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Navigating the Necessary: Critical First-Year Decisions After Losing a Loved One

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When we lose a loved one, it is common to hear the advice that we should not make any major decisions for at least one year following the loved one’s death. The idea behind this adage is that grief can cloud our judgment, and we may not be in the best frame of mind to make significant life changes or choices that could have long-term consequences. While this advice is well-intentioned and can be applicable in some situations, it is not always feasible, especially when it comes to handling the various financial and legal matters that arise in the wake of someone’s passing.

In reality, several critical decisions and tasks must be accomplished within the first year after death. For example, estate tax returns and final personal income taxes need to be filed with the Department of Revenue in the Commonwealth of Massachusetts and Internal Revenue Service. In particular, if an estate tax return is required, it typically must be filed within nine (9) months of the deceased’s date of death, although the deadline may be extended by six (6) months, if necessary. Failing to take action within the required timeframes can result in costly penalties.

Given the importance of these first-year responsibilities, it is essential to think carefully about who you name as a fiduciary in your estate planning documents. When you are choosing a Personal Representative or Trustee, name a person you trust implicitly and who is responsible and capable of making difficult decisions under pressure. They should also be willing and able to take on the significant responsibilities that come with the role, especially during that challenging first year. By selecting a fiduciary who is up to the task, you will ensure that your loved ones are protected and that your final wishes are carried out as smoothly as possible, even in the face of grief and loss.

At Samuel, Sayward & Baler LLC, a knowledgeable attorney will guide you through the selection of an appropriate fiduciary to appoint so that you may rest assured that those important (tax) responsibilities will be addressed in a timely manner after your passing.

Attorney Abigail V. Poole is a senior 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 Immediate Past President of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA). This article was written with the assistance of artificial intelligence system Claude AI and 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.
May, 2024

© 2024 Samuel, Sayward & Baler LLC

5 Things your Mom would Tell you if your Mom was an Estate Planning Attorney

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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

What’s New at Samuel, Sayward & Baler LLC – Don’t Miss Our Spring 2024 Newsletter

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Attorney Maria Baler discusses our Spring 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.

Death and Taxes

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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

If the Shoe Fits: Five Benefits of Paying for Long-Term Care Yourself

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“I heard on the radio that I should create an Irrevocable Trust to protect my home from the nursing home taking it away from me.” This is a comment I regularly get from clients who wish to explore long-term care planning. I am happy to do so with them. I start by explaining that the nursing home will not take your home from you; it is only if you receive Medicaid benefits (the combined state and federal government benefits program for which you must qualify) to pay for your long-term care in a nursing home (or a few other situations) that Medicaid will require reimbursement for the care expenses they have covered. In that case, reimbursement comes from the sale of your home while you are alive or from your probate estate after your death.

Further, the long-term care options available to you are entirely dependent on your goals, finances and family dynamics, which may be completely different from others who have engaged in such planning. For instance, your goal may be to preserve the value of your home for your children and therefore you may be willing to transfer your home to your two responsible, unmarried adult children now. On the other hand, your sister has no children, and preserving her assets to benefit the next generation may not be a top priority when she could utilize those assets to pay for care for herself now. With this in mind, this article examines the benefits of planning to pay for long-term care yourself instead of anticipating the use of state benefits to pay for your long-term care in a nursing home.

