Insurance Trust ("ILIT"): Often used for life insurance policies to keep the proceeds out of your taxable estate. This can be particularly beneficial if you have significant life insurance coverage.

Estate Taxes

Estate taxes can be both federal and state-specific. The federal estate tax exemption is currently $13.61 million per individual, but this is set to decrease to $5 million in 2026. Many states have their own estate taxes with varying exemption amounts. For example, Massachusetts has a $2 million exemption, while other states like Florida and California have no estate tax.

Probate

Probate is the legal process of transferring assets to heirs after death and can be time-consuming and expensive. Assets that are in your name alone, without a joint owner or beneficiary designation, go through probate. To avoid this, consider retitling assets into a trust or naming beneficiaries wherever possible.

Important Considerations

Executor: The person responsible for managing your estate according to your will.
Guardian for Minor Children: The person who will take care of your children if they are still minors when you pass away.
Healthcare Proxy and Power of Attorney: People you trust to make medical and financial decisions on your behalf.

Audience Q&A

Power of Attorney and Trusts for Children

If you’re not comfortable with your children receiving their inheritance until they turn 35, you should reconsider naming them as power of attorney. However, children can still be named as trustees in your trust for distributing assets after your death.

You must decide who your beneficiaries are and how assets will be distributed, including specific amounts and percentages. Consider who should inherit if a beneficiary predeceases you and have a final distribution plan if none of your beneficiaries survive.

What’s the difference between a trustee and an executor?

The trustee manages the trust and its distributions, while the executor handles probate for the will. Both roles require similar qualities and sometimes the same person can fulfill both roles. However, the trustee has broader responsibilities.

General Estate Planning Advice

When your children turn 18, they should have a power of attorney and healthcare proxy to allow you to make decisions for them. If you’re moving to a new state, have your estate planning documents reviewed by an attorney in the new state. Even if documents from one state are legally recognized in another, local laws may differ.

Key Takeaways

Estate planning is crucial for all, regardless of age or wealth. It involves decisions about assets and healthcare during and after life. Key documents like wills, powers of attorney, and healthcare proxies are vital to have in order. If you are from Massachusetts and have any questions or need further assistance, feel free to reach out to Robin HERE.

Hively