Attorney Maria Baler

Five Ways Matters of the Heart Intersect with Estate Planning

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It’s almost Valentine’s Day, and our thoughts turn to reminding those we love how much we care about them.  However, sometimes our relationships don’t always go as planned.  Either way, it’s important that your estate plan keeps pace with your love life.  Here are five ways your estate plan should respond when love is grand, or when love stinks.

1. Show your Love with a Good Estate Plan

Estate planning is about making sure the people you care about will be taken care of if something happens to you.  Estate plan documents provide a roadmap for your family, naming decision-makers and people who are in charge of settling your estate following your death, and making sure your assets get to the people you wish to receive them.  If you have young beneficiaries or those who can’t properly manage assets for themselves, your estate plan can make sure they are taken care of after your death, naming guardians for minor children, and creating trusts to make sure assets are properly managed and applied for young or immature beneficiaries.  Your loved ones will remember you fondly if you leave a well-planned estate.

2. Ensuring Continued Support for Parents or Other Relatives

If you provide support to your parents or other older relatives, planning for their continued support if something happens to you is something you may not consider because you do not expect to predecease them. However, if you do, and if the support you provide is crucial to their well-being, your plan should make provisions for their continued support.  An important part of planning for aging relatives is making sure any money left to them is left in trust, in a way that will not impact needs-based public benefits they may be eligible to receive to pay for their care. A trust will also insure that after your older relatives pass away, the remaining funds are distributed to people you choose.

3. When Love Goes Wrong

Unfortunately, relationships are not always all chocolates and roses.  For couples in the midst of divorce proceedings, estate planning should be a priority.  An important part of estate planning is naming decision-makers in the event you become incapacitated and cannot make legal, financial or health care decisions for yourself.  While a divorce is pending, you should consider updating your Power of Attorney (for legal and financial decision-making) and your Health Care Proxy (for health are decision-making), to make sure people you trust will make those decision for you.  Chances are your existing Power of Attorney and Health Care Proxy name your spouse as the decision-maker, which may not be the person you want to have that authority under the present circumstances.

If you pass away, your estate plan will determine how your assets are distributed.  Because a divorce proceeding, among other things, determines the ownership of a couple’s assets, there are some limitations on this aspect of estate planning while a divorce is pending.  During divorce proceedings, an automatic restraining order applies that prohibits either spouse from selling or transferring assets or changing the beneficiary on life insurance and retirement accounts except as permitted by Court order or agreement of the other party.  Although asset ownership and beneficiary changes may not be made until after the divorce judgment issues, in the meantime divorcing parties can create updated Wills and Trusts that will distribute their assets as appropriate after their divorce is final, keeping in mind that those instructions may not be effective until the divorce is final.

4. After Your Divorce Is Final

Massachusetts law provides for an automatic modification of an estate plan after divorce, although the result may not be what the divorced person intends.  In Massachusetts by law, a divorce judgment revokes any disposition of property to the divorced person’s former spouse, including trust provisions, beneficiary designations as to life insurance and retirement plans, transfer-on-death accounts, and any other revocable disposition.  If estate plan documents named the former spouse or family members of the former spouse as a fiduciary – such as a Personal Representative (formerly Executor) or Trustee – those designations are treated as if the former spouse and the former spouse’s relatives predeceased the divorced person.  Although these provisions may seem to do the trick, in reality they can wreak havoc on an estate plan and create unintended consequences.  In addition, in the event a divorced person intends to or is required by their divorce judgment to benefit their former spouse with life insurance or some other asset, steps must be taken to ensure that designation will stick after the divorce occurs.  The law also states that if a financial company is not properly notified of the divorce and it makes a distribution to the former spouse then the company cannot be held liable.

Once a divorce is final, each party should review their existing estate plan and beneficiary designations consistent with the terms of their divorce agreement and with the help of an experienced estate planning attorney and make any changes that may be necessary.  For example, for a couple with young children, a Trust may be appropriate to manage a divorced parent’s assets for the benefit of those children if that parent were to pass away during a child’s minority.  Naming someone that the parent trusts to manage and apply the Trust assets appropriately for the minor children is of the utmost importance for a single parent.  If a Trust is not created, the children’s guardian/conservator will have responsibility for managing any assets inherited by the children, and that person is likely to be the children’s surviving parent.  For most divorced couples, the idea that a former spouse will have control over the inheritance left to the children is unsettling and inconsistent with their intentions.  An estate plan that addresses divorce-related issues can ensure this does not happen, and that the divorced parent’s wishes will be carried out. 

