Halloween has come and gone, but here’s an even scarier thought – the holidays are right around the corner!!  To get you ready for the ‘season of giving’, here’s a primer on the tax and Medicaid implications of gifting.

Say I own 1,000 shares of Apple stock that I bought for $10,000.  That stock is now worth $100,000 and I decide I want to give that stock to my son Zach.  What are the tax and Medicaid implications of that gift?

Capital Gain Tax

If sell my Apple stock, I will have to pay state and federal capital gain tax on my gain of $90,000 ($100,000 – $10,000 = $90,000).  If I give that stock to Zach, his tax basis in the gifted stock is the same as my basis:  $10,000.  That is because the tax law provides for carryover basis  when a gift of appreciated property is made (i.e. stock, real estate, etc.).  That means that the recipient takes the basis of the donor.  If I gift the stock to my son, he will take it with my tax basis and will have to pay tax on $90,000 of capital gain if he sells it for $100,000.  If instead of giving the stock to my son during my lifetime, I kept the stock and he inherited it from me at my death, he would receive a ‘stepped-up’ basis in the stock.  That means his basis in the stock would be equal to the fair market value of the stock at the time of my death.  So if the stock was worth $100,000 when I died, and he sold it for $100,000 he would not have any gain on the sale and would not have to pay any capital gain tax.

Gift Tax

The gift tax is a federal tax only; there is no Massachusetts gift tax.  Gift tax is only owed when the donor (the person who makes the gift) makes cumulative excess gifts during her lifetime of more than the lifetime exclusion amount.  An excess gift is a gift that is more than the annual gift tax exclusion.  For 2014 and 2015, the annual gift tax exclusion is $14,000.  When I give Zach my 1,000 shares of Apple, I will be making an excess gift of $86,000 ($100,000 gift – $14,000 annual exclusion = $86,000 excess gift).

However, there is no gift tax owed until I have made cumulative excess gifts of more than my lifetime exclusion amount. In 2014, the lifetime exclusion amount is $5,340,000, and this will increase to $5,430,000 on January 1, 2105.  This means that if you don’t have assets worth more than $5 million, chances are you don’t need to worry about owing gift tax even if you make an excess gift.  However, you cannot disregard the gift tax entirely even if you don’t have a $5 million estate.  A person who makes an excess gift is required to file a federal gift tax return (Form 709) when an excess gift is made.  Also, making an excess gift can have an impact on the Massachusetts estate tax owed by the donor’s estate at the Donor’s death.

Income Tax Consequences

There are no income tax consequences associated with gifts to individuals.  The gift is not taxable income to the recipient, and it is not deductible by the donor.   So when I give Zach the stock, he does not have to report that on his income tax return and I am not entitled to deduct the gift on my income tax return.

Medicaid

This is an area of much confusion as many people believe that the annual gift tax exclusion also applies to the Medicaid eligibility rules – it does not.  The eligibility rules for Medicaid benefits to pay for long term nursing home care costs impose an ineligibility period if the applicant, or her spouse, gives away assets within five (5) years of applying for benefits.  Although there are exceptions to this rule, such as gifts made to a spouse or to a disabled child, there are no exceptions for the amount of a gift.  The annual gift tax exclusion amount referenced above has no bearing on, or relation to, the Medicaid rules.  If I give Zach my Apple stock, I need to make sure that I have retained sufficient funds to pay privately for my nursing home care during the 5-year ineligibility period following the gift, or that my son is able to return the $100,000 to me should I need long-term care during that 5-year ineligibility period.

The bottom line is that while gift tax may not be an issue for most people who are considering making a large gift, there are other issues to be concerned about.  Consult with your estate planning attorney before making an excess gift so that you understand the implications and can make an informed decision.

P.S. to Zach – sorry hon, you’re not getting $100,000 of Apple stock for Christmas this year.

Published November 2014

Did you know that the third week in October is National Estate Planning Awareness Week, officially designated as such by the U.S. House of Representatives in 2008?   The Resolution passed by the House noted that “it is estimated that over 120 million Americans do not have up-to-date estate plans to protect themselves or their families in the event of sickness, accidents, or untimely death.”  Using math skills I have not used since middle school, and based on figures from the 2013 U.S. Census, I calculated that slightly less than 50 percent of adult Americans do not have an up-to-date estate plan.

