Articles and Blogs

Five Things to Know About Life Insurance When Considering Estate Planning

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Life insurance companies are giving away free Apple Watches to people who share fitness data with them and meet their fitness goals.  New York state is allowing life insurance companies to scroll through your pictures on Instagram to determine your premiums.  The digital age has makes it possible to decrease premiums by installing fitness apps and posting pictures of yourself running. When thinking about life insurance as your family grows or your term life insurance expires, you will want to keep the following five things in mind as you consider the implications of life insurance on your estate plan.

1. What is life insurance? Life insurance provides a payout after your death (called a death benefit) to the people you designate as beneficiaries. It is an important safety net if anyone depends on you financially. Life insurance benefits can pay debts such as mortgages, replace your income and provide funds to pay college tuition. Life insurance can provide for dependents such as children or a younger spouse.  It can help a business owner buy out the interest of a deceased business partner.

2. Is group life insurance enough? Free life insurance at work is a great benefit. You sign up, and your employer pays.  More Americans are covered by work-based life insurance than by policies they purchase outside work. Most people rarely revisit their life insurance needs. Free coverage is typically one to two times your annual salary. However, you may want to replace more than two years of income upon your death.  Our firm does not advise clients as to the amount of insurance to obtain, but we work with financial advisors to make sure that ownership and beneficiary designations for insurance policies are in line with your estate plan.  If you have questions about your life insurance, speak with a financial advisor as to whether work coverage is sufficient depending on your goals to align with your estate planning needs.

3. Are your life insurance policies taxable? This is an important question to ask when preparing an estate plan. Beneficiaries do not have to pay income tax on death benefits they receive. However, proceeds of insurance policies are subject to estate tax upon your death if you control the policy – that is, if you can cancel, surrender, or assign the policy or change the policy’s beneficiary.  When life insurance proceeds are payable to your spouse, a marital deduction will apply.  However, if the proceeds are payable to children or others, an estate tax may be due.  As an example, if my sister designates me as beneficiary of a policy with a $50,000 death benefit, I will not pay income tax on the proceeds, but the $50,000 proceeds will be included in my sister’s estate for purposes of calculating the estate tax payable by her estate at her death. It is important to consider.

4. What can you do to avoid estate tax on life insurance? Life insurance proceeds can escape estate tax if you transfer the policy to an irrevocable life insurance trust.  Once the trust owns the policy, you cannot get it back or make changes to the provisions of the trust that will specify how the death benefit will be distributed at your death.  Also, you cannot be the Trustee of an Irrevocable Trust that owns a policy insuring your life. If you transfer an irrevocable policy to a trust but die within three years of the transfer, you lose the estate tax break, but if you create an irrevocable trust and the trust buys a new policy, the three-year rule does not apply.

5. What is the catch? The irrevocable trust as the policy owner must pay premiums. You cannot pay premiums directly but may make gifts to the trust.  The Trustee must give the beneficiaries notice of their right to withdraw amounts contributed to the trust so they qualify as present gifts.  These notices, called Crummey notices, are named after a court case that fleshed out these requirements and allow the contributions to qualify for the annual gift tax exclusion, relieving you of the need to file gift tax returns.

If you have purchased a life insurance policy or are contemplating purchasing a policy and would like to structure ownership to decrease the estate tax owed at your death, contact an estate planning attorney with experience in drafting and administering irrevocable life insurance trusts.

Samuel, Sayward & Baler LLC, a law firm that is based in Dedham.  The firm focuses on advising clients in the areas of estate planning, administration of estates and trusts 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.

April 2019

© 2019 Samuel, Sayward & Baler LLC

Digital Estate Planning – It’s Time to Plan for your Digital Assets

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In the year and a half since I last wrote about planning for digital assets not much has changed in Massachusetts.  Our state is still one of a handful of states that has not enacted the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), although there is a bill pending in the Massachusetts legislature that would do so.  This bill would clarify the authority your appointed fiduciaries (such as your agent under your Power of Attorney, or the Personal Representative of your estate) would have to access your digital assets if you become incapacitated or pass away.

What has changed in the past year and a half is that we all continue to be more dependent upon technology, and our digital footprint increases with each passing day.  We continue to use social media, online photo and document storage, and email on a daily basis, increasing the digital “assets” we have stored in these accounts.  The importance of the assets stored online has also increased – perhaps this is the only place you now store vacation photos (rather than putting them in your photo album), or perhaps you only receive your bank or investment account statements online rather than in the mail. This online footprint will only continue to grow, as will the need for your estate plan to address your digital assets.