Addressing the continued ownership of real estate that will be retained by one member of a formerly married couple is also important.  Although a divorce will sever a tenancy by entirety (the form of joint ownership for married couples) and a divorce agreement or order of the court will determine the title, it is still advisable to have a new deed signed conveying the property into the name of the spouse who is retaining it.  No matter how sick and tired you are of dealing with your soon to be ex-spouse, don’t walk away until the i’s are dotted and the t’s’ are crossed and that new deed putting the house in your name is signed and filed with the Registry of Deeds.  This will ensure you (and you alone) can sell, mortgage or plan with that property going forward, without the involvement of your ex-spouse.

5. Planning for a New Blended Family

And let’s not forget that many divorced people go on to find love again.  Estate planning for blended families is extremely important.  Re-marriage brings its own set of estate planning challenges, especially if both parties have children from prior marriages or relationships.  In such a case, good estate planning is crucial to ensure that if one member of the new couple dies, his or her children from a prior marriage will be provided for appropriately, while the new spouse or partner is also provided for if they do not have sufficient means of their own.  It is unfortunate when, because of poor or neglected planning, all of a parent’s assets pass to the new spouse, who then leaves them to his or her own children or family members at death, leaving the deceased’s children with nothing. 

When all is well, planning for death or incapacity may not seem to be a priority which means it can be left on the To Do list forever.  When a marriage is ending, there are many things that are a priority, and dealing with multiple attorneys at the same time is not a happy prospect (for most people).  But estate planning is an important part of taking care of your loved ones.  Whether your situation is simple or complicated, whether your relationships are wonderful or not, taking the time to talk through your situation with an experienced estate planning attorney will provide you with options and strategies to achieve your goals, to protect your family, to give you peace of mind, and allow you to show those you love just how much you care.

 

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 2023

© 2023 Samuel, Sayward & Baler LLC

 

The Millionaires Tax Comes to Massachusetts

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On Election Day, November 8, 2022, Massachusetts voters approved Ballot Question 1, the so-called Millionaires Tax by a close margin.  Of the 50% of Massachusetts registered voters that voted on Question 1, 52% were in favor of the tax and 48% voted against.

This ballot question approved the adoption of an amendment to the Massachusetts state constitution that was already twice approved by the state Legislature  in 2019 and again in 2021.  Starting with the tax year that begins on January 1, 2023, the Amendment will impose an additional 4% state income tax on a Massachusetts resident’s annual taxable income in excess of $1 million.  The threshold for imposition of the extra 4% tax will be adjusted annually for inflation.  The tax is expected to affect only 0.6% of Massachusetts households. 

The tax revenue raised by this extra 4% tax, estimated at $1 to $2 billion annually, will be used, subject to appropriation by the Legislature, for public education (including public colleges and universities) and transportation (repair and maintenance to roads, bridges, and public transportation.

If income from any source, including wages, interest, dividends, income from the sale of a home or business, and long and short-term capital gains, exceeds $1 million, the portion in excess of $1 million will be taxed at 9%  (the standard Massachusetts income tax of 5% plus the additional 4% tax on income in excess of $1 million). Because Massachusetts taxes short term capital gains at 12%, the effective new tax rate on this income will be 16%.  

For the typical Massachusetts resident, the sale of a home may be the most likely reason you would have $1 million of income in one year, in the form of capital gain realized on the sale of your home.  It is important to keep in mind that you do not pay capital gain tax on the entire sale price of your home.  First, capital gain is calculated by subtracting your “basis” in your home from the sale price. Your basis is the price you paid for the property, plus any capital improvements you have made to the property over the course of your ownership.  If an owner of the property has died, the basis in the property receives a so-called “step-up” in basis  to the value of the property on the date of the owner’s death, which will reduce the capital gain when the home is sold.  

Second, keep the capital gain exclusion in mind.  A single individual can exclude up to $250,000 of capital gain from tax if they sell their primary residence and have owned and lived in the home for two of the last five years prior to the sale.  Married couples can exclude $500,000 of capital gain from tax if one or both of them owned the home and both of them resided in the home for two out of the last five years.  A deceased spouse’s capital gain exclusion can continue to be used up to two years after their death if the home is sold during that time and the surviving spouse has not remarried.  If a homeowner has moved to a care facility and lived in the home for at least one year during the five years prior to sale, the time spent living in the care facility can be used toward the two-year residence requirement. 

Once the final regulations applicable to this tax are finalized its impact may be better understood, and with it the ways in which the tax may be minimized by proper tax planning.  In the meantime, if you anticipate a taxable event such as the sale of a home or business that will result in more than $1 million of income, consult your income tax advisor to understand how this new tax will impact you, and to determine if there are ways to reduce its impact.

