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Articles and Blogs
What is an Irrevocable Life Insurance Trust (ILIT)?
By Attorney Maria C. Baler
Under federal law your estate will not pay an estate tax when you die unless the assets you own at the time of your death (your so-called “taxable estate”) are valued at more than $13.6 million (in 2024). This is a big number, and most people don’t come close to having to pay a federal estate tax at death. But here in Massachusetts, we have a separate state estate tax with a much lower $2 million exemption amount for those whose deaths occur on or after January 1, 2023 ($1 million prior to that date). Given the value of our real estate and many people’s growing 401k accounts, it is not hard to get to a $2 million taxable estate if you are a Massachusetts resident. What this means is that your estate will pay estate tax at your death, or if you are married at the death of the surviving spouse, unless you undertake planning to reduce or eliminate the tax.
One of the assets people own that drives up the value of their taxable estate at death is life insurance. Although life insurance proceeds are not income taxable to the recipient of the death benefit, if you own a life insurance policy insuring your own life, the death benefit of that policy will count toward the value of your taxable estate at your death and will be subject to estate tax. It is not uncommon for parents of young children, business owners, or those with sizeable estates or large mortgages to own a life insurance policy with a death benefit of $1 million or more, to provide an influx of cash at death. These funds may be earmarked to help pay living expenses for their survivors, education expenses for children, to pay off a mortgage, or to provide cash to pay estate tax at death.
But how do you attain the benefits of a large life insurance policy on your life while not paying estate tax on the value of that policy at your death? An irrevocable life insurance trust may help you have your cake and eat it too.
An Irrevocable Life Insurance Trust (ILIT) is used to exclude the death benefit of a life insurance policy from the insured’s taxable estate. If your life insurance policy is owned by an ILIT (instead of by you) at the time of your death, it will not be included in your taxable estate and the death benefit of the policy will not be subject to estate tax. This can save hundreds of thousands of dollars in estate tax depending on the size of the policy and the insured’s estate.
Although an ILIT has significant tax advantages, there are important factors to consider before deciding if an ILIT is right for you:
- Once an ILIT owns the policy, you cannot get it back.
- The ILIT will specify how the death benefit will be distributed at your death, and you cannot make changes to the provisions of the ILIT after it is created.
- You cannot be the Trustee of an ILIT that owns a policy insuring your life.
- If you transfer ownership of your life insurance policy to an ILIT but die within three years of the transfer, you lose the estate tax break. The way to avoid this three-year survivorship requirement is to create an ILIT that purchases a new policy on your life.
In addition to the above, there are certain steps that must be followed each time a premium payment is made which are crucial to the effectiveness of the ILIT. Because the ILIT owns the policy, it is responsible to pay the premiums each year. Unless the ILIT has a reserve of cash, you will need to contribute money to the ILIT each year so that the ILIT will have funds available to pay the premium. These contributions will be considered gifts by you to the ILIT. In order for these gifts to qualify for the favorable gift tax annual exclusion (which avoids the need to file a gift tax return reporting the gift), the Trustee of the ILIT must give the beneficiaries notice each time a contribution is made, including notice of their right to withdraw amounts contributed to the trust so the contribution qualifies as a present gift. These notices, called Crummey notices, are named after a court case that fleshed out these requirements and allow the contributions to qualify for the annual gift tax exclusion. If the beneficiaries of the ILIT do not withdraw the amounts contributed, the Trustee will use the contributed amount to pay the policy premium, and this process will be repeated each year a premium is due.
Although an ILIT removes the life insurance policy from your ownership and control, for most people who own large term life insurance policies this is not a significant disadvantage as those policies do not benefit the owner of the policy during the owner’s lifetime. On the other hand, transferring ownership of such a policy to an ILIT can result in significant estate tax savings to your family following your death.
To learn more about whether an ILIT is an appropriate estate tax planning strategy for you, contact us and make an appointment to consult with one of our experienced estate planning attorneys.
Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and a past President of the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
October 2024
© 2024 Samuel, Sayward & Baler LLC
5 Ways to Own Your Home: Understanding Different Types of Property Ownership
By: Brittany Hinojosa Citron
Buying a home is one of the most significant investments many of us will ever make, and a home is usually our biggest asset. You’re probably already thinking about Halloween decorations and turning your new property into the spookiest one on the block (hopefully you didn’t buy a haunted house!). Before you get carried away, it’s important to understand the different ways to hold title to your home. How you own your home can have substantial implications on your estate planning and whether your home will be subject to probate after your death. Here are five common ways to own your home in Massachusetts.