The more digital assets become mainstream, the more important it is to plan for access to these assets by others if you are not able to do so. To the extent these accounts contain information that you would like someone to be able to access after your death or incapacity, it is necessary to provide the appropriate authority for such access as well as instructions about what you want done with these “assets.”  For some types of these assets, digital estate planning strategies are is crucial to prevent financial loss (i.e. the loss of a domain name used for business purposes, bill payment, access to investment account information), to protect sensitive personal information (on-line dating websites), to avoid identity theft, and to allow access to valuable assets (think bitcoin or an author’s manuscript).

Here are some tips to manage your digital assets until Massachusetts law catches up with the rest of the country and we have a clear roadmap for access for Massachusetts fiduciaries:

  • Review the terms of service agreements for the online accounts you use. Understand what those agreements provide about access, and if and how others can be given permission to access your account. Have a qualified estate planning attorney review these on your behalf if you have questions.
  • If an online entity offers a way for you to give permission or access to your digital assets stored with that company, pay attention and follow the directions. For example, Facebook allows you to designate a Legacy Contact who can manage your account after you die, or you can choose to have your account deleted if you pass away. Google allows you to control what happens to your account through their Inactive Account Manager feature. Here you can designate when your account will be considered inactive, what should happen to your Google account in that event, and designate one or more people who will have access to whatever portions of your Google account you choose.
  • Update your estate plan documents, specifically your Power of Attorney, Will and Trust, to ensure those documents grant express permission for the fiduciaries named in those documents to access your digital assets, and express direction regarding what should be done with specific digital assets at death. In our office, we include express permission for access in these documents.
  • Keep a current list of your usernames and passwords in an online password manager or recorded in another way where a trusted person can access this information if needed, and let that person know where this information is located. As a start, we provide our clients with a Digital Assets Memorandum that can be used to record access information and instructions about digital assets.

Keep in mind that if you have not used an online entity’s prescribed method of giving someone permission to access your account, and do not have express permission and direction in your estate plan documents, the company’s Terms of Service Agreement will govern. In such a case, you and your digital assets are at the mercy of the online provider, which may not allow access following your death or incapacity. Don’t fail your loved ones with poor digital legacy planning.

March 2019

© 2019 Samuel, Sayward & Baler LLC

5 Considerations If You Plan to Move to A Continuing Care Retirement Community

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You may be asking yourself “What is a Continuing Care Retirement Community?” A Continuing Care Retirement Community (CCRC) is a community that consists of graduated levels of residential and health care options to accommodate elders who are looking to downsize but remain independent and ensure that their health care needs are met as they “age in place” in a familiar setting. Generally, a couple or single person’s financial and health eligibility are rigorously reviewed by the CCRC and a signed agreement outlining the terms of residency, services, fees, transfers between types of residency units, and other matters (Agreement), along with a large Entrance Fee deposit (similar to a security deposit from renters), are required to join a CCRC. Here are five things to consider if you are contemplating moving to a CCRC.

  1. How are CCRCs Regulated?

There are currently about 30 CCRCs throughout the Commonwealth of Massachusetts. Under Massachusetts’ consumer protection law (G.L.c. 93, §76), CCRCs are required to disclose specific information regarding the terms of residency and services prior to or at the time the Agreement is signed or a deposit is paid, and to provide the same to the Executive Office of Elder Affairs (EOEA), which had made several CCRCs’  Agreements and other information available here. If a CCRC knowingly and willfully fails to disclose this information, the resident may recover damages, costs and attorneys’ fees, and in certain cases, a refund of the Entrance Fee, sometimes less certain costs outlined in the Agreement. However, in Massachusetts there is no state agency that has authority to oversee and enforce the CCRCs’ adherence to the statute.

  1. I Meet the CCRC’s Financial Requirements – Does It Meet Mine?

Typically, a large Entrance Fee deposit is required to buy in to a CCRC, and each CCRC treats the manner by which the Entrance Fee may be utilized during your lifetime and the process by which it is refunded differently.  For instance, some Agreements state that the Entrance Fee may be used by the CCRC to pay your monthly expenses if your other methods of payment have been exhausted. Other Agreements state that you, or your family if you are deceased, will not receive a refund until a new resident buys in to the CCRC, unless you are willing to receive a greatly reduced refund. Yet other Agreements may link the Entrance Fee refund to your period of residency, which means the refund may be significantly less than the deposit you paid if you reside there for several years. Carefully consider the Entrance Fee refund provisions and decide if they are acceptable to you and your family when reviewing an Agreement.

Also pay attention to the financial strength of the company that supports the CCRC, especially if the Agreement makes it clear that your receipt of a refund is dependent upon the buy in of a future resident.  If the company declares bankruptcy, you may lose your entire refund.   The Commission on Accreditation of Rehabilitation Facilities (CARF) is a nonprofit accreditor of health and human services providers and provides a Guide to Understanding Financial Performance and Reporting in CCRCs on its website.