Here are five things you should know about estate planning that will motivate you to create an estate plan or update your out-of-date plan just in case you’re one of those 120 million.

1. It’s Not as Complicated or as Scary as it Sounds. According to the American Bar Association, estate planning is “a process by which an individual designs a strategy and executes a will, trust agreement, or other documents to provide for the administration of his or her assets upon his or her incapacity or death.  Tax and liquidity planning are part of this process.” Although no one likes to think about death or incapacity, the hard reality is that all of us will pass away, and many of us will experience a period of incapacity before that happens.  Like any major life event, it is better to prepare for it before it happens, rather than to deal with it when it’s happening.  A thoughtful estate plan is one that is done in advance, when you are healthy and can think clearly about what you would want and who is best suited to assist you.  And contrary to superstition, in 27 years of practice I have never had a client die immediately after signing his Will. In fact, clients universally feel relieved after finishing their planning.

2. A Good Estate Plan starts with Education. Like anything else, before you can make good decisions about your estate plan, you need to become educated.  If you are the type who likes to read up on things before you embark on a new endeavor, there is an abundance of information on estate planning available online or in your local library.  If you are not so inclined, make an appointment with a good estate planning attorney who should spend most of the initial meeting educating you about different estate plan documents – Wills, Powers of Attorney, Health Care Proxies, Trusts – the purpose of each, and which are appropriate for your particular situation.

3. A Good Estate Plan is Not Necessarily Complicated, Just Right for You. Estate plans can be very simple or very complex, depending on the situation.  A complicated estate plan is not appropriate for everyone.  The plan that is right for you depends on your family situation, your planning goals, and your assets.    If you have a young family, your priorities are likely to include creating a Will in order to name a guardian who will care for your children if you are unable to do so, and creating a trust to ensure your children do not receive their inheritance at age 18 when they are too young to handle it responsibly.  If you are nearing retirement, perhaps you are concerned with saving estate taxes for your heirs and protecting your hard-earned assets from a child’s creditors or divorcing spouse.  If you are in your senior years, you may want to be sure you have named people to assist you with financial and health care decisions as you age. You may also want to better understand how to pay for long-term care should you need that care. An experienced estate planning attorney will spend time discussing how an estate plan can meet your objectives and the options available to you to accomplish your goals.

4. A Comprehensive Estate Plan Does Not Stop at Legal Documents. Although completing your estate plan documents is a great start to the planning process, you are not done yet!  An important part of a complete estate plan is making sure your assets are owned in a manner a consistent with your estate plan documents.  Reviewing and understanding the implications of the beneficiary designations on your retirement accounts is important, especially if you have significant assets in these accounts.  Considering whether life and/or disability insurance could benefit your family is another component of planning, especially for young families.   For these reasons, you will want to involve your financial advisor in the estate planning process.  Your financial advisor can work with you and your estate planning attorney to address the financial aspects of planning and make sure your financial plan is consistent with your estate plan.  It is a good idea for your advisors to work together to coordinate the planning they do on your behalf.

5. Don’t Forget to Update! It is hard to believe, given how much fun estate planning can be, that people fail to update their plan once they have put one in place.  Your family and financial situation will change during your lifetime and your estate plan must change with it.  As a general rule, I like to meet with my clients at least once every five years to review: 1) their documents, 2) how their assets are titled, 3) their beneficiary designations, and, 4) their current situation, goals and objectives.  As there can be a lot to think about in the estate planning process, it helps to break the process down into smaller tasks.   Think about the plan that would be best for your family now and then review and update it as time goes on.  This approach makes the planning process manageable. As long as you are diligent about reviewing and updating your plan, it ensures you will always have a plan that works for your current situation.

Before the holiday season is in full swing, and in honor of national Estate Planning Awareness Week, make it a point to get your estate plan in order, whether you are just starting or need to update your existing plan.  If you need a bit more time, put your estate plan on your list of New Year’s resolutions and make sure it’s a resolution you keep in the New Year.  You will feel good knowing you have done all you can to prepare and protect yourself, your spouse, your children, or others you care about in the event something happens to you.  Your loved ones will thank you!

November 2014

Attorney Maria C. Baler is an estate planning and elder law attorney and a partner with the Dedham law firm of Samuel, Sayward & Baler LLC.  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.

