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Three Things You Can Do Now

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Dear Clients and Friends,

We hope this finds you all well and safe!  We want to give you an update on our plans and assure you that we’re here for you.  While we may need to close our physical office, please be assured that our team members are well-equipped to work from home and to attend to the important work we are doing for you.  You are welcome to reach out to us by phone or email.

Over the past week, we have been thinking about how we can best serve our clients during this uncertain time. Here are three things we can do to help you now:

1. Provide Access to Your Health Care Documents Electronically Contact us if you would like us to send you or your health care agents your health care documents in electronic format.  You and/or your named health care agents should store the documents on your smart phone so you have them on hand at all times. Here are our directions for doing so. Please contact Jennifer Poles at poles@ssbllc.com with the names and email addresses of the people to whom you would like us to send your health care documents.

2. Meet with you by Phone or Video Conference Contact us if you would like to schedule a phone or video conference to discuss your estate plan and any updates that may be necessary.  We are offering flexible hours – early in the morning, during business hours, or in the evening – to allow you to have these calls at a time that is convenient for you.

3. Provide Answers to Your Long-Term Care Planning Questions Contact us if you have concerns about planning for long-term care needs for yourself or a loved one.

While the new realities of social distancing, sheltering in place, and self-quarantining are consuming our thoughts right now, the important issues addressed by estate planning are still there, and in fact, are more important than ever.   We will get through this crisis.  During this time and after, we want you to know that we are here to help you, so please don’t hesitate to reach out.

We wish you and your family health and safety during these uncertain times.

Suzanne R. Sayward

Maria C. Baler

Julia K. Abbott

Abigail V. Poole

Imaginative and Unique Estate Planning Provisions

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As part of our work as estate planning attorneys, we draft and review a lot of Wills and Trusts.  For the most part, they are pretty standard.   The testator of a Will and the Grantor of a Trust tend to leave assets to a surviving spouse, and then to children.  Of course, there are some variations – a “specific bequest” to a certain person or charity (a certain amount of money usually), or perhaps a child is disinherited due to a chemical dependency, a rocky marriage or a spending problem.  But the majority of our clients’ Estate Planning goals and objectives are to provide for their spouse and children and that the will and trust documents they need are drafted accordingly.  They tend not to include much humor or any “unusual requests” for the most part.

But every so often, we see or read about (or are asked to draft) some more “colorful” provisions.  Here are some of the more creative Estate Planning requests we’ve seen or read about.

1. US comedian Jack Benny included a provision in his Will that a single long-stemmed red rose be delivered to his wife every day for the rest of her life.  And his florist ensured that it happened until Mrs. Benny died eight years later.

2. A donor in Britain in 1928 made a bequest of a half-million pounds for the purpose of clearing the national debt.  The issue was, the donor specified that it can only be paid out once it is sufficient to clear the entire national debt.  Although the bequest is now worth 350M pounds, it is not sufficient to clear the entire national debt so it remains held in trust.

3. The creator of the original Star Trek series, Gene Roddenberry, was understandably obsessed with space and this even appeared in his Estate Planning wishes.  His famous quote was to “boldly go where no man has gone before.”  In keeping with his obsession, his Will requested a celestial burial.   His request was honored and several years after his passing, a portion of his remains were placed on a rocket and shot into space.

4. The magician, Harry Houdini, conducted seances during his life.  His Will included a provision requesting that his wife conduct an annual session with the afterlife.  He further asked her to commit a secret code to memory which, he believed, would provide evidence of communication with the “other side.”  His wife honored this request from his will for ten years following Houdini’s death, always on Halloween (the anniversary of Houdini’s death).

5. Janice Joplin (known to her close friends as Pearl) died at the age of 27 from a drug overdose.  Her Will included a bequest of $2,500 (approximately $16,000 in today’s dollars) to enable her friends to hold a rocking wake party which did happen in California several weeks after her death.  The invitations stated “drinks are on Pearl.”

6. Benjamin Franklin’s Will left a picture frame containing more than 400 diamonds to his daughter with the instruction that she “not engage the expensive, vain and useless pastime of wearing jewels.”  He intended for her to leave the frame intact.  Shockingly, this Estate Planning wish was not honored.

7. Billionaire Leona Helmsley left her Maltese dog “Trouble” the de minimis sum of $12M.  Her Will also instructed that the family mausoleum where she was buried be “washed or steam-cleaned at least once a year,” for which she left $3 million.

8. William Shakespeare’s Will bequeathed his “second-best bed” to his wife, Anne Hathaway and the majority of his assets to his daughter, Susanna.  His Will stated “Item I gyve unto my wife my second best bed with the furniture.”

9. German poet Heinrich Heine left his estate to his wife, Matilda, on the condition that she remarry so that there “will be at least one man to regret my death.”

10. Portuguese aristocrat Luis Carolos de Noronha Cabral da Camara left his sizeable fortune to 70 people selected from a Lisbon phone directory.  They had been chosen at random from the directory, in front of two witnesses at a registry office 13 years before when Luis Carlos made his Will.