Another matter to consider is what happens if you no longer have adequate funds to pay your monthly expenses, especially if you are in the skilled nursing facility section of the CCRC. Carefully review the Agreement to determine if there are terms that explain the procedure by the CCRC to collaborate with you to pay your expenses, including applying for Medicaid benefits.  Most CCRCs do not accept Medicaid.

  1. What Are the Monthly (and Other) Fees I Will Pay?

The CCRC should provide you with a detailed written description of the services included with the monthly fee you will be paying them as well as a list of fees for additional services.  For example, is transportation to local grocery stores, laundry services or light cleaning of your unit included in the monthly fee or are these additional fees? It’s a good idea to calculate the fees for the additional services you anticipate utilizing along with the monthly fees you will be paying.  Be aware that these fees generally increase annually.

  1. What Happens If My Health Declines?

The major appeal of CCRCs is that you can remain within a familiar community that provides more residential and health care support if and when your health declines. Many Agreements include provisions that broadly describe the process, factors and decision-makers that influence when you may be temporarily or permanently transferred from an independent living unit to an assisted living unit or a skilled nursing facility unit or to another facility outside of the community if warranted. Some Agreements permit residents or their legal representatives to weigh in and appeal the decision to permanently transfer the resident to another unit while others do not. A move to assisted living or skilled nursing can significantly increase your monthly expenses.  Additionally, the decision to permanently move you to a potentially more expensive unit may be out of your hands.  Carefully consider the factors and individuals involved in deciding if you require transfer to another unit, and note whether the Agreement clearly explains the fees if your healthy spouse remains in your independent living unit.

  1. What Else Is Important to Me?

Arbitration: Another part of a CCRC Agreement to consider is the arbitration/dispute resolution provision. Some Agreements state that any disagreement you have with the CCRC may only be resolved with arbitration and/or dispute resolution and not via the court.  This will limit your ability to pursue an outcome that may be more beneficial to you. Consider carefully if it is important to you to have all legal options available to you in the event the CCRC violates its Agreement with you.

Resident Rights: Beyond any rights described in the Agreement, residents may establish a residents’ association, submit comments to the CCRC regarding resident health and welfare, and request information about construction and the financial reserves of the CCRC under Massachusetts law. Think carefully about whether you will be comfortable with a limited ability to effect change within your community as a resident. Also keep in mind that you will be sharing common space with people that have different lifestyles from you; for instance, would you be bothered if your neighbor smokes cigarettes or has a noisy pet?

Activities: Review the activities, events and meal schedules of the CCRC and consider whether they appeal to you and fit your lifestyle.

For more information, an extensive consumer guide to questions and other topics for consideration regarding Massachusetts CCRCs can be found at the EOEA’s website.

If you are considering making a Massachusetts CCRC your future home and wish to better understand the terms and legal ramifications of the Agreement for you and your loved ones, contact an experienced elder law attorney to thoroughly review and discuss the Agreement with you.

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. 

February, 2019

© 2019 Samuel, Sayward & Baler LLC

Tax Time is Estate Planning Check-up Time

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In February, you’ll get tax forms – use them as an estate planning checklist for reviewing beneficiary designations.

By February 15, financial institutions will have sent you all the forms needed for your tax returns.  This nifty pile can help you review your beneficiary designations to make sure they are up-to-date. Beneficiary designations determine how retirement plans and life insurance proceeds will be distributed at death. Brokerage and bank accounts may also have beneficiary designations. Out of date designations may mean that assets go to the wrong people, and that’s just bad estate planning. You designated beneficiaries when you enrolled in your retirement plan. You may have filled out POD (payable on death) or TOD (transfer on death) forms when you opened investment or bank accounts.  Things to keep in mind in reviewing beneficiary designations are:

Your Designations May Be Wrong.  Life brings change, so it is wise to review your beneficiary designations and change them as needed.  Rules for retirement plans and remarriage are complex, and when the companies managing your assets merge, beneficiary designations may not transfer.  Review your designations when your marital status changes and when the institutions in charge of your assets change. Name contingent beneficiaries to receive assets in case primary beneficiaries do not survive.  Otherwise, these assets will need to be probated.

When providing for children or grandchildren, be thoughtful about the type of assets to leave them and the manner in which the assets will be distributed.  Do not name a minor as beneficiary.  Also, be cautious about naming a young adult as a beneficiary. Instead, create a trust for their benefit and name the trust as beneficiary.  Then, you can control when the child or grandchild can access funds. Contact a lawyer for wills and trust to discuss the right strategy for your children.

