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Ask SSB

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Q:       My mom passed away a few months ago.  She had a will that leaves everything to me and my sister equally.  That means we don’t have to go through probate, right?

A:        I wish I could get a hold of the person who started this tale: “If you have a will, you do not need to go through probate.”  This is one of the most common misconceptions among our clients.  I am happy to dispel this rumor once and for all!

The concept of ‘going through probate’ actually has nothing at all to do with whether or not you have a will.  A will is simply a document that outlines who you would like to receive your assets when you pass away.  A will states who you would like to serve as your personal representative (formerly known as executor), whether you have specific instructions about the distribution of certain assets and if you have minor children, who you would like to serve as guardian for those children.  If you do not have a will, the Commonwealth of Massachusetts has one for you.  This is called the intestacy statute.  However, you may not agree with what the intestacy statute says—sometimes its terms are surprising.  Having a will overrides the intestacy law and allows you to state clearly what your wishes are once you pass away.  It can also make the probate process run more smoothly as it allows you to make certain elections in the document (such as a waiver of surety on a bond or license to sell real estate) which can often expedite the whole process.

The answer to your question lies not in the having or not having of a will but rather what assets a will controls and what processes you have to go through to gain access to certain assets when a person passes away.  This is where probate comes in.  A will only has control over probate assets—these are assets that are held in the deceased person’s sole name with no joint owners and no named beneficiaries.  Most IRAs, 401Ks, life insurance policies and investment accounts give the owner the ability to name a beneficiary.  This beneficiary designation takes priority over the terms of the will with respect to that particular asset.  Even better, the beneficiary often has immediate access to the asset upon providing a death certificate.  Likewise, assets titled in the name of a trust are non-probate assets which pass according to the terms of the trust and not the decedent’s will.  Therefore, these assets are not subject to the probate process either.

So, the act of going through probate is only required if the deceased person has probate assets (remember—assets with no joint owner, named beneficiary and not held in a trust).  The will is the roadmap that determines how the probate process will play out but having a will, in and of itself, does not avoid probate.  There you go—this myth is BUSTED!

5 Things That Can Derail Your Estate Plan

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As we often tell our clients, although you would like your estate plan to last forever, it probably won’t.  Things change, laws change, family circumstances change, and your estate plan needs to change with it if you want it to continue to accomplish your planning goals.  For most people these goals include making sure the right people are making decisions on your behalf and making sure your assets get where you want them to go with a minimum of delays, estate settlement costs and estate taxes to pay.

Here are five things that can derail even the best estate plan.

  1. Change in Marital Status. In Massachusetts, if you create an estate plan when you are married and then get divorced, the divorce will automatically revoke any provision in your estate plan documents that benefits your former spouse or any of his or her relatives (other than children you may have in common), and any beneficiary designations in life insurance or retirement plans that name a former spouse as long as you had the power to change those designations prior to the divorce. A divorce also revokes any nomination of your former spouse or his or her relatives to serve as your Personal Representative, Trustee, health care agent, etc.   This may seem like exactly what you want to happen, and convenient that it happens automatically. However, you need to consider whether your documents address who will serve in these capacities if your spouse is disqualified, or who will receive your assets if provisions in favor of your spouse are automatically revoked.  Also, although the law makes provisions regarding the automatic revocation of beneficiary designations, it is not wise to rely on these provisions, for example, as to life insurance issued by an out-of-state financial institution or a retirement account subject to federal ERISA law.  Reviewing your documents and beneficiary designations and changing them as necessary is always the best approach.  If you create an estate plan while you are single and then get married, your marriage will no longer revoke your Will (as was the case under prior law) but be aware that Massachusetts law gives your spouse a right to receive a certain portion of your estate whether your Will provides that or not.  Make sure you understand what the law provides and create documents that consistent with your intentions if necessary.

