Schwartz & SCHWARTZ


Modern professionalism with old fashioned family service


1. What is a Durable Power of Attorney and Health Care Proxy

These documents allow you to designate someone who can handle your financial affairs and make health care decisions for you if you become incapacitated.  Without these documents, it may be necessary to have a legal guardian appointed by the court, which can be time consuming and expensive and can result in a family battle in court.  Without these documents you lose the ability to control who will handle these matters for you should you become incapacitated.

2.          When does the Power of Attorney take effect?

A power of attorney can be “springing” (takes effect only if you become disabled) or it can take effect as soon as it is signed by the principal.  In most cases, even when the power of attorney is immediately effective, the principal does not intend for it to be used until he or she becomes incapacitated.  An escrow agreement can be created to be sure the document will only be used if the creator becomes incompetent.

3. Why have a Health Care Proxy?

By signing a healthcare proxy you are able to designate who the person will be to make medical decisions for you if you become incapacitated.  Without a health care proxy, you may have multiple people in your life who think they should be the one to make these decisions and if they do not all agree on how to proceed, mayhem ensues and a court action may become necessary to resolve the matter.  Having a health care proxy is especially important for widowed people with several children, single people with no children, and gay, unmarried individuals who want to be sure their partner is in control of medical decisions.

4. Who should have a copy of my Health Care Proxy?

You should have a copy and your physician should have a copy with your medical records.  We also provide the service of holding original documents in our fire proof safe until the document is needed.

5. Can I name 2 or more people to serve jointly as my health care agent or financial agent?

You can, but it is better if you don’t.  Financial institutions can make it very difficult to use a durable power of attorney if 2 joint agents are named.  If joint agents can’t agree about a health care decision, your purpose for creating a health care proxy is defeated.  It is best if you name only one person to serve as your agent, with a second person to be named as an alternate successor.  If you feel you must name 2 people to serve at the same time, it is best if you set up the document so that either individual can act independent of the other.

6. What’s the difference between a testamentary trust and a living trust?

A living trust can be funded while you're living (to as great or as small extent as you wish) or can fund fully at death, your choice. A testamentary trust can only be funded at death. If funded now, the trust creators are usually the primary beneficiaries and would have full use of trust assets until their deaths, although other arrangements can be made.

Legal costs are slightly higher to establish a living trust versus a testamentary trust.  Legal and court costs for administering a testamentary trust after you are deceased are significantly higher (especially when your beneficiaries are young minors)...probably several thousand dollars higher.  If you fully fund the trust while you're living, you can eliminate all Probate Court costs and all assets will be immediately available at your death (no Probate Court time delays). However, to eliminate the Probate process, you have to have the time and energy to devote to the leg work of funding the trust now (it's either hassle now while you're living, or let your executor hassle later with the paper-work...either way someone has to have the hassle).

With a testamentary trust the Court is supervising everything. In contrast, a living trust, is a non- public document and only becomes controlled by the court if someone has an issue with the trustee and initiates a court proceeding. If you have litigious relatives, a living trust may minimize the litigation risk. If you have concerns that your trustee would not act in the best interest of your beneficiaries (particularly if they are minors or incompetent) then the testamentary trust is the better choice.

Generally, there are no tax consequences from establishing or disbursing from a living trust, especially if the creators are the primary beneficiaries. Yearly income tax consequences pass through to the beneficiaries. If your net worth exceeds one million in value, you should consider establishing  estate tax planning trusts , to minimize or eliminate the estate tax burden that would otherwise result under Massachusetts and Federal laws.

7.        What is a guardianship and when is it necessary?

A guardian may be appointed when the probate court determines that an individual is unable to care for herself and her estate by reason of mental illness, mental retardation, or physical incapacity.  It becomes necessary if the impaired individual did not create a durable power of attorney, health care proxy or trust prior to his becoming incompetent.

8.        What is a guardian able to do?

Unless limited by the court, the guardian has total control over the finances, medical and personal decisions of the ward. 

9.       What happens if a person does not set up a will or fund a trust prior to his death?

State law controls who will inherit from an individual who has no will and no designated joint owner or beneficiaries for his assets.  Assets will pass to his next or kin, as defined by state law.  If all you have is a third cousin who you hate and haven’t spoken to in 30 years, he will inherit from you.  Only in the event of it being impossible to locate any heirs will your property escheat to the state.  If you have no will, your relatives and friends may fight over who will be in charge of handling the estate.  It’s always better to have a will so that you can control who will be in charge of your estate and who will inherit from you.

10.    I  hear a lot about avoiding probate by setting up a trust.  Do I need a trust?

A trust is more efficient and less expensive to administer than a will that has to be probated in the court.  A trust is not for everyone.  A consultation with an attorney can help you evaluate whether a trust is best for your individual situation.  With the probate process, it takes at least a year before assets can be distributed to heirs.  With a funded trust, all assets are available to be distributed immediately following your death, unless your trust instructs differently.  The key is to set up the trust document, and take pro-active steps to move your assets into trust ownership.


11. If I need to go to a nursing home, will the nursing home get everything I own?

If you take no steps to plan in advance, then using all your assets to pay for nursing home care will be a likely result.  In many cases, implementing a Medicaid plan at least 5 years in advance of your needing nursing home care will preserve a large portion of your assets.  The Medicaid rules offer more protections for spouses who are not in nursing homes and with a married couple, many last minute planning options are available to protect the non-nursing home resident of the couple so that he or she will not face impoverishment.  An attorney can help you decide what types of advance or last minute planning techniques are available and suited to your needs.

12. Do I need an attorney if I am buying or selling real estate?

Buying or selling real estate involves large amounts of money and complicated legal documents.  Why wouldn’t you want an attorney advocating for you on an important transaction like this?  Attorneys will draft purchase and sale agreements when there are no realtors involved, will review and revise purchase and sales agreements drafted by brokers to be sure your interests are best protected and negotiate with all parties if issues arise.  If there is no mortgage being obtained for a purchase, a buyer needs an attorney to research the title and resolve issues in the title history, to prepare closing documents and to handle the money transactions related to the purchase.  If there is a mortgage being obtained to purchase the property, the lender will have you pay for an attorney that represents the lender only. By having your own attorney come to closing, you have someone to negotiate for you if there are disputed issues between you and the lender, or you and the seller.  In addition, by having your own attorney present at the closing, you have an extra set of eyes that knows what to look for in the documents and can correct errors before they become costly mistakes.

13. What is a life estate?

A life estate is a form of real estate ownership where you deed an interest in property to the people you want to have inherit your property and keep a life estate for yourself.  The life estate protects your rights in the property for your lifetime.  Upon your death, the parties you deeded the property to become the full owners.  If the property is not sold until after your death, there will be no Medicaid lien, the property will not need to be probated in court and will have a stepped up tax basis, meaning that at your death, the basis of the property will be its date of death value, not the value when you first purchased the property which can save thousands of dollars in capital gain taxes, compared to the taxes that would result from an outright gift of the property during your lifetime.  Further, the life estate allows you to retain a legal interest in your house, offering you both protection in and control over the asset, as well as access, if you are eligible, for real estate tax abatements.

14. Why do I need to set up a corporation or limited liability company for my business?

These formats offer liability protection.  The operating document provides a structure for daily operation of the business when there are multiple owners and addresses succession planning, buy out arrangements and means of resolving future disputes amongst the owners. 




Frequently Asked Questions