If a loved one has become disabled, you will want to change your designations to assure that you do not jeopardize that person’s eligibility for Social Security Supplemental Security Income (SSI). SSI provides income and Medicaid insurance to disabled people with less than $2,000 ($3,000 for a couple) in “countable resources.”  Inherited assets will be “countable resources” and jeopardize eligibility for benefits.  Instead, create a Special Needs Trust for the benefit of your disabled loved one and designate the trust as the beneficiary.

Your Designations Can Save Taxes. Retirement assets paid to an estate must be paid out within 5 years of death rather than over a named beneficiary’s lifetime. Name beneficiaries to save taxes! Life Insurance owned by a Life Insurance Trust can remove that asset from your taxable estate.  Finally, you can rollover or distribute your required minimum distribution to a charity and save income tax during life.

Your Estate Plan Needs Annual Exams.  Even if life has not handed you major change, review your beneficiary designations and make sure your loved ones know where to find important estate planning documents. Keep copies of your 1099 tax forms and use the contact information on the forms to call your financial institutions and check your designations.  Remember where you put your important documents and create a list for your family.

February, 2019

© 2019 Samuel, Sayward & Baler LLC

When Love Stinks – Five Ways Divorce Impacts your Estate Plan

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The approach of Valentine’s Day and the recent announcement by Jeff Bezos, founder of Amazon, that he and his wife are ending their marriage after 25 years, set me thinking about how divorce impacts a person’s estate plan (especially in high net worth couples).  Here are five ways that divorce can impact an estate plan and actions that should be taken to address that impact on your legacy planning.

  1. Update your Beneficiary Designations. One of the first things people think about when they split up with their spouse is that they need to change their Will to remove their soon-to-be ex-spouse as a beneficiary of their Will.  What is sometimes overlooked is updating beneficiary designations on assets such as retirement accounts, life insurance policies and annuities.  While Massachusetts has a statute (MGL c 190B § 2-804) which provides that a divorce revokes a beneficial designation made in favor of a former spouse unless the designation was made pursuant to the divorce, the law also states that if a financial company is not properly notified of the divorce and it makes a distribution to the former spouse then the company cannot be held liable.  Keep in mind that changes to assets, including beneficiary designations, may not be permissible while a divorce is pending but should be addressed as soon as the divorce is final.
  2. Avoid Probate to Avoid Prying. Probate is a public proceeding.  One of the requirements of probate is that notice of the filing be published in a newspaper local to the town in which the decedent lived at the time of death.  The purpose of this notice is to alert anyone who wants to make a claim against the estate that they have a limited amount of time to do so.  It is also an invitation to the nosy to snoop or to the vindictive to cause trouble.  Sadly, when love goes bad vengeance can be a byproduct.  Wreaking havoc with a probate estate is not that hard.  Even if a claimant does not have a valid claim, the prospect of prolonged delay and costs can motivate the Personal Representative of the estate to offer something in settlement.  However, if there is no need to file for probate this can be avoided.  When no probate is needed there is no publication in the local newspaper and there is no matter pending in the probate court for someone to meddle with.
  3. Follow through on Deed Changes. When a married couple divorces the disposition of their jointly owned real estate is determined as part of the divorce.  Sometimes the property is sold, but often the property will be retained by one of the parties.  Although a divorce will sever a tenancy by entirety and a divorce agreement, or order of the court on file in the probate court will determine the title, it is still advisable to actually have a new deed signed conveying the property into the name of the spouse who is retaining it.  It is surprising to me how often divorced clients do not take this last step.  Good estate planning advice is that no matter how sick and tired you are of dealing with your soon to be ex-spouse, don’t walk away until the i’s are dotted and the t’s’ are crossed and that new deed putting the house in your name is signed and filed with the Registry of Deeds.
  4. Create a Trust for Minor Children. Even though your Ex is no longer your spouse, he or she is still the parent of your children.  In the event you die while you have a minor child, your former spouse is likely to have custody of the children.  In addition, your former spouse will have control over your minor child’s assets.  That means if you die without a Will, or if you have a Will leaving your estate to your children, it will be your ex-spouse who will have control and custody of your assets that pass to your children until they turn 18.  The same is true if you name minor children as the beneficiaries of your life insurance and retirement accounts – those assets will be in the control of your former spouse.   If this alarms you, speak with a Wills and Trusts lawyer, and create a Trust that leaves your assets to your children via your Trust in which you will designate someone other than your ex-spouse to manage the assets for your children.
  5. Update your Power of Attorney and Health Care Proxy. Powers of Attorney and Health Care Proxies are legal documents in which the maker of the document appoints another person to manage financial affairs and make health care decisions in the event the maker is incapacitated.  Most married couples appoint each other to these roles.  However, most people would not want an ex-spouse managing their finances or making nursing home or health care decisions for them.  Even though Massachusetts law automatically revokes those appointments upon divorce, it is prudent to retrieve all copies of those documents that your former spouse, your physician, or a financial institution may possess and to revoke the documents.  Create a new Power of Attorney and Health Care Proxy naming people who you want to assume these roles in the event it is necessary.

