By Attorney Maria Baler (November 2011)

Like most people, you are probably doing what you can to save for your retirement. If you are an employee, your employer may have established a defined contribution plan such as a 401k or 403b plan to which you can contribute a portion of your income each year. As an alternative, or in addition to an employer-sponsored plan, you can contribute funds to an individual retirement account (IRA). If you are already retired you most likely have some funds in a 401k or IRA account accumulated over your working life. The income tax laws look favorably on retirement savings and allow you to defer paying tax on income you contribute to a retirement account and on the account’s earnings until the funds are withdrawn.

Many people have significant assets accumulated in their retirement account. Like any other asset of value, it is important to pay close attention to your retirement account when doing estate planning, to be sure this valuable asset is left to your heirs in the most tax-efficient manner possible.

Here are five facts to know about estate planning for retirement benefits.

1. Double the Tax, Not Double the Fun

The value of your IRA, 401k or other retirement account is part of your taxable “estate.” This means the value of that asset will be added to the value of all other assets you own at the time of your death to determine if your estate must pay state and/or federal estate tax at your death.

In addition to estate tax, because income tax has not been paid on the funds in your retirement account, the beneficiary who receives the retirement account after your death will pay income tax on the funds in the account as they are withdrawn by the beneficiary. Amounts withdrawn from the retirement account will be taxed as ordinary income based on the beneficiary’s own personal income tax rate.

2. Beneficiary Designations Control All

When you establish a retirement account you can name a primary beneficiary of the account – the person or organization to receive the funds in the account at your death. If you are married, your spouse must be named as the primary beneficiary of your employer plan unless your spouse agrees that a different beneficiary may be named. In addition, you can name a secondary or contingent beneficiary to receive the funds in the account at your death if your primary beneficiary is not living. You may name one or more people as beneficiaries, in equal or varying percentages. Charities, educational institutions, or other organizations may also be named as beneficiaries of a retirement account. These beneficiary designations control to whom the funds in your retirement account are paid at the time of your death.

It is important to review your beneficiary designations periodically and make changes as necessary. Life events such as marriage, divorce, the birth of a child, or the death of a family member should all trigger a review of beneficiary designations.

3. Plan to Take Advantage of Income Tax Benefits for your Beneficiaries

Uncle Sam is generous and patient… to a point. Although tax laws allow you to defer the payment of income tax on the funds you contribute to a retirement account, those same laws don’t allow this tax deferral to continue indefinitely. The tax laws require you to begin taking withdrawals from a retirement account when you reach a certain age. Similarly, when the owner of a retirement account dies, the tax laws require the beneficiary of that account to start withdrawing and paying income tax on those funds. How quickly the funds have to be withdrawn, and how much tax must be paid on the funds as they are withdrawn, are key issues to consider when planning for the distribution of your retirement benefits after your death.

There are significant income tax benefits to naming your spouse as the primary beneficiary of your retirement account including the option for the surviving spouse to ‘rollover’ the deceased spouse’s retirement account into the surviving spouse’s own IRA, and therefore delay the withdrawal of funds from the IRA until the surviving spouse turns age 70.5.

There are also benefits to naming young beneficiaries like children, grandchildren, or nieces or nephews, as they may have the option to “stretch” the withdrawal of funds from the retirement account over their own life expectancy. This type of stretch pay-out is a powerful tax-savings strategy, as income tax is paid only on the funds as they are withdrawn, allowing years of tax-deferred growth.

For those who are charitably inclined, naming a qualified charity as the beneficiary of a retirement account will save the income taxes that would otherwise be paid on those funds, as a charitable organization does not pay income tax on the retirement funds it receives.

4. Don’t Forget About Planning for Estate Taxes

An important part of estate tax planning is to consider the liquidity of the estate and plan for how estate taxes will be paid without the need to liquidate assets. Planning for taxes on an estate with a large retirement account is important, as having to withdraw funds from the retirement account to pay estate taxes will generate income taxes on the funds that are withdrawn, creating an undesirable tax result.

Leaving retirement benefits to charity is one way to reduce your estate tax burden. Naming a qualified charity as the beneficiary of a retirement account will give your estate an estate tax charitable deduction, allowing those benefits to pass to the charity estate-tax free. If you are planning to leave money to charity at your death, consider the estate and income tax benefits of funding that gift with retirement plan assets.

If you have a large estate or wealthy children, consider naming your grandchildren as beneficiaries of your retirement account, rather than your children. Doing so will allow the retirement plan assets to avoid estate tax at your children’s death, and will provide the income tax advantages of an extra-long stretch payout to grandchildren. If you are considering this type of planning, be sure to consult with your attorney about the generation-skipping transfer tax implications of this type of arrangement.

