News from Samuel, Sayward & Baler LLC for April 2021 includes the articles: 5 Things To Do Soon After A Loved One Passes Away, Delays Continue at the Probate Courts , Ask SSB: Can I disinherit my child?, Obtaining or Refinancing a Mortgage on Property that is Titled in Trust and an update of What’s New at the Firm including a Team Member Spotlight on Caitlin Frantegrossi, a Paralegal at the firm.
By Attorney Maria C. Baler
Testamentary Trusts are less popular than their well-known cousin the Living Trust, but in the right situation can be the perfect solution to a vexing problem – protecting assets for a surviving spouse when he or she may need nursing home care. Testamentary Trusts may be the one solution where it may be possible to have your cake and eat it too in the world of long-term care planning.
Here are five things to know about Testamentary Trusts
1. What is a Testamentary Trust?
The word “testamentary” means “relating to or bequeathed or appointed through a Will.” The “testament” in the phrase “Last Will and Testament” comes from this definition. A Testamentary Trust is, as the definition implies, a trust that is created by the terms of a Will. Because the Will does not take effect until death, the Testamentary Trust created by the Will does not come into existence until after the creator (or “testator”) of the Will has died.
This is very different than the more popular Living Trust, which is a trust created by the maker of the trust (the “grantor”) during the grantor’s lifetime. Living Trusts can own assets during the grantor’s lifetime; Testamentary Trusts cannot. Assets owned by a Living Trust at the grantor’s death avoid probate which is one of the primary reasons for creating a Living Trust. You may recall that probate is the court proceeding necessary to transfer title to assets owned by a person in his or her name alone (with no beneficiary named) at death.
Because Testamentary Trusts do not come into existence until after death, they cannot own assets during their creator’s lifetime. The assets that will be held in the Testamentary Trust after the creator’s death will pass through the probate estate of the testator, and into the Testamentary Trust as provided under the terms of the creator’s Will, to be held in trust for the benefit of the trust beneficiary.
2. Why Create a Testamentary Trust?
If a Testamentary Trust does not allow you to avoid probate with the trust assets, and does not come into existence until after death, why would you create one?
The answer is in the regulations that determine whether assets held in a trust created by a husband or wife are “countable” when determining whether or not either will be eligible for Medicaid benefits to pay for nursing home care.
If a husband creates a Living Trust and transfers $500,000 into that Trust during his lifetime, and names his wife as the beneficiary of that trust after his death, the Trust assets will be fully “countable” if either husband or wife tries to qualify for Medicaid benefits to pay for nursing home care during their lifetimes. If the husband passes away, and if his Living Trust allows the Trustee to use the trust assets for his wife’s benefit during her lifetime, the Trust assets, and any other assets the wife may own, will be “countable” and must be spent on the wife’s care before she will be eligible to receive Medicaid benefits to pay for her care.
However, Medicaid regulations provide that if a Testamentary Trust is funded by Will at the death of one spouse, and the assets are held in that Testamentary Trust for the benefit of the surviving spouse, the assets in that Testamentary Trust will not be countable in determining the surviving spouse’s Medicaid eligibility. This is an important distinction and one that can allow a spouse to set aside assets in trust for the benefit of his or her surviving spouse.
A Testamentary Trust works especially well in situations where one spouse is ill and is being cared for by the other spouse. In such a situation, if the caregiver spouse were to die, the ill spouse would almost certainly need a nursing home level of care as they could not live alone or care for themselves. In this case, if the caregiver spouse (the husband) creates a Testamentary Trust through his Will for the benefit of his wife, and if the caregiver spouse dies before his wife, any assets owned by the caregiver spouse in his name alone would pass through probate and fund the Testamentary Trust created by his Will for the benefit of his wife. The Trust assets could be used for his wife’s benefit during her lifetime, to pay for anything his wife needs that is not covered by Medicaid – things like flowers, books, hearing aids, haircuts, a new television, new clothes, companions or additional caregivers, or any number of other things outside of the cost of skilled nursing care. When the wife passes away, any assets remaining in the testamentary trust will be distributed according to the Will’s provisions – for example, to the couple’s children, or other individuals or charities.
