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What’s Love Got to do with it? – Estate planning for Second Marriages
As June is sometimes referred to as ‘wedding season’, what better time to talk about critical planning for those who dip their toes into the legal status of ‘married’ for the second (or third, or fourth) time.
Marriage is not just about declaring your love in the presence of your family and friends. Marriage is a legal contract which creates certain rights and obligations under the law for those who enter into that contract. While most people understand that divorce results in a couple’s assets being divided between them as a court determines if they cannot agree to terms themselves, not everyone is aware that marriage creates rights in a surviving spouse as well, and unlike divorce, it doesn’t matter whether it was a 2-week long marriage or a 2-decade long marriage.
Death without a Will
When someone dies without a Will in place they are said to have died ‘intestate’ and their probate estate will be distributed under the intestate laws of the state in which they were domiciled at the time of death. If a married person dies intestate, the determination of the share of the probate estate that will pass to the surviving spouse is based on the decedent’s other family members who survive. For example, if husband dies leaving wife and children surviving and all of the couple’s children are children of their marriage, then husband’s entire estate will pass to the surviving spouse. However, if either husband or wife has a child from a prior marriage/relationship, then the amount passing to the surviving spouse is the first $100,000 plus 50% of the remaining probate estate.
Death with a Will
A Will is the estate planning document that controls the distribution of a person’s probate estate. If you do not want the Commonwealth of Massachusetts to dictate the distribution of your estate, then make a Will that sets out your wishes. Under the Massachusetts Uniform Probate Code (enacted in 2012) even a Will made prior to a new marriage remains valid where that Will leaves assets to the decedent’s children.
But Beware the Spousal Elective Share
However, even if a deceased spouse leaves a Will, there is a Massachusetts statute that grants a surviving spouse the right to ‘take against the Will’ of the deceased spouse and claim the so-called spousal share. Similar to the intestate share, the amount of the spousal share depends on who are the other surviving family members of the decedent. For example, if the decedent left descendants, then the surviving spouse would be entitled to $25,000 and a ‘life estate’ in one-third of the remaining estate. While this law is intended to protect a surviving spouse from being disinherited, the effect of this statute can be to wreak havoc on an estate plan in a second marriages and can feel especially unfair in short-term marriages.
What’s the Solution?
As with so many things, the solution lies in advance planning. A prenuptial agreement which is properly entered into before the marriage, is the best way to make sure that both parties’ intentions are carried out. This allows the parties, and not the Commonwealth of Massachusetts, to determine how their assets will be distributed in the event of divorce or death.
If we can be of help to you with these or other estate planning or estate and trust administration matters, 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.
June, 2023
© 2023 Samuel, Sayward & Baler LLC
Attorney Brittany Citron Gives An Overview Of Her Experience And Her Practice 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.
The Certainties in Life: Death and Taxes
5 Things to Know About Alternate Valuation for Estate Tax Purposes
Federal Estate Tax
When a United States citizen or resident passes away, the estate of the deceased person may be required to file a federal estate tax return and may have to pay a federal estate tax. The estate tax is a one-time tax that is payable after death on the value of your “estate,” which is essentially any assets you own or control at the time of your death. An estate tax return is due on the nine-month anniversary of the deceased’s date of death.
The good news for most people is that the federal estate tax exemption is $12.92 million per person as of January 1, 2023 ($12.06 million in 2022). This means that if the value of the assets you own at the time of your death (your so-called “taxable estate”) is less than the exemption amount, you do not have to file a return or pay a federal estate tax. A surviving spouse may elect to assume their deceased spouse’s unused exemption, which allows married couples to pass $25+ million combined. Estate tax is also not payable on the value of assets left to your surviving spouse or to charity. The federal estate tax exemption is adjusted annually for inflation. The current federal estate tax law is scheduled to sunset on December 31, 2025, and if not extended by Congress prior to that date will cause the estate tax exemption amount to drop to $5 million, adjusted for inflation.
Massachusetts Estate Tax
However, if you pass away as a Massachusetts resident and the value of your taxable estate is $1 million or more, currently your estate will have to pay a Massachusetts estate tax. The Massachusetts estate tax is a one-time tax payable to the Commonwealth on the transfer of assets from a deceased person to their beneficiaries. The Massachusetts estate tax is also due 9 months after the date of death, and any estate tax due must be paid by that time to avoid interest and penalties from accruing, even if the filing of the return is extended
- What is Alternate Valuation?