11. Napoleon Bonaparte’s last wish was that his head be shaved and the hair divided up amongst his friends, possibly his true heirs.

12. John Bowan, a millionaire from Virginia, constructed a mausoleum to house the remains of his wife and two daughters who predeceased him. Bowman believed that after he died the whole family would be reincarnated together. He passed away in 1891 and in his will left a $50,000 fund to maintain his mansion and the mausoleum. The High Net-Worth will provided that the house staff of the mansion were to prepare dinner every night just in case the Bowman family was hungry after returning from the dead. Additionally, no one was allowed to stay in the house overnight so they wouldn’t disturb the ghostly residents. This was carried out every night until 1950 when the trust fund ran out.

While these examples are entertaining and imaginative (and somewhat dramatic), these types of Estate Planning and Will and Trust provisions can be risky.  It is important to remember that Wills can be challenged (contested) in court.  If a beneficiary successfully challenges a Will, the provisions in the Will could be found to be void in part or in its entirety.  If the Will is found to be void in its entirety, your estate would then be distributed according to the Rules of Intestacy in your state.  Before being witty or creative in your estate planning wishes, check with your estate planning attorney.  It might be possible to draft these types of provisions in a stand-alone letter of direction.

Attorney Julia Abbott is 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. 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, 2020

© 2020 Samuel, Sayward & Baler LLC

An Important Note to Our Clients and Partners

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Dear Clients and Friends,

As you may imagine, given our line of work, our client’s health and safety is our top priority.

You have no doubt been hearing about the spread of Coronavirus (COVID-19) which has been officially declared a pandemic by the World Health Organization. Many cases have now been confirmed in Massachusetts and Governor Charlie Baker has declared a state of emergency.

We understand that this virus has put many of our clients in a difficult situation, especially those who are older or have older loved ones at home.

Here are the preventative measures we are taking to keep our office environment as clean as possible, and to allow us to keep our clients and our staff safe while continuing to conduct business:

– We will practice social distancing, which includes the elimination of hand shaking.

– We wipe down all door handles, chairs, and conference tables after every meeting and have hand sanitizers and tissues available in every conference room.

– We will shortly have the ability to conduct meetings via video conference for anyone who wishes to do so. As always, if you would like to speak by phone, we are available to do so.

– We will postpone our upcoming Smart Counsel event scheduled for March 19, 2020, to be rescheduled at a later date.

If you have questions or concerns about an upcoming meeting at the office in Dedham, please call us to discuss other options for your meeting.

We will also take this opportunity to remind you to make sure your health care and other estate planning documents are in place and updated to reflect your current wishes. If you would like to schedule a meeting, phone call, or video conference to discuss your estate plan, please be in touch with Jennifer Poles at 781-461-1020 or poles@ssbllc.com.

Our office is currently open and will remain open as we closely monitor the situation in Dedham and the surrounding communities. We will keep you updated if anything changes. In the meantime, please don’t hesitate to reach out to us with any questions or concerns.

Sincerely,

Suzanne R. Sayward
Maria C. Baler
Julia K. Abbott
Abigail V. Poole

Five More Important Numbers to Know When Applying for Long-Term Care Medicaid Benefits

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Back in December, I wrote about in the event you require Medicaid (MassHealth) benefits to pay for long-term nursing home care expenses. To remind you, Medicaid is a federal/state government health care benefits program available to those who meet its medical and financial eligibility rules.  Here are five more important numbers to keep in mind if you are applying for long-term care Medicaid benefits in Massachusetts.

  1. An Account with $1,500 for Burial or Funeral Expenses is a Non-Countable Asset.

As you are preparing to apply for MassHealth benefits you may “spend down” your assets in certain ways and still qualify.  One way of spending down your assets is converting countable assets into non-countable assets. For example, MassHealth permits you to have a separate bank account of up to $1,500 for funeral and burial expenses.   This is in addition to the $2,000 a single person is permitted to own to qualify for MassHealth benefits. For example, let’s say you have a checking account with a balance of $3,500, which results in your ineligibility because you are over the $2,000 limit. Now let’s say you open a burial and funeral expenses account and deposit $1,500 into it. As you have only $2,000 remaining in your checking account you now meet the financial eligibility requirements to receive MassHealth benefits, and, bonus, you have put aside funds to assist with expenses after your death.  This account is in addition to any prepaid irrevocable funeral arrangements you may make.

  1. Your Principal Residence’s Equity Up to $893,000 is a Non-Countable Asset (for 2020).

Is my home considered a non-countable asset for Medicaid? If your principal residence is located in Massachusetts and your equity interest in the residence does not exceed $893,000 (for 2020), then it will be considered a non-countable asset for Medicaid benefits eligibility purposes. This equity interest amount typically changes each year. If your equity interest in your home is greater than that amount, it may cause you to be ineligible for Medicaid benefits, and you may need to sell your home or spend down the equity prior to or while your eligibility for Medicaid benefits is determined. However, if you make a good faith effort to sell your home Medicaid may exempt it from being countable for a period of nine (9) months, which time period may be extended.  Further, MassHealth may waive the period of ineligibility due to your home’s excess equity if it may cause undue hardship.

