Estate Planning Vault

Managing a Windfall in Massachusetts: An Estate Planning Approach

Sometimes, only the rich get richer, but on occasion, anyone can get richer via a windfall. A windfall is an unexpected addition to a person's assets, including cash, stocks, options, land or any items with substantial value. Windfalls may result from inheritance, divorce or a lottery win. The common reaction to a windfall is figuring how to spend the money. However, the sensible reaction would include planning how to manage the windfall by maintaining the assets to fit your lifestyle and needs.

An estate plan maps out a pre-planned asset distribution. At some point you may be unable to make decisions. With an estate plan you can choose who you want to assist you and how you want to be treated. After death, without an estate plan, the fate of your assets may not go as you would like. Instead, the government, unknown attorneys, or even relatives may end up controlling your assets. If a windfall comes your way and you have significant others and/or charities in mind, to ensure those people and organizations get the assets - then execute the proper estate plan.

Estate planning includes Power of Attorney, Health Care Proxies, Wills and Trusts. An estate planning attorney is advisable to see it fit your needs and wishes.

Simply defined, A Power of Attorney designates someone you choose to act as your agent. Your agent performs prescribed duties for you in the event of disability, incapacity or changed circumstances. Massachusetts provides Power of Attorney forms for Property and Finances Effective upon Disability, Property and Finances Effective Immediately and Care and Custody of Children.

You may also select Special or Limited Power of Attorney. These are Powers of Attorneys authorizing an agent to carry out particular business transaction for you. For example, in Massachusetts you can obtain a Special or Limited Power of Attorney for a real estate sales transaction by the seller or for the sale of motor vehicles.

A Power of Attorney terminates at some point in the future, either by set terms or by law such as your death or the death of the agent.

You should consider for the possibility of being mentally or physically incapacitated. It could happen. With a Health Care Proxy, also known as a Living Will, you can name someone you know and trust to make health care decisions for you, including designating your own physician. You can also decide whether you want health support under certain circumstances, as well as make other important decisions regarding your wishes in the event of illness. For example, have you thought about the possibility of being in a vegetative state? Who would you want to decide your fate? There is, of course, the possibility of advances in medicine and miracles have been known to happen. You can revoke or change a Health Proxy prior to becoming incapacitated.

A Last Will is an effective way to transfer estate assets through the probate process. If your estate is modest and does not include complex issues such as land in multiple states or a family business, a Massachusetts Will is one way to transfer your estate.

Massachusetts offers a wide variety of will forms. One can create a will for married, singled, widows or divorced persons, with or without children or create a multitude of varieties of mutual will packages for married persons or persons living together. While you may think that you would prefer that your heirs should not have to pay for and deal with the probate process, you should not dismiss the usefulness of a will. Creating a will is one way to deal with assets that you may not have included in your trusts, such as investment proceeds or specific items that you may want to bequeath to specific people. Also, if you are a parent with children, you can name a legal guardian. Wills are revocable and amendable under Massachusetts law.

With a large estate, you should consider a Complex Will with Credit Shelter Trust for Large Estates. Such a will maximizes the amount of property passing free of estate taxes, leaving the maximum tax-free amount allowed to a trust and the remainder of property to the surviving spouse.

Trusts are legal documents created to serve financial planning needs pertaining to your family and to future tax consequences. Trusts come in many forms and can be combined with wills and other estate planning instruments.

A living trust is one that takes place during your lifetime. You might place your windfall assets in the trust. You appoint a person to manage the trust for those you name to benefit, such as children or others.

If you want to create a trust you can't revoke unless you have permission from all the beneficiaries named in the trust, then draft a non-revocable trust. Whatever trust you create will depend on your assets and your desires. For example, you can create Charitable Trusts, Credit Shelter Trusts, Alimony Trusts and Real Estate Investment Trusts. One thing to be aware of about trusts is that they need to be funded promptly in order for the agreement to take effect. With your new windfall, you can fund the trust the right away.

If you want to add a safety net after creating a trust, use a pour over will. With a pour over will, upon your death, all of your assets from the will are transferred, or poured over to the trust.

In summary, a windfall is an unexpected increase in assets requiring planning similar to any assets. Often, windfalls come suddenly and there is less time to consider how to manage assets. Because of this, you need to avoid procrastination, if for no other reason, taxation. Once you obtain a windfall, determine assets and inventory them. Meet with an estate-planning attorney with expertise knowledge of Massachusetts estate planning laws to create a plan that fits with your idea of preservation of your estate. It is your life and your windfall. By creating a well thought-out estate plan, you can make sure you, rather than the government or a stranger, have control over the future of the windfall.