 

  1. Death or Incapacity in the Family. Estate plan documents typically name certain individuals – your spouse, children, siblings, friends – to handle certain duties during your lifetime (as attorney-in-fact or health care agent) or after your death (as Personal Representative or Trustee), and also as beneficiaries of your estate.    If someone named in your estate plan documents passes away before you or becomes incapacitated and unable to perform the duties they were nominated to perform, this can be an issue if successors have not been named in the document.  Further, if the person is still alive but is not able to perform those duties appropriately, they may still insist they are able to do so when you (and others) may know they are not a good choice anymore.  A little off topic, but also not uncommon, is the situation where a family member or friend is named as the guardian of minor children in a parent’s Will, but that person is no longer a good choice.  To avoid probate court involvement in designating successor fiduciaries, and to avoid people serving who are no longer appropriate, make sure you revisit the people you have named in your documents from time to time and make changes as needed.  If a beneficiary named in your estate plan is no longer living, make sure you understand how the documents (or beneficiary designations) will operate and where the assets designated for the deceased person will go instead, and make changes if necessary.

 

  1. Beneficiaries with Issues. There are few perfect families, and sometimes a person who is named as a beneficiary of your estate plan will hit a rough patch.  Maybe your child is in a bad marriage and headed for divorce and you are concerned that your daughter’s inheritance may be shared with her estranged husband.  Maybe your favorite nephew has developed an affinity for sports betting and you are concerned about how he will manage an inheritance he may receive from you.  Maybe a family member is an unfortunate victim of the opioid crisis that has hit Massachusetts hard.  Maybe a beneficiary has recently become disabled and you are concerned that an inheritance may disrupt receipt of public benefits.  If any of these situations arise in your family, take another look at your estate plan and update your plan as needed.  It may be that you want to disinherit a troubled individual altogether or retain their inheritance in trust in a way that it will be protected from their troubles but still be available to help them through the rough patches.  An estate plan can do all of this and more, but proper planning is required.

 

  1. Lack of Trust funding and Improper Beneficiary Designations. Even the best estate plan can be derailed if attention is not paid to how assets are owned and how beneficiaries are designated.  It is important to follow your attorney’s instructions regarding these matters to be sure the way in which your assets are owned and beneficiaries are designated is consistent with your estate plan.  In our office, we provide our clients with written trust funding and beneficiary designation instructions.  It is important to make sure the instructions are followed as to existing accounts or assets, and as to any new accounts that may be opened or new beneficiary designations that may be made after your plan is in place.  It is always a good idea to sit down with your estate planning attorney at least every 5 years or so to review asset ownership and beneficiary designations, and make sure they are as they should be.

 

  1. Change of Domicile. Many of my clients (especially after this past winter) think about moving to warmer locations when they retire, even if they want to spend some time in Massachusetts during the year.  It is important that your estate plan documents reflect where you consider yourself to be domiciled – where you intend to make your permanent home.  Although estate plan documents created in Massachusetts will be valid in Florida (or any other state), it is generally a good idea to have your estate plan documents updated when you move to another state. In addition to making sure your documents operate cost effectively and efficiently under the laws of that state, your documents should be written in the state in which you are domiciled.  This is especially important if you are moving from a state (like Massachusetts) that has a separate state estate tax, to a state (like Florida) which has no state estate tax, when your documents will serve as evidence of your intention to be domiciled in your new state.  Further, documents like powers of attorney and health care proxies are often state-specific, and you will want those documents to be used easily in your new state without any question or delay.

Like it or not, an estate plan is not something you can create and forget about.  Family circumstances change, the laws change, and often your goals change.  For these reasons, your plan should be reviewed regularly, revised as needed, and kept up-to-date so it will be ready to do its job whenever and wherever it’s needed.

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). 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, 2018

© 2018 Samuel, Sayward & Baler LLC

What does a Snowstorm have to do with Estate Planning?

