Non-Tax Estate Planning Considerations for the Terminally Ill Person in Massachusetts
Notes for lawyers from the Massachusetts Bar Association’s program entitled “Estate, Tax and Health Care Planning for the Terminally Ill Client”
For someone who is terminally ill, the following estate planning and health care planning measures should be considered:
(1) Execute a health care proxy under Massachusetts General Laws, Chapter 201D. Also consider preparing a living will; although it is technically not a binding legal instrument in Massachusetts, it carries great moral weight, and it lessens the burden on the health care agent to make end-of-life decisions. Consider hiring a nurse or someone else from the health care profession to help discuss issues in preparing the living will. Consider incorporating into these documents a provision regarding organ donations and other permissible anatomical gifts in accordance with Massachusetts General Laws, Chapter 113, Section 9.
(2) Consider probate avoidance, giving due weight to the fact that probate is not as expensive as one would believe by attending the free living trust seminars regularly touted in newspaper advertisements.
Avoiding pre-death probate would mean avoiding the need for guardianship proceedings, but a trust is usually not necessary to accomplish this goal. A durable power of attorney and a health care proxy could eliminate the need for guardianship proceedings for a Massachusetts resident.
Avoiding post-death probate proceedings is often a worthy financial goal for a terminally ill person, but the matter should be handled with a degree of sensitivity to the progression of the illness and family interactions.
With the variety of non-trust methods available to avoid probate, consider that a series of disconnected will substitutes (such as joint tenancy with right of survivorship, beneficiary designations and transfer-on-death designations) may cause uneven treatment of the intended inheritors.
(3) Consider whether there are particular individuals for whom the terminally ill person’s estate plan should be amended to incorporate special provisions. As a few examples, guardianship issues should be dealt with for minor children, and a standby guardianship proxy or short-term emergency guardianship proxy should be considered; minor children usually should not be the direct beneficiary of life insurance policies, annuities, IRAs and qualified plans; a person with special needs usually should receive the inheritance not outright, but rather via a special needs trust; a person with a substantial net worth often would prefer to have generation-skipping trusts established for the benefit of the family unit; a person who has been living in the terminally ill person’s home may need some time to relocate; a person who has been working in the terminally ill person’s business may need some financial assurances not to make an immediate departure; and an elderly spouse and the family often would benefit from the surviving spouse not inheriting outright, but rather via a discretionary testamentary trust.
(4) Consider whether there are particular assets of the terminally ill person that should be given special attention. As a few examples, real estate in a state other than the terminally ill person’s domicile could require extra probate proceedings if some planning steps are not taken before the death; a pre-death Roth IRA conversion could be advisable to allow the beneficiaries to have substantial tax benefits; and a business interest could qualify for the Qualified Family-Owned Business Interest deduction if left to a person who intends to work in the business.
(5) The disposition of items of tangible personal property can cause feuds that tear apart the family unit. Specific bequests of special items should often be considered, as well as an unemotional method of dividing up other items.