3. Who Can be the Trustee of a Testamentary Trust?
The Trustee of the Testamentary Trust is responsible to manage the Trust assets for the benefit of the Trust beneficiary – the wife in the previous example. Anyone other than the wife can be the Trustee of the Testamentary Trust for the wife’s benefit. For example, when the husband creates his Will with a Testamentary Trust for his wife’s benefit, he names his son Jack as the Trustee. Jack will have the authority to manage and invest the assets in the Testamentary Trust after his father’s death, and the discretion to use the assets in the Testamentary Trust for his mother’s benefit during her lifetime.
There may be a conflict of interest if Jack is also a beneficiary of the Testamentary Trust after his mother’s death, in that the fewer assets he uses for his mother’s benefit while she is living, the more that will be left for Jack and the other beneficiaries of the Trust after her death. This is something that should be considered when choosing the Trustee for the Testamentary Trust. It may be appropriate to choose someone who is not an ultimate beneficiary of the Trust after the primary beneficiary passes away.
4. Ownership of Assets is Key
In order for a Testamentary Trust to work properly, the creator of the Will that includes the Testamentary Trust – the husband in our example – must own assets in his name alone. Assets that are owned jointly will typically pass automatically to the surviving joint owner and will not pass through probate and into the Testamentary Trust at the husband’s death. Similarly, assets that name a beneficiary will pass automatically to the named beneficiary and not through probate and into the Testamentary Trust.
For this reason, if a Testamentary Trust is created, a change in the way assets is owned is often required. In our example, the home that is jointly owned by husband and wife should be transferred into the husband’s name alone, so that when he dies the home will pass via the husband’s Will into the Testamentary Trust for his wife’s benefit. Similarly, a joint bank account should be transferred into the husband’s name. Perhaps beneficiaries should be removed from CD accounts, etc. How assets should be restructured is specific to each person’s situation, and should be done only with the advice of an attorney. However, if assets are structured properly to fund a testamentary trust, those assets will be available to provide for the surviving member of the married couple even if they are receiving Medicaid benefits.
5. What are the Disadvantages of Using a Testamentary Trust?
One of the main disadvantages of using a Testamentary Trust is that the assets must pass through probate before they are protected under the Testamentary Trust. Probate is an expensive and time-consuming process, made even more time consuming by the impact COVID-19 has had on our probate courts in Massachusetts. For this reason, it may be best to make sure the intended Trust beneficiary has some assets in her name that can be used for living or care expenses until the Testamentary Trust is established when the probate process is complete.
If the husband in our example creates a Testamentary Trust, holding assets in his individual name in order to fund his Testamentary Trust at death will subject those assets to a Medicaid claim at the husband’s death if he receives Medicaid benefits during his lifetime. For this reason, Testamentary Trusts are typically created by individuals who have not and do not expect to receive Medicaid benefits during their lifetime, although their spouse likely will receive those benefits.
Finally, if the ownership of assets is not structured properly and thoughtfully, the Trust may not work at all, or may not work to its fullest advantage. For this reason, this type of planning should not be undertaken without advice from an experienced elder law and estate planning attorney.
Testamentary Trusts can be a very effective planning tool in a very specific situation – when one spouse wants to protect assets for the surviving spouse in the event the surviving spouse is expected to require a nursing home level of care and wishes to qualify for Medicaid benefits to pay for that care after the first spouse passes away. If this is your situation, seek out the advice of an experienced elder law and estate planning attorney who can assess your situation and discuss whether a Testamentary Trust is the right planning strategy for you.
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.
April, 2021
© 2021 Samuel, Sayward & Baler LLC
Have you ever wondered…?
Whether you should have an irrevocable Trust?
If you should put your house in your children’s names?
What probate is all about and why everyone wants to avoid it?
Whether you need to worry about estate taxes?
