I see clients every day who sheepishly tell me they have been meaning to update their Wills and Trusts for years, but just haven’t found the time to do so.  First things first – let the guilt go.  Procrastinating about estate planning is nothing new and is understandable in many ways.  Talking about illness, death and taxes is not most people’s idea of a good time (except for us estate planning attorneys).  That being said, there are times in life when it’s time to move updating your estate plan off the “to do” list and on to the “done” list.  Here are those times:

1. You have Young Children

If you have young children, your estate plan needs to do two important things: address the care and custody of your minor children (under age 18 in Massachusetts) should you pass away, and address the management and distribution of the assets you will leave them.  Your Will is the document in which you name a guardian for your minor children.  The guardian is the person who will decide where your children live and attend school, what type of health care your children receive, and make other day-to-day decisions regarding your children’s care and upbringing.  If you do not have a Will naming a guardian, family members or others may petition the Court to appoint someone as your children’s guardian.  The Court will have the difficult job of choosing among those who ask to be appointed without the benefit of your input.  Don’t lose the opportunity to put your children in the right hands by neglecting to speak with a lawyer who has experience drafting Wills and Trusts for families with young children!

After you have made sure that the right people will be raising your children, you need to make sure that the inheritance you leave them is preserved and protected for them.   Creating a Trust that sets out when and for what purpose your children will receive the inheritance you leave them, and names a responsible person (a Trustee) to manage those assets is the best way to do this.  Estate planning and Trusts are not just for those with millions of dollars.  Think about the assets your children would receive if you passed away – consider your home, your life insurance, your retirement accounts, your savings and investments.  Then think about how you feel about your children receiving those assets at age 18.  If this makes you uncomfortable, a Trust should be a part of your estate plan.  An experienced estate planning attorney can help you set up a Trust for your minor children. While funds are held in trust for your children’s benefit, the Trustee may use them for a child’s education, living expenses, health care, or other purposes you specify.

2. The Value of your Estate is more than $1 million

If you are a Massachusetts resident and the value of your “estate” (your home, retirement accounts, life insurance, bank and investment accounts) is more than $1 million, your estate will pay an estate tax to the Commonwealth of Massachusetts at your death unless your assets are left to your spouse or to charity.  The estate tax is a graduated tax.  With tax rates ranging from 6.4% (for estates just over $1 million) to 16% for estates in excess of $10 million, the tax bill can be significant. Estate taxes and estate planning are closely connected. Whether you are married or single, there are planning strategies that can be employed to reduce the estate tax payable at your death.  If you are married, this planning must be done while both spouses are alive.

For example, Jim and Sue have assets of approximately $1.5 million.  If all assets are owned jointly or left to the surviving spouse at the first spouse’s death, the surviving spouse will have $1.5 million of assets at her death and will pay Massachusetts estate tax of approximately $70,000.  If instead the first spouse to die leaves $700,000 of assets in trust for the benefit of the surviving spouse, the surviving spouse will have a taxable estate of only $800,000 ($1.5 million minus $700,000), and no estate tax will be payable at the surviving spouse’s death.  In this example, creating and funding the right type of trust will save Jim and Sue’s family $70,000 in Massachusetts estate tax, while at the same time ensuring all of the assets are available for Sue’s use during her lifetime.

3. You Created your Estate Plan Documents before 2012

In 2012, after decades of probate and trust laws that estate planners had come to know and love, the Massachusetts legislature made big changes to the laws that govern Wills, probate and Trusts in our state.   These changes in the law were favorable in many respects.  Although these changes did not make Wills and Trusts created prior to 2012 obsolete, the law did change terminology (Executors are now called Personal Representatives) and also gave us the opportunity to streamline and customize in many respects the way Wills and Trusts are administered after death.  If you have estate plan documents that were created before 2012, it is a good idea to have those documents reviewed, and consider updating them to include some of the new administrative provisions that will make things easier for your fiduciaries and your heirs after your death.  While you are at it, you can also include digital estate planning provisions that give your fiduciaries necessary authority to deal with your digital assets (email accounts, photo storage accounts, social media, online banking, etc.) if you become incapacitated or pass away. This will protect your fiduciaries from running afoul of federal “hacking” laws that do not look kindly on unauthorized access to online accounts, even if the person has your username and password.

4. You have Significant Wealth in Retirement Plans

An important estate planning concept to understand is that your Will and Trust do not necessarily control all of the assets you own at your death.  First, assets that have beneficiary designations – such as life insurance policies, annuities, and retirement accounts (IRA, 401k) – will be paid to the beneficiary you have designated at your death, regardless of the provisions of your Will or Trust.  For this reason, a crucial part of a comprehensive estate plan is to carefully review how beneficiaries are designated on these types of assets, and be thoughtful about making any necessary changes.  Second, retirement accounts are subject to their own, complicated set of rules regarding how and when distributions from those accounts will be made to the beneficiaries you have designated.  These rules are about to change when Congress passes the SECURE Act, which is expected to happen when Congress returns to session in September.  If you have significant assets in a retirement account, you should understand how these new rules will impact the distribution of these funds to your beneficiaries, and if necessary, make appropriate plans to manage those accounts for those who may not be capable of managing that wealth on their own, with an eye towards minimizing the income tax that will be payable on those distributions.  Finally, keep in mind that these assets are still considered part of your estate for estate tax purposes.  The estate tax provisions of your Will and Trust will need to specify whether the recipient(s) of those assets, if different (or in different proportions) from the beneficiaries of the assets controlled by your Will and Trust, will pay their share of the estate tax in proportion to what they receive.