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 the immediate 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.

November 2022

 

Five Family Situations that Merit Special Planning

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By Attorney Maria C. Baler

Although it is important for every person over the age of 18 to create estate plan documents, there are some family situations that make it especially important to plan.  In these situations, proper planning is crucial to protect your family, achieve your goals and prevent unintended consequences.   Here are five family situations where planning is crucial.

1. Disabled or Special Needs Beneficiary

If you have a child, grandchild or other beneficiary of your estate who is disabled or has special needs, that person may now or in the future be eligible to receive public benefits due to their disability.  If that person receives an inheritance directly, receipt of those assets will likely make them ineligible to receive those public benefits, which may provide a monthly income, affordable health care, prescription drugs, medical equipment, and needed care.  Many public benefit programs have an asset limit of $2,000 for eligibility.  If someone who receives Supplemental Security Income (SSI), for example, were to receive an inheritance of more than $2,000, they would lose the SSI benefit until the amount in excess of $2,000 is spent down in an allowable manner.  This problem is easily avoided by thoughtful planning – usually by creating a so-called Supplemental Needs Trust for the benefit of the beneficiary, commonly used to preserve needs-based governmental benefits for a person with disabilities. For example, parents of a child with disabilities, can create a third-party trust for the benefit of their child into which the child’s inheritance would be paid at the parents’ deaths.  This type of Trust does not need to include a payback provision for benefits the child may have received during life, and assets in the Trust will not cause the beneficiary to lose needs-based governmental benefits.  Instead, those assets can be used during the lifetime of the beneficiary to provide the beneficiary with services or experiences that enhance their quality of life and that are not otherwise covered by the benefits they receive.  Assets remaining in the trust at the death of the disabled beneficiary may be distributed to other family members

2. Beneficiary with Substance Abuse Disorder or Spendthrift Tendencies

If you would like to benefit a particular person at your death, but are concerned about that person’s ability to manage any assets they receive, you may benefit that person while controlling their access to the inherited assets by directing their inheritance into a discretionary Trust for their benefit, managed by a third-party Trustee.  The Trustee you choose will receive the inherited assets after your death and manage those assets for the benefit of the beneficiary.  It will be up to the Trustee if and when money is distributed from the Trust to or for the benefit of the beneficiary, based on parameters you create.  For example, if a beneficiary has substance abuse disorder, the Trustee could be directed to pay the beneficiary’s rent, health insurance premiums and uninsured medical expenses directly, keeping assets out of the hands of the beneficiary where it may be spent inappropriately.  For a beneficiary who is on a path to recovery, the Trust terms could require that the beneficiary undergo drug testing before receiving a distribution to incentivize them to stay clean.  

A beneficiary who has spendthrift issues may spend money in ways you do not find reasonable.  Sometimes, this is a minor issue (like spending too much money on expensive shoes), or the person may have serious spending issues and have creditors chasing them or a bankruptcy in their past (or future!).  If you would like to leave money to such a person in your estate plan, but would like to make sure the inheritance you leave them is not blown on fast cars, fancy handbags or $500 shoes, and/or is protected from current or future creditors, a Trust is the answer.  The Trustee will have discretion to use the money for the beneficiary’s benefit, but the beneficiary will not have control over how the money is spent. You may grant the beneficiary the right to request money from the Trust, but the Trustee will judge whether the purpose for which the money is requested is reasonable.  Alternatively, the beneficiary’s access could be limited by giving the beneficiary the income from the Trust for life, but no or limited access to principal.  This type of Trust can also work well if a beneficiary you wish to benefit is married to a spendthrift, and you are concerned that the spouse of the beneficiary may influence them to spend money inappropriately, or will end up in the spouse’s hands in the event of a divorce or the beneficiary’s death.  This type of Trust will also protect the money from a beneficiary’s creditors to the extent it is not distributed to the beneficiary.  In this way, the spendthrift beneficiary (or their spendthrift spouse) may spend their own money on expensive shoes, but be assured of having other needs met, if necessary, from the assets you leave in trust for their benefit.