How do you determine the value of a deceased person’s “estate”? Typically, assets are valued in one of two ways for estate tax purposes: either using the date of death value or using “alternate valuation.” The date of death value of an asset is the fair market value of the asset on the decedent’s date of death. Alternate valuation evaluates the fair market value of an asset 6 months after the decedent’s date of death (or on the date of disposition if the asset was distributed, sold, exchanged, or otherwise disposed of prior to the 6-month date).
- Using Alternate Valuation
When filing an estate tax return, the estate can elect to use the date of death value of the deceased’s assets, or the alternate value. Alternate valuation can only be used if the overall gross value of the estate is less than the date of death value and the estate tax calculated on the alternate value is less than the estate tax liability for the value of the estate as of the date of death. Alternate valuation must be elected for all of the assets in the estate. You cannot “cherry pick” certain assets to use the alternate valuation instead of the date of death value; the election for the assets is all or nothing.
- Who Elects Alternate Valuation?
Alternate valuation is elected by the individual administering the estate; this is often the Personal Representative (Executor) of the estate or Trustee of the deceased’s Trust if there is no probate estate. The Personal Representative or Trustee elects alternate valuation on the deceased’s estate tax return and reports both the date of death values and the alternate values on the return.
- Assets that Fluctuate in Value
Alternate valuation applies only to assets that change in value due to market conditions, such as real estate and stocks. If electing alternate valuation, all assets that fluctuate in value must be valued as of the date of death and as of the alternate valuation date (unless they have been sold or distributed prior to the alternate valuation date, in which case they are valued as of the date of sale or distribution). For assets that that do not fluctuate, their value is locked in as of the decedent’s date of death (such as bank accounts and life insurance).
- Why to Use vs Not Use Alternate Valuation
Deciding whether to elect alternate valuation is something that should be explored carefully with an experienced estate planning attorney or tax expert. The choice of whether to elect alternate valuation depends on individual circumstances, financial goals, and consideration of tax consequences. The potential estate tax saved by using alternate valuation should be weighed against other potential tax implications, such as changes to the step-up in basis and the impact of using alternate valuation in calculating capital gains.
If you have questions about the estate tax, how alternate valuation is assessed, and/or what can be done to reduce the estate tax that may be owed on your estate, please call our office and schedule a time to meet with one of our experienced estate planning attorneys.
June, 2023
© 2023 Samuel, Sayward & Baler LLC
Update on Credit Shelter Trusts
Attorney Maria Baler details a new position taken by the Massachusetts Department of Revenue on Credit Shelter Trusts regarding the inclusion of half of the value of a house funding the credit shelter trust of the first spouse to die in the taxable estate of the surviving spouse for Massachusetts estate tax purposes when the house was previously owned by both spouses. Please watch and if you have any questions or want to learn more please call us at 781 461-1020.
Smart Counsel Series – The Do’s and Don’ts of Serving as a Trustee – A Study in Contrasts
Please watch our pre-recorded webinar in our Smart Counsel Series which aired on Thursday, May 18, 2023 virtually via Zoom. Attorneys Suzanne R. Sayward and Megan L. Bartholomew presented the Do’s and Don’ts of serving as a Trustee.
If you have been named to serve as Trustee for a family member or friend, or if you have created a Trust in which you have named someone to serve in that role should you become incapacitated or when you pass away, you may be wondering what is involved in taking on such a commitment. The answer is – A LOT!
The presenters discussed the specific tasks a Trustee must undertake along with the general duties and responsibilities of a Trustee. Examples of the right way – and the wrong way – of carrying out the duties of serving as a Trustee can help you understand what is involved in serving in this important role.
How is Estate Planning Similar to Gardening?
It’s that time of year when gardeners are breaking out their trowels and sunhats, and perusing nurseries for plants to create their gardens for the summer. I love gardening and have spent that last couple of weekends planting seeds and seedlings of tomatoes, peppers, green onions, potatoes, kale, spinach, radishes, cabbage and Swiss chard. And I still have more to plant! While digging in the soil, it occurred to me that gardening and estate planning are similar in a few ways.