Let’s say your home has a tax-assessed value of $1,000,000 and you own it free and clear.  In that case, MassHealth would consider you ineligible for benefits because your home equity exceeds $893,000. Now let’s say you have a $250,000 mortgage on your $1 million home resulting in the equity interest in your home being $750,000. You are eligible for MassHealth benefits. Note that your home may be a non-countable asset immediately, regardless of your equity interest in it, if your spouse resides with you, or you have a child who is under age 21 or blind or permanently disabled, a sibling with ownership interest, or an adult child who is taking care of you and meets specific requirements residing with you. There are other things to know about Medicaid benefits for seniors and your home that are discussed here.

  1. You May Keep $72.80 of Monthly Income as Your Personal-Needs Allowance (PNA).

In general, your monthly income will be paid to the nursing home (the “Patient Paid Amount”) once you begin to receive MassHealth benefits, with some permissible deductions.  One permissible deduction is the Personal-Needs Allowance of $72.80, which amount has not changed in several years. You are permitted to keep the Personal-Needs Allowance in Massachusetts (PNA) to be used for any personal expenses not covered by Medicaid. You can pay for clothing, salon visits, etc. from your PNA account.

Other typical permissible deductions from income are health or medical insurance premiums and support for children, parents, siblings or your spouse remaining at home who meet certain criteria.

  1. 4 to 6 Months (or Longer) from MassHealth Application Submission to Approval.

It can take a few months to prepare a MassHealth application and gather the information you need to submit along with the application.  Once you have submitted the application and documentation to MassHealth it may take 4 to 6 months, or longer depending on your circumstances, to obtain approval to begin receiving Medicaid benefits.  During that time period you will receive correspondence from MassHealth requesting additional information to be provided to them.  The initial determination you receive from MassHealth on your application may be favorable or unfavorable.  If the determination is unfavorable an appeal may be filed with the Board of Hearings.

  1. There Are 26 Aging Services Access Points (ASAPs) in Massachusetts.

Aging Services Access Points (ASAPs) are private, non-profit agencies that contract with the Executive Office of Elder Affairs and cover 26 separate geographical regions in Massachusetts. They provide home care services, investigate elder abuse and assist with health insurance benefits, including Medicare inquiries and MassHealth applications. The local ASAP is Health and Social Services Consortium, Inc. (HESSCO) which covers the towns of Canton, Dedham, Foxborough, Medfield, Millis, Norfolk, Norwood, Plainville, Sharon, Walpole, Westwood and Wrentham.  Although ASAPs are a great source of information, it is always best to consult with an experienced elder law attorney before having anyone prepare a MassHealth application on your behalf, to ensure you are receiving appropriate advice about the timing of the submission of the application as well as any planning steps you may wish to take to achieve eligibility.  In many cases, having an elder care or long-term care attorney prepare the application will be in your best interest, and give you the greatest chance of success.

Meeting the financial eligibility criteria to receive Medicaid benefits to pay for long-term nursing home care expenses can be confusing and difficult depending on your assets, health and family relationships. An experienced long-term care and elder law attorney can assist you with advance planning to preserve your assets, address your questions and concerns, and prepare you and your family to navigate the eligibility process.

Attorney Abigail V. Poole is an associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is an active member of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA).  This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020. 

March, 2020

© 2020 Samuel, Sayward & Baler LLC

5 Things to Know about the SECURE Act

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What is the SECURE Act?

As you may be aware, a new law which significantly changes the way in which inherited retirement assets will be distributed to beneficiaries went into effect on January 1, 2020.  This is the SECURE Act.  While the SECURE Act includes some beneficial provisions such as increasing the age at which a participant must begin taking required minimum distributions from age 70.5 to age 72 and eliminating age restrictions for contributions to IRAs for individuals who continue to work, the significant downside to the Act is that it will require most beneficiaries of inherited IRAs or 401ks to withdraw all of the funds in the account within 10 years from the owner’s death.  This is a big change from the prior rules which permitted distributions over the life-expectancy of the beneficiary.  Read on for 5 Things to Know about the SECURE Act (and how it could impact your estate plan.)

  1. Your beneficiaries will realize less value from the inherited IRA under the SECURE Act. If you were counting on your beneficiaries receiving a certain amount from your estate which includes large IRAs or employer retirement plans, count again. Under the pre-2020 rules, an individual beneficiary could “stretch out” the withdrawal period over which he was required to take distributions over his life expectancy as of the death of the IRA owner.  Since the IRS assumes everyone is going to live until age 80 or so, this could mean a very long withdrawal period if your IRA was left to a child or grandchild.