3. Parents in Need of Support

We often see clients who are providing support to aging parents.  As parents live longer, some can no longer afford to cover all of their own living expenses, or cover costly care expenses.  If they are lucky, their children may be in a position to help them with these expenses.  However, a child in this situation needs to consider what would happen if the child predeceased the parent.  Without a thoughtful plan, the monetary support the child is providing to the parent could end abruptly, creating unintended consequences.  In this situation you would hope that the deceased child’s siblings would step up to the plate and provide needed assistance, however this is often not possible and may be why the deceased child was providing so much assistance in the first place.  You would also hope the deceased child’s spouse or children would continue to provide that assistance, however that may also not be possible depending on the extent of the inheritance or how it is left to them, especially if the child was providing support due to a sizeable employment income that ended with the child’s death.  Careful planning can ensure that parents who rely on a child’s support will be protected in the event of a child’s death.  Using a trust to benefit the parents is an important part of that plan, to ensure assets left directly to parents will not disqualify them from receiving public benefits for which they may otherwise be eligible.

4. Troublesome In-Laws

We all hope the people our children choose to marry are mature, responsible and treat our children well.  Unfortunately, this is not always the case.  We have all heard statistics about the large percentage of marriages that end in divorce.  If you are leaving assets to a child or other beneficiary at death and you have concerns about the stability of the beneficiary’s marriage, or are just not very fond of the person they chose to marry, a Trust can be used to benefit the beneficiary while keeping the inherited assets out of the hands of their spouse, and protecting those assets to a greater extent in the event of a divorce.  If assets are not inherited directly by a beneficiary, they cannot give those assets to a spouse, or deposit them into a joint bank account where their spouse has access and ownership.  In many cases, assets that are not inherited directly will not be subject to division in a divorce proceeding.  To avoid leaving assets directly to a beneficiary with a troublesome spouse, leave those assets in trust for the beneficiary.  Establish parameters in the Trust as to how the assets may be applied for the beneficiary.  Prevent the Trustee from distributing assets directly to the beneficiary, and instead allow the Trustee to use those assets for the benefit of the beneficiary.  Perhaps include the beneficiary’s children or siblings as beneficiaries of the Trust in addition to the beneficiary.  Name a Trustee who is not a family member to provide greater protection in the event the beneficiary finds herself in the midst of a divorce proceeding. Although the extent to which a trust offers protection in the divorce context varies depending on the circumstances and the state in which the beneficiary resides at the time of the divorce, trusts offer significantly more protection for inherited assets than an outright distribution to the beneficiary.

5. Blended Families

Although marriages end in divorce, there are many instances of divorced or widowed individuals finding love with a new partner.  When one or both partners have children, this can create a situation of competing planning goals – making sure that when they die their partner is taken care of, but also wanting to make sure their children are provided for, and that their money is not directed by their partner away from their children should their partner re-marry or leave assets to their own children.  These goals can be achieved with careful planning by thoughtfully deciding which assets are best to leave to a partner vs. children at death. Alternatively, creating a Trust that will benefit the surviving partner during their lifetime, while ensuring that assets remaining in that Trust after the partner’s lifetime will be left to children is a common arrangement.  This type of planning is important for people with young children, who may rely on their parent for support and education expenses, and also for those with adult children, who may be devastated when their deceased parent’s assets, particularly assets such as a beloved family home or vacation home, are left to a surviving partner and sold or pass to others at the partner’s death.  

People with non-typical situations often delay planning because they fear that there is no good way to achieve their complicated or competing planning goals, or address concerns (sometimes unacknowledged) about the beneficiaries they hope to benefit.  Taking the time to talk through your situation with an experienced estate planning attorney will provide you with options and strategies to achieve your goals, and will result in a plan that addresses your special family situation in the best way possible.  If you have one of these situations in your family, don’t delay – speak with an experienced estate planning attorney today!

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 the immediate 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.

October 2022

© 2022 Samuel, Sayward & Baler LLC

 

As the Massachusetts Estate Tax Turns

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The Massachusetts estate planning world watched with bated breath this summer as we came closer than ever to increasing the Massachusetts estate tax threshold from $1 million to $2 million.  But alas, it was a false alarm.

As you may know, Massachusetts is one of only 11 states plus the District of Columbia to have a separate state estate tax.  Among those states, Massachusetts and Oregon are the two states with the lowest estate value that is subject to estate tax – $1 million.  If you die a resident of Massachusetts and own assets valued at $1 million or more, you will currently pay tax on the entire value of your estate.

Every year there are bills filed in the Massachusetts state legislature to increase the Massachusetts estate tax exemption.  This year, both the Massachusetts House and Senate passed bills that would raise the estate tax threshold from $1 million to $2 million, and it looked like the bills would be reconciled and become law.  However, at the last minute, the Governor raised the possibility that a 1986 law would trigger a requirement that the state return to taxpayers over $2 to $3 billion due to the state’s large budget surplus.  Needless to say, that put the brakes on any other form of tax relief until things are sorted out.

