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The Particular Importance of Estate Planning for LGBTQ Individuals and Families

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One of the goals of proper estate planning is to reduce the risk of conflict in the administration of your estate and the carrying out of your wishes both after your death and during periods of incapacity while you are alive. Though we all like to think that our families (both our legally recognized families and our chosen families) and loved ones will come together and unite during times of crisis, it is unfortunately not uncommon for such crises to lead to painful, emotionally charged conflicts.

Such cases are even more common when it comes to LGBTQ individuals whose legally recognized relatives disapprove of their lifestyle. Although acceptance of LGBTQ individuals is far greater than it used to be, LGBTQ individuals still risk being disowned, shunned, and/or shamed by their relatives if and when they come out. With that in mind, I wanted to take a moment this Pride Month to talk about the particular importance of estate planning for LGBTQ individuals and families.

The most critical thing to understand is that, in the absence of estate plan documents that say otherwise, the law favors biological and legally recognized familial relationships over other relationships. Without a valid Last Will and Testament, upon your death the assets in your individual name will pass by law to your closest legally recognized relatives (known as your “heirs at law”) through a process known as “intestacy.” In Massachusetts, even if you are married, if you die without a Will, there are circumstances where your individually held assets will be distributed among your surviving spouse and your surviving parent(s).

Similarly, if you become incapacitated during your lifetime without a valid Durable Power of Attorney and Health Care Proxy, it may become necessary to have a guardian and/or conservator appointed by the Probate Court. As in the intestacy process, the guardianship and conservatorship processes favor biological and legally recognized relationships, giving priority to your spouse and parents to be appointed as your guardian and/or conservator over romantic partners and close friends.

While having a comprehensive estate plan in place can close off many opportunities for disapproving legally recognized relatives to take control of an LGBTQ individual’s estate in times of crisis and potentially shut out or cut off the individual’s chosen family (i.e., romantic partners, close friends, etc.), not all estate plans are created equal on this front. In particular, if you have an estate plan that relies on a Last Will and Testament to control the disposition of assets after death, a public probate process will need to be initiated after your death in order to validate the Will. Part of that process involves giving notice to your heirs at law. This once again gives disapproving relatives an opening to object to the proceedings and attempt to assert control over your estate.

By contrast, a comprehensive estate plan designed to avoid the probate process will greatly reduce the ability of disapproving relatives to cause trouble. While the probate process requires that notice be given to those who would inherit in the absence of a Will even if they are not named as beneficiaries in the Will, under a Revocable Living Trust, only the beneficiaries named in the trust document are entitled to notice. Thus, if you want to ensure that your wishes are followed and that the people you choose to carry out those wishes are able to do so without interference, you should contact an experienced estate planning attorney and create a plan to achieve your goals today.

 

June, 2021

 

© 2021 Samuel, Sayward & Baler LLC

What Are Five Duties of a Probate Estate’s Personal Representative?

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By Abigail V. Poole. Esq.

Sometimes I like to think of administering a probate estate as similar to investigating and solving a mystery.  The Personal Representative (formerly known as Executor) of the estate is the Detective. The Personal Representative takes steps to administer the estate by accessing and consolidating estate assets much like a Detective discovers clues and pieces them together one at a time to solve a mystery. Simultaneously, the Personal Representative keeps in mind certain duties while performing these tasks due to his or her fiduciary position much like a Detective who follows the laws while investigating the mystery. Here are five duties the Personal Representative must obey while “solving the mystery” of probate administration.

  • Follow Directions 

The Personal Representative’s most important overall duty is to follow the directions left in the deceased’s Last Will and Testament and the relevant Massachusetts laws.  The Will works hand-in-hand with the laws; it must be filed with the probate court, which approves the appointment of the Personal Representative. If the deceased did not leave a Will expressing the deceased’s intentions, then the intestate laws of Massachusetts govern the estate administration. 

The Personal Representative is also duty-bound to administer the probate estate expeditiously and efficiently in a way that is consistent with the best interests of the estate. For example, if the deceased possessed an expensive diamond necklace at the time of her death and she stated in her Will that the necklace should be distributed to her daughter, then it is the Personal Representative’s responsibility to do so.  However, if the diamond necklace is the only valuable asset and the estate has significant expenses and debt, then the Personal Representative may need to sell the diamond necklace to pay the estate expenses and debt instead of distributing the necklace.