5. You are Concerned about the Cost of Long-Term Care

Estate and tax planning can be inconsistent with long-term care planning.  The estate plan you created 15 or 20 years ago when your family was young is most likely no longer adequate for the issues your estate plan should address as you age.  It is important to get educated about issues relating to long-term care while you are still healthy and able to take whatever long-term care planning steps may be necessary.  An experienced estate planning and elder law attorney can help you think through questions like – What is your plan if you or your spouse need care?  Do you intend to stay in your home?  If so, how should it be owned?  Do you intend to move to a different state to be near children, or to a CCRC?  Do you have or should you look into purchasing long-term care insurance?  Will you be or do you wish to be eligible for public benefits to pay for long-term care?  Are there planning steps you should take now to position yourself to be eligible in the future?  What will public benefits pay for and what won’t they pay for, and is eligibility for those benefits the best planning strategy?  Depending on your answers to these questions, your estate plan can be updated to plan appropriate for your future.  In addition to these issues, the importance of a good Power of Attorney (for financial decision-making) and updated health care documents (such as a Health Care Proxy) cannot be overstated.

Take the time to consider whether your estate plan is due for a review and update.  If you have never created an estate plan, now’s the time!  Put your mind at ease, cross this important item off the “to do” list, and contact an experienced estate planning attorney today to get the process started!  You will be glad you did.

Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and currently serves on 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.

September, 2019

© 2019 Samuel, Sayward & Baler LLC

When someone schedules an estate planning or long-term care planning meeting with an attorney at our firm, they are asked to complete our Client Questionnaire and send it to us prior to that meeting.  This is the case for both clients who are new to us who don’t already have an estate plan and for returning clients who are coming in to update their estate plan.  There are often questions about why we need this information so I thought I would take the opportunity this month to explain why this is so important when it comes to estate planning.

Q. Why do you need detailed information about my assets? We ask for detailed information about your assets, including their value, how they are owned, how beneficiaries are designated, and the nature of the asset (i.e. whether an account is an IRA or other type of qualified retirement account or not) so that we can properly advise you about probate avoidance, long-term care planning, legacy planning, as well as estate planning and estate taxes.

Probate Avoidance.   One of the primary goals of estate planning is to pass assets to family at death without the need for probate.  Probate  is the court process of changing the title on an asset when the owner of the asset passes away.  Probate can take a long time, cost a lot of money, and cause surviving family members much aggravation.  As such, many folks want to avoid probate.  There are several ways to avoid probate depending upon an individual’s circumstances and the type of assets he or she owns.  In order for us to advise you about your options for probate avoidance our estate planning and probate attorneys need to know about your assets.

Estate Tax Planning.   Although the federal estate tax is not currently a concern for many people because our current tax code permits each person to pass on $11.4 million of assets free of any federal estate tax, this is not the case in Massachusetts where we have a $1 million exemption for estate taxes. As such it is important to consider estate tax planning. Whether your estate will owe federal or Massachusetts estate tax depends upon the value of your taxable estate when you pass away.   In order to determine whether your estate will be liable for estate taxes and to advise you about your options for reducing or eliminating that tax, we need to know the nature and value of your assets.

Long-term Care Planning.  Long-term care planning is typically planning to preserve assets from having to spent down on long-term care costs.  Such planning can be done in advance (the need for long-term care is not imminent) or in a crisis (nursing home care is imminent or likely within the next few months).  In either case, our long-term care attorneys, need to have detailed information about assets and income in order to advise you about your options for planning to preserve your assets.  When we are working with a married couple, information about both spouses’ assets is needed since eligibility for some long-term care benefits programs is contingent on both spouses meeting the criteria imposed by the benefits program.

Estate Planning.  Estate planning is done to make sure your assets pass to the people you intend at your death.  How an asset is owned and how beneficiaries (if any) are designated on an asset will determine how that asset will be distributed at your death.  In order to give you advice about whether or not changes to asset ownership or beneficiary designations are necessary based on your estate planning goals, we need to know how assets are owned and how beneficiaries are designated currently, so we can work with you to create the most accurate estate plan for you and your family.

