Attorney Suzanne Sayward

5 Ways to Leave a Legacy (but not the Good Kind) 

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If you look up the definition of Legacy in the dictionary, it has two distinct meanings.  The first is  a gift by Will, especially of money or other personal property (e.g. “Her aunt left her a legacy of $50,000”).  The second is something transmitted by or received from an ancestor (e.g. “He left a legacy of love and caring”).  Both of these meanings are common in the estate planning arena.  Clients often plan to leave money, real estate, jewelry, artwork, etc. to family or friends, and most people want to leave their families with fond memories and treasured traditions or customs.  

However, legacies of the second type can also cut the other way.  That is, rather than good will and fond memories, loved ones are left with feelings of anger and resentment.  Often this type of legacy comes from poor estate planning or no estate planning.  

Read on for 5 ways to leave a legacy of pain that lasts long after you’re gone. 

1. Naming co-fiduciaries who cannot work together.  A vital aspect of every estate plan is designating fiduciaries to carry out your wishes.  In a Will, this is your Personal Representative, in a Trust it is the Trustee, and in a Power of Attorney it is your Attorney-in-fact.  These positions can be held by one person or by two or more people.  Sometimes clients feel that it is important to appoint all of their children to these roles because they don’t want to hurt anyone’s feelings by leaving them out.  If your children do not get along or if they cannot work well together, naming them as co-fiduciaries is not going to heal that relationship and will probably make it worse.
 

2. Naming fiduciaries who are not qualified to carry out the job.  For most people it is not necessary to appoint a professional such as an estate planning attorney or a bank as Personal Representative of their Will or Trustee of their Trust.  However, it is important to appoint someone who is conscientious, responsible and competent to carry out the tasks of settling the estate in a timely manner.  These tasks often include updating bank and other financial accounts, gathering and organizing financial statements, making numerous phone calls to insurance companies and IRA custodians, cleaning out the house and readying it for sale, and working with professionals like attorneys and accountants, to name a few.  If the person you are considering naming as a fiduciary does not do a good job managing her personal matters, chances are she is not going to do a good job performing these tasks for you or your estate.
 

3. Treating children differently.  If you have more than one child, consider carefully the possible consequences of treating them differently in your estate plan. By that I mean leaving one child a greater portion of your assets and estate than another child, or directing that one child’s inheritance be distributed outright to her while another child’s share remains in trust to be managed for him.  There are certainly compelling reasons to treat children differently in your estate, such as when you have a child who receives needs-based governmental benefits, a child who struggles with drug dependency, or a child with disabilities that impair her ability to manage assets.   However, if there is not a compelling reason for treating a child differently than his siblings, doing so is likely to leave the child who is singled out feeling angry and resentful, and that anger is often directed at his siblings since mom and dad are no longer around.  In my practice I have seen this result in a total breakdown of sibling relationships which extended into the next generation.
 

4. Not being clear about your wishes for your tangible personal property. If you’re a fan of the TV series Fargo, then you will recall how distribution of a parent’s tangible personal property in a manner that feels ‘unfair’ can create trouble (Season 3).  Tangible personal property consists of items such as a car, jewelry, artwork, tools, collections/collectibles, etc.  In Fargo, one brother received a valuable stamp collection and the other a Corvette.  Sadly, many people don’t need a television show to experience the impact of family discord over the distribution of tangible personal property because they have experienced it in their own families.  If you have valuable artwork, items that have sentimental value to your children, jewelry, or other possessions that could be a source of controversy, designating the recipients of those items rather than leaving it up to your children to ‘figure it out’ will go a long way in ensuring family harmony.
 

5. Conveying conflicting messages to family.   Whether or not to share the details of your estate plan or legacy planning with family members is a personal decision.  For some families, a family meeting to inform everyone of decisions regarding who will serve as Personal Representative of the Will and the distribution provisions of the estate plan is the norm.  For other families, no information is shared.  I see problems arise when a parent shares information, such as who is named as Personal Representative or to whom certain assets will pass, and later changes those decisions without telling family members about the changes.  In my experience, it is a good idea to inform the people you are naming as your fiduciaries (Personal Representative, Attorney-in-fact, Trustee, etc.) in case they are not willing or able to serve – better to find out sooner rather than later.   In addition, your named fiduciaries should be provided with some basic information that will enable them to help in the event you become incapacitated or when you pass away.   This should include contact information for your professional advisors (accountant, estate planning attorney, financial advisor) and the location of your important documents.  While you need not provide your family with information about the value of your estate, maintaining a comprehensive list of your bank and investment accounts, insurance policies, retirement accounts, annuities (including copies of the contract), etc. and informing your fiduciary of the location of that information will go a long way toward the smooth settlement of your affairs. 
 