For example, under the pre-2020 rules, a $1 million-dollar IRA inherited by a 50-year old beneficiary could be distributed to the beneficiary over approximately 30 years.  This means that in the first year the beneficiary would be required to withdraw about $33,000 from the $1 million IRA and include that amount in his taxable income.  The remaining $966,666 that was not withdrawn would continue to grow tax free.  Assuming a modest 5% growth, the balance at the end of the year would be $1,015,000. The following year the beneficiary would have to withdraw 1/29th of the balance in the IRA, or about $35,000 from that IRA. Again, the amount that was not withdrawn, about $980,000 would continue to grow tax free during that year and at 5% would be $1,029,000 at the end of the second year, and so on.

Under the SECURE Act rules for inherited IRAs, most beneficiaries will be required to withdraw the entire balance of the IRA within 10 years of the owner’s death.  Applying the new rules to the above example means that if the beneficiary withdraws 1/10th of the IRA the first year, she would withdraw $100,000 and pay income tax on that amount. The remaining $900,000 would continue to grow tax free during the year.  Assuming a 5% increase, this leaves a balance of $945,000 at the end of that year. If the beneficiary took out 1/10th the second year, that would be a withdrawal of $94,500 leaving a balance of $850,000, and so on.

  1. There are no changes in the distribution rules for a surviving spouse. While the rules regarding inherited IRAs for most beneficiaries have changed, they have not changed as to a surviving spouse. If you leave your traditional IRA or 401k to your spouse, your spouse will have the option to roll it over into his or her IRA and defer required minimum distributions until age 72. If your spouse is already age 72 or upon reaching age 72, the surviving spouse will be able to take withdrawals over his or her then life expectancy. It is only when the surviving spouse dies and the IRA passes on to the remaining beneficiaries, such as your children, that the 10-year rules come in to play and should be considered in your inheritance planning.

 

  1. If your IRA is payable to your Trust it gets more complicated. If you require more complex trust planning or you have structured your estate plan to leave your assets to a Trust for the benefit of your children following your death to provide asset protection for their inheritance or to control the distribution of the funds to them, then this change in the law is even more complicated. The reason for this is that distributions from the IRA are income taxable to the beneficiary.  If the beneficiary is a Trust, then the Trust will be responsible for reporting as income the distributions from the IRA and paying the income tax unless the distribution from the IRA is distributed out of the Trust to the beneficiary in the same tax year, in which case the beneficiary will report the income on her income tax return and pay the tax.   The problem is that the income tax rates on Trusts are much higher than on individuals.   An individual taxpayer reaches the highest federal taxable rate of 37% when she has taxable income of approximately $510,000. A Trust reaches that highest taxable rate when it has income of about $13,000.   Since no one wants to pay more tax than is necessary, logic dictates that the distribution from the IRA be distributed out of the Trust to the individual beneficiary.  However, once the funds are distributed to the beneficiary, the money is subject to the easy reach of the beneficiary’s creditors such as a divorcing spouse, a bankruptcy, a lawsuit or other creditors.  In addition, funds distributed out to the Trust to the beneficiary may be spent as the beneficiary pleases which may not be in accordance with your estate plan goals.

 

  1. IRAs passing to minor children may be paid out over the child’s life expectancy, but this comes with a price. Under the SECURE Act, if your IRA passes to your minor child, then the distribution can be stretched out over the minor’s life expectancy during the child’s minority.  (Note that the special stretch out rules for minors apply ONLY to the minor children of the IRA owner; they do not apply to step-children, grandchildren, or nieces and nephews).  Once the child reaches the age of majority, the 10-year rule applies.  There are many challenges associated with this new rule.  For example, a minor should never be designated as the direct beneficiary of an IRA.   Aside from the fact that most people don’t feel comfortable having assets pass into the hands of a young beneficiary, if a minor is named as the beneficiary of an IRA, then a court proceeding called a Conservatorship will be required. This is expensive and time consuming and best avoided.  The best practice is to leave an IRA to a minor beneficiary via a Trust.  In order for a Trust to be eligible for the life expectancy payout for a minor under the new rules, the Trust must direct that the required minimum distributions be distributed out of the Trust to the minor beneficiary immediately.  This may not be such a big deal while the beneficiary is a minor and the minimum distributions are calculated based on his then life expectancy.  Further, the minor would have a guardian who will receive and apply the funds for his benefit.  However, once the beneficiary reaches the age of majority (which, by the way, under the SECURE Act could be any time between the ages of 18 and 26), requiring that the IRA distributions be distributed out of the Trust and into the hands of the beneficiary could be a significant problem.

For example, if a $1 million IRA is left to a Trust for the benefit of a minor child who is 10 years old at the death of the parent, then the required minimum distribution the first year would be about $14,300.  This amount would have to be distributed out of the IRA to the Trust and then out of the Trust to the beneficiary, or his guardian.  Because of the small amount that must be distributed during the beneficiary’s minority, the balance in the IRA is likely to be $1.3 million or more when the beneficiary reaches the age of majority.  At that point, the balance in the IRA must be distributed to the beneficiary within 10 years.  The Trustee will have the difficult task of deciding on the timing of the withdrawals from the IRA.  Is it better to give an 18-year old $130,000 each year for 10 years, or should the Trustee defer taking withdrawals from the IRA until the beneficiary is older, and hopefully wiser, even if doing so will mean a larger tax liability?  These are hard decisions and will need to made on a case by case basis.  Given the requirement that IRA distributions be distributed out of the Trust to the beneficiary in order to obtain the stretch-out during the child’s minority, parents with large retirement assets may choose to forgo the stretch-out in favor of granting the Trustee discretion to retain withdrawals from retirement accounts in the Trust.