Q. Why do I have to complete a Client Questionnaire if I am already a client? An important aspect to having an estate plan that actually accomplishes your goals is to keep your plan up to date.  Your life is not static – family situations change, health changes, income and assets change, etc.  These factors have an impact on the type of estate plan you should have and the provisions of your plan.  We actively encourage our clients to regularly review and update their estate plan to ensure the success of that plan.  Returning clients sometimes question the need to complete an updated Questionnaire saying that ‘nothing has changed.’  If it has been more than a few years since you filled out a Client Questionnaire, completing an updated Questionnaire will ensure that we are best able to advise you.   We would be happy to send you a copy of the most recent Client Questionnaire we have on file for you so that can you work off of that in updating your information  Just ask Jen to send that to you when you schedule your appointment.  Having an updated Questionnaire in your file will also help us help your family members in the event you become incapacitated, and at the time of your death, as we will be able to give them information about assets, help them locate a safe deposit box, etc.  This can save a lot of time and effort for family members.

Q. The Questionnaire is 14 pages long – do I really need to fill out the entire form? Yes, we do want you to complete the Questionnaire in its entirety. Some of the sections may not apply to you and you should indicate that on the form.  For example, we ask about ownership interests in a business – if you do not own an interest in a business, you will skip this section. If you do not have life insurance, you will skip that section.   The last page of the Questionnaire asks about your goals for your planning – is reducing taxes important to you?  Are you concerned about protecting the inheritance you leave your children from their creditors, such as a divorcing spouse or a lawsuit?  We want to know what is important to you so that we can help you create the right estate plan that is best for you and your family.

Q. Do you share that information with anyone outside of your firm? Of course not! We are lawyers, and confidentiality is of paramount importance to us. Our staff is also well-trained on keeping all client information, including the names of our clients, confidential.

We’re here to help you achieve your estate and long-term care planning goals.  Whether those goals are probate avoidance, estate tax reduction, preserving assets from the high cost of long-term care, or simply the peace of mind in knowing that you have put your affairs in order, successful legacy planning begins with our collection of the information requested on our Client Questionnaire.

August, 2019

© 2019 Samuel, Sayward & Baler LLC

At its heart of estate planning for beneficiaries with special needs is the special needs trusts (SNT).  SNTs allow you to provide your beneficiaries with an inheritance while allowing them to maintain eligibility for public benefits they need. Assets in SNTs do not count toward the asset limit imposed by government programs. You can choose a Trustee to manage the inheritance for your child and make distributions to supplement your child’s benefits. Below are five things to consider to provide peace of mind when you have a disabled beneficiary.

1. Create a Special Needs Trusts (SNT). Parents and grandparents can create trusts for their special needs children or grandchildren with the assistance of an estate planning attorney with expertise and experience in planning for beneficiaries with special needs.  This is preferable to leaving money directly to the beneficiary because SNTs provide long-term management of the inheritance you leave to disabled beneficiaries while allowing them to qualify for needs-based government benefits. Special needs trusts can pay for and supplement medical and travel expenses, entertainment, pet care and other expenses that can enhance a beneficiary’s quality of life especially when you are no longer around. You would name a Trustee to manage funds in the Trust. The person you name as Trustee could be a professional or a trusted family member.

2. Learn About the Types of SNTs. First-party trusts hold assets the beneficiary owns, for example, from inheritance or lawsuits. When the beneficiary dies, the funds remaining in the trust must be used to reimburse the government for services the beneficiary received. Parents with a disabled child often establish third-party trusts.  These trusts are created and funded by someone other than the beneficiary. The advantage is that any funds left when the beneficiary dies can be distributed to contingent beneficiaries such as other siblings. Special needs trust assets do not have to pay the government for services received.

3. How Much Money Do You Leave for a Beneficiary?  The amount a child needs depends on a family’s needs and lifestyle and a child’s abilities. Housing can be a large unknown. Group homes may require purchase of a condominium unit in a building with services for special needs, and monthly costs will apply for food, utilities and staff. Families may also want to budget eating out weekly, technology (for example, an iPad every couple of years) or gym memberships. When parents die, costs increase because a social worker must be paid to coordinate care and advocate for the beneficiary. Another consideration is legal fees.  Family members who serve as the sole Trustee of a special needs trust should consult attorneys to guard against actions that may jeopardize benefits.

4. Appoint a Guardian and/or Conservator. When special needs beneficiaries need to have a legal guardian and/or conservator, a probate court proceeding is required.  A guardian for a beneficiary with special needs is responsible for decisions about medical care and living arrangements. A conservator is responsible for your beneficiary’s property and finances.  Any person serving as a guardian or conservator should name successor guardians and conservators in their Will.  A court will need to appoint the guardian named in a Will to make decisions for your child. Responsibilities may include those below, so great care should be taken in deciding who to appoint to these important positions.

• Applying for public benefits including those from Social Security
• Advocating for your child’s rights and best interests
• Safeguarding your child’s finances and consulting with physicians
• Making decisions regarding treatment and placement
• Releasing medical records for Social Security and health insurance

5. Write a Letter of Intent. Parents of children with disabilities should write letters of intent.  A letter of intent provides Trustees, guardians, advocates and caretakers guidance about your child’s abilities, routines and interests and your child’s likes and dislikes.  The letter should include at least the following:

• Education – regular and special education needs, services, programs and providers
• Final Arrangements – cremation or burial; family plots; religious services and clergy
• Residence – group home or community preferences, size and arrangements for a child
• Healthcare – doctors, therapists and hospitals; frequency and purpose of appointments, medications taken in the past and currently and whether they worked

Keep these things in mind when thinking about your family member with special needs and consult with estate planning attorney who has expertise in special needs planning to advise you about these important matters.