In life there are deadlines that are firm (many involving the IRS) and those that are not (for example, deadlines for blog posts).  In the estate and tax planning world there are many firm deadlines of which you should be aware.  Here are a few, in chronological order:

• Happy 65^th Birthday! Several months before you turn 65 you should begin to investigate Medicare coverage and how to sign up.  For most people, unless you sign up for Medicare within the 7 month period surrounding and including the month you turn 65 you will pay higher premiums for Medicare coverage forever.  More information on this and all other Medicare topics can be found at medicare.gov.

• Happy 70^th Birthday! If you have an IRA, 401k, 403b or other retirement account, you must begin taking minimum required distributions (MRDs) from your retirement accounts no later than April 1 following the year in which you turn age 70 ½ . In subsequent years, the MRD must be taken by December 31.  Roth IRAs do not require minimum distributions during the account owner’s lifetime.  The minimum amount you must withdraw from these accounts on an annual basis is based on the total value of the accounts and your life expectancy.  The custodian of your IRA or the plan administrator may calculate the MRD for you, or you can do the calculation yourself.  Find more information about MRDs and how to calculate them here.  If you forget to take your MRD in any given year you will have to pay a penalty of 50% (yes – 50%!) of the amount not taken.

• Disabled At Any Age – If you have worked but are no longer able to do so because of a disability you may qualify for Social Security Disability Insurance (SSDI) benefits. There are complex rules for determining whether you will qualify for SSDI.  In terms of timing, it is important not to wait too long after you stop working to apply for disability benefits or you may no longer be eligible.  If you are disabled, call your local Social Security office to determine how long you have to apply for benefits.

• You Can’t Take It With You – If assets owned by a deceased person are in excess of $1 million in value (including taxable gifts made during life), a Massachusetts estate tax return must be filed within 9 months of the date of death, and any estate tax due must be paid by that time. For federal estate tax purposes the 2014 filing threshold is $5.34 million, scheduled to increase to $5.43 million in 2015.

• MRDs, Part II – If you are named as the beneficiary of an IRA or other retirement plan you must keep two dates in mind: (1) if the deceased account owner did not take his MRD for the year of his death before death, the beneficiary must take that MRD by December 31 of the year of the beneficiary’s death; and (2) a non-spouse beneficiary must begin taking minimum required distributions (MRDs) from the inherited retirement account by December 31 of the year following the account owner’s death. There are post-death MRDs required from both traditional and Roth IRA accounts as well as other types of retirement accounts.  The post-death MRDs are calculated differently than the MRDs required during the account owner’s lifetime, although the 50% penalty for failure to take a required MRD remains.   More information on the post-death MRD rules can  be found here and here.

*From the lyrics of a song sung by the White Rabbit in Disney’s Alice in Wonderland.

Published October 2014

Many people are concerned about protecting their assets from the cost of nursing home care.  This is not as easy as those radio ads would lead listeners to believe since preserving assets against long-term care costs often means transferring assets so that they are no longer accessible.  Transferring liquid assets such as bank accounts, mutual funds, or stocks and bonds is often not an option since those assets are being used to pay for living expenses, travel, health care, etc.  Transferring retirement assets such as IRAs or 401K accounts is not a good option because of the income tax consequences.

This leaves real estate.  Transferring real property to children while retaining a “life estate” can be a good asset protection planning strategy for parents trying to preserve the value of assets for children.  The parents usually continue to reside in the property and pay the expenses.  There are also some tax advantages to retaining a life estate in the transferred property. However, there are also risks associated with this strategy.

Here are five things to know about life estates.

1. What is a life estate?   A life estate is the right to use and occupy real estate for one’s lifetime. In the context of long-term care planning, a life estate typically refers to a scenario  in which parents deed their real estate to their children,  while retaining the right to live in the property for their lifetimes.  A deed with a life estate reads something like this:

“We, Mom and Dad, for $1.00, grant to our children, Alice and Bert, our home at 123 Elm Street, but we retain for ourselves the right to use and occupy the property for our lifetimes.”

The result of such a deed is that Alice and Bert are the owners of the property, but Mom and Dad have the right to continue to live in the property and pay the expenses for the rest of their lives.

