Attorney Maria Baler discusses our Spring Newsletter, for our Smart Counsel for Lunch Series. Please watch and if you have any questions or want to learn more please call us at 781 461-1020.
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Death and Taxes
Death and Taxes
Statesman Benjamin Franklin was famous for his words of wisdom or ‘proverbs’. One of his quotes that is still in frequent use today is, ‘in this world, nothing is certain except death and taxes.’ In the spirit of Ben’s quote, today we review the various tax returns that may need be filed when someone passes away.
The responsibility for timely filing the tax returns and making sure the tax is paid usually falls to the Personal Representative or Trustee. If you have been appointed as the Personal Representative of an estate, or if you are serving as the Trustee of a Trust created by a person who has passed away, it is important to understand the tax filing obligations. Failure to timely file may result in personal liability for late filing penalties and interest on late paid tax.
Final Personal Income Tax Returns
If someone passes away without having filed income tax returns for the prior year, it will be the responsibility of the Personal Representative to file those returns. If there is a surviving spouse and the couple filed joint returns, then the surviving spouse may file a joint return reporting the income of both spouses. The most common federal personal income tax return for U.S. taxpayers is Form 1040. In Massachusetts, individuals and married couples file a Form 1.
In addition to filing for the prior calendar year, if necessary, final state and federal income tax returns will have to be filed to report the income the deceased earned or received in the year of death. If there is a surviving spouse, a joint return may be filed. However, income earned on assets owned by a decedent after the date of death must be reported on a fiduciary income tax return (see below).
What happens if a person is not married at the time of death (so no surviving spouse to file) and there is no court appointed Personal Representative because the deceased did not have any probate assets? IRS Publication 559 states that in that case, the Personal Representative is “any person who is in actual or constructive possession of any property of the decedent.” That means a family member, for example, who has knowledge of the deceased’s situation may file the final income tax return.
If a deceased person is due a refund, a Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer, must be filed with the return. Form 1310 is exceptionally handy when there is no court appointed Personal Representative because it allows for the issuance of the tax refund check to be made payable to the person signing the Form 1310. The person signing the Form 1310 must check the box on the Form stating that he or she (the signer) will distribute the refund in accordance with the deceased’s Will or, in cases where the deceased did not leave a Will, to the deceased’s heirs at law.
The reason this is so useful is that without that option, the refund check will be issued to ‘the Estate of the Deceased.’ For estates where no probate is needed, there is no account opened in the name of the Estate. As such, the check cannot be deposited until a probate is opened and a Personal Representative appointed – this is often a long, and always costly proceeding. In fact, sometimes the cost of probate may exceed the amount of the tax refund. Form 1310 avoids this situation.
Fiduciary Income Tax Returns
If assets were owned in a decedent’s individual name or if the assets were held in Trust, then to the extent the assets earn income following the deceased’s death, that income is reported on a fiduciary income tax return filed by the Personal Representative of the Estate or the Trustee of the Trust. This is a federal Form 1041 and a Form 2 for Massachusetts. This would be the case for example if the decedent owned an investment account, rental property, a business, a bank account, etc. at the time of death. These assets will continue to produce income after the deceased’s death.
Assets that were jointly held, or assets which designate a beneficiary to receive them, pass directly to the surviving joint owner or named beneficiary and income earned subsequent to the deceased’s death is reported by the new owner.
It is not proper to report post-death income under the deceased’s Social Security number, nor should the Social Security number of the Personal Representative or Trustee be used. Once the owner of the revenue-producing asset passes away, the Personal Representative for the Estate or the Trustee of the Trust must obtain a new Taxpayer Identification Number (TIN), sometimes called an Employer Identification Number (EIN), for the Estate or Trust. Revenue produced by the Estate or Trust holdings will be reported under the Taxpayer Identification Number assigned to the Estate/Trust on a fiduciary income tax return.
Estate Tax Returns
An Estate Tax Return (not to be confused with a fiduciary income tax return discussed above) must be filed when the value of a decedent’s assets is more than the allowable exemption amount. For federal purposes the return is Form 706; in Massachusetts this is a Form M706.
