Attorney Suzanne Sayward discusses Our Sale on Estate Plans, 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. For more information about the sale please email Joanne Loetz at loetz@ssbllc.com
Meet Attorney Leah Kofos!
Attorney Leah Kofos Introduces Herself 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. Learn more about Leah here
5 Things your Mom would Tell you if your Mom was an Estate Planning Attorney
It being May, our thoughts are on longer days, warmer weather, graduations, and Mother’s Day. Being a mom myself, I can say with certainty that while I loved the gifts my children gave me for Mother’s Day, especially the hand-made ones when they were little, nothing warms a mother’s heart more than hearing her children say, “I followed your advice Mom and you were right.” (I think I can hear the mothers out there both agreeing and laughing hysterically…)
Read on for 5 Things your mom would tell you if your mom was an estate planning attorney.
1. Just Do It. Not to infringe on Nike, but if you’re an adult and you don’t yet have an estate plan, just do it. A basic ‘don’t leave home without it’ estate plan consists of a Will, Power of Attorney and Health Care documents. A Revocable Living Trust is an estate planning tool which can address many goals that people have when creating an estate plan such as probate avoidance, management of assets for young or disabled beneficiaries, and creditor protection for inherited assets left to children or other beneficiaries.
2. Get organized. This is the estate plan equivalent of ‘clean your room’ – something your mom may have said to you once or twice. But seriously, I often say to my clients that the best gift they can give to their families is to keep their records organized and updated. Would your family know what bills need to be paid and how to access the funds to pay them if you were incapacitated or at your death? Would they be able to easily discover what financial accounts you have? For many people their financial information is now available only via online access, and therefore they do not receive monthly statements in the mail. This can be a real problem if you have not prepared a list of your accounts (and, at the risk of horrifying IT people everywhere, your user names and passwords to access those online accounts) and made this information available to at least one trusted person. Consider what someone would need to figure out what you own and how to access it and prepare a road map.
3. Check your Beneficiary Designations. Many assets, such as retirement accounts, life insurance policies, and payable-on-death bank accounts, pass directly to beneficiaries when the owner passes away. It is crucial to review and update beneficiary designations regularly to ensure they align with your overall estate plan. Failing to designate beneficiaries or keeping outdated designations can lead to unintended consequences, such as assets passing to ex-spouses or deceased individuals. It can also have serious negative tax consequences when it comes to qualified retirement accounts. Reviewing your beneficiary designations on a regular basis is also important. When financial advisors change companies, the beneficiary designations that were set on the IRAs with the old company do not carry over to the new company. The fairly simple task of making sure the beneficiary designations are current will go a long way to ensuring a smooth, probate-free, and tax efficient transition of these assets at your death.
4. Make Sure Someone’s Watching the Children (Mom’s Grandchildren). For those who have minor (under age 18) children, it is vital to create a Will to name one or more people as the legal guardians for those minor children. The legal guardian of a minor child is the person who will have physical custody of the child and decide where child will reside, where the child will go to school, and oversee their religious education. The legal guardian is also the person who will have the authority to make medical decisions and have access to school records. However, naming someone in your Will as the guardian for your minor child does not confer the legal status of guardian; only a court can appoint a legal guardian. The naming of a guardian by parents in their Wills is an expression of their wishes which the court will honor (unless there is a valid objection raised but that’s a topic for a different day) but the process takes time. Because of that delay, parents should also sign a document appointing a temporary guardian for their minor children. Massachusetts has a statute that permits parents to appoint a temporary (for 60 days) guardian for their minor or disabled children. This allows time for the court to act to appoint the permanent legal guardian. The appointment of the temporary guardian does not require the involvement of the court.
