Estate Planning

Massachusetts’ Highest Court Overturns Case Which Eroded Asset Protection Aspect of Trusts

September 8, 2016 by Attorney Suzanne Sayward

Sue_144px In our October, 2015 newsletter Attorney Baler reported on a Massachusetts Appeals Court case that held that a husband’s interest in a trust created by his father was a marital asset subject to division in his divorce (Pfannenstiehl v. Pfannenstiehl).

That Appeals Court decision was very disturbing to estate planning attorneys because prior to that holding, we could rely on hundreds of years of law holding that assets in a so-called spendthrift trust created by someone other than the beneficiary and managed by an independent trustee were protected from a beneficiary’s creditors.

The lower court’s decision was appealed and on August 4, 2016, the Supreme Judicial Court issued its unanimous decision reversing the Appeals Court holding. This is very good news for parents who have created trusts as part of their estate plan for the purpose of protecting their child’s inheritance from creditors including a divorcing spouse. If you are concerned about protecting your child’s inheritance, call Samuel, Sayward & Baler LLC or another experienced estate planning firm and schedule an appointment to meet learn how you can best protect your hard-earned assets from your children’s creditors.

Five Times to Review and Update Your Estate Plan

September 8, 2016 by Attorney Maria Baler

Maria_144px Although many people would prefer to sign their estate plan documents, file them away and never look at them again, the reality is that your estate plan is always a work in process. Family situations change, financial situations changes and laws change. In order for your estate plan to effectively achieve your goals, your plan needs to change periodically to address your current priorities. The estate plan you created when you were 30 years old is no longer appropriate at age 50.

How do you know when it’s time to create an estate plan or update your existing plan? Here are five stages of your life when reviewing and updating your plan is important:

Stage One – Engaged and Newly Married Couples. If you are planning to marry, meet with an estate planning attorney to get advice about whether or not a prenuptial agreement is appropriate for your situation. These agreements can ensure that assets owned by you prior to marriage, or inherited during the marriage, will not be part of the assets that are subject to division by the Court in the event of divorce. If you are newly married, remember that if you do not create a Will that contains your instructions about what happens to your assets at death, the laws of the Commonwealth provide one for you. If you die when you are married but have no children, your assets may be divided between your surviving spouse and your parents. Creating a Will is the only way to ensure your assets pass exactly as you intend. You may also wish to create or update your Power of Attorney and Health Care Proxy so that your new spouse has the authority to make decisions for you if you become incapacitated. Finally, it is important to review and update beneficiary designations on life insurance and retirement plans to ensure those assets pass as you wish in the event of your death.

Stage Two –Married Couples with Young Children. If you have young children, your estate plan needs to do two important things: address the care and custody of your children and address the management and distribution of the assets you will leave for your children. Your Will is the document in which you will name a guardian for your minor children. The guardian is the person who will care for your children in the event of your death. The guardian will decide where your children will live and attend school, what type of health care your children will receive, and make other day-to-day decisions regarding your children’s care and upbringing. If you do not have a Will naming a guardian, family members or others may “petition” the Court to appoint them as your children’s guardian, and the Court will have the difficult job of choosing among those who ask to be appointed without the benefit of your input. There’s a good chance someone you would not choose may be appointed. Don’t lose the opportunity to put your children in the right hands. After you have made sure that the right people will be raising your children in the event of your death, you need to make sure that the inheritance you leave them is preserved and protected for them. Creating a trust that sets the “rules” for managing assets for your children and names a trusted person to oversee the funds for them is the best way to do this. Trusts are not just for those with millions of dollars. Think about the assets your children would receive if you passed away – consider your home, your life insurance, your retirement accounts, your savings and investments. Then think about how you feel about your children receiving those assets at age 18. If this makes you uncomfortable, a Trust should be a part of your estate plan. A Trust allows you, rather than the state, to specify at what age or ages your children will be entitled to receive those assets. While funds are held in trust for your children’s benefit, the Trustee can use them for a child’s education, living expenses, health care expenses, or for other purposes you specify.