Natalene B. Ong, Esq. is an estate planning attorney at Samuel, Sayward & Baler LLC, a law firm in Dedham that focuses on advising clients in estate planning, special needs planning, estate and trust administration and elder law.  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.

August, 2019

© 2019 Samuel, Sayward & Baler LLC

As surprising as it may seem to some, it is not unusual for me to hear my clients who are very elderly or terminally ill tell me, in all seriousness, that they are ready to die.  For many people in this situation, having no control over their fate is very disheartening.

In the United States, a person’s ability to legally and voluntarily end his or her own life is a controversial topic.  However, the “death with dignity” movement is growing.  Also called “medical aid-in-dying” laws, these laws allow terminally ill, competent adults to request a physician to prescribe medication that will allow them to end their lives in a peaceful manner and at a time of their choosing.  As of April, 2019, nine states in the United States (Oregon, Washington, Vermont, California, Colorado, Hawaii, New Jersey, Montana and Maine) and the District of Columbia have physician-assisted dying laws in effect, or permit physician-assisted death by Court ruling.

This year in Massachusetts, the End of Life Options Act was filed in the Massachusetts legislature and sponsored by a total of 67 State Senators and Representatives.  Senate bill S.1208 was introduced in January 2019, along with companion bill H.1926.

This legislation would give adults who are terminally ill an additional option at the end of life – essentially to control the timing and manner of their death.

These bills would create a new law which would allow an adult who is mentally competent and who has been diagnosed as being terminally ill to request a physician to prescribe medication which the patient may choose to self-administer to bring about a peaceful death.  The End of Life Options Act contains various safeguards to ensure the request is voluntarily made by a patient who is informed, competent and is in fact terminally ill.  Two physicians must confirm:  1) that the patient is terminally ill; 2) that the patient is competent and acting voluntarily; and, 3) that the patient has made an informed decision.  The patient must also undergo counseling to ensure the patient is not suffering from a psychiatric or psychological disorder or depression that impairs the patient’s judgment.  Notification of the patient’s family is recommended but not required.

The law also spells out the effect of the patient’s actions on Wills, contracts, insurance policies, and other legal documents that may be affected by a person’s death.

The End of Life Options Act was referred to the Legislature’s Committee on Public Health, and heard in the Joint Public Health Committee on June 25, 2019, where patients with terminal illnesses and their loved ones, along with physicians, advocates, social workers and faith leaders testified about their experiences with death and dying.

It appears no further action has been taken on these bills since the June 25 hearing.  If you are interested in voicing your opinion on this legislation, a list of the sponsoring legislators for each bill can be found here: S.1208 and H.1926.

Although this is dealt with in the proposed law, if this legislation becomes law, it could potentially raise many estate planning issues around end of life decisions. Are people able to make sound decisions regarding inheritance and legacy planning during such a difficult time, will changes to these estates be contested? If you have questions regarding End of Life Planning or other concerns please contact a qualified Estate Planning Attorney.

July, 2019

© 2019 Samuel, Sayward & Baler LLC

Summer is finally here, and you may have plans to spend time at your vacation home with family and friends.  If you own a vacation home or are considering purchasing one, it is wise to create a plan for keeping the home in the family at your death or selling it if associated costs become unaffordable.  There are a number of options for keeping vacation homes in the family such as gifting a vacation home or putting a vacation home in a Trust or an entity.  Below is a short list with the upsides and downsides.

Wills. Individuals can distribute property they own in their individual names to the people whom they choose upon their deaths via their Wills. However, assets transferred under a Will must go through the public probate court process, which can be time-consuming and expensive.  Probate avoidance is a great gift you can give to your family.

Gifting.  Individuals can make gifts of vacation homes during their lifetimes.  The property would avoid probate and be removed from the individual’s taxable estate, thereby avoiding estate tax on the property. Many people consider gifting a house to avoid paying estate tax.  However, on the downside, the donor gives up control of the asset, and the asset is subject to the reach of the creditors of the donees who receive the property.  Also, the donee’s tax basis in the property would be “carryover basis”.  Tax basis is used to calculate the tax payable upon the sale of property.  Individuals who receive gifts of property have a basis in the property that equals the price the donor paid for the property.  If an individual inherits property at a person’s death, the basis in the property will “step up” to the value of the property at the time of death.

An important consequence of gifts made during life and after death is the basis of property.  If a parent purchases property for $500,000 and transfers it to children during life, then the children will have the same basis as the parent ($500,000).  If the children sell the property for $1 million, the children will pay tax on gain in the amount of $500,000 (the difference between the $1 million sale price and the $500,000 tax basis).