Last year, I planted several tomato plants on my deck and patio. Mid-way through the summer, the tomato plants on the deck were decimated by an infestation of spider mites. By the time I took action, it was too late to help the deck plants but luckily, I was able to save the tomatoes on the patio. Now I am more knowledgeable and better prepared to stop the pests in their tracks if I encounter the same problem this year. Creating an estate plan requires the same perspective. Your estate plan should be rooted in the present based on your finances, family and health, but prepared to address both expected and unexpected circumstances. In short, your estate plan should have a solid foundation and the flexibility to branch in several directions depending on the situation that arises.
I also planted yellow squash and zucchini for the first time last summer. The zucchini grew spectacularly; the yellow squash did not, despite fertilizer, more water, etc. I plan to plant yellow squash again this year, however, it will be a different variety and in another location with the hope that it will grow better. Similarly, you should adjust your estate plan regularly through the years. If you or your loved ones have major changes in health or finances, your estate plan may need to be updated. For example, if you name an adult child as your Personal Representative and she passes away, your Will should be updated to replace her and name a successor. Additionally, you may want to direct that her inheritance is distributed differently than what is in your current Will.
For years, I have planted basil and marigolds with my tomatoes. Besides the bright yellow, orange and red marigolds drawing attention to the cherry tomatoes hiding in the green foliage, the flowers also provide protection from several pests that can damage the tomato plants (except spider mites apparently). Beyond pest control, some plants provide beneficial nutrients to the soil for other plants. Like strategically growing certain types of plants together, it is important to consider the relationships of the individuals you appoint to manage your estate after your death. I often have clients ask if their adult children can serve together as fiduciaries (Personal Representatives, Trustees, Attorneys-in-Fact) when the real question is should they serve together. If one of your goals is to preserve a harmonious relationship between your adult children and minimize conflict that could cause estrangement for the rest of their lives, it may be better to name one at a time, depending on your particular circumstances and their dynamics.
These are just a few examples of how estate planning and gardening are similar. At Samuel, Sayward & Baler LLC, our knowledgeable attorneys will meet with you to thoughtfully assist with developing a foundational estate plan or adjusting your estate plan because of changes in your life. And after meeting, I will return to playing in my garden.
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 President of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA). This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit ssbllc.com or call 781/461-1020.
May, 2023
© 2023 Samuel, Sayward & Baler LLC
5 Reasons to Engage an Elder Law Attorney
May is Elder Law Month and was established by the National Academy of Elder Law Attorneys (NAELA) as a way to bring attention to the particular legal needs of the older adult community. While all adults should create an estate plan to ensure that their wishes are carried out if they become incapacitated or when they pass away, the needs and concerns of older adults are different than those of younger people. Elder law attorneys are attuned to the issues that impact older adults and skilled at addressing those issues. Read on for five reasons why engaging an elder law attorney as you age is important.
1. A Durable Power of Attorney is a legal document in which the maker (the Principal), designates a person (the Attorney-in-fact) to have the authority to manage the Principal’s financial affairs. For estate planning purposes, a Durable Power of Attorney is created to insure that should the Principal become incapacitated, the Attorney-in-fact will have the legal authority to act on behalf of the Principal with respect to legal and financial affairs and non-medical matters. For many older adults, protecting assets from having to be spent down on long-term care costs is important. In order to ensure that their Attorney-in-fact has the authority to undertake long-term care planning, a Power of Attorney must specifically authorize actions that are typically needed to protect assets from spend down. These include granting the Attorney-in-fact the authority to make gifts of the Principal’s assets, create an irrevocable Trust, and so-called ‘self-dealing’ authority. Elder law attorneys are knowledgeable about the importance of these provisions for older adults.
2. Older adults often worry about protecting assets from the high cost of long-term care; something that is not a concern for younger people. Elder law attorneys can advise clients about their options for protecting assets from having to be spent down on long-term care costs along the with the advantages and consequences of such planning.
3. As they age, parents may feel more financially secure – the children are grown and living on their own, college is paid for, there is no longer a mortgage on the house – which may make them more inclined to make gifts to children and grandchildren. While most estate planning attorneys are skilled in advising clients about the tax aspects of gifting, elder law attorneys will also advise clients about the impact that gifting will have on their eligibility for long-term care benefits. This can avoid a serious ‘trap for the unwary’ in the event long-term care benefits are needed.