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The snows and no-snows of March set me to thinking about disruption.  When I was a kid, waking up to a foot of snow was one of the most joyful events of my life – especially if it happened on school day.  As an adult, I have the opposite reaction.  In fact when I looked out the window on March 22nd and saw that the meteorologists’ prediction of a huge overnight snowfall was a complete bust, I was filled with delight.  In thinking about my two-selves’ different reactions to snow, I came to the conclusion that it is all about disruption.  As a kid, I loved unexpected disruptions – a snow day, a fire drill, a fight at recess.  As adults we are not so fond of disruptions – some people even dislike holidays!  In many ways, undertaking estate planning is about planning to minimize disruption when the unexpected happens.  The events that we are planning for when we create an estate plan are sickness and death.  If you, your spouse, your parent or your grandparent, gets sick or has an accident and is incapacitated as a result, that is a very disruptive event not only to person who is incapacitated but also to family members who are caring for the ill person.  Decisions about health care will need to be made, bills will need to be paid, maybe the house will need to be sold.  These added tasks are disruptive to the lives of the people who must take them on, but it is even worse if the incapacitated person does not have a Health Care Proxy and Durable Power of Attorney that legally authorize people to make health care decisions, pay bills, deal with real estate, file tax returns, etc.  If no such documents exist, then family members are forced to petition the probate court for guardianship and/or conservatorship in order to obtain the legal authority to make decisions and take action.  Believe you me, there is nothing quite so disruptive as having to deal with the probate courts – not to mention the expense involved in any court proceeding.  Similarly, if someone dies without a Will or Trust, the cost, time and aggravation of settling the estate are multiplied – more disruption!  You can reduce the disruption caused by incapacity and death by getting your affairs in order and creating (or updating, if it’s been a while) an estate plan.  As to the next snow storm….my advice, flee to Florida!

March, 2018

© 2018 Samuel, Sayward & Baler LLC

Five Things to Consider Before You Make Your Child an Owner of your Home

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Clients often tell me that they want to transfer their house to their children or add a child’s name to their deed because they want to protect the property from a forced spend down or a Medicaid lien in the event they need long-term care. However this is not an action that should be taken in haste.  There are significant consequences to such a transfer and these should be examined carefully.

Here are five things to consider before putting your child’s name on the title to your house.

  1. You will be subjecting your property to the reach of your children’s creditors. If your child’s name is on your home as an owner, your home is subject to the reach of your child’s creditors such as a divorcing spouse, bankruptcy, lawsuit, judgment, unpaid debt, etc.  If your child owns an interest in your home, your child’s creditors may place a lien against the property and you would not be able to prevent that from happening.  In any event, before deciding to make your child an owner of your property, have a frank discussion about any skeletons that may be lurking in your child’s closet – Is there a possible divorce on the horizon? Did your child personally guaranty a loan for his business that is now floundering?  Is your child in trouble with the IRS?  If the answer to any of those questions is ‘yes’ or even, ‘maybe’, adding that child’s name to the deed to your house is not in your best interest.

 

  1. You may lose the right to exclude the capital gain on the sale of the property.   The current income tax laws allow a person to exclude up to $250,000 of capital gain on the sale of her primary residence provided she has owned and occupied the property for two out of the five years prior to the sale.  This is an excellent tax benefit for people who have owned their home for a long time and have seen the value increase significantly.  For example, someone who purchased their home in the 1970s for $50,000 and sells it now for $300,000 would have a capital gain on the sale equal to $250,000 ($300,00 – $50,000 = $250,000).  However, no tax would have to be paid on that gain provided the seller owned the home and occupied it as her primary residence for two out of the five years preceding the sale.  If the home is transferred to the children, then the parent seller would not be the 100% owner of the property at the time of the sale.  If she retained a life estate when she transferred it to the children, or if the children were added as co-owners with the parent, then a portion of the gain would be tax free but the portion of house deemed owned by the children would be subject to capital gains tax (unless the children were living in the home).

 

  1. Once you do this, you cannot unilaterally undo it.   If you transfer your home to your children, or add their name to your deed so that you are co-owners of the property, you cannot unilaterally change this. If you change your mind about the transfer and decide you want to be the sole owner of the property, your children must sign a deed conveying the property back to you.  Even if you have the best children in the world and you are not worried that they would refuse to do as you ask, you still need to be concerned about factors beyond your child’s control such as your child being sued, getting divorced, filing for bankruptcy, becoming disabled, etc.  Any of those events, as well as a host of other troubles, could prevent your child from being able to transfer the property back to you free and clear of the claims of your child’s creditors.