How much you can gift to your children and the implications of doing so?
If you said ‘Yes’ to any of these questions, then join us virtually for our next Smart Counsel presentation on Thursday, April 22, 2021 from 6:00 pm to 7:30 pm when Attorneys Suzanne Sayward and Maria Baler will answer these and other questions about estate planning, elder law, and probate. This will be an interactive webinar – we’ll ask you some questions and you can ask us some questions. Since we’re all staying home, you will have to supply your own wine and cheese, but we’ll supply the answers and hopefully, have a bit of fun at the same time!
Contact Victoria Ung at 781/461-1020 or ung@ssbllc.com to reserve a spot for you and a friend.
The program is free but space is limited so don’t delay!
Suzanne R. Sayward
Maria C. Baler
Abigail V. Poole
Francis R. Mulé
A Directive as to Remains sets out a person’s wishes for disposition of their remains at their death. This may include instructions for the type of service to be held, which funeral home to use, the location of a pre-purchased burial plot, or directions for scattering a person’s cremains. Not every person chooses to leave a Directive as to Remains but if your wishes regarding cremation, your funeral, or other disposition instructions are important to you, writing those wishes down and sharing them with your family and the Personal Representative of your Will is the best way to make sure those wishes are followed.
A few things to know about a Directive as to Remains:
If you do create a Directive as to Remains, make sure you share a copy of it with the Personal Representative named in your Will and with family members who will be involved in making those final arrangements. A Directive as to Remains is not something everyone chooses to create, but if you have particular wishes regarding the final disposition of your remains, the type of funeral or memorial service you want, or if you have a special place that you want your cremains to be scattered, creating a Directive as to Remains is a good way to ensure your wishes are granted.
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 and Trust administration, elder law and probate 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.
Attorney Suzanne Sayward discusses Stepped Up Basis, 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.
A goal of many clients is to get their estate plan in order because they had to go through the time-consuming and expensive process of probate to deal with their deceased parent’s estate and they don’t want that burden to fall on their families. Probate is the process by which a Personal Representative (also known as Executor) is appointed by the Court to access, manage and distribute the deceased’s estate assets. The court that oversees probates is the Probate and Family Court in Massachusetts. There is a separate Probate Court for each county in Massachusetts. A large volume of probate matters are filed each year in Massachusetts. In addition to estate settlement matters, the Probate Courts also have jurisdiction over divorce, child custody, adoption, and guardianship and conservatorship cases. Most people would prefer to avoid the need for probate to make it easier on their family in the event of their incapacity or death. Here are five ways through careful estate planning that you can take action now to avoid the Probate and Family Court system (for which your family will be very grateful).
1. Avoid Guardianship by Completing a Health Care Proxy
A Guardian is a person appointed by the probate court to make decisions for someone who has been deemed incapacitated (a ‘protected person’). A Guardian is responsible for the well-being of the protected person and is authorized to take comprehensive or specific actions on behalf of the protected person depending on the situation. For example, a Guardian may consent to typical medical care and treatment but needs specific authority from the Court for other types of treatments, such as the administration of anti-psychotic medications. The Guardian must regularly update and report to the Court regarding the care of the protected person. Often it is a family member of the incapacitated person who must petition the Probate and Family Court to be appointed as Guardian.
Guardianships requiring Court supervision can usually be avoided by completing a Health Care Proxy. A Health Care Proxy is a document that appoints a health care agent to make health care decisions on your behalf if you are incapacitated and is a very important part of an Estate Plan.
2. Avoid Conservatorship by Completing a Power of Attorney
A Conservator is appointed by the probate court to manage the financial affairs of an individual who is adjudicated by the court to be unable to do so. The Conservator takes over the bank and other financial accounts of the incapacitated person, pays bills, makes decisions about how funds will be spent, which financial advisor to work with and how to invest your assets, for example. Similar to a Guardian, the Conservator must regularly update and report to the Court about the management of the incapacitated person’s finances, income and expenses. As with a guardianship, a family member is often the one to petition the Court to be appointed as Conservator.