2. Why do people use a deed with a life estate?  The primary reason for using this planning strategy is to protect the property from having to be used to pay the cost of long-term care.    Medicaid benefits, called MassHealth in Massachusetts, are the public benefits available to pay the cost of nursing home care for individuals with limited income and assets.  The rules that govern eligibility for Medicaid benefits permit an individual to own a home and receive Medicaid benefits to pay for nursing home care.  However, the Commonwealth will place a lien against the individual’s home so that the state can recover Medicaid benefits paid for the property owner’s care when the home is sold or when the Medicaid recipient passes away.   If the Medicaid recipient owns only a life estate in the home, then the lien is extinguished at his death.  Of course, the transfer of the home must have occurred more than five years prior to the individual applying for Medicaid benefits.

3. Sounds good – what’s the catch?  Although transferring property to children and retaining a life estate can be good asset protection planning in the right situation, there are consequences.  One of most serious is the potential risk to the property from the children’s creditors.  When a person transfers property to children, the children become the owners of the property.  If the owners of property incur liabilities, the property may be subject to those liabilities.  The types of creditor problems children may have include divorce, bankruptcy, loan defaults, tax liens, credit card debt, a lawsuit, etc.  Although the retained life estate means that a child’s creditors could not force the parents to vacate the property, those creditors could place liens against the property.

4. What if the parents want to move?  If Mom and Dad from my above example want to sell the house and move, then their children must agree to the sale since they own the property.  Even when parents believe that their children would be willing to sell the property, there could be circumstances that would prevent this from happening, such as a child’s death or incapacity.  If the property is sold, not all of the proceeds will belong to the parents.  Some of the sale proceeds will belong to the children.  The division of the proceeds between the owners (the children) and life estate holders (the parents) depends upon the ages of the life estate holders at the time of the sale.  The older the life estate holder, the smaller the ownership interest.

 5. And let’s not forget about taxes.   Some of the tax issues that need to be considered in connection with transferring property with a retained life estate include:

• capital gain taxes
• stepped-up basis
• exclusion of gain on the sale of a primary residence
• gift tax
• real estate tax exemptions offered by some towns; and,
• estate tax.

While a discussion of the tax aspects is beyond the scope of this article, it must not be beyond the scope of analysis when a person is considering whether or not to deed property to children with a retained life estate.

The above highlights some, but not all, of the issues that need to be considered before transferring real property for asset protection purposes.  While a deed with a retained life estate can be an excellent way to preserve the value of the home from liability for long-term care costs, it is vital to thoroughly examine the consequences before making the transfer.  An experienced elder law attorney can help you analyze advantages and disadvantages of using a deed with a retained life estate based on your particular situation.

October 2014

Attorney Suzanne R. Sayward 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.  She is a partner with the Dedham firm of Samuel, Sayward & Baler LLC.  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. 

One of the most quoted phrases from Shakespeare’s plays is the opening line of Hamlet’s soliloquy in Act III in which the prince questions whether it is better, ‘To be or not to be.’  While Hamlet was weighing the pros and cons of life or death, a less weightier but still important question for individuals who are thinking about their estate plan is ‘to trust or not to trust.’ That is, should their estate plan be designed to distribute all of the assets to the children at the parents’ deaths, or should a child’s inheritance continue in trust for the child?

There are some circumstances where stipulating that assets remain in trust following the death of the Trust maker are obvious.  These include families in which the beneficiaries are minors or disabled, for example.  But what about situations where the Trust maker’s children are all healthy adults with no issues?  In these cases, the question of whether a child’s inheritance should continue in trust for him, or be distributed outright to the child at the parents’ deaths depends on a myriad of factors.  These factors include the size of the inheritance, the attitude of the parents, and the age and circumstances of the child.

One of the primary advantages to setting up ongoing trust shares for adult children is creditor protection.  This is something my clients are more and more concerned about these days.  Even if your child seems to be in a good and stable place right now, who knows what the future will bring. Potential creditors include, but are certainly not limited to, a divorcing spouse, credit card debt, bankruptcy, a lawsuit, trouble in the child’s business, a disabling illness or accident, and the child’s poor judgment about people, money management, or both.

Directing that  a child’s share remain in trust for his benefit at your death can protect the child’s inheritance from the reach of his creditors.  There are many options for structuring such trust shares. These range from naming your child as the sole trustee of his share and granting him liberal discretion to make distributions to himself and his family, to requiring that there always be a professional trustee (i.e. bank or lawyer) who has the final say over distributions.