In the meantime, what’s a middle-class Massachusetts family to do about saving estate taxes?  As we all know, if you own a home in this state you are probably at least halfway to the $1 million estate tax threshold without even trying. Add to that the value of some life insurance, bank accounts, investments and/or an IRA or 401k and you are likely over $1 million without even trying.

For married couples in Massachusetts, credit shelter trusts are a go-to estate tax planning strategy which allows up to $1 million of assets to be “sheltered” in trust at the death of the first spouse to die such that those assets will not be subject to estate tax in the estate of the second spouse to die.  The surviving spouse can serve as Trustee of the trust and use the sheltered assets, as needed, for the surviving spouse’s health care and living expenses after the first spouse’s death.  If a credit shelter trust is created and funded appropriately, and depending on the size of the estate, the estate tax savings is significant. For example, a married couple with $2.5 million in assets would pay $139,000 in Massachusetts estate tax at the death of the second spouse without any tax planning.  If a credit shelter trust is in place and funded with $1 million at the death of the first spouse to die, the estate tax payable at the death of the second spouse would be reduced to $64,000, saving $75,000 in estate tax.

For single individuals, estate tax savings involves giving up control of assets, usually in the form of giving assets away to family members, charities or other beneficiaries.  Annual exclusion gifts of $16,000 per year per person can be given to as many individuals as desired each year without the need to file a gift tax return or pay any gift tax (unless these gifts exceed $12 million in total under current law).  These annual exclusion gifts, especially if given consistently over time, can reduce the value of the assets that will be subject to estate tax at death, and the corresponding tax that will be paid.   Gifts can also be given in unlimited amounts to pay tuition or medical expenses for another person.   However, before making gifts during life, the gift giver must carefully consider whether they can afford to do so.  Future living expenses and care costs are difficult to predict.  It may be smarter to retain control of assets to be sure living expenses and care costs in the preferred care setting can be paid, rather than worry about saving estate tax for heirs.  If the value of a person’s assets is diminished at the time of death due to spending on living and care expenses during life, the estate tax will be reduced naturally.

However, for single individuals with assets in excess of the estate tax threshold who are confronted with a terminal illness or a situation where death is imminent, deathbed gifts are a useful strategy to reduce estate taxes payable at death.  Gifts made immediately before death will reduce the value of the assets on which Massachusetts estate tax will be paid after death.  These gifts are possible only if the gift-giver is competent to make the gifts, or has a Durable Power of Attorney that specifically permits gifts to be made.

A few things to keep in mind when contemplating deathbed gifts:

  • If checks are written for gifting purposes, those checks must clear the bank account before death in order for the gift to be effective for estate tax purposes, and therefore it is better to make such gifts using bank checks that will withdraw the funds from the account immediately when the check is issued.  
  • As with any lifetime gift, gifts of appreciated assets transfer the gift-giver’s basis to the gift recipient, which will result in a capital gain tax if the gift recipient sells the gifted asset at a later date.  Holding appreciated assets until death under current law will provide a step-up in basis, eliminating any unrealized capital gain.  Consideration of the estate tax savings as compared to any future capital gain tax that would be paid is an important consideration in determining whether gifts of appreciated assets make sense.
  • A gift tax return may need to be filed post-death to report any gifts made in excess of $16,000 per person.  
  • Even if gifts are made that reduce the value of the gift-giver’s assets below $1 million, there may still need to be a Massachusetts estate tax return filed and estate tax paid, although the assets given away will not be subject to tax.  This is because gifts over $16,000 per person are considered when determining whether the value of the deceased person’s assets was $1 million or more at the time of death and whether an estate tax return must be filed.  However, the estate tax due is calculated only on the value of the assets not given away.  Although an estate tax return may still need to be filed, the estate tax paid will be less than if the gifts were not given.  

Deathbed gifts are a difficult subject, and something that a family may not wish to discuss at such a sensitive time. However, they are a useful strategy for a single person who may have held off on gifting during life for the reasons mentioned above, and whose estate will be subject to estate tax if gifts are not made.  It is important to get advice from an estate planning attorney if such gifts are contemplated, to make sure they are made the right way and using the right assets to achieve the most tax savings.

Stay tuned as we remain hopeful that the Massachusetts legislature will move forward to increase the estate tax exemption sometime soon, and make estate tax planning unnecessary for many residents of the Commonwealth.

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 the immediate 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.

