You may not know exactly what the future holds, but you can decide who will be there to handle it.Who will make your health care decisions if you cannot?  Who will manage your finances?  Who will handle your estate?

Estate planning is not just for wealthy people, and it is not something you need to postpone until you have accumulated significant assets. Regardless of how much or how little you own, having a basic estate plan in place now can help you and your family avoid legal problems and added expense later.

For most people, a basic estate plan consists of four legal documents.

1. Last Will and Testament

Everyone needs a Will.  Your Will directs the disposition of your probate estate. Your probate estate consists of assets held in your name alone that do not have a living designated beneficiary. Without a Will, your estate will pass according to the Commonwealth’s intestacy law.

A Will remains important even if you believe your assets will pass through joint ownership or beneficiary designations. Those arrangements depend on there being a surviving joint owner or beneficiary.  If you and the person who would otherwise inherit your assets die in a common accident, there may be no surviving owner or beneficiary, and your estate may have to be probated.

Your Will also allows you to designate a Personal Representative, formerly known as an Executor, to administer your probate estate. The Personal Representative gathers your assets, pays your valid debts, and distributes your estate to your beneficiaries as directed by your Will. If you have minor children, your Will can also designate a guardian to take custody of them after your death.

Without a Will, you give up the ability to make these important designations and to direct the disposition of your property.

2. Health Care Proxy

A Health Care Proxy allows you to designate someone to make health care decisions for you if you become incapacitated and unable to make those decisions yourself.  The person you designate essentially steps into your shoes and makes medical decisions as you would have made them.

“Living will” language is normally included in the Health Care Proxy. It addresses end-of-life decisions and generally states that you do not want extraordinary medical procedures used to keep you alive when there is no likelihood that you will recover.

Choosing the right person is especially important. You should name someone who can think clearly during times of stress and who will be able to honor your decisions.

3. Durable Power of Attorney

A Durable Power of Attorney allows you to designate someone to make financial decisions for you. It is usually in full force and effect when signed, but it is expected that it will not be used unless you want assistance with, or become unable to handle, your financial affairs.

This is a very powerful document. The person you designate will be authorized to handle far more than simply paying your bills. In most cases, that person will be able to handle your real estate, life insurance, retirement accounts, investment accounts, bank accounts, and other matters involving your money.

Choose someone you can trust without reservation who is comfortable managing financial matters. Honesty and financial experience are both important when selecting someone to take on this responsibility.

4. Declaration of Homestead

A Declaration of Homestead, once properly recorded in the Registry of Deeds, declares your principal residence to be your homestead.

The standard declaration protects the equity in your home up to $1,000,000 from attachment, seizure, execution on judgment, levy, or sale for the payment of debts. Without a recorded declaration, there is an automatic $125,000 of equity protection.

There are specific exceptions to this protection, and it should be noted that a Declaration of Homestead does not protect your real estate from nursing home costs or tax liens.

Four Documents, One Important Step

For most people, these four documents can help family members or trusted companions avoid lengthy, expensive legal hassles.  More complicated estates may require different or additional documents to fully protect your interests and those of your beneficiaries; however, for most people, a basic estate plan is only four documents away.

Gina M. Barry is a shareholder with the law firm of Bacon Wilson, P.C.  She is a member of the National Academy of Elder Law Attorneys, the Estate Planning Council, and the Western Massachusetts Elder Care Professionals Association.  She concentrates her practice in the areas of Estate and Asset Protection Planning, Probate Administration, Guardianships, Conservatorships and Residential Real Estate.  Gina may be reached at (413) 781-0560 or [email protected].