5. Take Time to Learn About Your Retirement Plan

All retirement accounts are not created equal. Although the rules governing IRA accounts are mandated by federal law, the terms of your employer’s retirement plan are specific to that plan and very likely different from another employer’s plan. For example, your employer’s 401k plan may not permit a beneficiary to stretch payment over his or her life expectancy, or may require a beneficiary to withdraw the funds from the retirement account in a lump sum within five years of your death. Other plans may not allow a Trust or a charity to be named as the beneficiary of a retirement plan. Rolling over the retirement funds from the employer’s plan to an IRA, either following your retirement or after your death, may give you and your beneficiaries more options.

An important first step in planning for your retirement benefits is to review your plan’s documents with your advisor, determine your planning options, and if necessary determine whether it is possible to move the funds, now or in the future, to allow more flexibility in planning.

For many people, a retirement plan is their largest asset. Like any other valuable asset, there are significant estate tax implications of owning a large retirement plan. Unlike many valuable assets, there are also significant income tax implications. A good estate plan will include thoughtful and careful planning to ensure that the funds in a retirement plan will be paid to the intended recipients after your death in a way that minimizes both income and estate taxes, and if possible takes advantage of the favorable tax rules applicable to this type of asset.

Because employer retirement plans vary in their provisions, it is important to get individual advice about your retirement plan and your options. As with other planning issues, what works for your neighbor, barber, chiropractor or pet sitter will not necessarily work for you and your retirement account.

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.

By Steven Joshua Samuel (October 2011)

With the aging of the baby boomer generation, planning for long-term care illness has become of increasing concern. U.S. Department of Health and Human Services statistics show that 70 percent of people over 65 will require some long-term care services, primarily for one to five years of care. In 2010, the national average annual costs of long-term care were $ 40,428 for assisted living, $78,840 for private room nursing home and $1,135 per week for one eight-hour home care aid shift. Furthermore, long-term care costs in Massachusetts are higher than the national averages. Many questions arise when a family member needs long term care. Having a plan already in place may ease the emotional and financial stress on the rest of the family. We have provided answers to the most frequently asked questions when it comes to key planning issues. The good news is there are some new insurance alternatives that give families added flexibility in planning ahead.

What costs are covered by government programs?

Medicare covers medical care costs for illness or injury and provides very little for custodial care. Medicaid, the joint federal and state welfare program, pays for nursing home care but only after almost all of your own money has been spent. Although Medicaid pays for some home care services for people who have very little income or assets, finding and paying for caregivers with Medicaid funds is extremely difficult. Consequently, government programs do not effectively cover the really burdensome long-term care costs for middle class families, which have to be paid by either personal money or long-term care insurance.

What location for care do most people choose?

Most people prefer to remain in their own homes and most who start receiving care in their own homes are able to remain there. Coverage for long-term care in assisted living facilities, nursing homes, and in the insured person’s home are offered in most currently available long-term care insurance policies.

How much insurance coverage is enough?

For people who can afford insurance, the decision of how much of it is needed is usually made in consultation with an experienced professional. Key considerations include family and personal health history, as well as the local costs of care and affordability of annual premium. Seventy percent of recent buyers of long-term care coverage purchased between three and five years of benefits; 8.5 percent bought two years or less and 21.5 percent purchased six years or longer.

New choices in Long-Term Care insurance: Linked Life-Long Term Care Insurance Policies

Paying annual premiums to provide insurance for long-term care that may not be necessary is one reason some middle class consumers with considerable resources still have not acquired LTC insurance. New choices have become available to address this concern. One new choice is a policy that combines a death benefit and long-term care insurance, with all benefits income tax free; and, if long-term care is not needed, a refund of the premium is distributed. Here’s one example:

A retired woman, age 65, is married and in average (“standard” in insurance industry language) health and has not purchased long-term care insurance because of the annual premium. To address the possibility of long-term care needs, she has set aside $100,000 among her retirement investment holdings. In consultation with her financial advisor, she realizes that the amount set aside will cover little more than one year of care.

If instead she repositions the $100,000 into a “linked life-long term care policy,” offered by one of several financially solid insurance companies, she would have these benefits:

•$600,000 available to pay for long-term care costs (six times what she had without the policy);

•$200,000 death benefit if she does not have a long-term care need; and, $20,000 in death benefits even if she uses all the long-term care fund money described above;

•both the death benefit and long-term care moneys are income tax free;

•If she changes her mind about wanting the policy, the premium is refunded minus only loans she has taken and benefits which were paid to her.

Other versions of linked life-long term care policies are available with slightly different features. They are worth investigating, as always, in consultation with a qualified financial advisor.

Helpful consumer resources used in this article:

Department of Health & Human Services, National Clearinghouse for Long-Term Care Information, September, 2008, www.longtermcare.gov.

Life Plans Long Term Care Market Summary: Cost of Care Update 2010, www.LincolnFinancial.com.

American Association of Long Term Care Insurance, 2010 LTCI Sourcebook.