In determining the value of the deceased’s estate for estate tax filing purposes, all of the assets that were owned or controlled by the deceased are included. It doesn’t matter whether it is a probate asset or a non-probate asset; if the decedent owned the asset or could control the disposition of the asset, then the value of the asset is part of the deceased’s gross taxable estate. Examples of assets that are includible in the gross taxable estate include real estate, retirement accounts, bank accounts, investment accounts and life insurance if the deceased owned the policy.
For federal estate tax purposes, the exemption amount is $13.61 million per person in 2024. The amount of the federal exemption will automatically revert to $5 million per person, adjusted for inflation, as of January 1, 2026. With the adjustment for inflation, the amount of the exemption is likely to be around $7 million person.
Massachusetts has a $2 million exemption. This means that if the gross estate (i.e., total value before deductions) of a Massachusetts resident’s estate is more than $2 million, a Massachusetts estate tax return must be filed even if allowable deductions mean that there will not be any estate tax payable.
The due date for filing a federal or Massachusetts estate tax return and paying any estate tax owed is 9 months from the deceased’s date of death.
Conclusion
Tax return filing for someone who has passed away can be confusing. Click here for a chart that may help to clarify this. However, if you are serving as the Personal Representative of an estate or Trustee of a Trust created by someone who has passed away, you are responsible for timely filing the relevant tax returns and it is vital that you understand your filing responsibilities to avoid personal liability. If we can help, please contact our office to schedule an appointment to meet with one of our attorneys.
Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
April, 2024
© 2024 Samuel, Sayward & Baler LLC
If the Shoe Fits: Five Benefits of Paying for Long-Term Care Yourself
“I heard on the radio that I should create an Irrevocable Trust to protect my home from the nursing home taking it away from me.” This is a comment I regularly get from clients who wish to explore long-term care planning. I am happy to do so with them. I start by explaining that the nursing home will not take your home from you; it is only if you receive Medicaid benefits (the combined state and federal government benefits program for which you must qualify) to pay for your long-term care in a nursing home (or a few other situations) that Medicaid will require reimbursement for the care expenses they have covered. In that case, reimbursement comes from the sale of your home while you are alive or from your probate estate after your death.
Further, the long-term care options available to you are entirely dependent on your goals, finances and family dynamics, which may be completely different from others who have engaged in such planning. For instance, your goal may be to preserve the value of your home for your children and therefore you may be willing to transfer your home to your two responsible, unmarried adult children now. On the other hand, your sister has no children, and preserving her assets to benefit the next generation may not be a top priority when she could utilize those assets to pay for care for herself now. With this in mind, this article examines the benefits of planning to pay for long-term care yourself instead of anticipating the use of state benefits to pay for your long-term care in a nursing home.
- Independence from State Benefits: Expecting to rely on federal and/or state-provided benefits such as Medicaid to pay for long-term care in a nursing home can be risky due to the unpredictability of government policies, and changes in the laws and regulations that govern eligibility for such benefits. By saving money to pay for your future long-term care independent of government benefits, you reduce the necessity of relying on government benefits and increase the possibility of having sufficient resources necessary to access quality care when you need it most in the future.
- Freedom to Determine Residence and Care Opportunities that Best Suit You: Saving to pay for your own long-term care allows you to choose the type of residence and level of care that best suits your needs and preferences. Government benefits such as Medicaid do not pay for all types of long-term care, and in most cases pay for only nursing home care. Whether you opt for an over-55 residential community, in-home care, an assisted living facility or a nursing home, having your own funds gives you the flexibility to access a wider range of options tailored to your specific requirements. This ensures that you receive the level of care, comfort and social activities that align with your lifestyle and preferences, especially as they may change as you age.
- Retain Funds and Gift as You Choose: One of the significant advantages of paying for long-term care yourself is the ability to retain control over your funds and allocate them as you see fit. Unlike qualifying for Medicaid benefits, which comes with restrictions on asset transfers and gifting, retaining your funds to access, manage and control yourself allows you to gift portions to loved ones or charitable causes during your lifetime if desired. This level of financial autonomy empowers you to continue to make decisions that align with your values and priorities.
