This week’s video on Smart Counsel for Lunch is a recording of last week’s Smart Counsel Series Webinar on College Planning for Young Adults. Don’t miss this webinar if you have children that are planning to go to college in the next year or two. Learn how to have everything in place for them when they leave home for the first time. Please watch and if you have any questions or want to learn more please call us at 781 461-1020.
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What are the different kinds of trusts and why does it matter which one I have?
A: As with many seemingly simple estate planning questions, the answer is far from simple. There are many different types of trusts and the trust that is best for you depends on your particular situation and your goals.
For example, if you have a child with disabilities, you will probably need to create a Supplemental Needs Trust, sometimes called a Special Needs Trust, to protect your child’s needs-based governmental benefits. A Supplemental Needs Trust can be a ‘third-party’ trust or a ‘first-party’ trust, and you may need both. A third-party Supplemental Needs Trust can be revocable or irrevocable. The type of Supplemental Needs Trust that is best for you will depend on your circumstances.
If you want to reduce estate taxes payable at your death, there are a number of different types of trusts that may be suitable depending on your circumstances. Some examples include: credit shelter trusts for married couples, an irrevocable life insurance trust (ILIT), a grantor retained annuity trust (GRAT), a qualified personal residence trust (QPRT), or a gift trust, to name a few.
If your goal is to preserve assets from being spent down on future long-term care costs, an irrevocable income only Trust may be appropriate, or maybe a so-called ‘children’s trust’ would be better.
Perhaps you want to avoid probate at your death. A revocable living trust is the most common type of trust for that purpose. Such a Trust is also likely to be an appropriate part of an estate plan for people who have young children or even young adult children.
There are thousands of books with hundreds of pages written about the various types of Trusts that can be used to achieve estate planning goals. The above are just a few examples of these. The best way to determine which type of trust is best for you is to meet with an experienced estate planning attorney to discuss your unique situation and your particular goals.
What Happens After the Death of a Person Who Received Medicaid Benefits?
Medicaid, also known as MassHealth, is the joint federal and state program that provides public benefits to pay for the care of individuals who are medically and financially eligible because they do not have sufficient assets to cover the costs themselves. If the individual was age 55 years or older and received MassHealth benefits during his or her lifetime, the MassHealth Estate Recovery Unit (“ERU”) is responsible for collecting reimbursement for the costs paid by the Commonwealth. Reimbursement comes from the deceased person’s probate estate. Under Massachusetts law, the ERU must be notified when probate pleadings are filed with the probate court. Thereafter, the ERU files a claim against the probate estate to reserve the right to be paid from the estate. As the recipient’s house is typically the largest asset remaining to be probated, the ERU is often reimbursed from its sale proceeds.
A recent decision by the Supreme Judicial Court of the Commonwealth of Massachusetts highlights the importance of understanding what happens when a person who has received Medicaid benefits during his or her lifetime passes away. In the Estate of Jaqueline Ann Kendall (SJC-12881, December 28, 2020), the Supreme Judicial Court held that the Commonwealth was not entitled to reimbursement from Ms. Kendall’s probate estate (consisting of 50% ownership of a house) because the ERU waited too long to file its claim. While it may seem that the decision favors procrastination for families whose loved ones were MassHealth recipients, this is not necessarily the case. The ERU is permitted under the law to file probate pleadings if no one else steps forward, and may become more aggressive in doing so following the Kendall case.
A better strategy for protecting your assets from nursing home costs is to be proactive and undertake long-term care planning. This may mean conveying property subject to a retained life estate, or crafting a so-called “Medicaid Trust” or “Irrevocable Income Only Trust”, or other options that best fit your needs and goals.
At Samuel, Sayward & Baler LLC, an elder care attorney knowledgeable in long-term care planning will guide you through the advantages and disadvantages of your long-term care planning options. Our estate planning attorneys can help you to avoid probating your house and the subsequent MassHealth claim, and preserve its value for the benefit of your children, in the event you require MassHealth benefits during your lifetime.
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 trust and estate planning, estate settlement and elder law matters. She is an active member and current 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 ssbllc.com or call 781/461-1020.
January, 2021
© 2021 Samuel, Sayward & Baler LLC
Possible Tax Changes on the Horizon
Although predicting changes to the tax laws is a difficult game, the election of President Biden and Democratic control of the House and Senate have made it more likely that President Biden’s tax proposals may become law. Here are a few that may impact the world of estate planning:
● The federal estate tax exemption, which is the amount you can leave to your heirs free of federal estate tax, is currently at $11.7 million per person. President Biden proposes to decrease the exemption to $3.5 million per person. Keep in mind that the law that gave us this high federal estate tax exemption amount was enacted in 2017, and the exemption amount will automatically
revert to 2017 levels ($5.49 million per person, adjusted for inflation) in 2025 unless Congress acts to extend the current law (and the higher exemption amount) and unless it is changed by Congress before that time.