However, if the parent dies owning property worth $1 million and leaves the property to his or her children, the children will have a stepped-up basis in the property of $1 million.  If the children sell the property upon the parent’s death, no gain will result.  The children will not pay income tax upon selling the property.  However, the property will be includable in the parent’s estate and subject to the estate tax.  The Massachusetts estate tax rate ranges from 4.6% to 16%.  Combined federal and Massachusetts capital gains rate can be 20% to 25%.  Thus, opting until death to pass property to children may be favorable for tax reasons.

Trusts.  Assets titled in trusts during a person’s lifetime avoid probate. This is one of the reasons for placing property in a trust. A person who creates a revocable living trust is the grantor.  Upon transferring title of an asset to a revocable trust, the grantor retains control of the asset and usually serves as Trustee of the trust and is the sole beneficiary of the trust during his or her lifetime.  The grantor can name a Trustee to manage assets in the trust for the remainder beneficiaries (i.e. those who will be the beneficiaries at the grantor’s death).  Trusts can be structured to provide creditor protection for property held in trust against a beneficiary’s creditors such as a divorcing spouse, tax liens and bankruptcy.  Property in this type of trust will get a step-up in basis at the death of the grantor.

Entities.  A limited liability company (LLC) or a family limited partnership (FLP) can own a home and transfer the ownership of a home to future generations. An LLC or FLP can provide rules for a home’s use and operation, limit ownership of the underlying property to family members and provide buyout terms so that an individual family member cannot force a sale of the property.  Payment of repairs, insurance and taxes can be outlined with family members paying into an account for cleaning and maintenance annually or paying costs for the time that they use the vacation home.

A vacation home is a great gift, and passing it on to your loved ones is a wonderful way to continue family traditions and promote family bonding. It is important to consider all of your estate planning options in relation to a vacation home. Make sure you have a plan in place to ensure your vacation home continues to be a blessing and does not become a curse.

June, 2019

© 2019 Samuel, Sayward & Baler LLC

One of the most frequent concerns I hear from clients in my estate planning and elder law practice is the fear of losing their home to the nursing home if they need long-term care.  This is a valid concern when it comes to Medicaid and estate planning.  Long-term care can cost upwards of $14,000 per month.  If the long-term care recipient is not able to pay those costs, then Medicaid (sometimes called MassHealth in Massachusetts) will pay. However, there is a cost associated with having MassHealth pay long-term care costs.  First, in order to be eligible for Medicaid benefits to pay for that care the applicant must meet the strict financial criteria imposed by the program.  Second, to the extent a Medicaid recipient owns assets at his death, the state can seek reimbursement from those assets for the funds it expended on the Medicaid recipient.  So, what happens to the home when the owner needs long-term care?  Here are five things to know about Medicaid and the home.

1. You don’t have to sell it, but there will be a lien. Many people think that they must sell their home in order to be eligible for MassHealth benefits. Sometimes they believe this because they have been told so by the long-term care facility caring for their loved one.  This is not the case. The home is a so-called ‘non-countable’ asset (up to $878,000 of value in 2019) for purposes of determining Medicaid eligibility.  That means that a person can receive Medicaid benefits to pay for nursing home costs and still own his home.  However, the Commonwealth will file a lien against the property with the registry of deeds unless the owner’s spouse or a child or sibling who meets specific requirements is still living in the home.  The amount of the lien is the amount the state pays on behalf of the Medicaid recipient. As such, the house cannot be sold during the owner’s lifetime without re-paying the state.  In addition, the applicable MassHealth regulations require that the lien be satisfied within 9 months of the appointment of a Personal Representative following the death of the homeowner.

2. Keeping the home can be challenging. Although the regulations permit a Medicaid recipient to own her home, this can be challenging since all but a small amount of the recipient’s monthly income must be paid to the nursing home each month.  As such, there is no income available to pay the real estate taxes, insurance, utility bills and the cost of upkeep on the home.  In some cases, family members will pay these expenses and hope to be reimbursed when the home is eventually sold. In other cases, the home will be rented and the rental income used to pay the property expenses.  Both of these options present challenges and should be thoughtfully considered before embarking on either and require proper Medicaid planning with an attorney that specializes in long-term care matters.

3. Transferring ownership of the house to the spouse in the community is usually advisable. Many married couples own their home as tenants by the entirety which is a special form of joint ownership for married couples.  This form of ownership means that when one spouse dies, the house belongs entirely to the surviving spouse without the need for probate.  Although the house is a non-countable asset and the state is not permitted to file a lien against the property if there is a spouse residing in the home, it is usually prudent to transfer the home into the name of the community spouse when one spouse needs long-term nursing home care.  The reason for this is to protect the home from a lien (see #1 above) in the event the community spouse predeceases the nursing home spouse. There is no ineligibility period imposed for transfers of assets between spouses (see #4 below).