1. Sole Ownership
Sole ownership is where one individual holds the title to the property in their own name. The owner has full rights and control over the property and is solely responsible for any associated obligations, like property taxes or mortgages. However, if you own your home in your individual name at your death, the Personal Representative of your estate must go through probate to sell the home or otherwise transfer title.
2. Tenancy by the Entirety
Tenancy by the entirety is a special form of joint ownership that is exclusively for married couples. There are many advantages to owning your home with your spouse as tenants by the entirety. One advantage is that a tenancy by the entirety provides creditor protection for one spouse’s liabilities. In Massachusetts, a creditor of one spouse cannot reach the property so long as the other spouse is living and using the property as their principal residence.
A tenancy by the entirety also avoids probate upon the death of the first spouse. When the first spouse dies, the property automatically transfers to the surviving spouse without the need for probate. However, keep in mind that the surviving spouse now owns the home in their individual name, and the home will be subject to probate upon the death of the surviving spouse.
3. Joint Tenancy with Right of Survivorship
A joint tenancy with right of survivorship is like a tenancy by the entirety in that it is a form of co-ownership where if one owner dies, the remaining owner becomes the surviving owner of the property without going through probate; however, it is not only for married couples. This type of ownership can be between siblings, unmarried partners, or anyone who owns property with someone else. If there are more than two owners on the house, as each remaining owner dies, the entire interest continues to be held by the surviving owners.
4. Tenants in Common
Tenants in common is another type of co-ownership where two or more individuals own property but, unlike joint tenancy, there is no right of survivorship. In other words, each owner’s share will pass according to their Will or estate plan upon death, and not automatically to the other owner. Probate may be required to transfer the deceased owner’s interest at their death.
Tenants in common is the default form of ownership for two or more owners if the deed does not state the type of ownership.
5. Through a Trust
Real property may also be owned by a trust. There are several different types of trusts, but the most common trust that will own a home is a Revocable Living Trust. Another trust that you may see owning a home is an irrevocable trust, typically for long-term care planning purposes or, less commonly, for estate tax savings purposes.
Probate is not required at one’s death for a home that is owned by a trust, whether it is owned by a revocable trust or an irrevocable trust, because the trust is the legal owner of the home rather than the individual. The trustee can directly transfer the property to the beneficiaries according to the terms of the trust without the need for probate.
Now that you have a general idea of the types of property ownership in Massachusetts, you should look at your deed and see how your home is titled. If you don’t have a copy of your deed, you can go to your county’s Registry of Deeds website and find it in their online records. Don’t assume that you have a tenancy by the entirety with your spouse, for example, because you own your home together; you must look at your deed to see how it is titled. The deed must say “tenancy by the entirety” to have a tenancy by the entirety. The same goes for joint tenancy with right of survivorship. If your deed doesn’t say anything, then it is default ownership, and you own your home as tenants in common.
Consulting an estate planning attorney can help you choose the right form of ownership based on your specific needs and long-term goals. Understanding the differences will not only help you make informed decisions but will also ensure your property is handled according to your wishes in the future.
Attorney Brittany Hinojosa Citron is an associate attorney with the Dedham, Massachusetts, firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate and trust settlement and elder law matters. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information or to schedule a consultation with one of our attorneys, please call 781-461-1020.
October 2024
© 2024 Samuel, Sayward & Baler LLC
Testamentary Trusts Explained
Testamentary Trusts, though less popular than their well-known cousin the Revocable Living Trust, can be the perfect solution to a vexing problem – protecting assets for a surviving spouse when he or she may need nursing home care. Testamentary Trusts offer a unique benefit in long-term care planning by safeguarding assets for your spouse’s Medicaid eligibility. Testamentary Trusts may be the one solution where it may be possible to have your cake and eat it too in the world of long-term care planning.
So what is a Testamentary Trust? A Testamentary Trust is a trust that is created by the terms of a Will. Because the Will does not take effect until death, the Testamentary Trust created by the Will does not come into existence until after the creator (or “testator”) of the Will has died.
This is very different than the more popular Living Trust, which is a trust created by the creator of the trust (the “grantor”) during the grantor’s lifetime and helps avoid the probate process. You may recall that probate is the court proceeding necessary to transfer title to assets owned by a person in his or her name alone (with no beneficiary named) at death. The key difference between the Revocable Living Trust and the Testamentary Trust is that while Revocable Living Trusts are usually better for avoiding probate, they do not protect assets if a person needs to qualify for Medicaid long-term care benefits.
