🔒Column: Plan to preserve your legacy

Having a comprehensive estate plan is important for every stage of life. As you reach your later years, you may wonder if you have done everything you can to preserve your legacy and protect those you’re leaving behind.

Estate planning is more than just directing where your assets will go. It is ensuring your wishes are honored and decisions are made by the people you trust the most. It is about minimizing stress and confusion for your loved ones as they navigate the grief of your passing. It is about ensuring the most vulnerable people in your life – an aging spouse or a special needs child or grandchild – are protected. And it is about avoiding unnecessary exposures to your assets such as taxes, creditors, and nursing home spend downs.

A carefully designed end-of-life estate plan is likely to involve the following documents and considerations.

Last will and testament: This document directs assets that have no surviving joint owner or designated beneficiary through the probate process.

Living trust: Used commonly in most well-designed estate plans, a living trust avoids probate, establishes a private, streamlined path for assets to pass to beneficiaries, and can provide ongoing protection for vulnerable beneficiaries such as minors, spendthrifts, disabled/special needs individuals, and people facing financial threats, including divorce or lawsuits.

Durable power of attorney: This names individuals to make a wide range of legal and financial decisions on your behalf. This is critical as you age and become physically or cognitively limited.

Healthcare proxy: This names individuals to manage your medical decisions if you become unable to do so.

Funeral/burial instructions: Although these can be relayed in a will, the best course of action is to establish a prepaid burial arrangement with your funeral home. This ensures your exact wishes are known and saves your family the financial burden of paying for your funeral and the emotional burden of painful decisions right after your death.

Tax sheltering: Estate taxes (a tax on your assets following death) are a frequently overlooked exposure. Although the federal estate tax currently only applies to estates of more than $13.6 million, people may be unaware Massachusetts has its own state estate tax applied to estates of more than $2 million. Given that all assets, including life insurance, count towards this calculation, the Mass. estate tax catches many people off guard. Planning strategies such as lifetime gifting and irrevocable trusts can shelter assets.

Income taxes can be a surprise hit to an inheritance. An example is capital gains taxes when a house is gifted to a child who later sells it. With proper planning, real estate can pass seamlessly to children and others with protection.

Long-term care/nursing home protection: Shielding assets from the cost of a nursing home stay has become one of the main focuses of estate planning. The rules regarding asset spend downs and eligibility for benefits (typically Medicaid) to pay for a nursing home stay are complex. Because many planning approaches involve a five-year lookback (a waiting period before the assets are protected), starting the process before your health becomes dire is critical. Married couples have more flexibility and can create a special trust in their wills to provide the surviving spouse with full access to assets.

Blended family: If you are remarried or cohabiting and have separate children, a careful examination of your documents and assets is crucial to ensure you protect each other without inadvertently disinheriting your beneficiaries.

Estate planning is an ever-changing landscape. Reviewing your situation with a compassionate, competent estate planning/elder law attorney is a critical step to give you peace of mind.

Brendan J. King is a founding partner at Worcester law firm Estate Preservation Law Offices.