August 2022

© 2022 Samuel, Sayward & Baler LLC

What’s New at Samuel, Sayward & Baler LLC – Don’t Miss Our July 2022 Newsletter

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Don’t Miss Our July 2022 Newsletter

Attorney Maria Baler discusses our most recent newsletter, for our Smart Counsel for Lunch Series. Please watch and if you have any questions or want to learn more then call us at 781 461-1020. Please find our newsletter below.

Pay Attention to your Deed

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A Deed is a document that determines the ownership of real estate.  When you purchase your home or other real estate, or if property is given to you, the person transferring the property to you (the Grantor) gives you (the Grantee) a Deed to the property, which is signed by the Grantor and recorded at the Registry of Deeds.  For most people, that is the last time they look at their Deed.

In the old days, an original Deed (or Certificate of Title for registered land) was an important document, and people often kept them in their safe deposit box.  Over the past decade, land records in Massachusetts have become fully electronic.  Once a Deed is recorded at the Registry of Deeds, the electronic copy of that document is the one that matters.

It is possible for you to look at the most recent Deed to your property (or to your neighbor’s property for that matter), your most recent mortgage, homestead, or any other document that has been recorded at the Registry of Deeds on the website for the Registry of Deeds for the county in which your property is located.  Go to www.masslandrecords.com, select your county from the state map, and then search for your name.  

From an estate planning perspective, your Deed determines the ownership of what is probably your most valuable asset – your home.  As part of creating an estate plan, your estate planning attorney should review your Deed to make sure the way your property is owned is consistent with your estate planning goals.  

There are various ways to own real estate in Massachusetts if two or more people own property, and the form of tenancy is generally noted after the name of the Grantee.  For example:

  • A Deed to “John Smith and Jane Smith as tenants in common” means that John and Jane each own a 50% interest in the property independent of each other.  If John dies, his interest will not pass to Jane, and will instead pass according to his Will, or if he does not have a Will according to the intestate laws.
  • A Deed to “John Smith and Jane Smith as joint tenants with rights of survivorship” means that if John or Jane dies, his or her interest will pass automatically to the surviving owner, and will not be controlled by the provisions of John or Jane’s Will.  
  • A Deed to “John Smith and Jane Smith, husband and wife as tenants by the entirety” is the form of joint ownership for married couples in Massachusetts, and as above in the case of “joint tenants”, the property will pass to the surviving spouse on the death of the first spouse.
  • A Deed to “John Smith and Jane Smith”, with no tenancy indicated after the names of the Grantees, means the property is owned as tenants in common.  Not indicating a tenancy on a Deed to two or more people is often an oversight that can have serious consequences.  A probate proceeding will be required at the death of an owner of the property.  This is particularly unfortunate when the lack of tenancy on the Deed goes unnoticed until just prior to the sale of the property, in which case the sale will be significantly delayed, if not lost, until a probate proceeding is commenced and a Personal Representative can be appointed for the deceased owner’s estate.

For estate planning purposes, property may be transferred from an individual’s name to a Trust to avoid probate, or for estate tax savings or asset protection reasons.  However, if your Deed is and will remain in your individual name, it is important to make sure the way you own your property is consistent with your planning goals.

It is important that the Deed to your property not be changed by anyone but an attorney who is experienced in real estate matters.  Mistakes in the names of the Grantor or the Grantee, in the type of tenancy indicated, or in the legal description of the property being purchased or transferred, can create serious title issues, delays, expense and no end of headaches.    

I was recently surprised to hear from a client that a bank, in connection with a mortgage loan transaction, changed the deed to the client’s property to add a child on to the deed.  This change, although accomplishing the bank’s objectives regarding the mortgage transaction, changed the manner in which the property will be owned following the client’s death in a way that was not at all consistent with the client’s wishes or the client’s estate plan.  Transferring title to real estate falls under the category of things you should not undertake on your own, nor should you sign a Deed prepared by someone else without having an attorney review the Deed and discuss with you any implications of the change in ownership.

Changing a Deed can also have tax implications, can expose the property to the creditors of a new owner, and can void Homestead protection.  There is no end to the headaches and unintended consequences that can result from changes to your Deed, whether properly drafted or not.  Take a look at the Deed to your home, make sure that the ownership reflected on the Deed reflects your wishes, and if it does not, or if you are not sure, ask your estate planning attorney to review it with you to be sure it is consistent with your planning goals for that property.

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 the immediate 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.