Samuel Financial, Inc. is located at 858 Washington St. Dedham, MA 02026 and can be reached at (781)461-6886. Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser. Fixed Insurance products and services offered by Samuel Financial, Inc. is separate and unrelated to Commonwealth. www.samuelfinancial.com

By Attorney Suzanne R. Sayward (September 2011)

On January 1, 2012, a law which is likely to affect every resident of the Commonwealth at some point will go into effect. This law is the Uniform Probate Code (UPC) and it changes the way estates are administered in Massachusetts.

Here are five ways in which the settlement of estates will change under the UPC.

1. New Names for Probate Terms. Currently, the person appointed by the court to administer an estate is called the ‘Executor’ when there is a Will and the ‘Administrator’ when someone dies without a Will. Under the UPC, these terms are replaced with ‘Personal Representative.” Right now, the Court issues a ‘Certificate of Appointment’ to the Executor or Administrator as proof of their authority to act on behalf of the estate. Under the UPC, this proof of authority will be called, ‘Letters Testamentary’ or ‘Letters of Administration.’

2. Informal Probate Process Available for Many Estates. Under the current probate system in Massachusetts, it takes about 45 days from the date probate documents are filed with the Court to obtain the appointment of a permanent executor. Prior to receiving that appointment from the Court, bank accounts and other assets owned by a deceased person (or “decedent”) in his individual name are not accessible. This can be troubling to families who want to pay funeral expenses and other bills, or who need to manage property or continue operating a business. Under the UPC, if the estate is being administered under the new “informal” probate process, the appointment of the Personal Representative may occur as soon as seven days following a person’s death.

3. Heir Today, But Not After January 1, 2012 – Maybe. When a resident of the Commonwealth dies without a Will, her estate is distributed to her heirs as determined under the intestate laws. While that will still be the case under the UPC, the people who are your heirs will change. For example, right now, if someone dies without a Will leaving a surviving spouse and children, her estate will pass one-half to the surviving spouse and one-half to the children, in equal shares. Under the UPC, the deceased person’s estate will pass entirely to the surviving spouse provided that all of the decedent’s children are also the children of the surviving spouse. If this is not the case, the old rule applies.

4. Exempt Property and Family Allowance. There are two new protections for surviving family members under the UPC. The first is a $10,000 Exempt Property allowance in favor of the surviving spouse, or if there is no surviving spouse, the allowance is allotted to surviving children. The Exempt Property allowance is made up first of the decedent’s tangible personal property (furniture, cars, personal effects, etc.). If the value of the tangible personal property is less than $10,000 the shortfall is made up from other estate assets.

The second protection is the discretionary Family Allowance, which allows the Personal Representative to pay a monetary allowance from the estate for the benefit of the decedent’s spouse and dependent children of up to $18,000 while the estate is being settled. Both the Exempt Property allowance and the discretionary Family Allowance have priority over creditors of the estate.

5. Shorter Limitation for Probating Will. Currently, the Will of a deceased resident of Massachusetts may be administered up to 50 years after that person’s death. That means that if you find Great Uncle Henry’s Will in an old desk 49 years after his death, you can still probate it. Under the UPC, that statute of limitations will be three years. Failure to probate a Will within three years will result in the decedent being deemed to have died intestate, and any property that is discovered owned by the deceased after that three-year period will be distributed to his heirs in accordance with the intestate laws, and not under the terms of his Will.

The above is the briefest of summaries of a few of the changes under the new law that will occur when the UPC goes into effect in January. There are many welcome aspects to the UPC that should streamline the probate process for most families, making it faster, simpler and less expensive to settle an estate. However, there are also a number of provisions in the UPC that will control the settlement of an estate for people who do not leave a Will. These provisions may not represent your intentions. As has always been the case, it is much better to take control of your estate plan and create your own Will rather than letting the Commonwealth do it for you.
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.

Attorney Suzanne Sayward is a partner with the Dedham law firm Samuel, Sayward & Baler LLC and served as the 2009 president 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.

By Attorney Suzanne R. Sayward (July 2011)

Many veterans and surviving spouses of veterans are not aware there is a benefit that will provide monthly income to help them pay medical expenses. This benefit, often referred to as “Aid and Attendance” is especially beneficial to veterans residing in an assisted living facility.

Here are five facts to know about Aid and Attendance benefits:

1. A veteran need not have a combat- or service-related injury or disability to be eligible for this benefit.

In order to be eligible for Aid and Attendance benefits, a veteran must meet the following criteria:

•The veteran must have served 90 consecutive days active duty with at least one day having been served during a period of war
•The veteran must have been honorably or medically discharged
•The veteran must be 65 years of age or older or 100% disabled
•The veteran must demonstrate a financial need

A single veteran can receive up to $1,644 per month and a married veteran could receive up to $1,949 per month.