Because Testamentary Trusts do not come into existence until after death, they cannot own assets during their creator’s lifetime. Instead, the assets pass through the probate estate of the deceased spouse, and into the Testamentary Trust as provided under the terms of the deceased spouse’s Will, to be held in trust after the testator’s death for the benefit of the trust beneficiary.
If a Testamentary Trust does not allow you to avoid probate with the trust assets, and does not come into existence until after death, why would you create one? Testamentary Trusts can help protect assets from being counted toward Medicaid eligibility if one spouse needs care. They do this by taking advantage of the regulations that determine whether assets held in a trust created by a husband or wife are “countable” when determining whether either spouse will be eligible for Medicaid benefits to pay for nursing home care.
For example, if a husband creates a Revocable Living Trust and transfers $500,000 into that Trust during his lifetime, and names his wife as the beneficiary of that trust after his death, the Trust assets will be fully “countable” if either husband or wife applies for Medicaid benefits to pay for nursing home care. If the husband passes away, and if his Revocable Living Trust allows the Trustee to use the trust assets for his wife’s benefit during her lifetime, the Trust assets, and any other assets (with a few exceptions) the wife owns, will be “countable” and must be spent on the wife’s care before she will be eligible to receive Medicaid benefits to pay for her care.
However, Medicaid regulations provide that if a Testamentary Trust is funded by Will at the death of one spouse, and the assets are held in that Testamentary Trust for the benefit of the surviving spouse, the assets in that Testamentary Trust will not be countable in determining the surviving spouse’s Medicaid eligibility. This is an important distinction and one that can allow a spouse to set aside money in trust for the benefit of his or her surviving spouse.
A Testamentary Trust works especially well in situations where one spouse is ill and is being cared for at home, or in a situation where the ailing spouse is residing in assisted living. In both of those situations, funds are needed to pay for the care of the ill spouse. Testamentary Trust planning means that there will be funds available to support the surviving spouse in the home or in assisted living. However, if a higher level of care is needed following the death of the first spouse, the assets in the Testamentary Trust will not have to spend down on the surviving spouse’s nursing home care costs.
When the surviving spouse passes away, any assets remaining in the testamentary trust will be distributed according to the Will’s provisions – for example, to the couple’s children, or other individuals or charities.
Anyone other than the beneficiary may serve as the Trustee of the Testamentary Trust. For example, when the husband creates his Will with a Testamentary Trust for his wife’s benefit, he names his son Jack as the Trustee. Jack will have the authority to manage and invest the assets in the Testamentary Trust after his father’s death, and the discretion to use the assets in the Testamentary Trust for his mother’s benefit during her lifetime.
In the right circumstances, a Testamentary Trust can be a game-changer for protecting assets from long-term care costs incurred by a surviving spouse. If this is your situation, seek the advice of an experienced elder law and estate planning attorney who can assess your situation and discuss whether a Testamentary Trust is the right planning strategy for you. With the right legal guidance, you will have peace of mind knowing your assets are protected and your family’s future is secure.
Attorney Leah A. Kofos is an associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC, which focuses on advising its clients in the areas of trust and estate planning, estate settlement, and elder law matters. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit ssbllc.com or call 781-461-1020.
© 2024 Samuel, Sayward & Baler LLC
Living Wills and End of Life Care
Many people want a Living Will because they want their family to know that they don’t want to be kept alive if they are in a vegetative state. But what if you know what’s going on around you? Does that change your outlook on life-sustaining treatment? Or not?”
Attorney Brittany Hinojosa Citron discusses Living Wills and End of Life Care. Please watch and if you have any questions or want to learn more please call us at 781 461-1020.
Five Ways that a Trust Beats a Will
In my estate planning practice, I advise my clients about the different documents that make up an estate plan, including Wills and Trusts. Both Wills and Trusts are used to pass assets on to beneficiaries at death. However, there are distinct advantages to using a Trust over a Will. Here are five ways in which a Trust beats a Will.