With apologies to the J. Geils Band, just because Love Stinks while you’re in the midst of a divorce, your estate plan doesn’t have to.  If you are recently divorced, contact an experienced estate planning attorney to create or update your estate plan so that the people you care about don’t have to suffer the effects of your divorce again should you fall ill or pass away.

Attorney Suzanne R. Sayward is a partner with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts.  This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit www.ssbllc.com or call 781/461-1020. 

January, 2019

© 2019 Samuel, Sayward & Baler LLC

Benefitting Charities Under Your Will – When is it Better to Give?

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I recently read an article about a man in Washington who donated more than $11 million to several charities after his death via his Will.  It got me thinking about charitable giving and legacy planning, and when it’s a good idea to consider naming one or more charities as the recipients (beneficiaries) of your estate assets.

  • When Charitable Donations Are Important to You.

If you regularly make gifts to one or more charities now, you may wish to consider donating to the same organizations after your death.  This can be achieved through setting up a Will or a Trust where you name the charities, the portion of your estate or the amount to be gifted, and specify the purpose for which you wish the gift to be used by the charity.

  • When You Want to Reduce Taxes.

Most people know that if you donate money or assets to a qualified charity you are entitled to a deduction on your income tax return.  Similarly, if you leave money to charitable organizations at your death, your estate is entitled to a deduction equal to the value of the gifted assets.  For Massachusetts residents who have an estate in excess of $1 million, leaving money to a charity will reduce the estate tax that would otherwise be due.  Naming a charity as the beneficiary of an IRA or 401K plan doubles the tax savings since not only is there an estate tax deduction but no income tax will be owed by the charitable recipient when funds are withdrawn from the retirement account.

  • When You Want to Leave a Legacy.

If you are able to make a significant gift to a charitable organization or you have the funds to establish your own foundation, then you can leave an estate planning legacy behind that will continue well beyond your lifetime.  A foundation is also an excellent way to involve family members in your pet charitable cause and to foster charitable giving values.

  • When You Want to Control the Distribution of Your Estate.

In Massachusetts you are considered to have died “intestate” if you do not have a valid Will at the time of your death or if all of the beneficiaries named in your Will have predeceased you.  Massachusetts law will govern to whom your estate will be distributed if you die intestate. Under Massachusetts law, the beneficiaries of an intestate estate are determined by several factors, such as your marriage status and your surviving family members at the time of your death. For example, if you are a single woman with no children, your estate will be distributed to your surviving parents if you do not have a Will. If your parents predecease you, then it will be distributed to your surviving siblings, if any, and if none, your estate will be distributed to continually more remote family members. This may mean that a family member with whom you have a poor relationship or no relationship may inherit your estate.

If you have absolutely no surviving family members, under Massachusetts law your estate assets will be distributed to the Commonwealth of Massachusetts.  Designating a charity as the beneficiary of your estate in the event all of your beneficiaries have predeceased you will permit you to control that final distribution and prevent the Commonwealth from receiving your estate assets as a last resort.

At Samuel, Sayward & Baler LLC, we carefully consider your wishes, including your charitable intentions and your estate planning goals, and then develop a plan with you to ensure that your estate plan represents your wishes. Call us at 781 461-1020 to schedule an appointment to meet with one of our estate planning attorneys to talk about achieving your goals.

January, 2019

© 2019 Samuel, Sayward & Baler LLC

Five Top Estate Planning Resolutions for the New Year

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January is a time to make resolutions to do things better in the new year.  Here are five resolutions to make to ensure your estate plan is where it should be in 2019.

  1. Resolve to Have an Estate Plan

Most of the clients I meet who do not have a Will, Power of Attorney or other estate plan documents know they should have them, they have just put off this task – sometimes for much longer than they should.  Sometimes it’s the first time they have done any estate planning or spoken with a lawyer about Wills and Trusts. If you are similarly situated, make it one of your goals for 2019 to get an estate plan in place.  A simple plan (Will, Power of Attorney, Health Care documents) is better than nothing at all.  If you have young children or assets in excess of $1 million, a Trust may be advisable to meet your planning goals.  An experienced attorney who prepares Wills and Trusts as the primary focus of their practice will give you options and let you decide which plan is best for you at the moment.