  1. If you have a Roth IRA, this change is actually beneficial. Under the old rules, inherited IRAs, including Roth IRAs, had to be paid out either within 5 years of the owner’s passing, or over the life expectancy of the beneficiary.  The life expectancy option was almost always the best choice as it minimized the taxes and maximized tax-free growth.  However, the life-expectancy withdrawal method required that every year beginning with the year after the death of the IRA owner, the required minimum distribution calculated on the beneficiary’s then life expectancy be distributed out of the IRA to the beneficiary.  Under the new 10-year rule, the entire amount of the IRA must be distributed by the end of the 10th year following the death of the owner; however, a beneficiary is not required to take the distributions in equal installments.  Since distributions from a Roth IRA are not income taxable to the beneficiary, a person who inherits a Roth IRA under the SECURE Act can refrain from taking any distributions for 10 years and allow the value of the Roth IRA to grow tax-free for that 10-year period.  After 10 years, the beneficiary will be required to withdraw the entire balance from the Roth but the amount withdrawn is not taxable income to the beneficiary since distributions from a Roth are income tax free.

The bottom line is that everyone who has significant retirement assets should review their estate plan with an experienced estate planning attorney who is familiar with the provisions of the SECURE Act, to understand the impact the Act will have on the distribution of these assets to their beneficiaries.  We are happy to review this with you and encourage you to be in touch to schedule a time to meet with one of our attorneys to evaluate how the enactment of the SECURE Act will affect your family and your estate plan.

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.

Febraury, 2020

© 2020 Samuel, Sayward & Baler LLC

The Do’s and Don’ts of Estate Planning According to the Movie Knives Out

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Over the holidays, I had the pleasure of seeing the movie Knives Out in the theater.  Knives Out is about an elderly author who dies shortly after a family gathering, and the subsequent inheritance of his multi-million-dollar estate.  The plot slowly reveals that the author’s death and his relationships with his family members and employees may not all be as they first seem. Naturally, I was curious to see the extent of artistic license taken versus my “real world” perspective as an estate planning attorney and probate administration attorney with regard to the inheritance and dealing with large estates. Here are a few do’s and don’ts of estate planning according to the movie Knives Out in comparison to the actual practice of estate planning and administration (warning – spoilers ahead).

Do Update Your Estate Plan Regularly to Reflect Your Wishes. In the movie, the author updates his Last Will and Testament shortly before his death and drastically changes who will inherit his estate from his family to an employee, thereby cutting off his family members from receiving any portion of his estate.

Practically, his family members could contest his Last Will and Testament in court for several different reasons in an effort to invalidate the Will and inherit the estate instead.  To combat an anticipated challenge to the Will, a so-called “no contest” provision (also known as an “in terrorem” or “poison pen” provision) may be included in a Will.    The no contest provision basically states that if any person who stands to inherit a portion of your estate challenges the Will he or she will receive nothing.  Such a provision is most effective when a person has something to lose in the event of a contest and it is clear that the Will creator intended to include the provision.  Not all states recognize these provisions as valid but Massachusetts does. Incidentally, part of Knives Out was filmed in Massachusetts at the Ames Mansion in Borderland State Park located in the towns of Easton and Sharon.

Don’t Tell Your Family Members That They Are Disinherited Otherwise It May Result in Your Untimely Demise If You Are A Rich Author. The author tells some of his family members that they are disinherited from his estate and will no longer receive financial support from him while he is alive. This leads to the author’s demise, which is investigated by an eccentric and cunning southern gentleman detective to determine if the author was, in fact, murdered, and by whom. The detective’s quest to discover the murderer leads him to the employee who is named to inherit the estate, which brings us to the last avenue by which the family could inherit the author’s estate: the so-called “slayer statute”. Under the slayer statute, if the person who stands to inherit from an estate is convicted of the deceased’s first-degree murder, second-degree murder or manslaughter, he or she is prohibited from receiving the inheritance (G.L.c. 265, §46).

In reality, it is your decision as to the information you wish to share with your family members about your estate plan. If it is important to you to be transparent about your wishes and you are comfortable sharing that information, you may wish to speak with each family member alone or hold a family meeting or simply provide copies of your estate plan. At the very least, provide your family members with your estate planning attorney’s contact information so they know who to call for guidance after your death.

Do Share Information About The Inheritance After The Person’s Death If You Are The Personal Representative. The Personal Representative (Executor) of the deceased’s estate must administer the estate according to the deceased’s Will or the state intestacy laws. One of the Personal Representative’s administrative duties is to inform those who will be receiving inheritances from the estate. The Personal Representative should work closely with an attorney to administer the estate properly, including filing probate pleadings, to ensure he or she completes all the necessary tasks according to certain deadlines to reduce the risk of liability.