Whether or not structuring your estate plan to include ongoing trust shares for your children after your death is right for you depends entirely on your particular situation and goals.  Talk to your estate planning attorney about how such trusts might benefit your family and stop wondering whether, ‘to trust or not to trust’!

Published September 2014

Lately there is a lot of discussion about allowing seniors to “age in place,” receiving whatever care they may need in their homes.  This movement in favor of aging in place has brought about many positive changes, including increased support services for those who want to stay in their home and the expansion of public benefit programs that will provide some level of home care for those who qualify.  However, home is sometimes a lonely and isolating place for seniors.  For seniors who want to stay active and engaged while they age, a continuing care retirement community (CCRC) may be the answer.  These communities are places where seniors can live independently in apartments, townhouses, or stand-alone residences.  They typically provide a host of activities for residents, as well as transportation to shopping, doctor’s appointments, and cultural activities.  If a resident requires care or assistance, the community typically has an assisted living facility and a nursing home on site where care can be provided.  This allows the resident who needs care to stay in close proximity to a spouse or friends who may require different levels of care or none at all.

Here are five things to think about if you are considering a move to a CCRC:

1. Size and Location are Important

CCRCs vary in the number of residents and the physical size of the campus.  If you have no mobility issues, you may love a sprawling campus or living units that are at a distance from the common areas and activity rooms.  If you move more slowly, you may prefer a smaller community with a more compact layout.  You should also consider carefully the location of your particular unit within the facility, as well as such things as the distance from your unit to the elevator or the trash chute.  Consider how close the community is to your family, your doctors’ offices, your place of worship, or other places to which you frequently travel.  Some communities provide transportation for their residents on scheduled shopping trips or individual excursions.  If you will be relying on community transportation, make sure it will take you where you need to go and understand any costs involved.

2. Consider the Costs

Take the time to carefully consider the cost of buying into a CCRC as well as the monthly fees.  Make sure you understand what these fees cover and what they do not.  Facilities with higher buy-in costs and monthly fees may cover the cost of some or all of the care you may need in the future.  Other facilities are more affordable to enter initially but require you to pay-as-you-go for the care you need.  Depending on which model you feel is best for you, make sure you are able to comfortably afford the cost, both now and in the future, especially if your care needs increase.   Make sure you ask about the CCRC’s history of fee increases.  If there comes a time when you are no longer able to afford to live in the community, find out if the community has a benevolent fund or other means to assist residents who have spent their assets but wish to remain there.  Take the time to understand how the CCRC you are considering is owned and managed, how decisions are made about when and if fees are increased, and to what extent the residents have input over how the facility is run, what activities are offered, etc.

3. What are Your Present and Future Health Care Needs?

Are you healthy and mobile with no health issues in sight or do you have an illness that is likely to require care in the future?  If you anticipate the need for future care, consider whether the CCRC is able to deliver the type of care you will need, and whether you will be able to receive that care in your unit or if you will have to relocate to one of the other on-site facilities.  How is the decision made if and when you will need to relocate, and is your input or your family’s input meaningfully considered?  Does the community have a separate assisted living facility?  If you need a limited amount of assistance each day, can care be delivered to you in your independent living unit?  When choosing a unit, consider whether there are physical features that will make it difficult for you to continue to live there as you age.

4. What Types of Activities Do you Enjoy?

One of the best things about CCRCs are the variety of activities they offer to their residents and how easily accessible those activities are.  Consider what activities you enjoy, and make sure the community provides them.  Do you like to garden? If so, does the community have garden plots available to residents, or a greenhouse where you can garden in the winter months?  Do you like to sing, dance or play an instrument? If so, is there a community chorus, regular social events where dancing is involved, or a piano available for residents to use?  Do you want a lifelong learning community that has a schedule of lectures for residents to attend, or book or discussion groups that meet on a regular basis?  Are you someone who likes to stay physically active? If so, look for a community with walking paths, a fitness center and/or a swimming pool, and consider how accessible these facilities are from the unit you are considering.