4. Long-term care insurance can be an excellent ‘tool’ in a person’s long-term care planning tool-box. While elder law attorneys do not sell long-term care insurance, they often work closely with individuals who are specialists in long-term care insurance. Elder law attorneys can advise clients as to how long-term care insurance would work as part of a long-term strategy for payment of care costs as the client ages.
5. Health Care documents consisting of Health Care Proxies, Living Wills and HIPAA Authorizations are important components of every estate plan. For seniors, making sure that their Health Care Proxy includes provisions permitting their appointed agent to make decisions regarding end-of-life care, administration of certain types of medications, and to contract for care givers or care facilities on behalf of the Principal is critical to ensuring that trusted family members, and not a probate court, are the ones making decisions in times of crisis.
Making sure that one’s affairs are in order is a primary goal of estate planning. For older adults, working with an elder law attorney means working with an attorney who is attuned to their particular legal needs. If you are an older adult, ‘celebrate’ Elder Law Month by contacting an elder law attorney to review your estate plan documents to ensure they are consistent with your current goals and concerns.
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, 2023
© 2023 Samuel, Sayward & Baler LLC
What’s New at Samuel, Sayward & Baler LLC – Don’t Miss Our April 2023 Newsletter
Updates to the Massachusetts Homestead Law
The Massachusetts homestead law protects a homeowner’s primary residence from forced sale by an unsecured creditor. What this means is that if you are sued and a creditor obtains a judgment against you, you cannot be forced to sell your home to pay the creditor unless the equity in your home is greater than the amount of your homestead protection. If the equity in your home is greater than the homestead protection, the home may be sold but the creditor will receive only what is left after you first receive proceeds equal to the amount of the homestead protection. The protection extends to the homeowner’s family which is defined as spouse and minor (under age 21) children.
How much is the homestead protection? Under the “new” homestead law enacted in 2011, a homeowner is entitled to automatic homestead protection of $125,000. However, 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 to $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.
In November of 2022, the Massachusetts legislature updated the homestead law to clarify a few of its provisions, notably:
- The 2011 homestead law allowed the holder of a life estate interest in real estate to have homestead protection, but not the holder(s) of the remainder interest in the property. The 2022 updates to the homestead law have made it clear that both the life estate holder and the remaindermen are entitled to homestead protection, provided the property is their primary residence.
- For all you co-op owners out there, the 2022 updates also made it clear that a lessee-shareholder of a residential cooperative housing unit is entitled to homestead protection.
If you are the owner of a home in which another person has a life estate, you are now entitled to Homestead protection. Both the life estate holder and the remaindermen should file a declaration of homestead at the Registry of Deeds to ensure the entire property is protected from creditors’ claims. Similarly, co-op owners should now file for homestead protection.
Keep in mind that a Declaration of Homestead will not protect you from all types of liability that may impact your home. It will not protect the home from a Medicaid/MassHealth lien for benefits paid on behalf of the homeowner, including benefits paid for nursing home care. A Homestead will not protect against governmental liens such as tax liens. A Declaration of Homestead will not prevent your mortgage lender from foreclosing if you do not pay your mortgage.
Interestingly, the homestead law protects the proceeds from the sale of a home for up to one year following the sale, and insurance proceeds received as a result of a fire or other casualty from the reach of creditors for a period of two years.
Keep in mind that if you filed a Declaration of Homestead and then refinanced your mortgage after your Homestead was filed and before March 16, 2011, your mortgage transaction may have voided your homestead protection. However, beginning March 16, 2011, a mortgage transaction does not impact your homestead protection even when the homeowner signs a mortgage that includes a waiver of homestead provision. The waiver of homestead provision in the mortgage relates only to the mortgage itself (which the homestead does not protect against anyway).
If you have questions about homestead protection, please feel free to give us a call, or get the advice of an experienced real estate or estate planning attorney. And if you have not filed a Declaration of Homestead on your home, make sure you do so!
Maria C. 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 a past 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 2023
© 2023 Samuel, Sayward & Baler LLC