If you already have estate plan documents in place (good job!) resolve to review those documents this year to make sure the documents still reflect your wishes.  If it has been more than five years since the documents were signed or you have had changes in your personal or financial situation, sit down with an estate planning attorney to identify any changes that should be made.

  1. Resolve to Get it Done Right

The advice of an experienced attorney is not cheap and estate planning attorneys are no exception.  However, making sure your assets go where you want them to go at your death, managing them properly for young beneficiaries, protecting assets for your family, avoiding probate and saving your beneficiaries as much income and estate tax as possible are important goals.  The way your estate plan is carried out will have a significant impact – positive or negative – on your family or other heirs.  When something is this important, make sure it’s done right. The temptation to draft your own Will or other legal documents is there and is frankly a poor planning option.  In my 31 years of practice I have yet to see a Will drafted by a client that will work as intended, and will not create more problems than it solves.  Proper estate planning is not something that can be done cost-effectively on your own. Seek the advice of an experienced estate planning attorney, not a general practitioner who prepares Wills along with divorce and personal injury law.  Get it done right, and you will have the peace of mind that crossing this task off your list will bring.

  1. Resolve to make sure your Beneficiary Designations are Up-to-Date

Many of your most significant assets – life insurance, retirement accounts, annuities – will be paid to a designated beneficiary at your death.  Properly designating those beneficiaries is more complicated than it may appear.   Understanding the implications of certain beneficiary designations is crucial.  For example, this can be especially significant in estate planning for a minor or disabled child. A trust for the benefit of a young or disabled beneficiary can be instrumental in avoiding a lengthy and costly court proceeding to appoint a guardian and in avoiding the loss of public benefits a disabled beneficiary may be receiving. Understanding how distributions from retirement accounts work after the death of the account owner, and how different beneficiary designations will impact the size, frequency and income tax payable on those distributions is crucial to making appropriate designations. Ensuring your beneficiary designations are consistent with your overall estate plan is critical to accomplishing your estate planning goals.

  1. Resolve to have Health Care Documents in Place

Much of the estate planning you do is for the benefit of your family or other heirs and will never impact you.  Creating health care documents that reflect your wishes is one area of estate planning that will directly and significantly impact you if you experience a period of illness prior to death.  Designating Health Care Agents to make health care decisions for you if you are unable, making sure the people you want to be able to get information from your physicians can do so and will not be obstructed by privacy laws, and determining your care preferences and communicating them to your Health Care Agents and physicians are all crucial to making sure your health care wishes are carried out.  In Massachusetts, the legal document that we use to make sure these things happen are Health Care Proxies, HIPAA Authorizations and Living Wills. The person you name to make health care decisions for you is called your Health Care Agent. These documents are all part of a complete estate plan, and arguably the most important part from your perspective.

  1. Resolve to Make Sure People You Care About Have a Plan Too.

Estate Planning is important for anyone over the age of 18. College-age children and elderly parents should have powers of attorney and health care documents that will allow someone to make financial and health care decisions for them if they are ill or incapacitated.  Parents of young children should name guardians for their children and create a trust to manage assets for young beneficiaries to avoid a child receiving control of an inheritance at age 18.  Parents who will leave a significant inheritance to their children should consider asset protection planning to protect inherited assets from a child’s creditors, divorcing spouse, etc.  Older couples or others with large estates can save their heirs significant estate taxes in Massachusetts with proper planning.  Elderly parents may want to plan to protect assets from long-term care liability.

If a friend or family member needs some inspiration to make estate planning a 2019 resolution, share this article with them.  Happy New Year!

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, 2019

© 2019 Samuel, Sayward & Baler LLC

Let Your Loved Ones Thank You for Giving Them the Gift of Your Estate Plan

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The holiday season is here and with it comes an excellent chance to talk with your loved ones about your estate plan – really!  The holidays are often the time when family members scattered all over the country for most of the year come together in one place.  In addition to catching up on the latest happenings, spreading good cheer and eating too many sweets, consider taking time to talk with your loved ones about estate planning you have done and instructions you have left.  Read on more about the two most critical times for planning:  during your life and after death (that’s a little estate planning humor).

1. Making important decisions in advance

People who do not plan for the possibility that they may suffer a period of incapacity during their lifetimes doom themselves to suffering in the public eye due to the need for a Probate Court proceeding appointing a guardian and/or conservator to provide oversight.  Don’t let this happen, and try to avoid probate if you can.  Create the legal documents you need to appoint the people you trust and want to make your health care decisions, pay your bills and manage your property or investments if it becomes necessary.