 

  1. If not done properly, your children will lose the stepped-up tax basis in the property.  One of the tax breaks that truly helps the middle class is the stepped-up tax basis that occurs when someone dies owning an appreciated asset. The tax basis of an asset is the starting point in determining the amount of gain realized on the sale of a capital asset such as stock or real estate.   To calculate the tax basis of a home, you start with the purchase price, and add the cost of the capital improvements made to the property.  For example, if mom and dad bought their home for $50,000 in the 1970’s and made $100,000 of capital improvements over the years (i.e. a new roof, new kitchen, replacement windows, etc.) the property now has a basis of $150,000.  If property with a $150,000 tax basis is sold for $350,000 there is a capital gain of $200,000 ($350,000 – $150,000 = $200,000) and that is the amount on which capital gains tax must be paid (but see number 2 above for an exemption on the sale of a primary residence).  However, if the property is still owned by the parents when they die, then the children will inherit the property with a ‘stepped-up’ basis.  This means that the children’s tax basis in the property is its fair market value when the last parent died.  In this example, it means that if the children sell the house for $350,000 then the gain on the sale will be zero ($350,000 – $350,000 = $0) and thus there would not be any capital gains tax to pay.  However, the stepped-up basis is only available if the property is owned at death.  If the parents deed their home to the children during their lifetimes, then the parents do not own it at death and therefore the basis is not stepped-up.  In that case, the children are stuck with their parents’ basis, $150,000 in this example, and will pay capital gains tax on the difference between the sale price and the parents’ basis.

 

  1. You will incur a 5-year ineligibility period for long-term Medicaid benefits.   One of the main reasons for transferring the home to children is to protect the property from having to be spent down to pay for the parents’ long-term care expenses or to avoid the imposition of a lien on the property by the state in the event a parent receives Medicaid (MassHealth) benefits.  The Medicaid eligibility rules disqualify a person from being eligible for long-term care Medicaid benefits if the applicant or the applicant’s spouse gives away assets within five years of applying for benefits. Deeding property to children or adding your children’s names to your deed is considered a disqualifying transfer.  Because of this it is very important to carefully consider the ramifications of a transfer before making it, especially for married people.  There are currently laws in place to protect the spouse of a nursing home resident from having to impoverish herself paying nursing home bills. However, a transfer of assets within five years could wipeout those protections.

While transferring the home to children can be a good way to protect the home from liens or spend down due to a parent’s long-term care needs, it is vital to consider the consequences of such a plan before rushing in.  Consult with an experienced estate planning and elder law attorney to fully understand the advantages and disadvantages of such a transfer before signing away your home.

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. 

March, 2018

© 2018 Samuel, Sayward & Baler LLC

Everybody Speaks a Secret Language

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A couple of weeks ago I took my car in for a service appointment because the car was all stutter-y and the ‘Service Engine Soon’ light had come on.  The service folks told me that the ‘ignition coils’ needed to be replaced and that the ‘valve cover gasket’ was leaking and also needed to be replaced.  When I picked up the car, the service light was off and the car drove fine – no more stuttering – so clearly the analysis of the problem and the solution were correct.  However, I left the service department a bit lighter in the wallet than when I went in and with no real understanding of what had happened other than my car had been broken and now it was fixed.

This started me thinking about the fact that everybody speaks a secret language.   If I knew how a car engine works, what the parts are, or how they all fit together, my experience may have made perfect sense.  But I don’t.  Terms like ‘ignition coils’ and ‘leaky valve cover gaskets’ are as foreign to me as ‘je suis confus’ (that’s French for, ‘I’m confused’).  The same holds true for other professions – think doctors, dentists and even hairdressers (what the heck is balayage?)!

Estate planning attorneys also speak a secret language that can leave clients puzzled about the advice they receive.  While you may not need feel the need to know exactly what your mechanic means when he tells you that you to replace the evaporative emissions purge control valve on your car, it is important to understand what your estate planning attorney means when she tells you that you need to name a successor attorney-in-fact in your durable Power of Attorney.

Estate planning is about the most important thing to most people – their family.  Understanding how the decisions you make in your Will, Trust, Power of Attorney, etc. (or that you fail to make if you do not have an estate plan) will affect the people you love is vital.  So the next time you are meeting with your estate planning attorney and she advises you to “convey your real estate to a nominee Realty Trust so that it can be used to fund your credit shelter trusts,” make sure she explains ‘the why’ of this to you and that you understand that explanation.  In the meantime, if your mechanic tells you that your car needs a new flux capacitor, you might want to look for a new mechanic!