June 2022

© 2022 Samuel, Sayward & Baler LLC

Five Reasons to Consider a Prenuptial Agreement

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Five Reasons to Consider a Prenuptial Agreement

By Attorney Maria C. Baler

As Alfred Lord Tennyson said in his poem Locksley Hall: “In the spring a young man’s fancy lightly turns to thoughts of love”…and an estate planner’s thoughts turn to pre-nuptial agreements.  With spring comes the start of wedding season.  Although estate planners are romantics at heart, they also know that not all couples live happily ever after.  

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.  Although some skeptics think that pre-nuptial agreements are only for the wealthy, here are five reasons you might want to consider a pre-nuptial agreement if you are headed to the altar.

  1. Protect Inherited Assets

In dividing a married couple’s property in the event of divorce, all property the couple has brought to the marriage or acquires during the marriage is considered, including any assets a member of the couple may have inherited during the marriage.  Massachusetts, like some other states, also allows a judge to consider the opportunity of each party to acquire assets and income in the future, including any inheritance a party may receive in the future.  A prenuptial agreement is probably the easiest and best way to protect inherited assets from being considered when dividing assets between divorcing spouses.  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.

  1. Protect a Family Business

If an owner or a member of a family business is getting married, this often (or should) raise concern about what will happen to that person’s ownership interest in the family business in the event of a divorce. Will a judge award an interest in the business to the ex-spouse?  What will that mean to the family’s ability to continue to operate the business or make business decisions if the ex-spouse has a say in how the business is run?  This can be a messy situation, and one which a prenuptial agreement can address.  The parties can agree in advance that the party with the ownership interest in the business will keep that interest in the event of a divorce.  This will go a long way to providing security for the other business owners and ensure the business can carry on without interference, regardless of how long the marriage lasts.

  1. Protect Children from a Prior Marriage

Prenuptial agreements are not just for first marriages, and in fact may be even more important for those who have been married before, and who may have more assets to protect and perhaps even children from a prior relationship.  Marriage confers certain rights on your spouse under the law, including the right not to be disinherited at death.  However, a prenuptial agreement can waive those rights, if appropriate.  For example, if two people who have children from prior relationships decide to marry, they may enter into a pre-nuptial agreement that prevents the new spouse from claiming any interest in the estate of the deceased spouse, so that the deceased spouse is assured that his or her assets can be left to their children at their 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.

  1. Address Long-term Care Concerns

A pre-nuptial agreement can make it clear, especially for couples who marry later in life, that each member of the couple is responsible to pay for their own care costs, including any long-term care expenses, rather than their new spouse bearing any responsibility for those expenses.  Often, couples will consider purchasing long-term care insurance to insure against the possibility that care costs will reduce the assets they may otherwise be able to leave to their children.    Keep in mind that if qualification for public benefits, such as Medicaid benefits, is necessary, a prenuptial agreement’s provisions will not be honored, and Medicaid will consider the assets of both spouses in determining eligibility for benefits.  However, if the marriage is terminated (and in some circumstances, divorce is a long-term care planning choice), the pre-nuptial agreement may prevent the Court from allocating assets in conflict with the agreement.

  1. Protect Special Assets 

Perhaps one spouse has a home they painstakingly restored prior to the marriage.  In the event of a divorce, that spouse may want to be sure they are able to keep the house, rather than having it go to their spouse or sold so that the value can be divided between them.  Maybe the other party has a partial ownership interest in a ski condo, or a valuable antique car.  A prenuptial agreement can address these special assets, and allow the parties to agree in advance how those assets would be treated and divided in the event of a divorce.

Whatever the motivation for creating a prenuptial 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 premarital 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 prenuptial 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, in order to be enforceable, Massachusetts courts have held that a prenuptial 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 to a prenuptial agreement must fully disclose his or her assets, including anticipated inheritances, to the other party.  Full and complete disclosure of assets is essential to the agreement’s enforceability.  Finally, prenuptial agreements must be entered into freely by each party, without coercion or influence from the other party or outside influences.  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.   

Consider a prenuptial agreement if your assets or circumstances are such that you want added assurance that no matter how matters of the heart may go, your assets and your children will be protected.

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 the immediate 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.

April, 2022

© 2022 Samuel, Sayward & Baler LLC

 

Five Reminders of Things to Do this Groundhog Day

by

By the time you read this it will likely be Groundhog Day, February 2nd, the day each year when a groundhog named Punxsutawney Phil emerges from his burrow in western Pennsylvania and determines, with questionable accuracy, whether we are in for another six weeks of winter. After last weekend’s blizzard, I think it’s safe to say we are all rooting for winter to be over as quickly as possible!
Many of you may also remember the 1993 movie Groundhog Day starring Bill Murray as a TV weatherman who relives the same day over and over as he goes on location to cover Punxsutawney Phil, and famously says: “Well, what if there is no tomorrow? There wasn’t one today.” In honor of Groundhog Day and in the spirit of the movie, I thought I would remind you of five things we talk about over and over and over again when helping our clients plan for the day when there is no tomorrow.

