Attorney Maria Baler

What’s New at Samuel, Sayward & Baler LLC – Don’t Miss Our Spring 2024 Newsletter

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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.

Five Questions and Answers About the New Massachusetts Estate Tax Law

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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

Love Stinks (Sometimes): A Case for Pre-Nups and Lifetime Trust Shares

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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 Your Estate Plan Allows You to Be Thankful For 

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Estate planning is hard.  Discussing topics like incapacity, death and taxes are unpleasant.  It’s the reason why an estimated two-thirds of Americans do not have an estate plan.  But like many hard things, after it is done there is a sense of accomplishment and relief, and in many cases gratitude.  Estate planning may be something you have been putting off for years, if not decades.  Getting it done is a great feeling, and something that benefits not just you but your loved ones.  Estate planning is an essential aspect of financial well-being and ensuring that your assets and loved ones are protected.  Here are five things to be thankful for when your estate plan is done.

1. Peace of Mind

One of the most significant benefits of estate planning is the peace of mind it provides. Knowing that your affairs are in order and that your loved ones will be taken care of in the event of your passing can be a great source of comfort. For families with minor children, estate planning means you have put in place a plan for your children to be taken care of by someone you choose if you pass away while they are still young.  It also means that you have created a trust so inherited assets can be managed for young children until they are mature enough to take control of those assets themselves.  Estate planning minimizes the potential for family disputes over assets, designates decision-makers of your choice, and makes the difficult process of grieving much more manageable for your heirs.

2. Control Over Your Legacy

Estate planning allows you to have control over your legacy. You get to decide how your assets will be distributed, who will receive them, and under what conditions, and who will oversee that process.  Holding assets in trust for minor children or a beneficiary with special needs is important.  It may also be important for older children for whom asset protection is a concern due to an unstable marriage, a pattern of mismanagement of assets, profligate spending, creditor issues, gambling issues or substance abuse.  This control ensures that your assets are used in a way that aligns with your values and priorities. Whether you want to support your family, friends, favorite charities, or any other cause close to your heart, estate planning allows you to make that happen.

3. Tax Efficiency

Effective estate planning, especially in a state such as Massachusetts with a separate state estate tax, can reduce the tax burden on your estate, leaving more of your assets to your loved ones. By using strategies like trusts, gifts, and other tax-efficient mechanisms, you can maximize the wealth you pass on to the next generation.  If you have a large IRA or other tax-deferred retirement plan, the estate planning process will help you understand how the income tax on these assets will impact you and your heirs.  You will be thankful for the opportunity to minimize the impact of these taxes on your estate and your heirs to ensure that your beneficiaries inherit as much as possible.

4. Smooth Transition of Assets

The estate planning process starts with compiling information about the assets you own, how they are owned, and how beneficiaries are designated.  Creating such an inventory and keeping it up to date will go a long way toward helping the people who are implementing your estate plan carry out their duties efficiently.  Ensuring your assets are owned properly and beneficiaries are designated appropriately and consistent with your plan is an important part of estate planning and will ensure your plan works as intended.  In Massachusetts, where the probate process can take a year or more to complete, the use of Trusts in an estate plan can avoid the probate process and allow for immediate access to assets at death.  This means that your beneficiaries will receive their inheritance more quickly and with far less delay and frustration. The ability to provide a seamless transfer of wealth will give you peace of mind and will be a source of gratitude for your heirs after your death.

5. Your Team

It takes a village, as they say, and estate settlement and trust administration is no exception.  If planning is done properly, an important part of the legacy you leave will be a team of advisors – your estate planning attorney, your accountant and your financial advisor – who will guide and advise your family after your lifetime while ensuring your estate plan is carried out according to your instructions.  Introducing your family to these team members while you are alive can ensure an even more seamless transition.  You will be thankful for the guidance your team provides you during your lifetime and will have peace of mind knowing they will be there to guide your family after your death.

Estate planning offers peace of mind, control over your legacy, tax efficiency, a smooth transition of assets, and a team that will guide you and your loved ones through whatever the future brings.  If you have not already created your estate plan, start the process.  If you have an estate plan in place, make sure it is up to date.  And while you are planning, be thankful for the opportunity estate planning provides to secure your family’s future, provide for charitable causes, and make your passing more manageable for those you leave behind. Your heirs will certainly thank you after you’re gone.

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.

November 2023

© 2023 Samuel, Sayward & Baler LLC

 

Community Resources Smart Counsel Webinar from September 14th

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Our latest Smart Counsel Series Webinar took place on Thursday, September 14, 2023, from 6:00p.m. to 7:30 p.m. virtually via Zoom, and was hosted by Attorney Maria Baler who moderated a panel on community resources. Our local cities and towns and regional organizations offer a wealth of programs, resources, and assistance to residents.

These include educational, wellness and social programs, home care services, caregiver support, Medicare counseling, assistance with money management, and providing veterans with assistance to gain access to health care and financial benefits that may be available to them. Many residents are not aware of the availability of these resources until they are in need. This webinar explored these resources in detail. Watch the webinar to learn more about what is available and how they can be accessed.

We were delighted to be joined for this discussion by three individuals who assist local residents every day: Lina Arena-DeRosa, the Director of the Westwood Council on Aging, Sheryl Leary, the Director of Planning and Community Development for HESSCO (the Aging Services Access Point (ASAP) and Area Agency on Aging (AAA) for Southern Norfolk County, and TJ Tedeschi, U.S. Marine Corps (Ret.), the Veteran Service Officer (VSO) for the West Suburban Veterans District which encompasses the Towns of Needham, Wayland, Wellesley, Weston and Westwood.

Smart Counsel Series Exploring Community Resources

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To our Clients and Friends:

Please join us for the next presentation in our Smart Counsel Series on Thursday, September 14, 2023, from 6:00p.m. to 7:30 p.m. virtually via Zoom, hosted by Attorney Maria Baler who will moderate a panel on community resources.

Our local cities and towns and regional organizations offer a wealth of programs, resources, and assistance to residents. These include educational, wellness and social programs, home care services, caregiver support, Medicare counseling, assistance with money management, and providing veterans with assistance to gain access to health care and financial benefits that may be available to them. Many residents are not aware of the availability of these resources until they are in need. Join us to explore these resources in detail and learn more about what is available and how they can be accessed.

We are delighted to be joined for this discussion by three individuals who assist local residents every day:
Lina Arena-DeRosa, the Director of the Westwood Council on Aging,
Sheryl Leary, the Director of Planning and Community Development for HESSCO (the Aging Services Access Point (ASAP) and Area Agency on Aging (AAA) for Southern Norfolk County, and
TJ Tedeschi, U.S. Marine Corps (Ret.), the Veteran Service Officer (VSO) for the West Suburban Veterans District which encompasses the Towns of Needham, Wayland, Wellesley, Weston and Westwood.

Please join us to learn more about the valuable resources and assistance available to you at the local level.

Contact Kenzie Sayward at 781/461-1020 or kenzie@ssbllc.com to reserve a spot for you and a friend.

Suzanne R. Sayward
Maria C. Baler
Abigail V. Poole
Brittany Hinojosa Citron
Megan L. Bartholomew

 

Wills • Trusts • Elder Law • Long-Term Care Planning • Estates

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