February 2018

© 2018 Samuel, Sayward & Baler LLC    

Five Do-It-Yourself Estate Planning Moves

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This is the time of year when New Year’s resolutions about getting an estate plan done (finally) bring people to my office.  Others may decide to take matters into their own hands.  As an estate planning attorney, I am not a big fan of do-it-yourself estate plans.  Whether it’s a so-called Will handwritten on a napkin, or documents created using LegalZoom or any of the other on-line tools, I have never seen a Will or other estate plan document drafted by a client work as intended.  For a variety of reasons, these documents are at worst invalid and at best poorly written, creating ambiguity and inevitably leading to more time and expense in the estate settlement process, which is precisely what the drafter was, I suspect, trying to avoid.  There is no substitute for an experienced estate planning attorney if you want to create an estate plan that will be valid, cost-effective, and accomplish your goals.  However, there are certain things you can do yourself that will go a long way toward ensuring that your estate plan works as you intend.  Here are five of them:

  1. Get Organized. One of the first tasks someone will need to complete after your death is to identify your assets. Your family will thank you if it is easy for them to figure out what you own and where your assets are located. Take the time once a year to create a list of your assets – bank accounts, investment accounts, real estate, life insurance policies, annuity contracts, IRA and 401k accounts, etc.  Include the institution and the account number.  Include information about any safe deposit box you may have and where the key is located. If you have a safe or other place you store assets or important papers in your home, make sure that is on the list.  Finally, and despite all advice to the contrary, include your passwords to online financial, social media, email and other accounts.  Without that information, timely access to your digital assets may be impossible.  After you create this list, update it at least once a year.  Then, put it somewhere where it will be easily found if something happens to you.  If you have a filing cabinet where you keep your asset information, put the list in the front of the cabinet.  Another good option is to make a 3-ring binder where you keep the list along with your most recent account statements.  Organizing the paperwork related to those assets in one location is also a plus.  Any method that works for you is OK. Keep your estate plan documents and the contact information for your attorney, your financial advisor and your accountant in the same location.  Then, tell the person you have named as Personal Representative in your Will what to do when you are gone.  It’s enough to say, “If I get hit by a bus tomorrow, go to the bottom drawer of the filing cabinet in the den and you’ll find everything you need there.”  A little organization and information will make things a lot easier for your family to pick up the pieces when the time comes.
  1. Check Beneficiary Designations. Identify the assets you own that have beneficiaries designated to receive those assets when you pass away – for example, life insurance policies, annuities, IRAs, 401ks and other retirement accounts.  Check with those companies, or with your employer, to confirm who you have designated as the primary beneficiary on a particular policy or account (to receive the asset at your death).  Make sure the primary beneficiary is still the person you want to receive that asset.  If your designated beneficiary is no longer a good choice, obtain the appropriate form and change the beneficiary – now.  Also, confirm that you have designated a contingent beneficiary who will receive the asset if the primary beneficiary is not living at your death, and if you haven’t done so, designate an appropriate contingent beneficiary or beneficiaries.  If the beneficiaries you wish to designate are under the age of 18, make sure you understand how the company in question will handle things at your death.  It may be that they will require a court-appointed conservator for a minor before money can be paid to the beneficiary.  This is a time consuming and expensive process.  Generally, designating a trust for the benefit of a minor beneficiary is a better approach.  If you have large retirement accounts, make sure you understand the rules that will require minimum distributions from those accounts each year to non-spouse beneficiaries after your death, regardless of their age, and the income tax implications to your beneficiaries.
  1. Specifically Identify Special Items. Your tangible personal property – the contents of your home, your car, your jewelry, your boat – are often overlooked in considering how assets will be distributed at death.  If you have tangible property of significant monetary or sentimental value, consider being specific about who should receive these items at your death. Create a list of the items and the people you would like to receive them.  Sign and date the list, and re-sign and re-date it when you make changes.  Keep the list with your asset list (see #1 above) or with your estate plan documents.  This will go a long way to avoid disagreements following your death about who should receive Mom’s engagement ring, grandma’s rocker, or the family’s prized Revolutionary War musket that needs a caretaker that understands and will respect its significance.
  1. Leave Instructions – About your Kids. One of the hardest but most valuable things you can do is write a letter of instruction to your children’s guardian about how you would like your children to be raised if you are not around to do it yourself.  As a parent, it is very difficult to imagine what your children’s life would be like if you are no longer there.  However, all parents have hopes and dreams for their children, as well as practical information about their children that would be useful for someone to have.  So, write it down.  “Dear Guardian, If I am no longer living, these are the things I want you to know about my children…”  Start with the mundane – who their doctors are, what allergies they have, what they like and don’t like (particular food, scary movies, clowns).  Continue with what you hope they will have the opportunity to do in the future – music lessons, a particular summer camp, time each year to visit with extended family who may live far away.  This is a letter you will need to commit to updating as time goes on, since as your children get older much of this information will change.  It’s not an easy thing to do or commit to keeping updated.  However, this kind of information can be invaluable for those who are left to care for your children, and can also give you some peace of mind that if your wishes are known they will be carried out.  Keep the letter with your estate plan documents and your asset list.
  1. Name Legacy Contacts. If you use email or social media, consider naming a legacy contact to whom you can give permission to access your “digital assets” stored with that company after your death. For example, Facebook allows you to designate a Legacy Contact (Settings/General Account Settings/Manage Account) who can manage your account after your die, or you can choose to have your account deleted if you pass away. Google allows you to control what happens to your account through their Inactive Account Manager feature (My Account/Personal Info and Privacy/Control your Content), where you can designate when your account will be considered inactive and what will happen to your Google account, and designate one or more people who will have access to whatever portions of your Google account you choose.  Keep in mind that if you do not use an online entity’s prescribed method of giving someone permission to access your account, and do not provide express permission and direction in your estate plan documents, the company’s Terms of Service Agreement will govern.  In such a case, you and your digital assets are at the mercy of the online provider, which may not allow access following your death or incapacity.