1. Create or Update your Estate Plan

An estate plan is your opportunity to create a roadmap for what happens to you and your assets if you become incapacitated or pass away. It is your chance to decide who makes legal, financial and health care decisions for you if you are sick, who will be in charge of settling your affairs and distributing your assets after your death, and how those assets will be distributed. Estate plans can be simple or complex. They can be designed to save taxes, avoid the involvement of the probate court, create a structure to manage an inheritance for a beneficiary who is young or foolish or both. Whatever your goals, create an estate plan, or update yours if it has been a few years since you did it. Life goes on, things change. As we say to our clients, it’s never too late to plan as long as you are alive and well, until you aren’t.

2. Fund your Trust

If you have created a Trust as part of your estate plan, you have heard us say many times that funding your Trust is one of the most important tasks that you need to do to ensure your plan works as intended. This means re-titling assets so that they are owned by the Trust, and not by you individually, or designating your Trust as the beneficiary of certain assets so that they will pay to the Trust at your death. Funding a Trust ensures the assets owned by the trust will avoid probate at your death. Funding a Trust can also ensure assets will be sheltered from estate tax at the death of the first spouse of a married couple, savings tens of thousands of dollars in taxes for your children or other heirs. Funding a Trust may also allow someone to manage and use those assets for you if you become incapacitated. So, if you have a Trust, don’t forget to fund it, and don’t delay in doing so.

3. Compile Important Information

If you become incapacitated or pass away, there is a lot of important information that your loved ones will need to know – What assets do you own and where are they located? Who prepares your income taxes? Do you have life insurance? Where is your safe deposit box? Where did you hide your stash of gold coins? What is the password to your Shutterfly account? What is the significance of those old candlesticks that occupy a place of honor on your mantle? Consider sitting down and writing a list of things someone would need to know if you were not able to tell them, including a list of your assets, your advisors (legal, financial, tax), and where your estate plan documents are located. Tell someone you trust where to find this information if necessary. And lastly, keep that list updated so that it will be current when it is needed.

4. Name Financial and Health Care Decision-Makers

Much of the fun and games in your estate plan happens after your death – taxes are paid, assets are distributed, beneficiaries divvy up your tangible property and fight over the patio furniture. However, there are two important documents that will directly impact you while you are alive – your Power of Attorney which names a person who will make legal and financial decisions for you and your Health Care Proxy which names someone who will make health care decisions for you if you are not able to make decisions for yourself. Make sure you have control over who is making decisions for you by creating these documents while you are well, and naming people you trust will make good decisions for you. Taking control of the situation and choosing your decision-makers while you are still able to do so will allow you to make the best choice, will allow you to prepare those decision-makers by discussing your wishes with them. Doing so will avoid a situation where no one is named and a judge decides who will serve in these roles rather than you.

5. Name a Guardian for Minors

Parents of young children do not have a lot of free time, and often the last thing on their mind is writing a Will, since the thought of passing away is remote and very scary. However, as a young parent, writing a Will is one of the most important things you can do. A Will is the one opportunity you have to decide who will serve as your child’s guardian if you are not able to do so. A guardian is a person who will be appointed by the Court to have custody of your children, and to make decisions regarding where they live, where they go to school, and their health care. If one parent dies, a child’s surviving parent will be named as the child’s guardian unless that parent is unfit. However, if both of a child’s parents are deceased, an alternate guardian should be named.

Naming a guardian for your minor children is one of the most difficult decisions you will make, but is arguably the most important thing you can do to ensure your child’s well-being if you die before your child is an adult. There is no perfect choice for this role, and often parents need to compromise on their ideal choices. As your children grow and change, a different person may be more appropriate, and your Will can be changed to name a different guardian at a later date. Naming someone is better than naming no one. If you die without naming a guardian for your children, the Court will have to choose among the people who ask to be appointed. And chances are some of those people may not be the people you would have chosen if you had the choice. Unfortunately, without a Will, the Court has no idea who your choice would be.

Long winter weekends, especially when COVID-19 has limited many people’s activities, are a good time to cross things off the To Do List. Put some of the above items on your list and get them done. Here’s hoping you will be around to celebrate many more Groundhog Days to come and fingers crossed for an early spring!

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 the immediate 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 2022
© 2022 Samuel, Sayward & Baler LLC

 

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