● The lifetime gift exemption, the amount you can give away without paying gift tax during your lifetime, would decrease to $1 million, from its current level of $11.7 million.
● The federal estate and gift tax rate of 40% for assets/gifts over the exemption amount could increase to 45%.
● Currently, when a person dies, the deceased’s assets are valued as of the date of death. If stock, real estate, or other appreciated assets are worth more at death than they were at the time of purchase, any unrealized capital gains are wiped out, and the basis in the inherited asset for capital gains tax purposes changes at death so that it is equal to the value at the date of death, without any capital gains tax being paid. This is the so-called step-up in basis rule. President Biden’s proposal would eliminate the step-up in basis at death and treat death as triggering capital gains tax on all of that unrealized gain at the long-term capital gains tax rate.
It appears that these changes will not come in the near term, as the administration may wait for the economy to improve before moving these proposals forward. It is also unclear if these proposals would pass even a Democratic-controlled Congress.
We will keep our eye on these proposals and keep you posted on whether there is any movement or change in what is proposed, and whether any of them ultimately become law, in what form, and when the change will take effect.
January 2021 Newletter
News from Samuel, Sayward & Baler LLC for January 2021 includes the articles: 5 Ways in Which the Best Laid (Estate) Plans can go Awry, Possible Tax Changes on the Horizon, What are the different kinds of trusts and why does it matter which one I have?, and an update of What’s New at the Firm including a Welcome to Deb Hayes our new Law Office Administrator and well wishes to Attorney Julia Abbott in the next phase of her legal career.
George Clooney and Gifting
Attorney Suzanne Sayward discusses George Clooney and Gifting and the tax implications, 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.
Smart Counsel Series College Solutions Webinar Preview (Jan 21st 6PM)
To our Clients and Friends:
Do you have children that are planning to go to college in the next year or two? Do you want to help your child find the best college for them? Are you worried about having everything in place for them when they leave home for the first time? If you answer yes to any of these questions, then please join us for the next Zoom webinar in our Smart Counsel Series on Thursday, January 21, 2021, from 6:00 pm to 7:30 pm, to learn how to find the right fit in a college for your child.
Larry Dannenberg, founder of College Solutions, along with his colleague Aaron Ladd, Managing Director for the Northeast, will discuss how to identify the ideal college from an academic, social and financial perspective — not only for students who are at the top of their class, but also for students who are in the mainstream academically, have learning disabilities, or may possess special athletic skills. Significant changes have occurred in the college admission process in the last year due to the Coronavirus (COVID-19) pandemic. Standardized testing has shifted, timing for financial aid has accelerated, and researching and visiting colleges has become very complicated. Join us to learn why starting the process early can offer significant advantages.
Additionally, Attorney Abigail Poole of Samuel, Sayward & Baler, LLC will discuss the importance of having your child execute a health care proxy, power of attorney and HIPAA Authorization upon reaching the age of 18. This has always an important measure for your child to have in place, but it has become far more critical since the onset of the Coronavirus.
Contact Lynne Abe at 781/461-1020 or abe@ssbllc.com to reserve a spot for you and a friend. (Please forward this message to a friend or family member if they have children who plan to attend college.)
The program is free but space is limited so don’t delay!
Suzanne R. Sayward
Maria C. Baler
Abigail Poole
Email abe@ssbllc.com to register
Five COVID-Inspired Estate Planning Resolutions
Looking ahead to this year’s resolutions, here are five estate planning resolutions that the COVID-19 pandemic has shown us to be more important than ever.
- Resolve to Have an Estate Plan
Most of the clients I meet who do not have a Will, Power of Attorney or other estate plan documents know they should have them, they have just put off this task – sometimes for much longer than they should, especially when faced with a global pandemic. I met many people in 2020 who had put off estate planning and were suddenly in a panic to get it done given what was happening all around them. If you are similarly situated, make it one of your goals for 2021 to get an estate plan in place. A simple plan (Will, Power of Attorney, Health Care documents) is better than nothing at all. If you have young children or assets in excess of $1 million, a Trust may be advisable to meet your planning goals. An experienced attorney who prepares Wills and Trusts as the primary focus of their practice will give you options and let you decide which plan is best for you at the moment.