  • Be Loyal and Prudent

The Personal Representative has a duty of loyalty.  The Personal Representative’s actions must be impartial toward all the parties involved (i.e., he or she cannot favor one party above another unless directed by the law or Will). The Personal Representative is also obligated to administer the estate with care and prudence by protecting the interests of the estate and administering the estate for the benefit of all the beneficiaries (the ultimate recipients of the estate distributions). Oftentimes, at the beginning of the probate process the Personal Representative may not have accurate information about all the assets owned by the deceased at the time of death. This means there may be valuable assets discovered after the Personal Representative’s appointment. In the case of the diamond necklace, it would be prudent of the Personal Representative to refrain from distributing or selling the diamond necklace until all the assets are discovered and weighed against the anticipated estate expenses and debt.

  • Find the Assets

The Personal Representative must investigate, determine, collect and inventory all the estate assets after appointment. Typically, an estate bank account is opened to consolidate and retain the balances from the deceased’s individual bank accounts. The Personal Representative is responsible for determining the value of the assets as of the deceased’s date of death. With respect to the diamond necklace, the Personal Representative should have it appraised to determine its value in the event it needs to be sold to pay the estate expenses and to include on the estate inventory. The inventory is a list of all the assets of the estate and their values that will be provided to the probate court or beneficiaries.

The Personal Representative is obligated to collect the income, interest and refunds due to the deceased or the estate, and dividends from stock. 

  • Protect the Assets and Pay the Expenses

The Personal Representative has a duty to secure, safeguard and manage the estate assets.  The diamond necklace should be securely stored until a decision is made to distribute or sell it, and insurance maintained for it, as necessary. The Personal Representative is responsible for collecting payments on any outstanding loans due to the deceased’s estate.

The Personal Representative must also pay estate expenses, such as funeral costs, fees to file assorted tax returns, and the fees of professionals to accomplish these goals (e.g., accountant, attorney, jewelry appraiser). If there is outstanding debt, such as a mortgage, credit card or Medicaid claim, the Personal Representative must prioritize payment of the debt according to the laws.

A crucial responsibility of the Personal Representative is to track all the income and expenditures of the estate. These records will assist the Personal Representative with making decisions regarding payment of expenses and debt during the administration of the estate.  It will also demonstrate to the beneficiaries and the probate court that the Personal Representative administered the estate properly via an account (report).

  • Distribute the Assets

The final obligation of the Personal Representative is to distribute the remaining probate assets to the beneficiaries as directed in the Will or by law. Luckily, the Personal Representative discovered other assets to cover the estate expenses so the diamond necklace was distributed to a grateful daughter.

Every good Detective has a partner to help solve the mystery.  Samuel, Sayward & Baler LLC can partner with you to find, protect and distribute the probate assets in accordance with the deceased’s instructions or the laws. Our attorneys are dedicated to guiding you through the probate administration process to ensure you adhere to your duties as the Personal Representative to successfully complete settling the estate.

Attorney Abigail V. Poole is an associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is an active member and Vice President of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA).  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. 

June, 2021

© 2021 Samuel, Sayward & Baler LLC

 

Make Updating your Estate Plan a Priority

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There’s nothing like a pandemic to make people worried about dying – that’s something we learned all too well during the past year.   Here at Samuel, Sayward & Baler, we were grateful that we all remained healthy and able to help our clients – both old and new – create and update estate plans that gave them peace of mind.

Now that the end of the pandemic is in sight, consider this a friendly reminder that reviewing and updating your estate plan is not something that should only happen when you are in pandemic-induced lockdown.  It’s something you should do on a regular basis – review things once a year, and meet with your estate planning attorney to review things (whether you think you need to or not) every five years or so, or sooner if you know changes are needed. 

Updating your plan is important for any number of reasons.  Here are some things you should ask yourself when reviewing your existing documents:

  • Are the people named in your Power of Attorney and Health Care Proxy to make financial or health care decisions for you still trusted people you can count on to be there if you are not well?
  • Is your Executor/Personal Representative named in your Will and the Trustee of your Trust still a trusted individual you can count on to settle your estate and administer your Trust fairly and efficiently at your death, working with your attorney, accountant and financial advisor?
  • If the people you have named are getting older or are not well, do you have appropriate alternates named to take their place if they cannot (or do not wish to) serve in those roles when the time comes?
  • Do your documents still reflect your current wishes about the distribution of your assets at death?  Does your Will or Trust refer to assets, such as real estate or a business, that you no longer own?
  • Have you recently been divorced?  Melinda Gates is updating her estate plan in light of her divorce, and you should too!  
  • On a happier note, have you recently been married, had a baby, won the lottery or received an inheritance?  Those type of events should also prompt a review and update of your estate plan.

In addition to the things you know should be changed, there may be other provisions of the documents that need to be updated as well. For example, provisions of your Will and Trust regarding how estate taxes will be paid may not operate as intended if certain assets are no longer owed, or if beneficiaries have been changed.  The federal estate and gift tax laws, laws governing inherited retirement accounts, and Massachusetts probate or trust laws have all changed within the last ten years, making many provisions of older documents out-of-date.  