If you want to leave a legacy of love and fond feelings, take care to consider how your estate planning, or lack of estate planning, may impact those you leave behind.  If we our estate planning attorneys can help you with that legacy planning, please contact us – we’ll help you leave a legacy that will live on in the hearts and minds of your loved ones in a good way. 

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.

December, 2020

© 2020 Samuel, Sayward & Baler LLC

To Gift or to Loan?

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If you live in Massachusetts you know that the prospect of buying your first home is a daunting one given the high cost of real estate.  Parents often want to help their children with their first home purchase by making a gift or a loan to the child to use toward the down payment.  For parents (or grandparents) who are in a financial position to do this, it is important that everyone involved understand whether the funds are gift or a loan and the consequences of each. This is also an important Estate Planning question. Read on for factors to think through when providing funds to a child.

If it’s a gift,

  • A gift to a person (as opposed to a gift to a charity) is not tax deductible by the person who makes the gift.
  • A gift is not income and should not be reported on the recipient’s income tax return. 
  • For most people, there is no reason to be concerned about gift tax even if the amount of the gift exceeds the annual gift tax exclusion amount of $15,000 (2020) per person per year.  
  • Even though it is unlikely that there will be any gift tax payable (under current law you would need to gift more than $11.6 million over your lifetime before there would be any gift tax payable) you may be required to file a gift tax return (form 709) reporting the gift. 
  • You are not entitled to repayment (this may seem as though it goes without saying, but that is not always the case in my experience).  
  • Making a gift could help your child qualify for a mortgage and you may need to provide a gift letter. 
  • Making a gift may be advantageous to you from an estate tax perspective as the gifted assets will reduce the value of your estate for estate tax purposes.
  • If you have more than one child, consider whether you want to make any changes to your estate plan to ‘even up’ the distribution of your estate among your children to account for the gift to one child.

If it’s a loan, 

  • It is important to document the loan with a Promissory Note. 
  • Even if you do not choose to charge interest on the loan, the IRS may think differently and may ‘impute’ taxable interest income to you.  Consult with your accountant to make sure you understand the income tax consequences of the loan.
  • Interest charged on the loan and paid to you as the lender is taxable income to you in the year received.
  • Consider whether the loan should be secured by a mortgage.  Even if you are not concerned about repayment, doing so may protect your investment in the event your child gets divorced, is sued, files for bankruptcy, etc. 
  • Consider what you will do if the loan is not repaid as expected. 
  • The outstanding balance on the loan will be an asset of your estate and you may want to specify that the Promissory Note should be allocated to the debtor child’s share of your estate. 

Seeing a child settled in their first home is a good feeling for parents and helping a child get there is a goal for many parents.  However, before you hand over that big check, decide whether you’re making a gift or a loan and make sure your child knows as well.   

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.

October 2020

© 2020 Samuel, Sayward & Baler LLC

Ask SSB

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October 2020

Q:        I hear that elder law attorneys charge a lot to prepare a MassHealth application for long-term nursing home care costs.  My friend said that when her cousin was in a nursing home there was a service that prepared the application for free.  Why would anyone pay for something that they could have for free?

A:        That’s an excellent question and the answer is sometimes they shouldn’t.  For example, a single person who has assets that are at, or close to, the program eligibility limit of $2,000, does not have an irrevocable trust, and who has not made any gifts of assets during the 5-year period preceding the application, does not need to pay an elder law attorney to prepare a MassHealth application for long-term care benefits.

The reason that single individuals who have assets in excess of the program limit and married couples where one spouse needs nursing home care, should consult with an elder law attorney is that an elder law attorney can provide advice about options for preserving their assets from having to spent down on long-term care.  The savings that can be achieved through planning can be far in excess of the legal fee paid to prepare the application.

For people paying privately for long-term nursing home care, the out of pocket monthly cost in Massachusetts ranges between $10,000 and $15,000 (or more!) per month.  The sooner MassHealth eligibility is achieved, the sooner that monthly outlay will cease or be significantly reduced.

When you engage an elder law attorney you are hiring an advocate who is working for you.  When you use a service recommended by the long-term care facility, you will not receive legal advice about your planning options such as how to preserve your assets or how to achieve eligibility more quickly, nor are you engaging an advocate for your application.  In fact, many of these ‘free’ services are actually paid by the nursing homes.  Keep in mind that it is in the nursing home’s best interest that residents pay privately for their care versus becoming eligible for Medicaid (MassHealth).  That is because the monthly fee that the facility receives for a Medicaid resident is much less than the amount they receive from a person who is paying privately.