- Long-Term Care Insurance Policies to Pay for Your Long-term Care: In addition to saving funds to pay for your care out of your own pocket, you may also consider obtaining a long-term care insurance policy to provide an additional layer of financial protection. A long-term care insurance policy is a type of insurance that specifically pays for long-term care, whether that care is received in your home or at an assisted living facility or nursing home, depending on the terms of the policy. It essentially creates another “bucket” of funds you can draw from to pay for your long-term care, which decreases the funds you are paying from your personal accounts and thereby prolongs your ability to pay for your care yourself without having to qualify for government benefits to pay for needed care.
- Flexibility in Determining Inheritance: By saving and paying for your own long-term care, you maintain the flexibility to determine how your assets will be distributed upon your passing. If you receive Medicaid benefits to pay for care, keep in mind that Medicaid is “first in line” to be reimbursed from your probate estate for any expenses Medicaid paid on your behalf. For example, your home that you intended to leave via probate to your brother at your death may instead need to be sold to reimburse Medicaid and your brother will only receive some (or none!) of the sale proceeds. By saving and paying for your own long-term care, you are better positioned to create a legacy according to your wishes. Whether you choose to leave assets to family members, friends, or charitable organizations, having control over your inheritance provides peace of mind and ensures that your financial legacy reflects your values and priorities.
In conclusion, paying for your own long-term health care offers numerous benefits that provide greater control, flexibility, and peace of mind compared to expecting to utilize government benefits, such as Medicaid. If you are concerned about planning for long-term care expenses, speak with an experienced elder law attorney who can guide you through a variety of considerations to assist you with determining the long-term care planning strategy that best suits you.
Attorney Abigail V. Poole is a senior associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is an active member and Immediate Past President of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA). This article is written with the assistance of Chat GPT and is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.
April, 2024
© 2024 Samuel, Sayward & Baler LLC
New Smart Counsel Interviews – Dianne Savastano from Health Assist on Hospice
Introducing the Smart Counsel Interview
Attorney Suzanne Sayward brings us something new today. Each quarter one of our attorneys will interview a guest on a topic that we feel will be of interest to you, our viewers. In this inaugural interview, Attorney Suzanne Sayward speaks with Dianne Savastano Founder & CEO of Health Assist on the topic of the hospice benefit. Please enjoy this video and her interview below and if you have any questions or want to learn more please call us at 781 461-1020.
Dianne Savastano Smart Counsel Interview on Hospice
Attorney Suzanne Sayward’s Smart Counsel Interview with Dianne Savastano. The interview covers many aspects of hospice and some of the misconceptions we have about it and the benefits covered during hospice. Please see links to the interviewee’s website Health Assist and the article that Dianne wrote that is the inspiration for the interview End of Life Care.
Understanding the Massachusetts Homestead Law: Protecting Your Home and Family
By: Brittany Hinojosa Citron
Owning a home is often considered one of life’s most significant accomplishments. Beyond its emotional value, a home is also a substantial financial asset for many individuals and families. However, unforeseen circumstances such as lawsuits, debts, or financial challenges can threaten the security of homeownership. To safeguard against these risks, Massachusetts offers homeowners the opportunity to declare a homestead.
The Massachusetts homestead law protects homeowners from the forced sale of their primary residence to satisfy certain debts or obligations. By filing a Declaration of Homestead in the county or district Registry of Deeds where the residence is located, homeowners can claim a portion of the equity in their home as “homestead protection.” This protection applies to various creditors, but it does not apply to mortgage lenders, tax liens, Medicaid/MassHealth liens for benefits paid on behalf of the homeowner (including benefits paid for nursing home care), and other specific types of debt. If the equity in your home is greater than the homestead protection, the home may still be sold, but the creditor will receive only what is left after you first receive proceeds equal to the amount of the homestead protection.
A homeowner is entitled to automatic homestead protection of $125,000, but homeowners who file a Declaration of Homestead with the Registry of Deeds can increase that protection to $500,000. For married couples where both spouses are over the age of 62, the homestead protection can be doubled by $1 million by filing an “Elderly” Declaration of Homestead. Increased homestead protection is also available to disabled individuals. Homestead protection is available whether you own your property in your individual name(s) or in trust.
Homestead protection isn’t just for the homeowner but extends to their spouse and minor (under age 21) children who reside in the home. This ensures that spouses and children are safeguarded from the loss of their primary residence due to financial difficulties.