The time and expense of a Conservatorship may almost always be avoided by completing a Power of Attorney. A Power of Attorney is another important Estate Planning document that appoints an attorney-in-fact to make financial decisions on your behalf. Some Powers of Attorney only “spring-to-life” when activated by confirmation of incapacity by a physician. Other Powers are effective immediately upon signing, which can be convenient in the event you need or want the attorney-in-fact to take care of your finances even though you are competent.
3. Sign a Parental Appointment of Temporary Agent (PATA)
Guardianships and Conservatorships also come into play if someone passes away leaving minor children. A Last Will and Testament is the document used to name someone to serve as the Guardian and Conservator of minor children. When someone passes away, it may take a while for the Probate court to appoint a Guardian and Conservator for the minor children. In the meantime, those minor children still need care. To bridge this gap, parents may appoint a temporary agent to care for minor children for a period of 60 days. The Parental Appointment of Temporary Agent (PATA) form designates a person who may make medical, residential and educational decisions for minor children prior to the official appointment of a guardian and conservator by the court. While completing this form does not avoid a visit to the Court, it reduces the apprehension of who will look after your children while legal custody is determined.
4. Create a Trust
Keep in mind that probate is necessary after death for assets that are individually owned and for which there is no named beneficiary. One way to change the ownership but retain full access, use and control of an asset is by having an attorney for trusts create a Revocable Living Trust for you and fund it during your lifetime. If you are the owner of your savings account as “Jane Doe, Trustee of the Jane Doe Revocable Living Trust,” your account is no longer in your individual name and thereby avoids probate. Some, but not all, other types of trusts also avoid probate.
5. Designate Beneficiaries of Certain Assets
Another way to avoid probate is to designate one or more beneficiaries of certain assets. Assets that have designated beneficiaries pass outside of probate. You may be familiar with designating your spouse as the primary beneficiary on your IRAs, 401(k)s and life insurance policies. After you pass away, your spouse will complete a form provided by the financial institution to receive the asset. However, designating beneficiaries can be a trap for the unwary. If the designated beneficiary is also deceased and there is no contingent (back-up) beneficiary designated, the asset must be probated. For this reason, it is important to periodically review your designated beneficiaries with your legacy planning and estate planning attorney and confirm them with the financial institution.
At Samuel, Sayward and Baler LLC, we will advise you about the best estate plan to avoid a trip to the Probate and Family Court and which is tailored to your needs and goals. Once your estate plan is in place, you may rest easy knowing that you have made it simpler and faster for your family to manage your estate if you become incapacitated or pass away.
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.
March, 2021
© 2021 Samuel, Sayward & Baler LLC
Attorney Abigail V. Poole discusses Long Term Care and CCRC’s (Continuing Care Retirement Community), 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.
One of the purposes of a Trust is to provide a structure for the distribution of assets after the lifetime of the creator of the Trust (the Grantor of the Trust) to the beneficiaries of the Trust who are designated to receive the Trust assets after the Grantor passes away.
In some cases, Trust assets are distributed outright to beneficiaries, meaning the Trustee has no discretion over when or if the beneficiaries receive the Trust assets. As soon as debts and taxes are paid, and the Trust assets are distributed from the Trust to the beneficiaries and the Trust terminates.
However, in many cases, Trusts are created for the purpose of providing oversight and management of the Trust assets for beneficiaries following the Grantor’s death. This may be done because the beneficiaries are minor children. In such cases, the Trustee will use the money for the children to ensure their living expenses are covered, their education is paid for, and the beneficiaries have a chance to mature before they are given control of inherited assets. Or it may be that a beneficiary is not good at managing money, is in a difficult marriage, has spendthrift tendencies or a gambling habit. In such cases, the Trust is created to protect the inherited assets. Control of the Trust assets will remain with the Trustee who will apply the Trust resources for the beneficiary as the Trustee determines to be prudent. Or it may be that the beneficiary has special needs or is disabled in some way, and the Trust assets are there to provide for the beneficiary’s needs in ways that will not disqualify the beneficiary from receiving or being eligible to receive needs-based public benefits.