4. Special rules for certain transfers of the home and the look-back period.   The general rule for long-term Medicaid benefits eligibility is that if the applicant (or his or her spouse) gave away assets within the 5-year period preceding the application for benefits, he or she will not be eligible for benefits.  This is sometimes referred to as the Medicaid look-back period. This penalty applies to transfers of the home as well as other assets even though the home is a non-countable asset.  However, there are some exceptions to this transfer penalty rule.   The most commonly used exception is the exception for transfers between spouses.  The Medicaid regulations permit assets, including the home, to be transferred between spouses without the imposition of any penalty period.  Taking advantage of this exception is a good way for a married couple to protect the home from a Medicaid lien or claim when one spouse needs long-term care.  Other exceptions to the transfer penalty include transfers to a blind or disabled child, to a child who has provided care to the applicant (subject to a variety of requirements), and to certain types of trusts.

5. Long-term care insurance can help. Long-term care insurance is insurance that pays for care at home, in assisted living, or in a nursing home.  This type of insurance can be expensive, however, there is a lot of flexibility in the type of policies available and the amount of coverage that can be purchased.  Massachusetts has a law preventing the state from filing a lien or claim against the home if the Medicaid recipient has a long-term care insurance policy which meets certain minimum criteria.  In order to protect the home, the policy must:  1) have a minimum benefit of $125/day; 2) provide coverage for a period of at least 2 years; and, 3) still be in place at the time of admission to a long-term care facility. (Note that long-term care policies issued prior to March 15, 1999, need only provide for $50/day of coverage in order for the owner to be eligible for the lien exception.)

The prospect of losing one’s home to long-term care costs is scary.  However, there are steps that can be taken to reduce the risk that this will happen.  If you or a loved one are faced with the prospect of long-term care or entering a nursing home and want to protect your home or other assets from loss to future long-term care costs, seek advice from an experienced elder law attorney to learn about your options for doing so.

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, 2019

© 2019 Samuel, Sayward & Baler LLC

Think about everything you own – perhaps you have personal possessions, savings bonds, real estate, life insurance, and financial accounts such as checking and savings, investment, and retirement accounts. Your physical personal possessions, such as your vehicles, furniture, clothing, jewelry, artwork, boats, collectibles, and other items are known as your “tangible personal property”.

Some tangible personal property is financially valuable – consider the countless stories you hear of a person discovering that the painting she bought at a garage sale is worth millions.

However, often the most significant value of tangible personal property is its sentimentalmeaning to you and your family. For example, your mother’s costume jewelry which you remember seeing her wear during special occasions. If you have siblings or other family who have similar emotions and memories attached to the same item, tangible personal property can quickly become a source of serious conflict between family members after death.

To avoid conflict that will damage the relationships between your surviving family members, speak with a qualified estate planning attorney to determine how you may best direct the distribution of your tangible personal property. One option is to identify and direct what happens with a specific item in your Will (and/or Trust). For example, the Will can state that your $3,000 statue is to be sold and the sale proceeds distributed equally among your children after your death. However, you must carefully consider whether disposing of your tangible personal property in your Will makes sense. If you later decide the statue should instead be distributed to your daughter, you will need to change your Will which will involve another trip to your lawyer’s office and another fee to make that change.

The better option is often to list specific items and their recipients on a tangible personal property memorandum. Under Massachusetts law, a memorandum that is incorporated by reference in the Will is legally enforceable even though it is a separate document from your Will and one that you can change on your own at any time. For instance, if you later prefer the statue to be distributed to your son instead of your daughter, you may update the memorandum yourself without the time and expense of changing your Will.

A third option is to distribute specific items of tangible personal property to the family member you wish to receive it while you are alive. Before doing this, consider whether you will miss the item, whether other family members will dispute that gift after your death (in which case you should document the transfer in writing), and whether you will be upset should the recipient decide to sell it or give it to someone else without consulting you.

Beyond the specific items you wish to distribute to certain recipients, it is important that your Will also describe what happens to all your other tangible personal property. For example, the Will may state that your other tangible personal property is to be distributed equally among your children. If your children do not want your remaining tangible personal property, your Will may direct your Personal Representative (Executor) to sell it, donate it to charity, and/or otherwise dispose of your tangible personal property.

A little inheritance planning goes a long way, especially after you are gone. At Samuel, Sayward and Baler LLC, we recognize the importance of maintaining family relationships, and look forward to tailoring your estate plan to fit your tangible personal property distribution wishes now and for the future.

May, 2019      

© 2019 Samuel, Sayward & Baler LLC

As an estate planning attorney, I see a lot of clients who try to take matters into their own hands to save money, time or both.  I also see the unfortunate estate planning missteps and the results, including the time, cost and effort required to correct the mistakes that could have been easily avoided by seeking legal advice from an experienced lawyer.  Here are a few things to avoid on your way to an appointment with a qualified estate planning attorney to discuss your own estate plan, and a couple of others to keep in mind once you get there.