Filing a Declaration of Homestead in Massachusetts is relatively straightforward and inexpensive. By taking advantage of the Massachusetts homestead law, homeowners can secure their primary residence and help ensure a portion of the equity in their homes for themselves and their loved ones. Whether facing unforeseen circumstances or simply seeking peace of mind, declaring a homestead is a prudent step towards protecting one’s most significant asset – the family home. If you have questions about homestead protection or if we can help you with your estate planning needs, please contact us to schedule a consultation with one of our attorneys.
Attorney Brittany Hinojosa Citron is an associate attorney with the Dedham, Massachusetts, firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information or to schedule a consultation with one of our attorneys, please call 781-461-1020.
March 2024
© 2024 Samuel, Sayward & Baler LLC
Transferring Your Home to a Revocable Living Trust
Five Questions and Answers About the New Massachusetts Estate Tax Law
In October 2023, the Massachusetts legislature enacted a long-awaited update to the Massachusetts estate tax law. Although it did not become law until October, the law’s provisions are retroactive, applying to estates of those who died on or after January 1, 2023.
The new law increases the Massachusetts estate tax exemption amount from $1 million to $2 million, meaning that those who die with an estate valued at less than $2 million will not have to pay a Massachusetts estate tax at death. The law also eliminates the so-called “cliff” effect of the prior law, which taxed the full value of an estate if the estate’s value was over the $1 million threshold. Under the new law, the first $2 million of assets are not taxed. The value of the estate over $2 million is subject to tax at rates ranging from 8% to 16% for estates over $10 million.
Here are a few things to consider with respect to your own estate when thinking about whether and how this new estate tax law impacts you and your family.
1.How Do You Determine if Your Estate is subject to the Estate Tax?
The estate tax is a one-time tax, payable nine-months after death, on the value of the assets in your “estate.” For Massachusetts estate tax purposes, your “estate” consists of all of the assets you own or control. This includes bank accounts, stocks, bonds, investment accounts, retirement accounts such as IRAs, 401ks, 403bs, annuities, life insurance which you own on your own life, the cash value of life insurance you may own on someone else’s life, personal property such as automobiles and jewelry, and real estate, whether located in Massachusetts or in another state. The total value of all of these assets is the total value of your estate that would be subject to estate tax at your death. If that number is above $2 million, your estate will need to file a Massachusetts estate tax return and may have to pay estate tax after your death, depending on the deductions available to your estate. Assets left to charity or to a surviving spouse are deductible. For this reason, for most married couples who leave assets entirely to the surviving spouse at the death of the first spouse to die, there is no estate tax payable until the death of the surviving spouse.
2.What if you did Estate Tax Planning Before the New Law?
Under the old law, when the threshold for the Massachusetts estate tax was $1 million, many Massachusetts residents were impacted by the estate tax and incorporated estate tax planning into their estate plan. This type of planning likely included credit shelter trusts which shelter a portion of assets in trust at the death of the first spouse to die for the benefit of the surviving spouse in order to reduce or eliminate the estate tax payable at the surviving spouse’s death. If you created credit shelter trusts before the change in the law, now is the time to sit down with your estate planning attorney and review your plan. It may be that the complexities of an estate plan that shelters assets from estate tax are no longer necessary. However, you may still benefit from such a plan. The manner and extent to which your trusts are funded should be reviewed and updated to make sure you are taking full advantage of the new $2 million credit. Whereas under the old law we were concerned with funding credit shelter trusts with at least $1 million of assets, now we can shelter up to $2 million of assets at the first spouse’s death, so increasing the funding of those trusts appropriately can reduce or eliminate the estate tax payable at the surviving spouse’s death.
3.What if you are a Massachusetts Resident but own Real Estate in another State?
If you are a Massachusetts resident but own real estate in another state, such as a vacation home in Maine, that property is included in the value of your “estate” when determining if your estate is worth more than $2 million and therefore a Massachusetts estate tax return must be filed. The Massachusetts estate tax is calculated on the full value of your estate, including the out of state property. However, your estate will receive a credit against the Massachusetts estate tax for the proportionate share of that tax attributable to the out of state property.
Keep in mind that 12 other states in the country impose a separate state estate tax. If you are a Massachusetts resident and own real estate in Vermont, Rhode Island, Maine, or several other states, you may have an obligation to file an estate tax return and pay estate tax to the state in which that real estate is located following your death.