In all of these circumstances, it is the job of the attorney drafting the Trust to communicate the Grantor’s intent while at the same time making sure that the Trust instructions are flexible enough to allow the Trustee to respond to changed circumstances or unanticipated events that arise following the Grantor’s death. Because of the need for flexibility, mandating specific directions in the Trust document can be unwise, both because they may tie the Trustee’s hands, and also because they may become inappropriate as the beneficiary ages or circumstances change.
On the other hand, the intent of the Grantor of a Trust is extremely important, as it is that intent that should inform the Trustee’s decision-making from how the Trust assets are managed to how the Trustee exercises discretion for the benefit of the Trust beneficiaries.
Enter the letter of intent – an excellent tool that a Grantor can use to spell out his intent and provide guidance to the Trustee without memorializing these intentions in the Trust document. Think of a letter of intent as the Grantor’s private instructions to the Trustee. A letter of intent should be written by the Grantor in the Grantor’s own words. In it, the Grantor should state the reasons for creating the Trust, tell the Trustee about the beneficiaries, and express the Grantor’s wishes for the way the Trustee should use the Trust resources to help the beneficiary.
For example, the Grantor of a Trust that is intended to manage assets for the Grantor’s minor children may express his wish that his children attend private secondary school and that tuition be paid for by the Trustee, that his children be allowed to travel to visit relatives abroad, or be encouraged to study abroad in college, or that his daughter’s love of horseback riding or his son’s passion for the saxophone be fostered and encouraged.
If the Trust is for the benefit of a beneficiary with special needs, the Grantor may want to express wishes regarding the child’s need for specific therapies or enjoyment of certain experiences – for example a yearly trip to Disney World. A letter of intent can also set out a parent’s vision for their child’s future – for example, wanting the child to be able to live independently with a companion, or in a group home setting.
The beauty of a letter of intent is that it can be changed as often as necessary, to keep pace with the Grantor’s changing desires for the beneficiaries without the need to update the Trust document. This can be especially useful where the intended beneficiaries of the Trust are young, and their needs and interests, and the Grantor’s goals for them may change from year to year – for example, if a child’s passion for the saxophone this year turns into a passion for the trumpet, or soccer, or chess next year.
The letter of intent need not be perfect or all encompassing, and as time passes, may no longer be relevant. For example, if the Grantor dies while beneficiaries are young, the Grantor’s intent as expressed in that letter will be frozen in time. However, a Trustee will be able to take some useful guidance from the letter that can be applied as the beneficiaries age.
As a Grantor, writing a letter of intent is not an easy exercise, or one that should be done in haste. However, done thoughtfully and mindful of the fact that it is to be used as a roadmap of your intentions for the people you intend to benefit with the assets you leave behind, it can be a very fulfilling exercise. If the letter is modified as time goes on and circumstances change, you have an opportunity to leave the best possible evidence of your intentions for those you have entrusted with carrying out those intentions after your lifetime.
If you have questions about creating your own letter of intent, please contact our office. We will be happy to assist you.
Attorney Maria Baler discusses selling your home when it’s not owned in your name, such as if it’s owned by a Trust or if you own a life estate interest in your home, on Smart Counsel for Lunch
We include a column in our law firm’s quarterly newsletter called ‘Ask SSB’ in which we answer questions posed by readers. Recently, a reader asked about the different types of trusts and which one was right for her. As with most estate planning questions, the answer to, ‘what’s best for me?’ is, ‘it depends.’
There are far more than 5 types of trusts and each type of trust is intended to accomplish different goals. Read on to learn about 5 types of commonly used trusts.
The best way to determine the Trust that is best for you and your situation is to consult with an experienced estate planning attorney. If we can help you with that planning, please contact us.
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, 2021
© 2021 Samuel, Sayward & Baler LLC