Unfortunately, this past year has taught us that life and health are unpredictable.  Although having an estate plan is an important first step, keeping that plan up-to-date is just as important, as a plan that’s out-of-date can often create more issues than no plan at all.  Make it a priority to review your plan today, and sit down with your estate planning attorney to discuss any necessary updates.  They will be happy to see you alive and well and keeping your estate plan up-to-date, since it will make their job easier when you are no longer around.

Five Proposed Changes to the Estate and Gift Tax Laws

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After the spending spree necessitated by the Coronavirus (think CARES Act, stimulus payments, vaccine development support, etc.), coupled with President’s Biden infrastructure building plans, it is not surprising that Congress has turned its focus toward revenue raising as we emerge from the pandemic.  Revenue raising proposals usually mean finding a way to collect more tax dollars.  At the end of March, Senators Bernie Sanders and Sheldon Whitehouse introduced a bill they call, “For the 99.5 Percent Act” which proposes sweeping changes to existing estate and gift tax laws.  Read on for five of the most significant proposed changes.  

  1. Reduce the current $11.7 million federal ESTATE tax exemption to $3.5 million.  For the vast majority of Americans, the federal estate tax (the ‘death tax’) has been a non-issue since 2010 when the exemption was raised to $5 million and indexed for inflation.   The exemption is the amount that each person is permitted to pass on free of any federal estate tax at death.  Because $5 million was not high enough for some people, the exemption was increased to $11 million under President Trump, albeit with a sunset provision that reduced the exemption back to $5 million at the end of 2025.  The Sanders/Whitehouse proposal calls for rolling that exemption back to $3.5 million and indexing it for inflation.  While this rollback (if it happens) will mean that more estates will be subject to federal estate tax, the vast majority of estates will not be impacted because most Americans do not have an estate worth more than $3.5 million ($7 million for a married couple).  Those folks whose estate is more than the proposed reduced exemption amount should keep an eye on this legislation and explore their options for undertaking some planning before the end of 2021.
  2. Increase the rate of taxation on federally taxable estates.  Under the current federal estate tax law, taxable estates which exceed the exemption are subject to tax at the flat rate of 40%.  That means that on a $20 million estate there will be federal estate tax payable of $3,320,000 ($20 million – $11.7 million x .40).  Under the Sanders/Whitehouse proposal, the estate tax rate would be increase to 45% for taxable estates valued between $3.5 million and $10 million, 50% for estates over $10 million but less than $50 million, 55% for estates between $50 million and $1 billion, and 65% for estates over $1 billion.  While these rates are super high, the number of estates subject to them will be very small.
  3. Limit total annual exclusion gifts to two-times the amount of the annual exclusion.  The annual exclusion amount is the amount that each person may gift to any number of people in any calendar year without having to file a gift tax return and without reducing that person’s lifetime gift tax exemption.  In 2021 that amount is $15,000 (a base amount of $10,000 indexed for inflation).   For example, under the current law, I can give up to $15,000 to each of my two children, to my seven nieces and nephews, to my two siblings, and to my mailman, if I am so inclined, without any impact on my lifetime gift tax exclusion.  There is no limit on the number of people to whom I can gift up to $15,000 in any calendar year.  To the extent I give more than $15,000 to any one person in any one calendar year, I will ‘chip-away at’ my lifetime gift tax exemption.  For example, if I gave my child $115,000 during the year, I will have made an excess gift of $100,000.  This will reduce my lifetime exemption from its current $11.7 million to $11.6 million ($11,700,000 – $100,000 = $11,600,000).Under the proposed law, annual exclusion gifts would be limited to two-times the amount of the annual exclusion.  That means that if the annual exclusion amount is $15,000, I could give each of my two children $15,000 in one year but could not give any other gifts in that year without reducing my lifetime gift tax exemption.
  4. Reduce the current $11.7 million lifetime GIFT tax exemption to $1 million.   Under the current federal gift tax law, each person has an $11.7 million lifetime gift tax exemption, which is the amount they can give away during their lifetime before any gift tax must be paid.  The proposed law would reduce the gift tax exemption to $1 million, meaning that cumulative excess gifts of more than $1 million during someone’s lifetime will incur gift tax.  The reduction of the gift tax annual exclusion amount coupled with the proposal to reduce the federal gift tax exemption from its current $11.7 million to $1 million is likely to significantly curtail estate tax planning in the future if these provisions are enacted, since tax planning done to reduce the size of your taxable estate often involves gifting assets.  People who have large estates and who want to undertake planning to reduce their federal estate tax should do so before the end of 2021 in order to take advantage of the current $11.7 million gift tax exemption amount, which will be reduced to $1 million under the new law.
  5. Limit generation-skipping transfer trusts to a term of 50 years.  The generation skipping transfer tax (GSTT) is a tax imposed on transfers to ‘skip’ beneficiaries (think grandchildren).  The GSTT is in addition to the federal estate tax and is assessed at the same high rate.   In order to mitigate the harshness of the tax, there is an exemption from the GSTT which is currently equal to the amount of the federal estate tax exemption.  That means that under the current law a person with an $11.7 million estate could leave his entire estate to his grandchildren and there would not be any GSTT payable.  Typical GSTT planning involves creating trusts for multiple generations to shelter family wealth from diminution from the estate tax.  In this way, the inheritance from grandpa may escape estate taxation for 100+ years, preserving family wealth for future generations.  The Sanders proposal would limit the term of such trusts to 50 years, requiring the payment of estate tax every 50 years.