It is worth noting that some attorneys believe it is unconstitutional for Massachusetts to consider the value of out of state property in computing its estate tax, even if a credit for a proportionate share of that tax is given. The issue is yet to be conclusively determined under the new Massachusetts estate tax law.
It is common practice to transfer real estate owned for investment purposes, especially rental property, to a limited liability company (LLC) for asset protection purposes. Keep in mind that transferring real estate to an LLC converts real estate into a personal property interest (the membership interest in the LLC) which like any other asset will be part of your “estate” for Massachusetts estate tax purposes, and tax will be paid on the full value of that interest.
4.What if you are not a Massachusetts Resident but own Real Estate in Massachusetts?
Massachusetts also imposes an estate tax on non-residents who own real estate in Massachusetts, based on the value that real estate bears to the owner’s total estate. The estate tax is computed as if the non-resident was a resident of Massachusetts. The share of the tax attributable to the value of the Massachusetts real estate is then determined, and this is the amount paid to the Commonwealth as the non-resident estate tax.
5.How Do You Reduce Your Estate Tax Bill?
For those with assets valued at $2 million or more, reducing the estate tax payable by their heirs after death is often a top planning goal. As mentioned above, certain types of trusts such as credit shelter trusts can be used to reduce estate taxes while still allowing control over assets during life. Transferring assets out of your ownership may be appropriate in some cases and if done properly will reduce the value of the taxable estate. This includes gifts that fall under the federal gift tax annual exclusion, which in 2024 permits gifts of up to $18,000 per person per year without the requirement of filing a gift tax return or reducing the giver’s federal estate and gift tax exemption (currently $13.6 million per person, but scheduled to drop to about half that amount if Congress does not extend the increased exemption amount by the end of 2025). Larger gifts of real estate or other assets may be appropriate, whether directly to individuals or to an irrevocable trust. However, an analysis of the benefits of reducing estate tax versus the advantage of your heirs receiving assets with a stepped-up tax basis should be done before gifting appreciated assets. Transferring life insurance to an irrevocable trust is a way to significantly reduce the taxable estate as it removes an asset from tax that the owner does not typically consider an asset during their lifetime, especially if it is term insurance without cash value. Gifts of tuition or medical expenses may be made in an unlimited amount if paid directly to the institutions providing those services. Finally, gifts to charity, whether directly, via retirement accounts, donor advised funds, or in trust, are a way to reduce the estate tax payable at death while benefiting worthy causes.
If you are a Massachusetts resident with a home, life insurance and a retirement account, you may have a taxable estate without realizing it or planning for it. Review your assets and speak with an experienced estate planning attorney to learn about the estate tax your family may have to pay after your death, consider how it will be paid (and whether further planning is needed to avoid the sale of real estate or a business in order to raise funds to pay taxes), and take whatever steps are appropriate for you to reduce the tax to the greatest extent possible. Your heirs will thank you.
Maria C. Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and the former President of the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
March 2024
© 2024 Samuel, Sayward & Baler LLC
Attorney Suzanne Sayward discusses Fiduciaries
Attorney Suzanne Sayward discusses Fiduciaries, for our Smart Counsel for Lunch Series. Please watch and if you have any questions or want to learn more please call us at 781 461-1020.
Love Stinks (Sometimes): A Case for Pre-Nups and Lifetime Trust Shares
It’s Valentine’s Day and love is in the air! Here’s hoping that all of you have a love – of a spouse, partner, parent, child or friend – worth celebrating. Although estate planners are romantics at heart, we know that love of the romantic kind doesn’t always work out. Unfortunately, when this happens, it can sometimes impact other things that are important – like our assets. Fortunately, there are things that can be done from an estate planning perspective to protect our assets, if not our hearts, from the impact of a failed romance.
If you are getting married, or if you have a child who is planning to get married, a pre-nuptial agreement should be considered. A prenuptial (or premarital) agreement is a contract between two people who are planning to marry, by which they agree in advance to a division of their assets in the event of divorce or death. Pre-nuptial agreements are not only for the wealthy. They can go a long way toward protecting assets and future financial security against the possibility of a failed marriage. These agreements are especially important for people who come into the marriage owning assets they want to protect in the event of divorce. For young couples, this may be a house purchased by one member of the couple prior to the marriage. For others, this may be an interest in a family business, vested stock options from an employer, or an ownership interest in a family vacation home. If you have assets you would not want to be part of the
“pot” to be divided between you and your ex-spouse by a judge during a divorce proceeding, then it’s worth having a prenuptial agreement to protect that asset.