Estate planning is not as easy as do-it-yourself websites may have you believe, and I would not recommend that you try it at home.  Work with an experienced estate planning attorney to create estate plan documents that are appropriate for you and that will accomplish your goals after you are gone.  In addition, consider taking the steps described above to make things easier for those you leave behind.

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). 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.

February 2018

© 2018 Samuel, Sayward & Baler LLC    

Estate Planning Considerations for Retirement Accounts

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These days, I see fewer and fewer clients with pensions that pay them a monthly income for their lifetime, and perhaps for their spouse’s lifetime as well.  Most of my clients now have large retirement accounts to which they and perhaps their employer have contributed.  These accounts may be in the form of a 401k, 403b or other retirement savings plan through a current employer, a rollover IRA (holding funds rolled over from a former employer), an inherited IRA (holding funds from an IRA of which the client was named as beneficiary) or a traditional IRA or Roth IRA established by the individual client.    These types of assets all have certain things in common – the funds in them have for the most part not been subject to income tax (with the exception of a Roth IRA), they are subject to specific and detailed rules for withdrawals during the lifetime and after the death of the account owner, and they often comprise a large percentage of the account owner’s wealth.  These factors combine to make it extremely important for clients to pay close attention to how they plan for these accounts.

As an estate planner, my goal is to make sure that the designated beneficiaries of my clients’ retirement accounts are consistent with the rest of their estate plan, that if someone becomes incapacitated his or her retirement funds can be appropriately managed, and that when the account owner dies these valuable assets are properly administered.  Most people diligently designate their spouse as the primary beneficiary of their retirement accounts, but many people do not designate contingent beneficiaries on their retirement accounts.  Admittedly, the contingent beneficiary designation is a much harder exercise.  Should you name a charity, your children, your grandchildren, your second wife, your Trust?  What if your desired beneficiaries are young and have no idea what a retirement account is?   The decisions that must be made when designating beneficiaries can have far-reaching income tax, estate tax, and other implications for you and your beneficiaries.

Further, many people are not aware that when they die, a non-spouse beneficiary must begin taking minimum required distributions from an inherited retirement account by the end of the year following the year in which the account owner dies.  This holds true whether the beneficiary is age 2 or 72, and leads to the important discussion of how to designate the beneficiary of your retirement account if you want to benefit young children.  There are pros and cons and tax considerations to deciding whether to name the child individually, or a trust for the child’s benefit, as beneficiary.

It is of course important to get good financial advice about how your retirement accounts are invested.  Many of these plans are now self-directed, with on-line tools to help you pick investments that are appropriate for your age and goals.  However, if you have a retirement account with several hundreds of thousands of dollars in it, you really should have a conversation about your investments with a human, preferably an experienced financial advisor, rather than your computer.