1. Naming Minors as Beneficiaries.  Beneficiary designations are a convenient way to avoid probate and make sure an asset is paid directly to your chosen beneficiary at death.  You can name a beneficiary on your life insurance policy or retirement account. Many states (including Massachusetts) now permit you to designate a beneficiary on your bank account or investment account.  Many well-meaning parents and grandparents designate their children or grandchildren as beneficiaries of any or all of these types of assets. However, a minor (under the age of 18 in Massachusetts) is not legally able to own an asset.  This means that the financial institution involved (the bank, insurance company, or IRA custodian) will not simply name the minor child or grandchild as the new owner of the account following the original account owner’s death. And this is where the fun begins.  A conservator must be appointed by the Court to receive the asset on behalf of the minor child, and must hold that asset for the minor’s benefit until he or she is 18. The conservator will need to file annual accountings with the Court reflecting the activity in the account, and how any funds in the account were used for the minor’s benefit, until age 18.  The time, effort and expense involved in this process is significant, and unnecessary. In addition, an 18-year-old should probably not have control of significant assets anyway. Leaving your assets to a trust for the benefit of minors or young adults, rather than naming them directly as beneficiary, is usually the better solution, and an attorney who prepares wills and trusts can help guide in preparing a trust appropriate for your situation. 
2. Drafting Your Own Will.  Some people are disappointed to learn that the days of the $100 Will are behind us.  In an attempt to save the legal fees required for an experienced estate planner to draft a Will for them, those same people take to the Internet and draft the document themselves.  I have seen many of these home-grown Wills over the years, most with the same issues – ambiguous and/or conflicting provisions, an absence of administrative provisions specific to Massachusetts law that will allow the administration of the estate to go smoothly and cost-efficiently, and improperly executed documents.  When it comes time to probate one of these Wills after death, all of the money saved up front and more is spent on legal fees trying to resolve the ambiguities and deal with the Court on administrative matters that could have been avoided with proper administrative provisions in the document. I have also seen situations where the so-called “Will” is found to be invalid. For these reasons, doing a Will yourself can be risky business, and is best done by an attorney experienced in Will drafting. 
3. Adding Joint Owners to Bank Accounts Without Due Consideration of the Consequences.  Adding a child’s name to your bank account is a way to give your child convenient access to the account.  The child can run to the bank and get cash for you, sign checks if you are in the hospital, or have ready access to the account to pay post-death expenses.  I am not opposed to this arrangement for small accounts where convenience really is the objective. However, keep in mind that your child is considered the owner of any account on which his or her name appears.  If that child is sued, gets divorced, files for bankruptcy, or encounters other liabilities, that account is considered the child’s asset, and could be reached and the funds taken by a child’s creditor. Joint ownership of accounts can also become an issue after death if your Will does not clearly state what your intention is regarding that account – do you want the funds remaining in the account to belong to the child, or do you want those funds divided equally between all of your children? These are important legacy planning questions that an attorney can help you answer. If your wishes are unclear, the bad feelings and disagreements that result are magnified by the size of the account. All of these issues can be resolved with thoughtful estate planning that includes a power of attorney and/or trust planning, which will allow access to your account by others when needed and division of the account after death consistent with your wishes. 
4. Failing to Fund Your Trust.  If you have a trust, don’t forget to fund it.  Funding your trust means changing the ownership of assets so that those assets are owned by your trust or designate the trust as beneficiary.  When your trust is properly funded, the assets funding the trust will avoid a probate proceeding at your death. If your trust includes estate tax planning provisions, the assets will be sheltered from estate tax at death.  Funding a trust is something that must be done before you die. Once you are no longer with us, the benefits of funding the trust are lost, and probate and taxes cannot be avoided. This is not to say that you should fund your trust willy nilly with any and all assets.  The estate planning attorney who drafted your trust for you should provide you with written trust funding instructions consistent with the goals of your estate plan. Make sure you follow those instructions. If it has been a while since your trust funding was reviewed, and you have acquired additional assets or your goals have changed, sit down with your estate planning attorney again, review your trust funding, and confirm the instructions before proceeding to fund that trust! 
5. Choosing Co-Fiduciaries Unwisely.  Despite every parent’s hope that their children are life-long friends, some siblings just don’t get along. As a parent, it is important to recognize your children’s strengths and weaknesses, and be realistic about their relationship with each other and their ability to work together when deciding who will make financial decisions for you under your Power of Attorney, health care decisions for you under your Health Care Proxy, and who will settle your estate as Executor of your Will or Trustee of your Trust.  These positions are important jobs that will impact you during your lifetime, and impact people you care about after your death. If you name two people who don’t get along or trust each other a job to do together, things will take longer and cost more than they should as the two parties check up on each other, question every action taken by the other, and delay dealing with what needs to be done because the process is so painful. Do yourself and your family a favor and choose your fiduciaries wisely. Don’t worry about birth order or bruised egos.  Choose the person or persons you know will do the job well and treat everyone fairly.

Keep these things in mind when thinking about your own estate plan, and hopefully implementing it with the advice and assistance of an experienced estate planning attorney, who can help you avoid these estate planning don’ts.

Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and currently serves on 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.