Prenuptial agreements are not just for first marriages, and not just to protect assets in the event of divorce. Those who have been married before may have children from a prior relationship. If two people who have children from prior relationships decide to marry, they may enter into a pre-nuptial agreement that not only protects each spouse’s assets in the event of a divorce, but also prevents the new spouse from claiming any interest in the estate of the deceased spouse if a spouse dies during the marriage. In this way, the deceased spouse is assured that his or her assets can be left to the deceased spouse’s children at death without the threat of interference from the surviving spouse. This can be especially important if the children of the deceased spouse are minors and may need those assets for their support and education. It can be equally important for older children who may be nervous about their potential inheritance being disrupted by a parent’s new spouse. A pre-nuptial agreement will not prevent the couple from leaving assets to each other at death if they wish but will prevent the surviving member of the couple from disrupting the deceased’s estate plan after the fact.
Whatever the motivation for creating a pre-nuptial agreement, the agreement must be created in a way that will ensure it will be enforceable if the parties divorce. Massachusetts courts have established very clear parameters that must be followed for a pre-nuptial agreement to be enforceable if, and when, the time comes for the agreement to do what it was created to do – protect assets. First, when creating and negotiating a pre-nuptial agreement, it is mandatory that both parties have their own attorneys to ensure each party understands how the terms of the agreement benefit and obligate them. Second, a pre-nuptial agreement must be fair both at the time the agreement is signed and at the time it is sought to be enforced. Third, each party must fully disclose his or her assets, including anticipated inheritances, to the other party. Finally, prenuptial agreements must be entered into freely by each party, without coercion or influence from the other party or outside influence. For this reason, courts have found that the agreement must be entered into far enough in advance of the wedding that neither party feels coerced into signing.
In addition to romantic partners protecting their own assets, we hear a lot of concern from our clients who are parents about protecting assets their children may inherit from them, and what would happen to those assets if a child divorced. A pre-nuptial agreement is a great first line of defense to protect inherited assets. The agreement can provide that any assets a party inherits during the marriage or may inherit in the future should not be considered during property division in the event of the couple’s divorce. For many couples (and their parents), a prenuptial agreement that is narrowly tailored to protect inherited assets may provide peace of mind that family wealth will not be at risk if the marriage does not work out.
If a pre-nuptial agreement is not a possibility, there are a couple of other estate planning cards a parent can play to protect assets on their own. Disinheriting a child who may be married to a problematic spouse or who is headed for divorce is always an option, but not a great one, especially because most parents are concerned about their child’s long-term well-being. A lifetime trust share for the benefit of the child is a better way to protect inherited assets. A parent can create a trust that at their death continues to hold the trust assets in trust for the benefit of their child. The Trust can provide even greater asset protection if the Trustee has discretion to distribute trust assets not just to the child, but also, perhaps to the child’s children or siblings. The purpose of these trust shares is to provide the child with less control over and access to their inheritance from a legal and practical perspective, which in turn provides protection against a child’s creditors, including a divorcing spouse. Although the protection offered by lifetime trust shares is be impacted by the identity of the Trustee, the way the Trust is administered, and the state in which the beneficiaries reside, these shares are a great tool to increase the protection of inherited assets in the event of divorce.
A prenuptial agreement is something to consider if your assets or circumstances are such that you want added assurance that no matter how matters of the heart may go, the things you care about will be protected. Whether or not a prenuptial agreement is in the cards, consider other estate planning options, like lifetime trust shares, to provide protection. As always, we are here to provide advice and counsel on these and all other estate planning matters. For matters of the heart, you will need to seek advice elsewhere.
Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and a past President of the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
February 2024
© 2024 Samuel, Sayward & Baler LLC
Five Things To Do When a Loved One Passes Away
Dealing with the death of a loved one is a challenging and emotional process. Whether the passing was expected or unexpected, managing his or her affairs can be difficult to think about while dealing with the grief and loss of a loved one, and you may need guidance throughout the process. Here are five things you should consider doing after a loved one’s death:
1. Arrange Burial and Memorial Services According to the Loved One’s Wishes
If the deceased was forward-thinking enough to pre-arrange and/or pre-pay his or her funeral when also preparing his or her estate plan, then contact the funeral home with which these arrangements were made. If no plan was put in place before death, contact a reputable funeral home to guide you through the burial and memorial service process.