While you are dreaming about how you will spend that money in retirement (hopefully on living well, doing good, and having great adventures), take some time to consider what will happen if you do not outlive your retirement funds (which is the goal, after all).  Consult with an experienced estate planning attorney for advice on how best to plan for those retirement funds consistent with your estate planning goals so that the next generation can continue those dreams!

January, 2018

© 2018 Samuel, Sayward & Baler LLC    

Five Estate Plan Actions to Take In Light of the New Tax Law

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Some people put off their estate planning pending passage of the 2017 tax law in case there were changes in the law that would affect their planning choices.  The new tax law increases the amount that each person may pass on free of federal estate tax from $5.49 million to $11.2 million.  While this is great news for the super wealthy, for the 99.5% of the rest of us, the federal estate tax became a non-issue in 2010 when the exemption from federal estate tax was increased to $5 million per person.

Estate planning has always been about more than tax planning and the reasons to make sure that you have a comprehensively drafted, up-to-date estate plan remain the same as they were before the tax law changed.  These include planning for the possibility that you may become incapacitated, making sure that your family is taken care of when you are no longer around to do so, protecting your children’s inheritance from the reach of their creditors, making sure minor children are properly provided for, and reducing the time and costs often associated with estate settlement.

Here are Five Actions to take to make sure that your estate plan accomplishes the goals for which it was created.

  1. Make sure your beneficiary designations are up to date.  Many a well-drafted estate plan has been undone by failed beneficiary designations.  Beneficiary designations are most commonly used for retirement accounts like IRAs and 401Ks and for life insurance.  However, beneficiaries may also be designated on annuities, mutual funds, investment accounts and even bank accounts.  A beneficiary designation is a form typically supplied by the company or financial institution and is completed by the owner of the account or policy.  The form designates the person or persons who will own the account or receive the life insurance proceeds when the original owner dies. The problems with beneficiary designation forms arise in a variety of ways, from not having any beneficiary named, to having the wrong beneficiary named, to designating beneficiaries that are inconsistent with the rest of your estate plan.  This can happen because the form was never updated when the first named beneficiary passed away, or because the owner did not complete a new beneficiary designation form after creating a trust. It can even happen when financial institutions merge or one company is acquired by another and paperwork goes missing in the transition.  For many people, their retirement accounts and their life insurance are their most valuable assets.  Making sure that beneficiaries are properly designated on these assets is vital in making sure your estate plan works as intended.
  2. Consider whether you should do estate tax planning to reduce the Massachusetts estate tax.    Even though few people need to be concerned about the federal estate tax, Massachusetts residents, and non-residents who own real estate in Massachusetts, should be aware that Massachusetts has its own estate tax system that imposes a tax on estates valued in excess of $1 million.   For married couples who have more than $1 million, basic estate tax planning can save their families $100,000 or more.  Unmarried people with estates over $1 million may be able to reduce or eliminate the Massachusetts estate tax by using an Irrevocable Life Insurance Trust to own life insurance or doing other planning.
  3. Update your estate plan to address changes that have occurred in your family or financial situation or in the law.   Think back to five years ago and consider what has changed since then.  Everyone in your life is five years older – does that passage of time mean that some people, like children or nieces or nephews, are now better choices to serve in fiduciary roles such as Personal Representative or attorney-in-fact under your Power of Attorney than the people you named five years ago?   Have your fiduciaries moved away or perhaps you have just drifted apart and these folks are no longer good choices.  What about your financial situation?  Has that changed in the past five years? Perhaps you received an inheritance and your estate is now much larger than it was when you created your estate plan.  Perhaps you have retired and now have concerns such as long-term care planning that you were not worried about when you were younger.   In 2012, Massachusetts enacted a brand new probate law and a brand new trust law.  If you haven’t met with your estate planning attorney to review your estate plan and the impact these changes in the law may have had on your plan, it’s time to do so.
  4. If you have created one or more Trusts, make sure your Trusts are properly funded.  Creating a trust as part of an estate plan can accomplish many goals.  One of the primary reasons for creating a trust is probate avoidance.  Probate is the court process of changing the title on assets owned by a deceased person so that the assets can be distributed to the heirs or devisees.  Avoiding probate is desirable because probate can take a long time, it is expensive, it means a loss of privacy and it can be an aggravating process.  A trust is a great way to pass your estate to your intended beneficiaries outside of probate but this only works if the assets are re-titled in the name of the trust during lifetime.
  5. Learn about your options for long-term care planning and choose the one that is best for you.  Long-term care is an area of concern because the cost is very high and because many people want to avoid becoming a resident of a nursing home. Meeting with an experienced estate planning attorney with knowledge of elder law to educate yourself about long-term care planning options is a must for anyone over the age of 65.