If you already have an estate plan in place (good job!) resolve to review it this year to make sure the provisions of your plan still reflect your wishes. If it has been more than five years since the documents were signed or you have had changes in your personal or financial situation, meet with an estate planning attorney (virtually of course!) to identify any changes that should be made.
- Resolve to Get it Done Right
The advice of an experienced attorney is not cheap and estate planning attorneys are no exception. However, making sure decisions can be made for you if you are ill, making sure your assets go where you want them to go at your death, managing inherited assets properly for young beneficiaries, protecting assets for your family, avoiding probate and saving your beneficiaries as much income and estate tax as possible are important goals. The way your estate plan is carried out will have a significant financial and emotional impact – positive or negative – on you and your family. When something is this important, make sure it’s done right. The temptation to draft your own Will or other legal documents is there and is frankly a poor planning option. In my 33 years of practice, I have yet to see a Will drafted by a client that will accomplish what the client thinks it will. In fact, most self-drafted Wills create more problems than they solve. Proper estate planning is not something that can be done cost-effectively on your own. Seek the advice of an experienced estate planning attorney, not a general practitioner who prepares Wills along with divorce and personal injury law. Get it done right, and you will have the peace of mind that crossing this task off your list will bring.
- Resolve to make sure your Beneficiary Designations are Up-to-Date
Many of your most significant assets – life insurance, retirement accounts, annuities – will be paid to a designated beneficiary at your death. Properly designating those beneficiaries is more complicated than it may appear, and understanding the implications of certain beneficiary designations is crucial. Designating a trust as beneficiary for the benefit of a young or disabled beneficiary can be instrumental in avoiding a lengthy and costly court proceeding to appoint a guardian, or avoiding the loss of public benefits a disabled beneficiary may be receiving. Understanding how distributions from retirement accounts work after the death of the account owner, and how different beneficiary designations will impact the income tax payable on those distributions is critical to making appropriate designations, and is something that changed significantly when the SECURE Act became law on January 1, 2020. Ensuring your beneficiary designations are consistent with your overall estate plan is vital to accomplishing your estate planning goals.
- Resolve to have Health Care Documents in Place
Much of the estate planning you do is for the benefit of your family or other heirs and will never impact you. Creating health care documents that reflect your wishes is one area of estate planning that will directly and significantly impact you if you experience a period of illness prior to death. This has never been more apparent than this past year, when so many people became incapacitated, and so quickly, by the COVID-19 virus. Designating Health Care Agents to make health care decisions for you if you are unable to do so, making sure the people you want to be able to get information from your physicians can do so and will not be obstructed by privacy laws, and determining your care preferences and communicating them to your Health Care Agents and physicians are all crucial to making sure your health care wishes are carried out. In Massachusetts, the legal document that we use to make sure these things happen are Health Care Proxies, HIPAA Authorizations and Living Wills. The person you name to make health care decisions for you is called your Health Care Agent. These documents are all part of a complete estate plan, and arguably the most important part from your perspective.
- Resolve to Make Sure People You Care About Have a Plan Too.
Estate Planning is important for anyone over the age of 18. College-age children and elderly parents should have Durable Powers of Attorney and health care documents that will allow someone to make financial and health care decisions for them, and have access to information if they are ill or incapacitated. This year underscored this need, as some college students fell ill far from home, and elderly parents were too sick to make decisions regarding their own care. Parents of young children should name guardians for their children and create a trust to manage assets for young beneficiaries to avoid a child receiving control of an inheritance at age 18. Parents who will leave a significant inheritance to their children should consider asset protection planning to protect inherited assets from a child’s creditors, divorcing spouse, etc. Older couples or others with large estates can save their heirs significant estate taxes in Massachusetts with proper planning. Elderly parents may want to plan to protect assets from long-term care liability.
Now that 2020 is behind us and a COVID vaccine is here, we look back on 2020 grateful that we were able to continue to do our work, happy to be able to provide some peace of mind to our clients in these uncertain times, and hopeful that there are better days ahead. For those of you who are fortunate enough to be alive and well in these challenging times, we recommend you take these resolutions to heart, and create or update your estate plan today. If a friend or family member needs some inspiration to make estate planning a 2021 resolution, share this article with them. Wishing you a Happy and Healthy New Year!
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 current 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.
January, 2021
© 2021 Samuel, Sayward & Baler LLC
Happy Holidays from Samuel, Sayward & Baler LLC
The Staff of Samuel, Sayward & Baler LLC with Holiday Wishes on this Episode of Smart Counsel for Lunch