If you have questions about whether you should hire an elder law attorney to prepare and file a MassHealth application for long-term nursing home care costs, please contact us to speak with one of our attorneys.

5 Ways in Which the Best Laid (Estate) Plans Can Go Awry 

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When someone takes the time to create a Will or Trust that sets out their wishes for the distribution of their estate at death, they often experience a feeling of relief knowing that their assets will be distributed in accordance with their wishes. However, if the estate plan is not carefully crafted and then reviewed and adjusted from time to time, the intended results may not be achieved. 

Read on for 5 ways in which the best laid estate plans can be derailed. 

  1. Assets are distributed other than by way of the Will or Trust.  In some ways a Will is the “distributor of last resort.”  For example, if you own assets jointly with another person, or if you designate a beneficiary to receive an account (‘pay-on-death’ or ‘transfer-on-death’), then those assets are not going to pass under your Will or Trust.  If someone provides for specific bequests in her Will, such as $5,000 to my sister Jane or $1,000 to the Animal Rescue League, but has her children as joint owners or pay-on-death beneficiaries on all of her accounts, then those specific bequests will not be paid.  Make sure you understand how your assets will be distributed and that you own your assets in a way that will achieve your distribution goals. 
  2. Taxes are not factored in – part 1. There are two types of taxes to be concerned about when planning your estate:  income tax and estate tax.  For the most part, inherited assets are not income taxable to the recipient.  For example, if my aunty leaves me $50,000 in her Will, that is not taxable income to me.  However, qualified retirement accounts such as IRAs and 401ks are an exception to this rule.  If my aunty names me as the beneficiary of her $50,000 IRA, that will be taxable income to me.  Consequently, I will not actually receive a $50,000 bequest; it will be diminished by the state and federal income taxes I must pay. 
  3. Taxes are not factored in – part 2.  Estate taxes are imposed on the value of the assets that a person owns at death and that are distributed to someone other than a spouse or charity.  Currently, the federal law provides for a very large exemption from estate tax of almost $11.6 million per person.  That means that if the value of a person’s estate is less than $11.6 million, there is no estate tax payable to the IRS.  Massachusetts has its own estate tax system which allows for an exemption of $1 million dollars.  If your estate is more than $1 million, be aware that the amount you will be passing on to your beneficiaries will be less than the full value of your estate. In addition to being aware of the tax liability, it is also important to specify in your estate plan who is going to bear the burden of the tax.  For example, say you have a family business worth $2 million and other assets (home, investments, retirement accounts) totaling $2 million.  Your daughter works in the business so in your Will you leave the business to her.  Your Will then leaves the rest of your estate (the residue) to your son.  There will be $280,000 of estate tax payable to Massachusetts.  Who will pay that tax?  Should it be borne equally by your children.  If so, does the business have the liquidity to pay its share?  Should the tax be paid entirely from the residue of your estate (the share going to your son)? What’s ‘fair’?  Your estate plan should state your intentions. 
  4. Estate assets change over time and the estate plan is not updated.  It is very important to review and update your estate plan from time to time because things change.  This happens often with distributions of tangible personal property such as jewelry and collectibles.  I have seen a number of situations where the Will or accompanying memorandum leaves a particular piece of jewelry to a someone but that item has been sold or cannot be found when the testator dies.  It is particularly troublesome when the item cannot be located and no one has any information about whether it was sold or intentionally given away during the deceased’s lifetime – it’s in those situations that the finger-pointing begins… 
  5. The possibility that a beneficiary will predecease the testator is not factored into the planning.  Your Will or Trust should include provisions stating what will happen in the event one or more of your beneficiaries predeceases you.  For example, if you leave $10,000 to your grandchildren Gary and Caroline in your Will, what should happen to that bequest if Gary predeceases you? Should Gary’s share be distributed to Gary’s children? Should it be distributed entirely to Caroline? Should it lapse?  

These are just a few of the pitfalls that can derail your intentions for the distribution of your assets after your death. When you take the time to consider and decide how your estate should be distributed among the people you care about, make sure that your wishes are actually carried out at your death by working with an experienced estate planning attorney  to create your Will or Trust, and then reviewing your estate plan with your attorney every few years.  Happy planning! 

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.

August, 2020

© 2020 Samuel, Sayward & Baler LLC

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

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