2. A surviving spouse of a veteran can be eligible for Aid and Attendance benefits.

The surviving spouse of a deceased veteran can be eligible to receive up to $1,056 per month if she meets the eligibility criteria. There is no age requirement for a surviving spouse but he or she will need to provide proof that certain income and asset tests are met, in order to receive the benefit.

3. Aid and Attendance benefits are income tax free!

What more is there to say?!

4. In determining eligibility for the benefit, an applicant’s income is reduced by his medical expenses, including assisted living expenses.

Although the income limitation for qualifying for Aid and Attendance benefits is relatively modest, an applicant’s income is reduced by medical expenses for purposes of determining eligibility.

For example, an unmarried veteran seeking Aid and Attendance benefits cannot have an annual income in excess of $19,736 ($1,644 per month). However, the veteran’s medical expenses, including the monthly assisted living fee, reduce his income dollar for dollar. As such, an eligible, unmarried veteran with $30,000 of annual income who pays $2,000 per month for assisted living would be deemed to have an annual income of $6,000 for purposes of determining eligibility for Aid and Attendance benefits ($30,000 – $24,000 annual assisted living charges = $6,000).

5. Although there is an asset test for eligibility, many veterans are able to meet the eligibility threshold with a little bit of planning.

In addition to an income limitation, there is also an asset test imposed in determining eligibility for Aid and Attendance benefits. However, even if assets exceed the guidelines set forth in the Veterans Administration regulations, there are many factors involved in determining actual countable assets for VA benefits purposes. Further, even if an otherwise eligible individual’s assets exceed the asset limitation, there are planning options available to many people that will allow them to meet the eligibility requirements.

If you are a veteran or the surviving spouse of a veteran who could use some additional income to meet your medical expenses, or if you are considering assisted living but concerned about your ability to pay for the cost, contact your local Veteran’s Service Officer or a VA accredited attorney to learn whether you are eligible for the Aid and Attendance benefit.

Attorney Suzanne Sayward is a partner with the Dedham law firm Samuel, Sayward & Baler LLC where she concentrates her practice in the areas of estate planning and elder law. She is an accredited attorney with the Veterans Administration. For more information, visit www.ssbllc.com.

By Attorney Maria Baler (June 2011)

Only about half of the people who die in the United States each year have a Will. Your Last Will and Testament is the roadmap for determining what happens to everything you own and those you care about when you die. Don’t miss the opportunity to create this roadmap for those you leave behind.

A Will can be a simple document, but nonetheless is one that should be created by an estate planning attorney. Despite the availability of do-it-yourself Will forms found in books or on the Internet, Wills are documents that are governed and interpreted under the law of each particular state and should be created by an attorney to ensure your intentions are fulfilled. A poorly drafted Will often results in Court involvement, thereby delaying the distribution of assets to your heirs and creating significant additional expenses.

Here are five important reasons to meet with an estate planning attorney to create a Will today:

1. Name a Guardian/Conservator for Minor Children. Most parents do not want to think about what would happen to their minor children if they were no longer around to care for them. A Will can provide important instructions about the care of these children after a parent’s death. This is an important issue that all parents should consider thoughtfully and take steps to address.

Creating a will allows parents to name the person or persons who will serve as a child’s legal guardian and conservator upon their death. A legal guardian is the person charged with caring for the child, determining where the child will live, where he will go to school, and making all other decisions regarding the child’s health care, religious upbringing, etc. A conservator is the person who will manage the child’s assets for the child’s benefit. Many parents create a Trust to hold and manage assets for minor children to ensure a child does not receive full access to and control over assets before an appropriate age. However, if a Trust has not been created, a conservator will manage the child’s assets until the child turns 18.

Without a Will, the Court will decide who will care for a minor child whose parents are no longer living and who will manage the child’s inheritance. If you want to choose who will care for your child and his inheritance if you cannot, write a Will today.

2. Make it Clear Who Should Receive Your Assets. Any assets you own in your name will be governed by your Will at your death. Your Will can specify who will receive your tangible property (for example, your car or your prized stamp collection) and your other assets (such as real estate, bank accounts, etc.). If a designated recipient is not living when you die, your Will can state who will receive the property instead. If you have joint bank or investment accounts, your Will can confirm that you want those assets to be given to the surviving joint owner, or in the alternative distributed according to the terms of your Will.

Without a Will, state law determines who will receive your assets. In many cases, the way the law would distribute your assets is not the way you would want them to be distributed. A Will ensures your assets are distributed to those people or charities you wish to benefit.

3. Choose an Executor You Can Trust. Your Will appoints the Executor of your estate. This is the person responsible for identifying your assets after you die, paying your debts, filing your final income tax return, paying any income or estate taxes that may be due, and distributing your remaining assets according to the instructions in your Will. Careful selection of your Executor may be important to avoid family discord and to ensure that your estate is settled without delay. It is important to choose someone trustworthy who will work well with the attorney, accountant and other professionals who may be called upon to assist the Executor in carrying out his or her duties. If you do not have a Will, the Court will choose the person to perform these tasks, and that person may be different from the person you would have chosen given the opportunity.