Estate planning means taking steps to make sure you and your family are taken care of in the event of incapacity or death.  While tax planning is certainly a component of estate planning it is by no means the only reason.  If you have not created your estate plan or if it has been awhile since you last reviewed your plan, resolve to make 2018 the year you take care of this important business.

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. 

January, 2018

© 2018 Samuel, Sayward & Baler LLC    

AGING IN PLACE

by

By Steven Joshua Samuel JD, MBA, AIF®

The Economist magazine recently published a story that summarizes some of the issues that all of us have to address to age in place well, meaning, live where and how we prefer to live:

“In 1965, ANDRÉ-FRANÇOIS RAFFRAY, a 47-year-old lawyer in southern France, made the deal of a lifetime. Charmed by an apartment in Arles, he persuaded the widow living there that if he paid her 2,500 francs (then about $500) a month until she died, she would leave it to him in her Will. Since she was already 90, it seemed like a safe bet. Thirty years later, Mr. Raffray was dead and the widow, Jeanne Louise Calment, was still going strong. When she eventually passed away at 122, having become the world’s oldest person, the Raffray family had paid her more than twice the value of the house.”

The widow Calment achieved a measure of security for her housing and income needs, both key requirements of aging in place well, according to the MIT AgeLab. Here are the rest of the issues the MIT AgeLab believes she needed to address and how technology can help:

Financial Security

The arrangement between Jeanne Louise and Andre-Francois made it possible for her to stay in her residence, assuming that $500 each month was enough at both the beginning and end of the 30 years she lived. Using a historically reasonable annual inflation rate of 3%, ten years after their deal, Jeanne Louise would have needed $750 monthly and at the 20th year, $1000.  So, either $500 more than met Jeanne Louise’s needs at the beginning, or her standard of living declined quite a bit, unless she had other sources of income. If she had investments to supplement what Andre-Francois paid her, she hopefully would have educated herself sufficiently to invest in both stocks and bonds, to keep up with inflation.

Housing

If Jeanne Louise hoped to live out her years in her own home, she would need more than money. Even routine home maintenance and repairs can be a challenge at any age. Hopefully, Jeanne Louise had friends and family to help her find qualified and trustworthy plumbers, electricians and other tradespeople. Today, this task can be helped by technology, like HomeAdvisor or similar software applications (apps) as well as trusted family, neighbors and friends.

Transportation

Staying mobile makes it possible and easier to age in place well. Mobility means everything from navigating without significant help from bedroom to breakfast and shower, to shopping and getting to appointments and social events. Losing the ability to drive a car does not have to feel like a catastrophic loss as it did in the past, with the availability of ride sharing companies such an Uber and Lyft and soon, self-driving vehicles. Being open and able to use these technologies can avoid loss of social contact and ability to live independently as personal health permits.

Healthcare

For those able to adapt to advances in technology, healthcare is changing dramatically. Software applications enhance communication between patients and physicians and other health care providers. Apps can monitor and track health conditions, order prescriptions to be delivered to our homes and keep us motivated to continue fitness programs.

Social Connection

Maintaining social contacts is mentioned as a key factor in virtually every study of people who age in place well. Even when physical mobility or distance to friends and family are a challenge, Facebook and numerous other apps are a connecting bridge.

Putting it all Together

Successfully managing financial security, housing, transportation, healthcare and social connections requires finding trustworthy information and resources in a wide variety of fields. This is easier said than done and it is often hard to know where to find help. A good place to start is an estate planning or financial professional you have come to trust. Over years of helping families address personal and family issues, estate planning and financial professionals often develop knowledge or resources in all of these fields.

Samuel Financial LLC is located at 858 Washington Street, Dedham, MA 02026 and can be reached at 781.461.6886.  Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser.

December 2017

© 2017 Samuel, Sayward & Baler LLC

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

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