Don’t Expect A Reading of The Will To Learn About Your Inheritance. The reading of the author’s Will is a pivotal and dramatic moment in Knives Out. In reality, readings of Wills rarely take place after the deceased’s death. Instead, copies of the Will are provided to the recipients of the estate by the Personal Representative.  Additionally, the original Will is filed with the probate court along with the pleadings and becomes public record.

If you have some free time and enjoy movies with well-crafted dialogue delivered by a talented multigenerational cast, surprising plot twists and turns, and filmed in Massachusetts, I suggest you see Knives Out. It is not only entertaining but also highlights the importance of having an up-to-date estate plan in place.

Attorney Abigail V. Poole is an associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters such as long-term care planning. She is an active member of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA).  This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.

January, 2020

© 2020 Samuel, Sayward & Baler LLC

Five Taxes your Heirs May Pay (or not) After your Death

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Most people understand that estate planning and inheritance planning involves making sure that people you trust can make decisions for you if you become incapacitated during your lifetime, and making sure your assets go where you want them to go when you die.  It should also involve identifying and planning to minimize the five different types of taxes that may be payable by your heirs after your death.

  1. 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.  A federal estate tax return is due on the nine-month anniversary of the deceased’s date of death, and any estate tax due must be paid by that time to avoid interest and penalties from accruing.

The good news for most people is that the federal estate tax exemption is $11.58 million as of January 1, 2020 ($11.4 million in 2019).  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.  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.  On December 31, 2025, the federal tax law that gave us such a large federal exemption amount will “sunset” unless Congress takes action.  Upon sunset, the federal estate tax exemption amount will revert to the prior level, adjusted for inflation, most likely a little more than $5 million.

If your “estate” is greater than the federal estate tax exemption, speak to your estate tax planning attorney and tax advisors about planning steps you can take to reduce or eliminate any federal estate tax your estate may have to pay.  Don’t forget about trusts when it comes to estate tax –  certain type of trusts, as well as gifting strategies, including charitable giving, can be effectively reduce the estate tax payable at death.

Keep in mind that even if you do not owe federal estate tax at death, it may still be advisable for the Personal Representative of your estate (formerly known as your Executor) to file a federal estate tax return so that your surviving spouse’s estate can take advantage of your unused federal estate tax exemption.

  1. State estate tax – If you live in Massachusetts, you live in one of 18 states plus the District of Columbia that has a separate state estate or inheritance tax. If you die a Massachusetts resident, your estate must file a Massachusetts estate tax return if the value of your estate is $1 million or more.  This is a relatively low threshold.  For many residents of Massachusetts who own a home, have a retirement account of significant value, and own life insurance, this is a tax they should be aware of and plan for.

There are several bills pending in the state legislature that would raise the Massachusetts estate tax exemption amount, however none of them has succeeded to date.   Until the exemption amount is increased, as with the federal estate tax, the Massachusetts estate tax can be reduced if not eliminated with thoughtful estate tax planning with the advice of your attorney.  As with the federal estate tax, a Massachusetts estate tax return must be filed and any tax paid within nine months after death.

  1. Personal Income Tax – No matter what time of year you pass away, final state and federal income tax returns will have to be filed to report the income you earned or received during the year of your death from January 1 through the date of your death. It is important to keep good records of your income and deductions, and to keep your tax records organized, so that your heirs or others who are settling your estate will be able to provide your tax preparer with the information necessary to prepare your final personal income tax returns, and so that those returns can be filed timely to avoid penalties and interest that may accrue and be payable by your estate.

It is also important to keep your personal income tax filings up to date while you are alive.  Collecting information necessary to file the deceased’s final personal income tax returns is hard enough.  Trying to reconstruct past years’ records in order to file returns that are past due is difficult, time consuming, and can be very expensive when interest and penalties for unpaid taxes start to add up.  Keep in mind that the Personal Representative of your estate can be personally liable for any unpaid tax liabilities. This is not a legacy anyone should leave.

  1. Fiduciary Income Tax – The fiduciary income tax is a little-known income tax payable by estates and trusts on income earned during the year. For example, if you die owning 1000 shares of Exxon stock and a three-family rental property, those assets are part of your “estate” at your death. The dividend income received on the Exxon stock and the rental income paid by the tenants residing in your rental property after your death is “income” earned by your estate.  This income must be reported on a fiduciary income tax return each year your estate remains open.  If these assets are owned by a trust, income earned on trust assets is also reported on a fiduciary income tax return.

Fiduciary income tax can be very steep, considering that the tax brackets are such that estates and trusts reach the highest federal income tax bracket of 37% at only $12,750 of income.  To avoid paying unnecessary fiduciary income tax, it is best to plan with your attorney to ensure your estate will be administered efficiently, and that any trust you create is structured properly with tax savings in mind, even if assets will stay in trust for the benefit of your heirs.