May, 2019      

© 2019 Samuel, Sayward & Baler LLC

By Kevin Cotton and Steven Joshua Samuel, JD, MBA, AIF® Roth IRA accounts allow a taxpayer to contribute after tax money to an account which is never taxed again. The popularity of Roth accounts has grown and presents unique opportunities for retirement and for supercharging bequests to family or friends after the lifetime of the original owner. Converting Pre-tax Assets Eliminates Future Taxation Some people are fortunate enough to accumulate amounts of money in retirement that are more than enough for their own spending needs. For those taxpayers, converting some of the assets from a traditional IRA to a Roth IRA offers major advantages. Conversions to Roth IRAs are most commonly done with traditional IRA assets, but some 401(k) and other employer sponsored retirement plans even allow for “In-Plan” conversions. Converting money in a traditional IRA to a Roth IRA does require payment of income taxes. However, paying taxes upfront allows assets to then grow tax-free forever.  And, the Internal Revenue Code does not require minimum distributions at age 70.5 from Roth IRAs as it does from traditional pre-tax accounts. It is best to pay the tax using cash not in the traditional IRA for two reasons:

1. So that the entire pre-tax balance is converted, ultimately increasing the after-tax value.
2. To avoid the early withdrawal penalty on taxes paid from the Traditional IRA when the IRA owner is under age 59 ½ at the time of the conversion.

For taxpayers who intend to pass gifts to future generations, a Roth IRA can magnify the gift. Magnifying Gifts to Future Generations with Roth IRAs Roth accounts (or converting traditional IRAs to Roth) can be very effective as an estate planning and wealth transfer tool, especially if gifts to younger people are important goals. Since Roth IRAs do not require owners to take required minimum distributions, the account balance will continue growing and can ultimately result in a much higher balance being transferred to the named beneficiary after the original owner’s death. When a Roth is transferred to a younger beneficiary at death, the Roth becomes the beneficiary’s account. Some factors make the inherited account extremely valuable. Withdrawals from inherited Roth accounts are always free of penalty and are generally tax-free to the beneficiaries. Please note that inherited Roth IRA distributions may be subject to tax if it has been less than 5 years since the original Roth IRA owner funded his or her first Roth IRA. Although required minimum distributions do not apply to original owners of Roth accounts, they do apply to inherited accounts. However, required distributions are taken based on the heir’s life expectancy rather than the original owner’s life expectancy. For this reason, younger people will ultimately have a much higher balance inside the Roth, growing tax-free forever. Two examples of the magnifying effect of gifting a Roth IRA to a younger person follow below. Real Life Scenarios Bob, age 65, is considering leaving his $50,000 traditional IRA to his daughter, Jane, or grandson, Jack. He wants to know whether converting his traditional IRA to a Roth and paying the taxes on the conversion is a better idea. If Bob chooses the Roth conversion, he will pay the necessary tax with money outside of the IRA so that the full $50,000 balance is converted. This will cost Bob anywhere from $5-15,000 depending on his tax bracket, but see below for how well the Roth rewards that sacrifice. Scenario 1:

• Assuming a 6% annual growth rate, the $50,000 Roth account balance grows tax-free (without required distributions) to approximately $127,021 at the time of Bob’s death at age 80.

• Compare the Roth total of $127,021 with what would happen without the Roth conversion. The traditional IRA requires distributions starting in the year Bob turns 70.5 and would grow to only approximately $79,500 at the time of Bob’s death at age 80.

• Jane inherits the $127,021 Roth account at age 45. Jane now enjoys tax-free growth and is only required to take out small annual required distributions based on her longer life expectancy.

• Jane sees the inherited assets as additional retirement savings and lets the balance grow. At age 65, the Roth account grows to approximately $200,909, compared to only $125,746 if Jane had inherited a traditional IRA.

Scenario 2:

• Assuming a 6% annual growth rate, the Roth account balance grows tax-free (without required distributions) to approximately $94,917 at the time of Bob’s death at age 75. The similar traditional IRA requires distributions starting in the year that Bob turns 70.5 and grows to approximately $75,392 at the time of Bob’s death at age 75.

• Jack inherits the $94,917 Roth account at age 10. Jack now enjoys tax-free growth and is only required to take out small annual required distributions based on his longer life expectancy.

• Jack sees two possible uses for the inherited assets: college expenses and the purchase of a home:

• At age 18 and assuming a 6% annual growth rate, the Roth account grows to approximately $129,373, compared to only $102,763 for the similar inherited traditional IRA

• At age 40 and assuming a 6% annual growth rate, the Roth account grows to approximately $312,907, compared to only $248,541 for the similar inherited traditional IRA

Notes: The above estimates assume 6% annual growth, 25% total taxation on all withdrawals, 15% total taxation on investments, and that RMDs are taken at the end of each year. These are hypothetical examples and are for illustrative purposes only.  Actual performance and results will vary. As the figures show, using Roth assets as a wealth transfer tool can be a very effective way to increase the value of a gift over time to a younger beneficiary. Since the inherited account does not have restrictions on withdrawals, the increased value can be a useful source of funds for various important goals in a beneficiary’s life. As always, consult a trusted financial advisor before implementing investment strategies. 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. Fixed Insurance products and services offered through CES Insurance Agency.