As part of an estate plan, the deceased may have prepared a Directive as to Remains. A Directive as to Remains is a document that instructs the deceased’s Personal Representative (the person named in the Will who is responsible for administering the estate) to arrange the deceased’s burial or cremation and funeral/memorial services as directed in that document. Your loved one alternatively may have written down similar wishes in a letter of instruction. Carefully review your loved one’s estate planning documents to learn if the deceased left such instructions so that his or her wishes are carried out.
2. Find and Organize Important Documents
Hopefully your loved one showed you where he or she keeps important documents like his or her Will, income tax returns, financial account statements, and bills that are regularly paid. This information will be necessary for settling and administering the deceased’s estate. Look for these documents and gather as much information as you can.
If the deceased named you as the Personal Representative of his or her estate, then you will need death certificates for the deceased. You should obtain about 5 to 10 death certificates to provide to financial institutions, life insurance companies, and the court if probate is necessary.
Locate a safe but easily accessible place where you can store this information as you will refer to and use it often. Do not throw away any financial records or legal documents until you know you will not need them for tax filings, asset valuation, or other purposes.
3. Secure Property of the Estate
Your loved one may have several different types of assets in his or her estate at death. In every case, the Personal Representative (or Trustee if there is a Trust) is responsible for ensuring the deceased’s property is secure and protected for the beneficiaries of the estate. For example, it is important to safely store valuable jewelry and artwork. Similarly, any real estate should be securely locked (perhaps even change the locks) and regularly visited to ensure the real estate and the deceased’s personal belongings are secure. In fact, it is an obligation of the Personal Representative to do so, and he or she may be liable if such measures are not taken and damage occurs to the property. The Personal Representative should also maintain or obtain insurance in connection with the deceased’s assets, as necessary, and may need to have some or all of them appraised for estate administration and/or estate tax purposes.
4. Contact an Estate Planning and Administration Attorney
The settlement of an estate can be incredibly complex depending on the assets and beneficiaries involved, and the provisions of the deceased’s estate plan. The Personal Representative should contact an attorney to guide and assist him or her through the process of completing and filing the required documents to be appointed as Personal Representative by the probate court, gathering assets, paying appropriate expenses, and making distributions, to avoid failing to fulfill his or her obligations. This is especially important if the estate assets are valued at over $2 million and a Massachusetts estate tax will be payable, or if it is anticipated that MassHealth (Medicaid) may file a claim against the estate to be reimbursed for any MassHealth benefits (for home care or nursing home care) received by the deceased during his or her lifetime.
Keep in mind that the administration of an estate typically takes at least one year, so you may want to take the tortoise’s point of view – slow and steady wins the race. You want to be thorough and properly navigate the legal and financial aspects associated with administering the estate.
5. Communicate and Work Together
On top of the issues mentioned above, estate administration can be made more difficult if there are strained relationships between the beneficiaries, which often also includes the person who is serving as Personal Representative. Perhaps there is a history of family disharmony. Perhaps multiple beneficiaries are sentimentally attached to mom’s diamond engagement ring and they must decide who gets to keep it. The only person who wins when there are disagreements between beneficiaries that cannot be resolved is the attorney who gets paid to resolve them via negotiation or court action. Instead, consider embracing the three C’s as much as possible when working with each other: Communication, Cooperation and Compromise. Try offering support to each other during this difficult time.
Estate administration can be a juggling act where the Personal Representative is managing several different responsibilities all at once, including fulfilling the wishes of the deceased and the Personal Representative’s obligations to the beneficiaries. An estate planning attorney knowledgeable in the process of estate administration can guide you through that process in a correct and efficient manner so that you have peace of mind when all is complete—hopefully with family relationships intact, which is most likely what your loved one would have wanted when setting up his or her estate plan.
Attorney Brittany Hinojosa Citron is an associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information or to schedule a consultation with one of our attorneys, please call 781-461-1020.
February 2024
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