  1. Independence from State Benefits: Expecting to rely on federal and/or state-provided benefits such as Medicaid to pay for long-term care in a nursing home can be risky due to the unpredictability of government policies, and changes in the laws and regulations that govern eligibility for such benefits. By saving money to pay for your future long-term care independent of government benefits, you reduce the necessity of relying on government benefits and increase the possibility of having sufficient resources necessary to access quality care when you need it most in the future.
  2. Freedom to Determine Residence and Care Opportunities that Best Suit You: Saving to pay for your own long-term care allows you to choose the type of residence and level of care that best suits your needs and preferences. Government benefits such as Medicaid do not pay for all types of long-term care, and in most cases pay for only nursing home care. Whether you opt for an over-55 residential community, in-home care, an assisted living facility or a nursing home, having your own funds gives you the flexibility to access a wider range of options tailored to your specific requirements. This ensures that you receive the level of care, comfort and social activities that align with your lifestyle and preferences, especially as they may change as you age.
  3. Retain Funds and Gift as You Choose: One of the significant advantages of paying for long-term care yourself is the ability to retain control over your funds and allocate them as you see fit. Unlike qualifying for Medicaid benefits, which comes with restrictions on asset transfers and gifting, retaining your funds to access, manage and control yourself allows you to gift portions to loved ones or charitable causes during your lifetime if desired. This level of financial autonomy empowers you to continue to make decisions that align with your values and priorities.
  4. Long-Term Care Insurance Policies to Pay for Your Long-term Care: In addition to saving funds to pay for your care out of your own pocket, you may also consider obtaining a long-term care insurance policy to provide an additional layer of financial protection. A long-term care insurance policy is a type of insurance that specifically pays for long-term care, whether that care is received in your home or at an assisted living facility or nursing home, depending on the terms of the policy. It essentially creates another “bucket” of funds you can draw from to pay for your long-term care, which decreases the funds you are paying from your personal accounts and thereby prolongs your ability to pay for your care yourself without having to qualify for government benefits to pay for needed care.
  5. Flexibility in Determining Inheritance: By saving and paying for your own long-term care, you maintain the flexibility to determine how your assets will be distributed upon your passing. If you receive Medicaid benefits to pay for care, keep in mind that Medicaid is “first in line” to be reimbursed from your probate estate for any expenses Medicaid paid on your behalf. For example, your home that you intended to leave via probate to your brother at your death may instead need to be sold to reimburse Medicaid and your brother will only receive some (or none!) of the sale proceeds. By saving and paying for your own long-term care, you are better positioned to create a legacy according to your wishes. Whether you choose to leave assets to family members, friends, or charitable organizations, having control over your inheritance provides peace of mind and ensures that your financial legacy reflects your values and priorities.

In conclusion, paying for your own long-term health care offers numerous benefits that provide greater control, flexibility, and peace of mind compared to expecting to utilize government benefits, such as Medicaid. If you are concerned about planning for long-term care expenses, speak with an experienced elder law attorney who can guide you through a variety of considerations to assist you with determining the long-term care planning strategy that best suits you.

Attorney Abigail V. Poole is a senior 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 Immediate Past President of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA). This article is written with the assistance of Chat GPT and 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

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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.

Understanding the Massachusetts Homestead Law: Protecting Your Home and Family

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By: Brittany Hinojosa Citron

Owning a home is often considered one of life’s most significant accomplishments. Beyond its emotional value, a home is also a substantial financial asset for many individuals and families. However, unforeseen circumstances such as lawsuits, debts, or financial challenges can threaten the security of homeownership. To safeguard against these risks, Massachusetts offers homeowners the opportunity to declare a homestead. 

The Massachusetts homestead law protects homeowners from the forced sale of their primary residence to satisfy certain debts or obligations. By filing a Declaration of Homestead in the county or district Registry of Deeds where the residence is located, homeowners can claim a portion of the equity in their home as “homestead protection.” This protection applies to various creditors, but it does not apply to mortgage lenders, tax liens, Medicaid/MassHealth liens for benefits paid on behalf of the homeowner (including benefits paid for nursing home care), and other specific types of debt. If the equity in your home is greater than the homestead protection, the home may still be sold, but the creditor will receive only what is left after you first receive proceeds equal to the amount of the homestead protection.

A homeowner is entitled to automatic homestead protection of $125,000, but homeowners who file a Declaration of Homestead with the Registry of Deeds can increase that protection to $500,000. For married couples where both spouses are over the age of 62, the homestead protection can be doubled by $1 million by filing an “Elderly” Declaration of Homestead. Increased homestead protection is also available to disabled individuals. Homestead protection is available whether you own your property in your individual name(s) or in trust. 

Homestead protection isn’t just for the homeowner but extends to their spouse and minor (under age 21) children who reside in the home. This ensures that spouses and children are safeguarded from the loss of their primary residence due to financial difficulties.

Filing a Declaration of Homestead in Massachusetts is relatively straightforward and inexpensive. By taking advantage of the Massachusetts homestead law, homeowners can secure their primary residence and help ensure a portion of the equity in their homes for themselves and their loved ones. Whether facing unforeseen circumstances or simply seeking peace of mind, declaring a homestead is a prudent step towards protecting one’s most significant asset – the family home. If you have questions about homestead protection or if we can help you with your estate planning needs, please contact us to schedule a consultation with one of our attorneys.

Attorney Brittany Hinojosa Citron is an associate attorney with the Dedham, Massachusetts, firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. 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 or to schedule a consultation with one of our attorneys, please call 781-461-1020. 

March 2024

© 2024 Samuel, Sayward & Baler LLC

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

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