5. Read the Fine Print        

Like any other legal or financial transaction, making the decision to become a resident of a CCRC is an important decision that should not be made without careful consideration and advice from your financial and legal advisors.  Take the time to visit, have a meal with current residents.  How is the food?  Do the residents like living there?  What don’t they like about it?   Read the agreements you must sign carefully and consult an attorney to be sure you understand what those documents say in terms of the costs you will have to pay, the services that are covered by your monthly fee, any additional fees, what type of care you can receive and in what location,  etc.  Make sure you examine the financial strength of the facility and its parent company, as the CCRC’s ability to continue to operate is crucial to your future.  If the CCRC refunds a portion of the buy-in cost to your heirs following your death, the financial strength of the company will dictate whether your heirs receive those funds down the road.

Keep in mind that CCRCs, unlike nursing homes, are not regulated by the Commonwealth of Massachusetts.  Some CCRCs choose to become accredited by the Commission on Accreditation of Rehabilitation Facilities (CARF), an independent organization.  More information is available at www.carf.org.  The Commonwealth’s Executive Office of Elder Affairs also has a wealth of information on CCRCs available on-line at http://www.mass.gov/elders/housing/ccrc/.

September 2014

Attorney Maria Baler is an estate planning and elder law attorney and a partner with the Dedham law firm of Samuel, Sayward & Baler LLC. She is also a director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA). For more information, visit www.ssbllc.com or call (781) 461-1020.  This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.

The more we expand our use of social media – Facebook, Twitter, LinkedIn, etc. – and online sites that allow us to store information and conduct business – via photo storage websites, on-line banking and bill payment, Dropbox, PayPal, etc. – the more important it is to plan for these digital “assets.”  Also, the more we follow advice to make our passwords complex and keep them secret to improve the security of our on-line accounts, the more difficult it is for family members or others to access these accounts if necessary in the event of incapacity or death.  It is possible to plan for these assets in such a way that the security of these accounts is not compromised but those whom you trust can gain access to them when needed.  Make sure your Durable Power of Attorney contains adequate provisions to allow your attorney-in-fact access to your digital assets if you are not able to handle your own financial affairs.  Make sure your Will gives your Personal Representative similar authority, and provides instructions about what you want done with your digital assets and the digital devices you use to access them (computers, smartphones, etc.).  Finally, and despite all advice to the contrary, keep a written list of your passwords, and keep it updated and in a safe place.  Without that information, timely access to your digital assets may be impossible.   You can read more information on this topic here .  The Uniform Law Commission recently passed the Uniform Fiduciary Access to Digital Assets Act (UFADAA),  which will give fiduciaries the authority to access, manage, distribute, copy or delete digital assets.  This is now in the last review stage before being finalized and available to state legislatures to enact.  Even if Massachusetts does enact this law, everyone who has digital assets should be proactive about control over and disposition of these assets.  The next time you update your estate plan documents be sure to include provisions that speak to your digital assets.

Published August 2014

One of the most important decisions clients face when creating their estate plan documents is who to name to the multiple fiduciary positions that must be filled.  These include the Personal Representative (formerly called Executor) of your Will, the attorney-in-fact who will act for you under your Power of Attorney, and the Trustee of your Trust.  Black’s Law Dictionary defines a fiduciary as a person who is granted certain rights and powers to be exercised for the benefit of another person and who must use scrupulous good faith and candor in doing so.

Clients are often inclined to choose one of their children to serve in these roles based on birth order, gender, or geographical location.  These are generally not good criteria for selecting a fiduciary.  Here are five things to consider when deciding who to name to fiduciary positions.

1. Consider choosing different people to serve in the various fiduciary positions.  A comprehensive estate plan will include a Will and a Power of Attorney, and may include one or more Trusts. Each of these documents names a fiduciary to carry out duties and instructions when the maker of the document is unable to do so because of incapacity or death.  Choosing different people to serve in these roles may be appropriate depending upon your situation.  For example, if your daughter lives nearby and is available to help you with bill payment, mail management, insurance claims, etc., she may be your best choice to serve as your attorney-in-fact under your Power of Attorney.  However, she may not be the best choice to serve as your Personal Representative or Trustee if your children do not get along or if estate assets or distribution provisions are complicated.  Naming different individuals to serve in the various fiduciary positions can also provide a good “checks and balance” system, as no one person will be in control of everything.