The above changes are only proposals and we don’t know what the final law will be.  The revenue raising plan submitted by President Biden does not contain these provisions so perhaps none of them will be enacted.  However, if you have an estate that you anticipate would be subject to federal estate tax if these proposals are enacted, and if you are interested in exploring options for reducing the tax in the event one or more of th`ese proposals become law, you should take action soon.  

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, 2021

© 2021 Samuel, Sayward & Baler LLC

Obtaining or Refinancing a Mortgage on Property that is Titled in Trust

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Conveying real estate into a Revocable Trust or a so-called Nominee or Realty Trust is a common aspect of the estate planning process for people who own real property.  Property owned in trust avoids probate which reduces time, cost and aggravation for surviving family members.  In addition to probate avoidance, titling real estate in trust is often a vital part of estate tax savings planning undertaken by married couples.   

However, if you decide to obtain a mortgage or Home Equity Line of Credit (HELOC) on property titled in the name of your Trust, or refinance an existing mortgage, be aware that many banks and mortgage lenders require that the property be removed from the Trust for the loan closing.  The property may be conveyed back into the Trust following the completion of the loan transaction.  There is a federal law (the Garn-St. Germain Depository Institutions Act) that prohibits a lender from exercising the due on sale clause under a mortgage for certain types of transfers, specifically including the transfer of property to a trust of which the borrower is a beneficiary.  

When your property is titled in a Revocable Trust (or in a Nominee or Realty Trust which names you or your Revocable Trusts as the beneficiary) there is no impact on your estate plan to remove and then re-convey the property to the Trust. Note that this is NOT the case for property held in an IRREVOCABLE Trust. 

We are happy to prepare the deed and related documentation to remove property from your Trust and re-convey it to the Trust once the mortgage transaction is complete.  Our typical legal fee for this service is $550 per property.  In addition, there will be recording charges to the Registry of Deeds.  

Please contact our office if you are obtaining a mortgage or HELOC, or refinancing an existing mortgage and your lender requires that your property be removed from your Trust in order to complete the loan transaction.

Delays Continue at the Probate Courts

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They say that patience is a virtue, and when it comes to Massachusetts’ probate courts, they are right. Capacity limits imposed as a safety precaution to mitigate the spread of COVID-19 mean that court personnel across the Commonwealth are operating on a rotating schedule such that only a limited number are physically in the various courthouses at any one time. Naturally, this severely limits the courts’ capacity to process mail and issue important documents like Letters of Authority and Decrees and Orders of Complete Settlement, which require official stamps and seals. Our contacts at one courthouse have told us that they are as much as three months behind on processing their incoming mail as a result of the capacity limits.  The limited staffing issues, coupled with the significant increase in the number of estates needing to be probated as a result of the 17,000+ deaths attributed to the pandemic over the past year, have placed a severe burden on the probate courts. 

Beyond the issues created by COVID-19, there are county-specific issues that are exacerbating these delays. In Norfolk County, for example, the long-serving Register of Probate was elected Sheriff this past November and the new Register is, understandably, still learning the ropes. Meanwhile, Middlesex County not only split its Probate Court into two divisions last spring, its southern division moved from its longtime home in Cambridge to Woburn last fall and it unexpectedly lost one of its most experienced staff members around the same time.

As you can imagine, all of these factors combined have led to extreme backlogs at several courthouses such that even the processing of routine, uncontested cases can take weeks, if not months. While you can rest assured that we are diligently pursuing every avenue possible to ensure that our probate cases are processed in as expeditious a manner as possible, ultimately it will take time for the courts to work through these backlogs. 

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

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