  1. Income Tax on Retirement Accounts– The government kindly allows us to save money in our retirement accounts – IRAs, 401ks, 403bs – without paying federal or state income tax on the funds contributed to those accounts. The end result is that many people have large “qualified” retirement accounts on which income tax has never been paid.

The tax laws require money to be withdrawn from retirement accounts, and state and federal income tax paid, when we reach a certain age, or within a certain period of time after the account owner dies.  The SECURE Act, signed into law by President Trump just before Christmas as part of the budget bill, makes significant changes to these rules.

If you have large retirement accounts, it is important to understand the changes made to these tax rules by the SECURE Act, how much your beneficiaries will have to withdraw from these accounts and when, and to plan to minimize the income taxes payable on those distributions if possible. This is not as easy as it used to be now that the SECURE Act is law; however, there are still planning options to consider that can have a big impact on how much of those accounts may be lost to income taxes after your death.

Death and taxes (and estate tax and income tax planning!) are not most people’s favorite topic (present company excluded), however you can save your heirs a lot of money, and maximize the inheritance they receive, if you take the time to understand the taxes that are potentially payable at death and take steps to plan to minimize or eliminate these taxes before they become due.

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.

January, 2020

© 2020 Samuel, Sayward & Baler LLC

“I Just Need a Will”

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Potential clients sometimes call our estate planning and elder law firm to make an appointment to see an attorney stating that they “just need a Will.”  Ironically, a Will is often the least needed estate planning document.  For many people, their estate will pass to their intended beneficiaries without a Will exactly as it would if they had a Will.  That’s because the Massachusetts intestate law that determines the people to whom an estate will be distributed in the absence of a Will, is in keeping with the distribution and inheritance planning wishes of many people.

Massachusetts law regarding wills and inheritance provides that if a member of a married couple dies without a Will and all of the couple’s children are children of the marriage, then the estate of the deceased spouse will pass entirely to the surviving spouse.  If the surviving spouse later dies without a Will without having remarried, her estate will pass to their children in equal shares.  Further, many married couples own all of their assets jointly (their home, bank accounts, investment accounts) or have beneficiaries designated to receive their assets (IRAs, 401Ks, life insurance, etc.).  In that case, no assets pass under the terms of the Will and instead pass by operation of law (joint ownership) or via the ‘contract’ made with the financial company or life insurance company when that beneficiary designation form was completed.

Of course, for people who do not have a situation that fits neatly under the intestate statute, a Will, and often a Trust, is vital.  This includes blended families, people who have beneficiaries with disabilities or special needs or beneficiaries who struggle with addiction or beneficiaries who are spendthrifts.  It also includes those with minor children and those who want to reduce estate tax or provide creditor protection for the inheritance they leave their beneficiaries.

Frankly, the essential estate plan documents that everyone over the age of 18 should have in place include a durable Power of Attorney and a Health Care Proxy.  These documents appoint someone to pay bills, manage assets, deal with the insurance company and make medical decisions if the person making those documents has an accident or gets sick and cannot do those things for himself.  The law does not make it easy for someone to do these things in the absence of Power of Attorney or Health Care Proxy.  In the case of incapacity without those documents in place, the law requires a court proceeding to appoint a conservator to manage an incapacitated person’s finances and another court proceeding to appoint a guardian to make medical decisions.  These are expensive, time-consuming, and public proceedings and best avoided.

Give us a call us at 781-461-1020 and let us help you create the right estate plan (even if you just need a Will) for your family.

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.

 December, 2019

© 2019 Samuel, Sayward & Baler LLC

Five Important Numbers to Know for Long-Term Medicaid Benefits

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“What happens if I need long-term care in a nursing home and I can’t afford to pay for it?” I hear this question frequently from clients who are concerned about long-term care because the cost of nursing home care is so high. In Massachusetts, nursing home care costs anywhere from $11,000 to $17,000 per month ($132,000 to $204,000 per year) and continues to increase regularly. The short answer is Medicaid (MassHealth), a joint federal/state government benefits program, will cover your long-term care nursing home expenses so long as you meet the medical and financial eligibility criteria for the program. Here are 5 important numbers to keep in mind with respect to eligibility for long-term care Medicaid benefits in Massachusetts.

You Must Be 65 Years of Age or Older. 

The first hurdle to apply for and receive Medicaid long-term care benefits is that you must be 65 years of age or older.

You May Not Have More Than $2,000 of Countable Assets. 

Medicaid has strict limitations with regard to the value of assets an individual may own and qualify for long-term care Medicaid benefits to pay for nursing home care.  Assets may be deemed to be “non-countable,” “inaccessible” or “countable.”  Countable assets include assets such as bank accounts, investments, most retirement accounts and the cash value of life insurance, to name a few.  An individual may have only $2,000 in countable assets in order to be eligible for long-term Medicaid benefits.  Non-countable assets include pre-paid burial accounts, one automobile and a primary residence.  Inaccessible assets are less common and include things like the proceeds from a lawsuit that has not yet settled or an anticipated inheritance during the estate administration phase and before distribution. Countable assets above that $2,000 threshold must be spent down (in permissible ways) before eligibility will be achieved.