2. Consider appointing co-fiduciaries.  You can appoint more than one person to serve as your attorney-in-fact, Personal Representative and Trustee.  Doing so makes sense in situations where:

• you have multiple beneficiaries
• your chosen co-fiduciaries can work well together
• you have a complex situation
• one of your chosen fiduciaries lives far away

There are of course other considerations when deciding whether to name more than one person to serve as a fiduciary.  However, the ability of your co-fiduciaries to work together is a must.

3. Consider the term of your Trust and the value and character of your assets when choosing a Trustee.  If your Trust will continue during the lives of your children and then grandchildren, you need to consider your Trustee provisions carefully.  If you name an individual Trustee, how old is that person and for how long will he or she be able to competently serve as Trustee?  Who will serve when that person cannot?  Will you give your children the right to appoint successor Trustees?  If they fail to do so, how will your successor Trustee be appointed?  If your estate includes a business, or multiple pieces of real estate, or a very large investment portfolio, consider carefully whether any of your family members have the skills to manage those assets when you are not around to do so.

4. Sometimes a professional Trustee is the best choice.  If your family members do not get along, if your children are too busy to devote the time that will be needed to settle your estate, or if you do not have a family member who is well-suited to serve as your Personal Representative or Trustee, consider naming a professional Trustee.  A professional fiduciary is typically a bank, trust company, lawyer, or accountant.  Some of the advantages to using a professional fiduciary are:

• A professional is experienced in estate settlement and trust administration
• A professional carries insurance to make the estate or trust whole in the event of malfeasance
• A professional does not have a personal stake in the situation

The disadvantage to hiring a professional fiduciary is there will be a fee.  However, if designating a professional means that your estate is settled promptly and efficiently, and that your Trust is properly administered, then the cost of a professional fiduciary is money well spent.

5. If selecting a non-professional as a fiduciary, look for these traits.  A fiduciary owes the highest duty of good faith and fair dealing to those he serves.  When considering your family members for fiduciary positions, look for someone who has the following character traits:

• Organized
• Diplomatic
• Even tempered
• Responsible
• Financially astute

The person you choose to serve as your fiduciary can “make or break” your estate plan so choose wisely.   Your estate planning attorney can help you make the best decision based on your particular family situation, assets, and distribution plan.

August 2014

Attorney Suzanne R. Sayward 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.  She is a partner with the Dedham firm of Samuel, Sayward & Baler LLC.  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. 

Last month in this space my law partner Maria Baler wrote about the importance of planning to avoid probate because of the time and costs associated with probate (Avoid Probate at all Costs, or Incur a lot of Them).  Another benefit derived from avoiding probate is eliminating the possibility of a Will contest.  If a probate proceeding is necessary, the Personal Representative must send notice to all of the decedent’s heirs.  For disgruntled heirs, receipt of such a notice is practically an invitation to contest the Will.  If no probate is necessary, then no such notice need be given.

Grounds for overturning a Will include the following, with numbers 1 and 2 being the most common basis of a Will contest:

1. That the decedent was not of sound mind when he signed his Will. Note that the law only requires that the maker of the Will be of sound mind at the moment he is signing the Will.  While evidence that the individual was not of sound prior to or after he signed the Will may be relevant to the testator’s state of mind at the time he signed the Will, it is not necessarily conclusive.
2. That the Will was the product of fraud, coercion, or undue influence.  That is, the person who stands to benefit under the Will improperly influenced the decedent to write the Will in the beneficiary’s favor.
3. That the Will was not executed properly.  In order to be valid in Massachusetts, a Will must be witnessed by two people and should be executed with so-called testamentary formalities.  Allegations that the Will was forged would also fall into this category.
4. That the Will presented is not the final Will of the decedent.
5. That the decedent did not understand that he was signing his Will.

While there are situations when a challenge to a Will is warranted, if you’re reading this post, chances are you are of sound mind and you do NOT want your final wishes altered because of a Will contest brought by a disgruntled heir.  Although it is not easy to win a Will contest, it is easy for a disgruntled heir to allege that the Will should be overturned, leading to significant delays in the probate process and significant expense for all involved.  If you plan your estate so that no probate is necessary, you will greatly reduce the opportunity for mischief by relatives or kin who are unhappy with your decisions regarding the disposition of your estate.