1. A Trust can be used to Avoid Probate – a Will cannot. Probate is the process of changing the title on assets when someone passes away. Assets that are owned in a deceased person’s individual name and for which there is no named beneficiary are no longer accessible once the owner of the asset has died. In order for family members to gain access to accounts or other assets in the deceased’s individual name, they must file a petition with the probate court and wait for the court to approve the Will and appoint the Personal Representative. This can be a long and costly process during which bills cannot be paid and assets cannot be managed. A Trust is an excellent probate avoidance tool because assets that are owned in the name of a Trust are immediately accessible to the trust-maker’s designated successor.
2. A Trust can provide Creditor Protection for the Inheritance you Leave to Beneficiaries – a Will cannot. Many people worry that the inheritance they leave to their children will be lost to their children’s creditors such as a divorcing spouse, unpaid credit card bills, a bankruptcy, a business loss, or a lawsuit. Sadly, this is often the case when assets are distributed to beneficiaries via a Will. A Trust allows the maker to safeguard an inheritance from the easy reach of the beneficiaries’ creditors by keeping the assets out of the name of the beneficiary. Ownership of the assets remains in the Trust. The beneficiary will have access to the assets in accordance with the directions you leave in your Trust. You may name your beneficiary to serve as Trustee, allowing the beneficiary to manage her own inheritance. By leaving assets to your beneficiaries via a Trust rather than outright via your Will, you can ensure that the assets you worked so hard for will be available to your children and future generations and will not end up with the beneficiary’s ex-spouse.
3. A Trust can Protect Government Benefits for a Person with Disabilities – a Will cannot. If you have a child, grandchild or other beneficiary with disabilities, then a Trust is a must. If you leave assets to a person who receives needs-based government benefits via your Will, it will place your beneficiary in the difficult position of either losing those benefits, or transferring the inheritance into a Trust of which the state must be the beneficiary at the beneficiary’s death. Unless the inheritance you are leaving is so significant that the monetary and medical benefits available to the person through programs such as Social Security and Medicaid are no longer important, then making sure that those government benefits continue to be available is vital. Leaving assets to a person with disabilities via a Trust is the best way to ensure those government benefits are preserved and that the inheritance you leave will be available to pay for expenses that are not covered by those benefits, which while vital to many, are limited in their scope.
4. A Trust makes it Easier to Manage Assets for an Incapacitated Person – a Will cannot. If a person experiences a period of incapacity during their lifetimes, they will need someone to pay their bills, manage their investments, maybe sell their house, etc. The worst situation to be in should this occur is to have done no estate planning at all. For those with no estate planning in place, family members or another interested party will need to petition the court to be appointed as the Conservator for the incapacitated person in order to obtain authority to manage the assets. This is an expensive, time-consuming, and public process. A basic estate plan will include a durable Power of Attorney which is used to appoint a person to manage one’s affairs in the event of incapacity. A Power of Attorney is a very important estate planning document but it can be difficult for the appointed individual to utilize with banks and other financial institutions which often push back hard on someone attempting to access an account using a Power of Attorney. Banks and other financial institutions do not have the same hostility toward Trust accounts. The successor Trustee of a Trust can easily manage the Trust assets and use them for the benefit of the trust-maker in the event of the trust-maker’s incapacity
5. A Trust can Administer Assets for Minor Beneficiaries without Court Intervention – a Will cannot. Leaving money directly to a minor (under age 18) creates an administrative nightmare because under the law, a minor does not have the legal capacity to receive assets. The parent of the minor does not have the authority to act as the child’s legal representative until the court says so. As such, if you die with a Will that leaves money to minor beneficiaries, or if you name a minor as the beneficiary of your life insurance or IRA, the court will need to appoint a Conservator to receive that inheritance for the minor. The Conservator will be required to report annually to the court and the court will appoint an overseer (guardian ad litem) to make sure the Conservator is doing his or her job for your minor beneficiaries. This means huge costs and long delays in administering funds for minors. It also means that when the minor turns 18, he or she will be entitled to receive all of those assets and will be free to do with them as he or she wishes (think, fast cars, spring break, and lots of shopping). Creating a Trust to receive assets passing to a minor, or even to a young adult beneficiary, is the best way to ensure that the court is not involved in the process, that the person you want to manage assets for the beneficiary is able to do so, and that the beneficiary may use the assets only for purposes you decide are important and/or at ages that you dictate.
These are just five of the many ways in which a Trust is superior to a Will. If you want to learn more about whether a Trust is right for you, call us or email us to schedule an appointment with one of our experienced estate planning attorneys.
