Estate Planning; Wills and Trusts

Estate planning is a very broad topic and may include any of the following areas:

• The Will
• Durable Power of Attorney
• Advance Health Care Directive/Living Will
• Estate Tax Issues
• Protecting and Preserving Assets/Medicaid Issues

The Will

By making a Will, you are entitled to select the beneficiaries of your assets. Without a Will, the property you own as of your death will be distributed in accordance with the laws of the State of Maine, which may not reflect your desires in many instances. For example, in a common situation where a husband dies, leaving a wife and several children, the laws of the State of Maine would distribute the first $50,000.00 of the estate and one-half of the balance to the wife. The remaining one-half would be distributed equally among his children. In certain situations, specifically where the wife is elderly, the husband might have preferred to leave his entire estate to his wife. The assets remaining after her death, if any, could then pass to their children.

Besides executing a Will, we strongly urge our clients to consider a durable power of attorney and a general health care power of attorney. A power of attorney is a written instrument in which you, the principal, give authority to an agent to act in your stead. This agent is known as the attorney-in-fact.

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Durable Power of Attorney

A durable power of attorney is a document which gives your agent the power to do everything that you can do personally – including paying your bills, selling your assets and filing your tax returns.

Statistically, you are more likely to become disabled than you are to die unexpectedly. Many people incorrectly assume that if they become disabled their spouse or children will be able to act in their stead. This is not always the case. Your spouse, for example, has no authority to act concerning non-marital or solely owned property. Your spouse also has no ability to sell or mortgage your jointly held real estate, or even take out a home equity loan. If you were ever to become unable to function on your own, whether through an accident or illness, the Probate Court would have to appoint a guardian/conservator to act as guardian/conservator. However, if you have already appointed an attorney-in-fact to act in your stead, no guardian/conservator would have to be appointed.

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Advance Health Care Directive/Living Will

A health care power of attorney (often referred to as an advance health care directive or living will) gives your agent the power to make medical decisions, should you become incapable of doing so yourself. These decisions include consenting to surgery and deciding which treatments will be used. Like the durable power of attorney, you should choose an agent that you trust implicitly to carry out your exact wishes. A health care power of attorney or Advance Health Care Directive also contains a living will. This provision allows your medical agent to know your intentions should you be in a terminal condition or persistent vegetative state and will also serve as an open dictate to an attending physician should your agent be unavailable to make decisions for you.

It is important to note that both these documents, like a Will can be revoked or amended at any time by you, the principal.

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Estate Tax Issues

When an individual or a married couple has a high net worth there are significant estate tax consequences which may be applicable. The exemption equivalent for federal estate taxes for the year 2011 is $5,000,000.00 ($10,000,000.00 for a married couple). This means that an individual can pass $5,000,000.00 to anybody he or she chooses without there being any estate tax at the federal level. Unfortunately, Maine has "decoupled" itself from the federal system and has passed its own estate tax using a far lower "exemption" amount ($1,000,000.00) for deaths occurring in 2011 and ($2,000,000.00) for deaths occurring in 2013 and beyond. However, Maine's estate tax rate is far less than the federal tax (about 9.6%) on anything in excess of the exemption amount, making estate tax planning very difficult at this time. Even more uncertain is the future. In these troubled financial times it is nearly impossible for accountants or lawyers to predict what future exemption amounts will be, as legislatures at both the State and Federal level continue to struggle with this issue.

At Ballou & Bedell we are happy to work to assist you in determining whether you need to be concerned about estate taxes or not.

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Protecting and Preserving Assets/Medicaid Issues

Some individuals may find that they are in need of long-term or nursing home care and are concerned that this will drain their assets especially if they are of moderate means. For some, the answer is long-term care insurance but for others the answer is to plan for a nursing home stay through asset protection. Medicaid planning is a difficult area of the law fraught with traps for the unwary. At Ballou & Bedell we can help guide families through these difficult decisions.

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