A Spouse Living in the Community May Keep an Additional $126,420 of Countable Assets.

If the individual who is residing in the nursing home and applying for Medicaid benefits has a spouse who is living in the community (i.e. not in a nursing home) that community spouse has asset limitations, too.  The spouse is allowed to own only $126,420 of countable assets for 2019.  This amount, called the Community Spouse Resource Allowance (CSRA), is typically increased every year. This means that a married couple living in Massachusetts may have a combined total of $128,420 in countable assets (2019).  If they have additional countable assets, such as an investment account or an IRA worth $100,000, then those funds must be spent down before the nursing home spouse will be eligible for Medicaid benefits.  An experienced elder law attorney can advise a married couple of options for dealing with excess assets in this situation.

Beware the 5-Year Look Back Period!

An important thing to remember about Medicaid benefits eligibility is that Medicaid will review any transfers of your assets made within the five years (60 months) prior to the Medicaid application.  This is often referred to as the 5-year look back period. Medicaid can request copies of account statements for the last five years to check for gratuitous transfers.  For example, if you gifted $15,000 to your child three years prior to applying for Medicaid benefits, Medicaid will view this as a disqualifying transfer of funds because you could have otherwise utilized that money to cover a month of your nursing home expenses. Disqualifying transfers made within the 5-year look back period will result in a period of ineligibility.

The Applicable Divisor is Currently $367.21 Per Day.

Medicaid determines the period of ineligibility for Medicaid benefits due to a disqualifying transfer by dividing the value of the asset transferred by the average daily cost of a nursing home as determined by the state. As of November 1, 2019, this transfer divisor is $367.21 per day in Massachusetts. This means that $15,000 you gifted to your child three years ago will result in 41 days of ineligibility for Medicaid benefits to you now.  But here’s the kicker – the disqualification period only begins to run once you have no more than $2,000 of countable assets.  This means that after all of your funds are spent, you will then be ineligible for Medicaid benefits for 41 days. This is a serious ‘trap for the unwary’ and why long-term care planning is so important.

Another trap for the unwary can occur when someone has made a large gift, such as putting the house in the children’s names, and then applies for Medicaid benefits prior to the expiration of five years.  In that case, the ineligibility for Medicaid benefits can extend well beyond five years from the gift.

The financial eligibility rules for long-term Medicaid benefits are complex and everyone’s situation is unique.  The elder law and medicaid planning attorneys at Samuel, Sayward & Baler LLC can assist you with planning in advance to preserve your assets for your family in the event you require Medicaid long-term nursing home care benefits and can help you prepare to navigate the Medicaid application process.

Attorney Abigail V. Poole is an associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters such as long-term care planning. She is an active member of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA).  This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020.

December, 2019

© 2019 Samuel, Sayward & Baler LLC

In Estate Planning, Preparation Is Key

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It is everyone’s hope that they will die after they have managed to get everything in order so that their family will have an easy time of it and not be left picking up the pieces.  Here are some things to put on your Estate Planning To Do list, to make it easier on your family if you depart this world before tying up all the loose ends:

  1. Identify a place in your house where you keep important information and documents and let trusted family members (or personal representatives) know where that is. I suggest a well-organized filing cabinet with clearly labeled folders containing important information and copies of your legal documents such as wills, trusts, powers of attorney and health care proxies.
  2. Create a list of your assets that includes the institution where each account is located, the account number, your contact person at that institution (if any) and their contact information. Include on this list bank accounts, investment accounts, annuities, life insurance, retirement accounts, etc.    Keep this list updated, and in the place where you keep other important papers so that it can be found.
  3. If you have original stock certificates, savings bonds, cash or other valuables in your house, make a note of where those items are kept so that they are not overlooked or inadvertently thrown out.
  4. Don’t forget digital estate planning. Create a list of usernames and passwords for any important online accounts – financial, photo storage, email, social media, document storage accounts. Keep this list updated and in the place where you keep other important papers so that it can be found.
  5. If you have young children or a child with special needs, consider a letter of instruction that provides important information about your child – the name and contact information for their physician, allergies, other important medical information and other things you think someone should know if they had to care for your children unexpectedly.
  6. Review and update beneficiary designations on life insurance and retirement accounts in consultation with your estate planning attorney to ensure the designations do not disrupt the other provisions of your estate plan.
  7. Do your best to keep your income tax filings up-to-date so that your family will not have to try to piece together that information in order to file income tax returns after your death. This is a painful and expensive process that can lead to lingering liability for family members.
  8. If you have a safe deposit box, make sure at least one other trusted family member’s name is on the box so that they will have access after your death This is especially important if your original Will or other estate plan documents are in the box.
  9. And finally, make sure your estate plan documents are up-to-date, and that you have left instructions for your family regarding where to find them, and the contact information for your estate planning attorney.

Tackle one of these tasks every month, and within a year you will be leaving your family well-prepared if something unexpected occurs.

November, 2019

© 2019 Samuel, Sayward & Baler LLC

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

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