4. Save Your Heirs Some Money. An important part of a Will that is not often discussed is the Will’s administrative provisions. A Will can include various provisions that will save an estate considerable delay and expense in the administration process.

For example, if appropriate, the waiver of sureties on a probate bond can save an estate hundreds of dollars a year in surety bond premiums. Permitting your Executor to sell real estate without obtaining Court approval can save attorneys fees and costs if the sale is necessary to settle an estate. Appropriate administrative provisions are very state-specific and are not often included in the form documents readily available. However, an experienced attorney will understand which of these provisions are appropriate to your particular situation and will include them as needed to ensure the administration of your estate proceeds smoothly and without unnecessary expense.

5. Avoid Controversy. Not every family lives in perfect harmony. In some families, parents wish to leave their assets to a particular child or children and omit others with whom they may no longer have a relationship, or who have substance abuse or other issues. In second marriage situations, spouses may want to leave limited assets to their surviving spouse and the bulk of their assets to their children from a prior marriage. Single people with no children may prefer to see their assets benefit a favorite charity after their death, rather than go to distant relatives with whom they are not close. All of these options and many others are possible, but will not happen without a Will. A Will ensures that your instructions regarding your assets are clear and will be carried out following your death, without controversy or interference from family members whom you do not wish to benefit from your estate.

If you want to make sure your young children are cared for and your assets are distributed as you wish, seek out an experienced estate planning attorney, make an appointment, and write a Will today. You will be rewarded with peace of mind, and your heirs will thank you.

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.

By Attorney Suzanne R. Sayward (May 2011)

Individuals with disabilities may require care that is not covered by health insurance and which can be very costly. In addition, a person with disabilities may not be able to earn a living to pay for such care. There are governmental benefits available to individuals with disabilities that provide support and medical care. Some of these governmental benefits programs are needs-based, meaning that in order to qualify for the benefits, the individual’s income and assets must be below the program limit.

For parents who have a child with special needs and for individuals with disabilities, ensuring eligibility for governmental benefits is crucial. A Special Needs Trust, sometimes called a Supplemental Needs Trust, can be an excellent tool for parents of a special needs child and for people with disabilities to protect needs-based governmental benefits. Here are five facts to know about using a Special Needs Trust as part of your estate plan.

1. Supplemental Security Income (SSI) and Medicaid are needs-based governmental benefits.
The SSI program makes monthly payments to eligible individuals for the purpose of providing funds for basic necessities such as food, shelter, and utilities. In order to be eligible for SSI, a person’s income must be less than the monthly benefit amount. In addition to the income limitation, the SSI program imposes a limit on the amount of assets a beneficiary may have. An eligible recipient may not have more than $2,000 of countable resources. The amount of the monthly benefit will vary depending upon the individual’s living arrangements and income. In 2011, the maximum federal SSI benefit for a single person is $674. Many states, including Massachusetts, supplement the federal benefit.

Medicaid is a state and federally funded program that pays for medical care for individuals whose income and assets fall within the program limits. For most types of Medicaid coverage, a person may not have more than $2,000 of countable assets.

2. Receipt of assets by an SSI or Medicaid beneficiary can cause a loss of those benefits.
A person who is receiving SSI or Medicaid benefits will lose those benefits if her countable assets increase above $2,000. This makes it especially important for parents who have a child with disabilities to create an estate plan which will not jeopardize their child’s access to benefits.

For example, if Mom has a $300,000 estate (home, bank accounts, etc.) and dies without a Will leaving three children, her estate will be divided equally among the children. If one of those children is disabled and receiving SSI, the receipt of $100,000 will cause him to lose his SSI and Medicaid benefits until the funds have been spent. If the child refuses to accept the inheritance, or if he gives the money to his siblings, he will be deemed to have made a disqualifying transfer and will be ineligible for public benefits until the disqualification period expires.

3. A parent can leave assets in trust for the benefit of a child who receives SSI and Medicaid.
If you are the parent of a child with disabilities, you do not have to disinherit your child to protect her SSI and Medicaid benefits. You can create a Special Needs Trust to receive that child’s share of your estate at your death. The terms of the Trust will direct the Trustee to use the income and assets in the Trust in ways that would supplement the benefits that are provided by the governmental programs. Examples of additional items that could be paid for with Trust monies include haircuts, salon services, massage and other alternate therapies, dental work, transportation expenses, cable television, internet, the expenses of purchasing and owning a pet, movies, concerts, etc.

The small stipend provided by SSI is not sufficient, and is not intended, to pay for expenses beyond the necessities of life. As a parent, you want to enrich your child’s life to the greatest extent possible. Funding a Special Needs Trust to support your child with these extras when you are no longer around to do so is an excellent way to ensure your child has the opportunity to live as full and robust a life as possible.