Attorney Suzanne R. Sayward is a partner with the Dedham law firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate and Trust settlement and elder law matters. She is certified as an Elder Law Attorney by the National Elder Law Foundation, a private organization whose standards for certification are not regulated by the Commonwealth of Massachusetts. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit our website at www.ssbllc.com or call 781/461-1020.
September, 2024
© 2024 Samuel, Sayward & Baler LLC
Estate Planning Hurdles
Attorney Leah Kofos discusses, Estate Planning Hurdles, for our Smart Counsel for Lunch Series. Please watch and if you have any questions or want to learn more please call us at 781 461-1020.
Estate Planning on a Different Court
It is not often that sports and estate planning intersect, but two of my favorite things did so recently when the New York Times (and many other sources) reported that the Grousbeck family, the controlling owner of Boston Basketball Partners LLC which owns a majority interest in the Celtics, announced that it has decided to sell the basketball team. The Celtics’ statement said the sale was prompted “after considerable thought and internal discussion” by “estate and family planning considerations.” Although the statement was short on details, it is suspected that 90-year-old H. Irving Grousbeck is the one driving the sale. His 63-year-old son Wyc Grousbeck, one of Irving’s four children, owns a relatively small stake in the team himself, but manages his family’s controlling interest.
So why would you want to sell the Boston Celtics, a team that less than two weeks before the sale was announced won their 18th NBA Championship and have most of their team under contract for the foreseeable future? For estate planning reasons, of course! Here’s some insight into what Irving and his estate planning attorneys might be thinking.
Taxes Might Be Driving the Team Bus
Irving and his ownership group bought the team for $360 million in 2002. Today, after winning its latest championship, the team is worth an estimated $4.7 billion. That’s a nice return on investment, but nothing comes without a price.
If Irving dies owning an interest in the Celtics, that interest will be an asset of his estate, and the value of that interest will be subject to estate tax at his death. Although Irving hails from Northampton, Massachusetts (which might explain his interest in owning the hometown team), he currently lives in Portola Valley, California. Although the weather may have played a part in the decision to move west, there is also an estate tax advantage. California (unlike Massachusetts) is one of the majority of states that do not impose a separate state estate tax on its residents.
However, when you own an interest in an asset that’s worth billions of dollars (not to mention the value of your other assets), you need to worry about the federal estate tax, which is a tax imposed on assets owned at death which exceed $13.6 million (in 2024). Assets over this threshold are taxed at a whopping 40%.
So how does selling the team help Irving potentially save estate tax for his family? If Irving sells his interest, he will still have the same amount of assets (less some capital gain tax of course), but rather than an interest in a basketball team, he will have cash. Cash is much easier to plan with. Here are some ways Irving might use that cash to save some estate tax:
- Irving can give a bit of that cash to anyone he likes. The gift tax annual exclusion allows Irving to give $18,000/year to any person without having to pay a gift tax or file a gift tax return, and without reducing the $13.6 million federal estate and gift tax exemption Irving has to use against the value of his estate at his death. But even after giving annual exclusion gifts to Wyc and his siblings, and to Jayson Tatum, Jaylen Brown, Jrue Holiday, Derrick White, and the rest of the team, Irving will still have a lot left.
- Irving can pay tuition for his grandchildren without limitation – gifts made to an educational institution for tuition (or to a medical institution for medical care) can be made in an unlimited amount without any gift tax implications.
- Next on the tax savings idea list may be giving a bunch of money to charity, which will reduce Irving’s taxable estate without reducing his exemption. Doing so will also provide a nice income tax benefit to Irving currently.
- Irving might also want to consider making larger, “taxable” gifts before the end of 2025. The current federal estate tax law is scheduled to “sunset” or end on December 31, 2025. If Congress does not act before that date, the prior law will come back into effect. This means that the current $13.6 million estate and gift tax exemption will drop to approximately $7 million. Because making taxable gifts during your lifetime reduces your estate/gift tax exemption, Irving may be thinking about making some larger taxable gifts to take advantage of his $13.6 million exemption before that exemption drops down to $7 million and he loses the opportunity to give away that extra $6.6 million estate and gift tax free.
- Irving may also wish to consider “skipping” a generation with his gift-giving, as giving gifts directly to grandchildren will avoid estate tax on those assets when his children pass away.
Again, easier to do any of these things with cash than with an interest in a basketball team. If Irving is serious about gifting, he can reduce the value of his taxable estate significantly, benefiting his family and charity in the short term, and benefitting his family in the long term by reducing the estate tax they will have to pay at his death. Keep in mind that for every dollar Irving gives away he is likely saving his family $0.40 in estate tax when he dies.