A Durable Power of Attorney is a legal document that designates one or more people to manage your financial matters.  Select a trusted friend or family member with strong financial skills.  A Health Care Proxy appoints people to make health care decisions for you if you are not able to do so for yourself.  Choose people who will respect your wishes.

2. Planning for After Death – Wills

Wills are the basic estate plan document that determine who receives your assets on your death.  Note your Will only controls the distribution of probate assets – assets owned in your individual name and that do not have a beneficiary designated to receive them.  A Will does not determine how jointly owned assets and assets that have a named beneficiary (such as retirement plans and life insurance) pass.  The Personal Representative you name manages your probate assets after your death.  This person will identify and consolidate your assets, pay your debts and taxes and distribute assets as you direct in your Will.

Your Will also controls the distribution of your tangible property, i.e. the things loved ones often fight over. Reduce the likelihood of controversy by writing down your wishes about where this special stuff should go so your family knows what you want.

An experienced estate planning attorney can craft your Will. Give your loved ones a gift of peace this holiday season by creating your own estate plan if you do not have one or making sure your existing estate plan represents your intent.  They will thank you from the bottom of their sugar-plum fairy hearts!

December, 2018

© 2018 Samuel, Sayward & Baler LLC

Five Reasons Not to use “Pay-on-Death” Accounts or Joint Ownership to Avoid Probate

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As an estate planning attorney, I advise clients about the ways they can pass their assets to their beneficiaries and avoid probate.  This is a desirable goal for most people since probate can be expensive, time consuming, and aggravating for those you leave behind.  There are multiple ways to avoid probate including:  1) owning assets jointly with another person; 2) designating pay-on-death (POD) or transfer-on-death (TOD) beneficiaries on an account; or 3) titling assets in the name of a trust.  While opening a joint account and filling out a beneficiary designation form are easy, they are not the best choice in every situation.  Read on for five reasons why joint ownership or a pay-on-death designation is not always the best choice if you are trying to avoid probate.

  1. When you add a joint owner to your account you take on that person’s problems. Many clients add an adult child’s name to one or more of their bank accounts.  The most common reason for doing this is so that someone will have ready access to funds to pay bills in case the parent becomes incapacitated or dies.  Adding a child as a joint owner on an account is not necessarily a bad thing to do however in most situations it should be confined to the parent’s checking account in which a small balance is maintained.  One of the reasons for this is that when someone’s name is added to an asset, that person is a legal owner of the asset.  If that joint owner experiences some troubles (i.e. divorce, lawsuit, failed business, tax lien, etc.) that person’s creditors may very well try to reach that jointly held asset to satisfy their claim.  While the parent may eventually prevail on the argument that the account was funded solely with the parent’s money and established ‘for convenience’, that may only occur after a protracted period of time during which the account could be frozen and expensive legal fees incurred.
  1. Your estate will need some money to pay bills. If you have beneficiaries designated on all of your assets (i.e. bank accounts, investment accounts, life insurance, IRAs, etc.), when you pass away none of your assets will need to be probated.  This is a great result since probate is time consuming, expensive and aggravating, right?  Well yes, probate avoidance is good, but where will the money come from for your estate to pay funeral expenses, outstanding bills, final medical expenses, taxes, accountant fees, etc.?  You might assume that the people you have named as the beneficiaries will ante up and pay those expenses and maybe they will – or maybe they won’t.  Being thoughtful about cash needs in your estate and ensuring funds will be available is an important aspect of planning and will go a long way toward reducing bad feelings among your beneficiaries.
  1. Your intended beneficiaries are minors. I have a number of clients who want to leave their IRAs to their grandchildren.  In addition to giving grandchildren a nice gift, leaving tax deferred retirement benefits to grandchildren can be a ‘tax-wise’ plan.  Naming young beneficiaries to inherit IRAs allows for a longer withdrawal period (‘stretch-out’) for those tax-deferred assets. When someone other than a spouse inherits an IRA, the tax rules require that distributions from the IRA begin by December 31st of the year following the owner’s death.  The beneficiary does not have the option of deferring distributions until age 70.5 like the owner of the IRA does. However, the beneficiary of an IRA does have the option of taking withdrawals from the IRA over the beneficiary’s life expectancy. Life expectancy is determined by an IRS table (of course) which assumes a life expectancy of about 83 years for everyone.  For example, if an IRA is left to a child who is 60 years old when the parent dies, the IRS table requires that the child take withdrawals from the IRA over a 25-year period beginning with 1/25 the first year, 1/24 the second year and so-on until the IRA is completely paid out in the 25th   The assets in the IRA that do not have to be distributed continue to grow tax-deferred each year.  Contrast that with an IRA left to a 10-year old grandchild whose withdrawal period is 73 years.  That’s 73 years of tax-deferred growth versus 25 years.  However, if a minor is the beneficiary of an IRA, the only way to transfer ownership of the IRA to the minor child when the grandparent dies is to petition the court for the appointment of a conservator.  In Massachusetts, this is a time-consuming and expensive process.  Grandparents can use a trust to leave IRAs (or other gifts) to a grandchild instead of naming the grandchild as a beneficiary, thereby avoiding the need for a conservatorship proceeding while still obtaining the tax benefits of the extended pay-out.
  1. You have concern about your beneficiaries’ ability to manage money. Even if your beneficiaries are not minors, you may be uncomfortable with the notion that some (or all) of your beneficiaries will receive unfettered access to the accounts on which you have designated them as beneficiaries.  If you have beneficiaries who are irresponsible with money, who have drug, alcohol or gambling problems, who are in a bad marriage, who have a shaky business, or who are just young and inexperienced with money, leaving them money outright may not be the best approach, even if it is easy and avoids probate.   Rather than designating them as pay-on-death beneficiaries of accounts, consider using a trust to control the distribution of these assets to your intended beneficiaries.
  1. Your plan will fail if your designated beneficiary or joint owner predeceases you. What happens if your joint owner dies? In order for joint ownership or pay-on-death planning to achieve probate avoidance goals, the joint owner or named beneficiary must survive the owner. If the unexpected occurs (and let’s face it, it often does), then the joint ownership will fail and the asset will once again be owned individually. Likewise, if the named beneficiary predeceases the account owner, then the account may end up in probate or may be distributed in an unintended manner.  When you designate a beneficiary of an account, the disposition of that beneficiary’s interest in the event the beneficiary dies is determined by the financial institution’s paperwork which may not be in keeping with the account owner’s intention.  The owner could address the situation by adding a new joint owner or beneficiary when someone passes away, but surprisingly this often does not happen.  If a trust is created then this issue is avoided since a trust will not ‘die’.  In addition, a trust will address disposition of the asset in the event a beneficiary predeceases the owner.