5. Save Taxes if you can. When estate planning attorneys talk about taxes, we are usually referring to estate taxes. The estate tax is a transfer tax imposed on the value of assets transferred to beneficiaries when someone dies. There is both a federal and a Massachusetts estate tax. For both federal and Massachusetts purposes, assets that pass to a surviving spouse pass free of any estate tax regardless of the value of the assets. For assets passing to a person other than a surviving spouse, there is estate tax payable if the value of the estate exceeds the allowable exemption amount. In 2024, the federal estate tax exemption is $13.61 million and $2 million in Massachusetts. If your estate is at or above those levels, consult with an experienced estate planning attorney about planning to reduce estate taxes.
Creating and maintaining a comprehensive, up-to-date estate plan is a gift to your family that they will truly appreciate. If you don’t have an estate plan, or if it’s been more than five years since you’ve reviewed your existing plan, call us or email us to schedule an appointment with one of our estate planning attorneys. And Happy Mother’s Day to all the mothers out there!
Attorney Suzanne R. Sayward is a partner with the Dedham law 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 our website at www.ssbllc.com or call 781/461-1020.
May, 2024
© 2024 Samuel, Sayward & Baler LLC
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
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.
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.
What’s New at Samuel, Sayward & Baler LLC – Don’t Miss Our January 2024 Newsletter
Attorney Suzanne Sayward discusses our Winter 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.
Get Ready Small Business – the Corporate Transparency Act is Coming for You. Five Things to Know about the CTA
The Corporate Transparency Act (CTA) is a federal law passed in 2021 intended to reduce money laundering and tax fraud – noble goals. In order to achieve these goals, the federal government is going to require all ‘entities’ (other than those that are exempt…a story for another day) to file an annual report with the Financial Crimes Enforcement Network (FinCEN) disclosing detailed information about the entity and the individuals associated with it. The government expects over 32 million initial reports to be filed at an estimated cost of about $22 billion, plus an additional $2 billion each year for updated reports.
Read on for 5 Things to Know about the CTA.
1. Who has to Report?
Business entities that are required to report are called reporting companies. These include corporations, limited liability companies (LLCs), and other entities created or registered by filing a document with a secretary of state or similar state office.
Keep in mind that ‘business entities’ such as LLCs are often used as part of an estate plan especially if rental or commercial real estate is owned. Those LLCs fall within the scope of the CTA and must comply with the reporting requirements.
2. What Information is Required?
Reporting companies created before January 1, 2024, must provide information about the company and its beneficial owners. Reporting companies created on or after January 1, 2024, must provide information about the company, its beneficial owners, and its company applicants.
A. Company Information
The reporting company must provide its name and any alternative names, the address of its principal place of business, the state of formation, and its taxpayer identification number.
B. The Identities of the “Beneficial Owners”
A beneficial owner is anyone who owns at least 25 percent of the reporting company or ‘exerts substantial control over it.’ Each beneficial owner of a reporting company must furnish their full legal name, date of birth, residential address, and an identification number from a driver’s license, passport, or other state-issued identification (ID), along with a copy of the ID document.
Note that while a trust is not a reporting company, it may be subject to reporting information as a beneficial owner if ownership interests in a reporting company are held in trust.
C. What is a “Company Applicant?”
A company applicant is the person who files the business entity’s creation documents, as well as the person who directs this action. This could include the business owner(s), a lawyer, a CPA, other advisors, and potentially their assistants and staff. A company applicant is required to submit the same information as a beneficial owner.
3. What are the Deadlines for Filing?
Entities created prior to January 1, 2024, have until January 1, 2025, to file an initial report; reporting companies created after January 1, 2024 and before January 1, 2025, will have 90 days after creation to file an initial report. Entities created on or after January 1, 2025 will have 30 days to submit an initial report to FinCEN.
This is not just a one-time reporting requirement. A company, beneficial owner or company applicant must report any changes to reported information to FinCEN. For updates, the 30 days start from when the relevant change occurs. For corrections, the 30 days start after becoming aware of, or having reason to know of, an inaccuracy in a prior report. There are no safe harbors for filing an incorrect report.
4. What Happens if a Report is not Timely Filed?
The penalty for failure to file is up to two years in prison and $10,000.