Another reason to cash out now is the estate tax that is likely to be due at Irving’s death. Whether Irving dies before or after the current estate tax law sunsets, and even if Irving makes gifts to reduce the value of his estate, the federal estate tax payable on Irving’s estate will be significant. And the IRS does not accept Celtics tickets, even if they are courtside playoff tickets, in payment of the estate tax bill. They deal in cash only. So, better to liquidate a large asset now and free up some cash for the estate tax bill that’s coming due. When you are 90 years old, that bill could come due and payable sooner rather than later.
Succession Planning Is Difficult On and Off the Court
When you have multiple children and one special asset, planning can be challenging. That asset could be a family business, a beloved vacation home, or a racehorse. All of these things are valuable, valued by some or all family members, and illiquid – a difficult combination.
Wyc has done a great job being the face of the majority ownership group for years. However, Irving probably wants to benefit each of his children equally in his estate plan, even if only one of them has given him the joy of an NBA championship this year.
If Irving dies owning the team, Wyc may want to keep the team, but his siblings may want to sell, creating potential family disharmony. Sometimes, it’s possible to give one child who may be involved in the family business, for example, that particular asset and give other assets to the other children while still equalizing the value of assets everyone receives and maintaining family harmony. And it may even be the case that Wyc’s siblings care nothing about basketball and would be happy for him to receive Irving’s ownership interest in the Celtics when Irving passes if they get other assets of equal value. The problem for Irving is that when you have a basketball team that’s worth a whole lot (and likely to keep appreciating in value, at least in the short term) it’s hard to equalize things for your other three children unless you have a whole lot of other assets. Selling Irving’s interest in the team now will allow for easier equalization of his assets among his children at his death, which will simplify Irving’s estate. This is an issue faced not just by Irving, but by the owners of all professional sports franchises.
Although we estate planning attorneys may make it look easy, estate planning is complicated – especially for those individuals who hold our beloved sports teams’ destinies in their hands. Assuming you don’t own a professional sports franchise, your personal estate planning situation may not be as complex, but good estate planning advice is important for everyone who wants to make sure their assets pass efficiently and harmoniously to their intended recipients.
Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham (and a Boston Celtics fan). She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and a past President of the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
August 2024
© 2024 Samuel, Sayward & Baler LLC
Dog Days of Summer: Caring for Your Pets with Your Estate Plan
Ever thought about who would look after your pets if something unexpected happened to you? If so, you are not alone as the welfare of your animal companions during a health crisis or should they outlive you are critical considerations for responsible pet owners. Here are five strategies available to ensure the continued care of your pets in the event of your incapacity or death.
1.Designate an Emergency Caregiver and Share Information
One of your first steps you can take is to put down in writing information about your pets. For example, you may wish to include a pet’s typical feeding schedule, food they can/cannot eat, medications they take, the veterinarian they visit, any unique habits, and their favorite toys. Next, designate one or more individuals to be the Emergency Caregiver for your pet. Share the Emergency Caregiver’s contact information with your veterinarian. Identify the Emergency Caregiver on clearly marked documentation on/near the inside of your front door and have a small card in your wallet with the Emergency Caregiver’s information on it. Provide your written instructions to the Emergency Caregiver – by doing so, you are sharing information that not only keeps your pet healthy but also helps to keep a routine in place for your pet during a potentially stressful time. Finally, consider giving a set of keys to your home to the Emergency Caregiver.
2.Give Your Attorney-in-Fact the Power to Pay for Your Pet’s Care
A Durable Power of Attorney can provide for pet care in the event of your incapacity. This document can authorize the appointed individual (your Attorney-in-Fact) to utilize your assets to pay for your pet’s ongoing care and maintenance. If the Emergency Caregiver and the Attorney-in-Fact are different individuals, they will work together to ensure your pet is cared for appropriately.
3,Designate Caregivers of Your Pets with Your Last Will and Testament (and Make Gifts for Your Pet’s Care, Too)
You can create a Memorandum in connection with your Last Will and Testament as part of your estate plan. This document can specify individuals (Caregivers) to assume custody of your pets and can be updated without necessitating a complete revision of your Will. This flexibility allows you to adapt your plans as circumstances change regarding your pets.