The bottom-line is that in some situations, and for some assets, joint ownership and/or pay-on-death planning is completely appropriate.  However, it is important to be thoughtful about these decisions and to consider the consequences in the context of your overall estate plan.  As with all estate planning, whether or not a particular type of estate planning strategy is right for you depends entirely on your unique situation.  Speak with an experienced Massachusetts estate planning attorney about your situation and your goals to make sure your intentions are realized.

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, 2018

© 2018 Samuel, Sayward & Baler LLC

 

Probate Administration: It’s a Marathon, Not a Sprint

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“We will be done with all of this soon, right?” That’s the question I often hear when working with a client who has been appointed as the Personal Representative (PR) of the estate of a loved one who has recently passed away. My answer is to view the administration of an estate as a marathon, not as a sprint. You will reach the finish line so long as you put one foot in front of the other, but it may take some time and there will be periods when more of your energy is required depending on the obstacles in front of you during the probate process.

The administration of an estate in Massachusetts typically takes a year or more.  One reason is that under Massachusetts law, creditors have one year from the deceased’s date of death to file a claim against the deceased’s estate for the payment of a debt owed to the creditor, such as an outstanding balance on a credit card. This often means that as PR you will need to carefully manage and hold the majority of the estate assets for at least a year before final distributions can be made to the estate beneficiaries (those inheriting money from the estate).

It will feel like much of your energy will be expended during the first few months of the estate administration when you are marshalling the assets of the deceased. While it may seem tedious and difficult to methodically discover, document, consolidate, and manage the assets of the estate,  you will be fulfilling your fiduciary obligations, and avoid liability to the beneficiaries and creditors of the estate for mismanagement. Your careful approach will benefit you later on when you easily handle other PR responsibilities, such as filing final personal income tax returns, estate tax returns, and fiduciary income tax returns.

All your hard work will pay off at the end of the estate administration process when you account to the beneficiaries by documenting the amounts received by the estate and the expenditures of the estate under your management, and the beneficiaries happily receive distribution of their inheritances from the estate.

Everyone tackles marathons differently, however, in all cases it is beneficial to have support and guidance; training is essential, too. At Samuel, Sayward & Baler LLC we are happy to run the marathon with you, providing support and guidance every step of the way through the probate process. Read more of our articles, attend our seminars, and do not hesitate to contact us when it is necessary for you to embark on the probate administration journey – it will seem like you are crossing the finish line in no time at all.

November, 2018

© 2018 Samuel, Sayward & Baler LLC

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

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