Published July 2014

As an estate planning attorney, I spend a lot of time educating parents about planning for their children and putting those plans into place for them. For many of you, it is also important to plan for the other members of your family – your pets.  Pets are like children who never grow up.  They are completely dependent on their owners for care their entire lives.  For this reason, it is incumbent upon pet owners to be thoughtful about their pets and plan appropriately for them.

Here are five questions to consider when planning for your pet.

1. Who Will Care for Your Pet When You Can’t?

If you are unable to care for your pet, designating a willing family member or friend may be a good choice.  It is important to identify both a caretaker who can care for your pet in the short term in the event of an emergency, as well as a long-term caretaker who will care for your pet in the event you are no longer able to do so.  Make sure that the caretaker you choose will take the responsibility seriously.  If your chosen caretaker has pets of his own, make sure your pet will fit into the household without difficulty.  If you do not have any good or reliable candidates among your friends or family, ask your veterinarian to refer you to organizations that serve as pet caretakers.

2. Should the Caretaker be Paid and How Much?

Consider whether your estate plan should provide funds to pay for the care of your pet in the event you become incapacitated or following your death.  In the event of your incapacity, you can include a provision in your power of attorney allowing your assets to be used for the ongoing care of your pet, either in your home or in the home of a caretaker.  Consider whether the caretaker who has agreed to care for your pet at your death has the means to do so from her own resources, or whether you should leave funds to help cover the many costs that will be incurred in the short term or over the pet’s remaining lifetime.   The amount that should be left depends on many factors including the age of your pet, your pet’s present health and future health concerns, the cost of routine veterinary care and anticipated extraordinary and end-of-life care, the routine expenses of caring for your pet, and whether the pet will be kept in the caretaker’s home or needs separate accommodations.

3. What Information will the Caretaker Need to Care for your Pet?

An important document for any pet owner to create is an information sheet that allows someone who is not familiar with your pet to know how to care for it properly.  This document should include the pet’s birth date, identifying marks, food preferences, exercise habits, daily routine, behavioral quirks, likes and dislikes, veterinarian’s name and contact information, pet sitters/walkers names and contact information, health history and medications, and the type of care you would want your pet to receive if it becomes seriously ill.  Keep this document in an accessible place in your home, and inform your emergency and long-term pet caretakers where the document can be found.

4. How will others know of your plans?

Communication of your plan to others is crucial since your pet is unable to speak for itself.  In the event of an emergency, owners should carry a pet alert card in their wallet that alerts the authorities that there is a pet that may need care in the event the owner is unable to return home.  The card should provide the name of the emergency caretaker(s) you have identified who should be contacted to take custody of the pet and provide care in your absence.   Inform the emergency and long-term caretakers of the arrangements you have made, where they can locate the pet information you have compiled, and how to contact your attorney if formal planning arrangements have been made for the pet’s care during your incapacity or following your death.  After you have made a plan for your pet’s care, share that plan with your veterinarian and find out what you need to do to ensure the designated caretaker will be able to secure veterinary care and have access to your pet’s health information.

5. Should you formalize the arrangement?

If you have a pet, consider including a provision in your durable power of attorney that allows your funds to be used for the care of your pet in the event you become incapacitated.  Without such specific direction, the person handling your financial affairs will not have the authority to do so.  Arrangements for pet care following the owner’s death can be informal where there is a family member willing to assume care for the pet without compensation.  If you will pay a third party to care for your pet, more formal arrangements are appropriate.  Your Will can provide for a one-time gift to a pet’s caretaker following your death, assuming you trust the designated caretaker to use the funds for the care of your pet and not run off to Vegas with the money.  If a significant amount of money will be left for the care of one or more pets or pets that require expensive care or are likely to live a very long life (such as horses and birds), a pet trust should be created.  A pet trust includes specific guidelines for the caretakers, designates primary and alternate caretakers, names a separate trustee who will monitor the caretakers and make payments to them as provided by the trust, and provides for disposition of the remaining trust funds following the pet’s death.

The next time you are reviewing and updating your estate plan – or creating a plan for the first time – don’t forget to consider your pets to ensure that no matter what happens they are well cared for in the future.

Attorney Maria Baler is an estate planning and elder law attorney and a partner with the Dedham law firm of Samuel, Sayward & Baler LLC. She is also a director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA). For more information, visit www.ssbllc.com or call (781) 461-1020.  This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.

July 2014