Financial provisions for pet care can also be incorporated into your Will. A specific distribution to the designated Caregiver, typically ranging from $1,000 to $40,000, can be included in your Will to offset the costs associated with pet ownership, such as veterinary care, grooming, boarding, training, etc.
4.Revocable Trust Sub-Trust for Your Pet
If you are contemplating a more comprehensive arrangement, a pet sub-trust within a Revocable Living Trust may be appropriate. Structuring your estate plan this way allows for the allocation of larger sums for pet care while placing the management of these funds in the hands of a trusted individual separate from the Caregiver.
5.Stand-Alone Trust for Your Pet
If you have a pet that may have substantial longevity or exceptional care requirements (horses, birds, tortoises, etc.), a stand-alone pet trust might be the most suitable choice for you. However, it is crucial to ensure that the funds allocated to the Pet Trust are proportionate to the pet’s needs, as courts may intervene if the amount is excessive.
Integrating pet care provisions into your estate planning is a prudent step to care for your pets. Whether through arranging an Emergency Caregiver or creating simple Will provisions or more complex trust arrangements, numerous options exist to ensure the continued well-being of your beloved animal companions in the event of your incapacity or death. At Samuel, Sayward & Baler LLC, we help pet owners determine the most appropriate strategy for their pet’s specific needs. If we can help you incorporate pet care into your estate plan, please contact our office to schedule a meeting with one of our attorneys.
August, 2024
© 2024 Samuel, Sayward & Baler LLC
How a Marriage or Divorce Can Affect Your Estate Plan
When it comes to estate planning, understanding how major life events like marriage and divorce can affect your estate is crucial. These events can significantly impact the distribution of your assets if they are not properly addressed in your estate plan. Here’s what you need to know to ensure that your estate plan remains effective and reflects your current wishes.
Marriage: Premarital Wills
If you get married after executing a will but you never get around to updating your will to include your spouse, your premarital will stays in place at your death. However, Massachusetts law allows the surviving spouse to take his or her intestate share of your estate before your property is distributed under your will. The surviving spouse’s intestate share is the share that the spouse would have received if you died without a Will. This is called an “elective share” of your estate, and your spouse can claim this share regardless of what your premarital will says.
If your premarital will gives property to your child who was born before your marriage and who was from a prior relationship (i.e., not also your spouse’s child), then the surviving spouse’s elective share is taken from the portion of the estate that you did not give to such child. The amount of the elective share that the surviving spouse can take depends on several factors, such as whether you had children with your spouse, whether either of you had children from prior marriages or relationships, and if neither of you had children but you die with a living parent.
There are exceptions to this rule. If you knew you were getting married, you could have stated in your premarital will that it is being made in contemplation of marriage to your spouse and your will is to be effective notwithstanding any subsequent marriage. But if marriage was the last thing on your mind when you made your will, then you need to revise your premarital will to avoid potential conflicts and ensure that your estate is distributed according to your wishes.
Divorce: Automatic Revocation of Provisions
If you have a will and subsequently get divorced from your spouse, any provisions you made in your will for your spouse are automatically revoked. This also applies to beneficiary designations on life insurance and retirement plans, transfer-on-death accounts, and any other revocable disposition. If your will named your former spouse or family members of your former spouse as Personal Representative of your estate, those designations are treated as if the former spouse predeceased you. However, if you and your former spouse later marry each other again, then the previously provisions in your will are revived.
This automatic revocation only applies if you are really divorced, not if you are just separated, and not if your divorce is not yet final.
Although the automatic revocation of dispositions to your spouse may seem to do the trick, they can wreak havoc on an estate plan and create unintended consequences. You may intend to benefit your former spouse even after your divorce with life insurance or some other asset, but the beneficiary designation is automatically revoked upon your divorce. Additional steps must be taken to ensure that designation will stick after the divorce occurs.
After a divorce, revising your will is essential to remove your former spouse (or include them, if you want to provide for your former spouse) and make any other necessary changes, such as updating your named Personal Representatives.
All this is to say that significant life events, whether through marriage or divorce, can dramatically alter your estate plan and result in unintended consequences. By proactively revising your will and other estate planning documents when these events happen, you can ensure that your estate is handled according to your wishes and that your loved ones are provided for as intended.
Attorney Brittany Hinojosa Citron is an associate attorney with the Dedham, Massachusetts, firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of estate planning, estate settlement and elder law matters. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information or to schedule a consultation with one of our attorneys, please call 781-461-1020.
July 2024
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