4. A Special Needs Trust funded with assets owned by the person with disabilities is a ‘self-settled’ Special Needs Trust.
A Special Needs Trust created by a parent for the benefit of a child, or created by anyone other than the disabled person, is sometimes called a Third Party Trust. A Trust created by someone who is receiving needs-based governmental benefits is a Self-Settled Trust. A Self-Settled Special Needs Trust is used when a person who is receiving needs-based governmental benefits receives assets that will cause her to lose those benefits. This can occur, for example, if the individual inherits assets directly or is awarded monies in a lawsuit.

For example, say Martin is hit by a car while he is crossing the street in the crosswalk, rendering him totally and permanently disabled and in need of 24-hour care. Martin successfully sues the driver for $1 million. While $1 million is a lot of money, it is not enough to pay for Martin’s care costs, which average $120,000 per year. If Martin has to spend his funds on his care, they will be depleted in less than 10 years. Martin can transfer his $1 million to a Self-Settled Special Needs Trust which meets the statutory requirements and thereafter he will be eligible for SSI and Medicaid. These programs will provide Martin with basic medical care and a small monthly stipend to pay for basics. The funds in the Trust will be used to provide Martin with those items not otherwise available to him such as massage therapy, dental work and movie tickets.

5. A self-settled Special Needs Trust must include a pay-back provision; a third party Special Needs Trust need not include a pay-back provision.
The major difference between a Third Party Special Needs Trust and a Self-Settled Special Needs Trust is that a Self-Settled Trust must include a pay-back provision. That means upon the death of the Trust beneficiary, the assets remaining in the Trust must first be used to reimburse the state for all benefits paid on behalf of the Medicaid recipient. Only after the state is satisfied in full can the assets remaining in the Trust be distributed to family members.

For people who have a family member receiving needs-based governmental benefits, doing advance planning by creating a Third Party Special Needs Trust means their disabled child or grandchild will be taken care of during the child’s lifetime. Advance planning will also ensure that funds remaining after the death of the beneficiary will be paid to family members rather than to the Commonwealth of Massachusetts.

Attorney Suzanne Sayward is a partner with the Dedham law firm Samuel, Sayward & Baler LLC and served as the 2009 president of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA). For more information, visit www.ssbllc.com.

By Attorney Maria Baler (April 2011)

This month is National Elder Law Month. Its purpose is to raise awareness of the assistance elder law attorneys can provide to seniors and their families.

Elder law is often described as a holistic area of law, as elder law attorneys are experienced in reviewing and providing legal advice about may different aspects of a senior’s life – from housing options, to health care, to estate planning, to public benefits, and more. Elder law attorneys are different than traditional lawyers in that they focus on a specific population, rather than one practice area.

In furtherance of the purposes of National Elder Law Month, here are five important services an elder law attorney can provide to seniors and their families:

1. Estate planning
Creating and maintaining appropriate estate plan documents is important for people of all ages. Documents such as Wills and Trusts ensure a person’s assets will be left to their intended beneficiaries and that their wishes will be carried out upon death. Powers of Attorney and Health Care Proxies allow individuals to appoint people to make financial and health care decisions on their behalf if they are no longer competent to make those decisions themselves. Unlike many typical estate planners, elder law attorneys have a particular focus on integrating estate planning with other goals that are important to seniors, such as protection of assets from long-term care costs or qualification for veteran’s benefits or other public benefits. Elder law attorneys can also help seniors understand the ways in which certain planning strategies may or may not be consistent with other estate planning goals, such as treating family members equally or planning to reduce estate or income taxes that may be payable by heirs.

2. Locating resources for care and assistance
Elder Law attorneys are familiar with the network of services and providers available to assist elders in a number of areas. These include local state agencies, called Aging Service Access Points, which serve as the entry point for services available to elders in a given community. Elder law attorneys help identify the appropriate state and federally funded programs that provide services and support to elders and their families. Elder law attorneys can also connect seniors with local Geriatric Care Managers (GCMs) who can be an important resource for seniors and their families. GCMs focus on the unique needs of elders who require assistance and can help locate resources and coordinate care specifically tailored to the needs of an individual elder’s situation. GCMs can be a particularly valuable resource for families who live at a distance from an elderly relative and need an experienced and knowledgeable local person to be familiar with the elder’s day- to-day needs, monitor care, and advise the family when changes are necessary. GCMs can also help identify appropriate assisted living and nursing facilities if the need arises.

3. Assisting with qualification and application for public benefits
There are many public benefit programs available to assist low-income and low-asset elders with the care they need. These include the different veterans’ benefit programs as well as the Medicaid/MassHealth program, which provides both community and institutional benefits to eligible individuals. Elder Law attorneys stay updated on the frequent changes to the laws and regulations that govern these benefit programs and the eligibility requirements. Elder law attorneys also advise clients how to obtain and maintain eligibility for these programs, which can provide important care and other types of assistance often crucial to allow older adults to maintain their independence.