5. How do you file a report?
The reports must be filed electronically via the FinCEN website.
There is a possibility of at least temporary relief for small businesses in the form of a bill entitled ‘The Protect Small Business and Prevent Illicit Financial Activity Act (H.R.5119)’ which was passed by the House and is currently before the Senate. If passed, this bill would extend the deadline for existing companies to January 1, 2026. The deadline for companies formed on or after January 1, 2024 to file their initial report would be codified as 90 days; and the deadline for companies to report changes in their reports would be extended from 30 to 90 days.
If you have a small business that is an LLC, a corporation or other registered entity, you should consult with your business attorney about your filing duties. If you have an LLC or other entity for liability protection or as part of your estate plan, we recommend you consult with your CPA to discuss your reporting obligations and the steps needed to achieve compliance.
Attorney Suzanne R. Sayward is a partner with the Dedham law 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 our website at www.ssbllc.com or call 781/461-1020.
January, 2024
© 2024 Samuel, Sayward & Baler LLC
Hope and Planning for The New Year
Attorney Suzanne Sayward gives us a message of Hope and Planning for the New Year, 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.
Important Numbers for 2024 Estate Tax Planning
Important Numbers for 2024 Estate Tax Planning
Each year around this time, the IRS comes out with the inflation adjusted federal Estate and Gift Tax exemption amounts for the following calendar year. Here are the numbers for 2024.
2024 Federal Estate Tax Exemption
The federal estate tax exemption is the amount that each person is permitted to pass on free of any federal estate tax. For 2024, this amount is $13.61 million per person (up from $12.92 million in 2023) which translates into $27.22 million for a married couple.
2024 Annual Gift Tax Exclusion
The Annual Gift Tax Exclusion amount is the amount that a person may gift to any number of other individuals during a calendar year without impacting the donor’s Lifetime Gift Tax exclusion. For 2024, this amount will be $18,000 per person. For example, a grandparent may give each of his or her five grandchildren $18,000 for a total of $90,000 during 2024 without needing to file a gift tax return (form 709) reporting the gifts and without any impact on the donor’s Lifetime Gift Tax exclusion.
2024 Lifetime Gift Tax Exclusion
In addition to the Annual Gift Tax Exclusion, each person has a Lifetime Gift Tax exclusion which is currently equal to the federal estate tax exemption – $13.61 million for 2024. If gifts in excess of a person’s Lifetime Exclusion amount are made, tax on the excess gifts is payable by the donor (person making the gift) at the rate of 40%. To the extent a person makes gifts over and above the Annual Gift Tax Exclusion amount, their Lifetime Gift Tax exclusion amount is reduced
2024 Gifts to Spouses
Amounts passing to a U.S. citizen spouse either at the death of the first spouse or during lifetime in the form of gifts, pass free of federal and Massachusetts estate tax regardless of the amount.
The same does not apply for non-U.S. citizen spouses. When one spouse dies leaving assets to a surviving non-U.S. citizen spouse, there is no marital deduction permitted for those assets. Since the deceased spouse may leave $13.61 million free of federal estate tax, the lack of a marital deduction does not matter for many people.
Lifetime gifts to a non-U.S. citizen spouse are limited to $185,000 (2024) per calendar year.
What about Massachusetts?
Massachusetts has its own estate tax system which until very recently had a $1 million threshold for taxable estates. As of October 4, 2023, we have a $2 million exemption and this is effective for estates of decedents dying on or after January 1, 2023. This amount is not indexed for inflation so it will take another act of the Massachusetts legislature to increase it. But still, we are grateful for the bump up to $2 million ($4 million for a married couple who undertake estate tax planning).
Keep in mind that Massachusetts does not have a gift tax. As such, there is no limit on the amount you may give away under Massachusetts tax law.
If you are interested in discussing estate tax planning or creating a gifting plan, please contact our office to schedule a time 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.
November, 2023
© 2023 Samuel, Sayward & Baler LLC