4. Guardianship and Conservatorship
In circumstances where an elder is no longer able to make decisions for him or herself, an elder law attorney can assist family members in obtaining authority from the court to make decisions on the elder’s behalf. If the assistance needed relates to the elder’s assets only, a conservatorship will be necessary. If personal decisions must be made for the elder, such as where the elder will live, what type of medical care will be provided, or whether the elder will be admitted to a hospital or nursing home, a guardianship may be required. Elder law attorneys can help families assess the situation and determine if existing documents such as Health Care Proxies or Powers of Attorney provide the authority necessary to assist the elder, or whether the appointment of a guardian or conservator is required.

5. Educating elders and family members
One of the most important services elder law attorneys provide is educating elders and their families about resources and planning strategies that are appropriate to each individual client. There is a tremendous amount of information available to elders about estate planning, long-term care, public benefits, financial planning, and a host of other topics. However, along with this wealth of information often comes confusion and misinformation. A plan that is appropriate for one senior may be inappropriate for another. Elder law attorneys are a valuable resource to elders and their families, providing advice and guidance on complex issues tailored to each individual’s particular means, needs and wishes.

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.

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.

By Attorney Maria Baler (March 2011)

In mid-December, Congress passed and the President signed into law the long-anticipated 2010 Tax Relief Act, bringing significant changes to the federal estate and gift tax laws. Even though the provisions of the new law are effective only for two years, it’s important to understand how these changes may affect you and your estate plan.

Here are five important facts you should know about the new federal estate and gift tax laws.

1. The Unified Federal Estate and Gift Tax Exemption is now $5 million

You may recall that Congress’s inaction at the end of 2009 resulted in a period of time where there was effectively no federal estate tax for individuals who died in 2010 (see additional details below). The new law reinstates the federal estate tax for 2011 with a federal estate tax exemption of $5 million per person. The new law also reunifies the estate and gift tax exemption amounts. What this means is that each person has a $5 million exemption that can be used, during his or her lifetime and/or at death to transfer assets estate and/or gift tax-free. The $5 million exemption will allow the vast majority of people in the United States to pass all of their assets to their heirs without the payment of federal estate or gift tax.

2. Estates of those who died in 2010 may pay estate tax or not – their choice

The new law retroactively applies the new federal estate tax law to estates of those who died in 2010. However, executors of those who died in 2010 have the option of electing out of the new federal estate tax law, paying no federal estate tax, and instead accepting the carry-over basis provisions that were in effect for 2010 estates prior to the enactment of the new tax law. For example, the executor of the estate of Sue Smith who died in 2010 owning a house and an investment account with a total value of $1,250,000 will most likely allow the new law to retroactively apply to the estate. Because Sue’s estate is under $5 million in value there will be no federal estate tax payable by the estate. However, the executor of George Steinbrenner’s estate will have some thinking and calculating to do before making that decision. Since George’s estate was well over $5 million in value, opting out of the estate tax may make sense, depending upon the capital gain tax implications of accepting the carryover basis rules. If you are the executor of the estate of someone who died in 2010, be sure to consult your attorney for advice about what steps you may need to take in light of the changes to the tax laws for 2010 estates.

3. The New Concept of Portability

For the first time, the new tax law introduces the concept of “portability” of the estate and gift tax exemption for husbands and wives. This allows the unused estate and gift tax exemption of a husband or wife to be “portable,” meaning that a spouse’s unused exemption amount may be used by their surviving spouse if an appropriate election is made on the federal estate tax return for the estate of the first spouse to die.

For example, if Fred and Freida have a $10 million estate and Fred dies leaving all of his assets to Freida, Freida will have an estate valued at $10 million. Fred will not need to use any of his $5 million exemption because assets passing to a spouse pass tax free under the unlimited “marital deduction.” If Freida dies after Fred with a $10 million estate, and if at her death she is able to use only her $5 million exemption, her estate will pay federal estate tax on the remaining $5 million. However, if at the time of Fred’s death his executor makes an election to transfer his unused exemption to Frieda, then at Frieda’s death, her executor may apply both Freida’s $5 million exemption and Fred’s $5 million exemption against Freida’s taxable estate, thereby eliminating the federal estate tax on Frieda’s entire $10 million estate.

Although portability saved Fred and Freida’s children from having to pay federal estate tax in the above example, it is much better to be proactive with respect to estate tax planning than to rely on the portability provisions of the tax code. The future of portability is uncertain. As of right now, it is only available to estates of individuals dying between January 1, 2011 and December 31, 2012. Also, portability will not shelter assets from Massachusetts estate tax. In addition, there are significant advantages to proactive estate tax planning which cannot be achieved by relying on portability.

4. Inherited Assets Receive a Step-Up in Basis Once Again

Along with the new federal estate tax comes the old concept of a step-up in basis for inherited assets for capital gain tax purposes. This means that if you inherit capital assets, such as real estate or stock, from a deceased person (except for a person who died in 2010 and elected out of the new federal estate tax), those inherited assets will have a basis for capital gain tax purposes equal to the value of the assets on the date of death of the deceased owner. In other words, all capital gains that accumulated during the lifetime of the deceased person are essentially wiped out.

5. All This and a Rate Reduction Too!

The new law sets a flat estate tax rate of 35 percent for estates in excess of the $5 million exclusion amount, with tax paid only on the value of the estate in excess of the exclusion. This rate reduction represents a real savings over the 55 percent rate that would have taken effect in 2011 if Congress had not passed the 2010 Tax Relief Act.

Similar to the prior estate tax law, this new law “sunsets” on December 31, 2012, after which time the “old” law, with its $1 million federal exemption amount and top estate tax rate of 55 percent will be reinstated unless Congress acts to extend the new law or make it permanent.

In thinking about your own estate plan, keep in mind that in Massachusetts we are in the somewhat unique situation of having a separate state estate tax (enacted in 2003) which is unaffected by the recent change in the federal estate tax law. The Massachusetts estate tax has a filing threshold of $1 million and there is no portability provision. If you are above the threshold, your heirs will pay tax on the full value of your estate. Now is a great time to sit down with an experienced estate planning attorney to review your situation and any existing documents, and determine if any planning is necessary to take advantage of the tax savings strategies afforded by these different estate tax laws. Equally as important is a review of how your assets are owned and how beneficiaries of life insurance and retirement assets are designated, to ensure that your assets will be distributed as you intend under the terms of your estate plan.

Attorney Maria Baler is an estate planning attorney and a partner with the Dedham firm 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.

By Steven Joshua Samuel (February 2011)

You may be able to reduce some of your most challenging 2010 education and health expenses with help from The American Recovery and Reinvestment Act of 2009 (the “Stimulus Plan”) and other recent tax changes. Here’s a summary of six examples and how to obtain more information for each.

Education Expenses
The American Opportunity Credit, the former Hope Credit, has been expanded to include more benefits for 2010 education expenses. Individuals with adjusted gross income of up to $80,000 ($16,000 for joint filers) are now eligible for the full tax credit of up to $2,500. A tax credit directly reduces the amount of tax you owe and is more valuable than a tax deduction, which reduces the amount of income subject to taxation. Tuition, books, supplies and equipment are eligible expenses and a computer may now qualify in some cases. Use IRS form 8863 to claim the tax credit.

The Lifetime Learning Credit allows eligible taxpayers a lifetime total of a $2,000 tax credit for undergraduate, graduate and professional degree courses, including continuing education programs and any classes designed to improve job skills. Education expenses for a spouse and dependent child qualify and there is no limit to the number of years the education program may run. There are some limits regarding income and eligibility, and only one kind of credit may be taken for a student in the same tax year.

529 College Plan changes expand the definition of qualified higher education expenses to include, for example, computer equipment and internet access. You’ll find these and eleven other ways to offset college and post-graduate education costs explained in IRS Publication 970 “Tax Benefits for Education” at www.irs.gov.

Health Care Expenses
Small Business Health Care Tax Credit is included in the Affordable Care Act, which became effective March 23, 2010. A tax credit of up to 35 percent of health insurance premiums paid is available to small businesses with 25 or fewer full- time employees. To be eligible, the company must pay at least 50 percent of individual coverage for each employee who must have average earnings under $50,000 per year. Locate IRS Form 8971 or news release IR-2010-96 at www.irs.gov for more details.

Employer Coverage for Employee’s Children Under Age 27 is now generally tax free to employees. Employers with * cafeteria health plans may permit employees to make pre-tax contributions to cover this expanded benefit. This also applies to self-employed persons who qualify for a health insurance deduction on their federal income tax returns. See IRS news release IR-2010-53 for more information.

Medicare Part D Prescription “Donut Hole ” Rebate of $ 250 is provided by the Affordable Care Act for Medicare recipients who have reached their drug plan coverage gap. The rebate is not taxable. For information about how to obtain the rebate, see www.medicare.gov.

Remember to consult a qualified tax and financial advisor before making any important financial or tax decisions. For additional timely and helpful financial and investment information, visit www.samuelfinancial.com.

* A cafeteria plan is an employer-written plan complying with Section 125 of the Internal Revenue Code, which enables employees to pay for certain benefits such as health and child care with pre-tax dollars.

Samuel Financial, Inc. is located at 858 Washington St. Dedham, MA 02026 and can be reached at (781)461-6886. Securities and advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment adviser. Neither Samuel Financial, Inc. nor Commonwealth Financial Network offer tax or legal advice.