Stage Three –Married Couples with Teens and 20-somethings. Trust planning is a crucial component of a good estate plan when you have teenagers or young adults as well. No matter how mature your 20-somethings may be, they may still fall victim to the bad judgment or hair-brain schemes of others. Trusts can very effectively protect inherited assets from so-called “creditors” and “predators.” Young adults may spend money irresponsibly or make loans to ‘friends’ that are never repaid. Young adults are more likely to have car accidents or get into other types of trouble that create liability. They may marry young and have their marriage end in divorce. All of these potential issues put inherited assets at risk, and are all possibilities that a good estate plan can address if your plan is updated as your children age. Finally, this is a good stage to introduce the concept of estate planning to your child who, at age 18, is considered an adult in Massachusetts. Have your adult child sign a Health Care Proxy and Power of Attorney so you can assist them with decision-making if your child has a serious illness or disability.

Stage Four –Married Couples Approaching Retirement Age. Just because your children are out of the house and perhaps married with children of their own does not mean you should not keep your estate plan updated. If you have a child with a disability or other issues (such as substance abuse), your estate plan should address lifelong planning for that child. At this stage in your life, the value of your estate (home, bank accounts, investments, retirement accounts and life insurance) is likely as large as it will ever be. Review the value of your estate with your estate planning attorney and discuss whether estate tax planning is advisable. This planning will reduce the amount of estate taxes your children will pay following your death. If you have grandchildren, consider planning that leaves some assets directly to your grandchildren or in trust for them, both to leave a legacy to the younger generation and also to save estate taxes in your children’s estates. Finally, have a conversation with your estate planning attorney about long-term care planning and discuss the advisability of purchasing long-term care insurance. Make sure your health care documents and powers of attorney are up-to-date so that if an unexpected illness occurs, people you trust can act for you, last-minute planning can be done, and the expense of Court involvement can be avoided.

Stage Five –Enjoying Your Golden Years. You made it! But no rest for the weary when it comes to estate planning. This can be the stage of your life when your estate plan does the heavy lifting, and it’s more crucial than ever to make sure that your plan is appropriate to your current situation. Review your powers of attorney and health care documents (again) with your attorney and make sure they are up to date and the people you have named to make decisions for you are still appropriate. Review long-term care options and planning issues. How is your health? Do you intend to stay in your home for the long term? What are your options for housing and care if you are not able to remain at home? What do they cost? How would you pay for them if needed? Will it be possible or necessary for you to qualify for public benefits, and if so are there steps you should take to make that easier if and when necessary? If you or your spouse is diagnosed with a chronic illness or condition (i.e. Parkinson’s disease, Alzheimer’s disease, dementia), see your estate planning attorney immediately and make the necessary changes to your plan before the ill spouse is no longer competent to participate in planning. A different type of planning may be appropriate to ensure that if the spouse who is not ill predeceases the ill spouse, assets will be available to care for the ill spouse. If protecting assets for children against liability for long-term care is one of your planning goals, it is important to discuss this early on, before any care is needed, and decide if protecting assets is appropriate and possible given your particular situation.

Recently, I received a call from a child of clients for whom I had done estate planning when my clients were in their 40’s and their children were young. Now, one of my clients was in a nursing home and the other had recently died. Although we had sent these clients reminders every year to review and update their plan, they had not done so. Unfortunately, an updated plan could have left their children and my surviving client in a better position than they now find themselves.

Good estate planning attorneys maintain relationships with their clients throughout their lives and encourage their clients to review and update their plans periodically. Next time your estate planning attorney reminds you to review your plan, listen to her and set up an appointment if it’s been awhile since you’ve reviewed your plan. You, and your family, will be glad you did.

Happy Anniversary to the Federal Estate Tax!

July 1, 2016 by Attorney Maria Baler

Maria_144px It may (or may not) interest you to know that the federal estate tax has been with us for 100 years, since it was enacted in 1916 by Congress to boost revenues in anticipation of the country’s participation World War I. Forms of inheritance or estate tax had been around for brief periods prior to 1916 to finance earlier wars, but unlike previous incarnations of the tax, this one stayed in place.

The estate tax is a tax paid at death, by the estate of the deceased, before assets are distributed to heirs. The estates of deceased Massachusetts residents are potentially subject to both the federal estate tax as well as a separate Massachusetts estate tax. Whether or not your estate will pay tax depends on the value of the assets you own or in which you have an interest on the date of your death.

Unlike 2016, the 1916 federal estate tax had a top rate of 10% and an exemption amount of $50,000. Today, the combined federal estate and gift tax “applicable credit amount” is $5.45 million per person (and is annually adjusted for inflation). This means that every U.S. Citizen can give away $5.45 million, either by making lifetime gifts or leaving assets to heirs at death, without paying a federal estate tax. If the value of your lifetime taxable gifts and assets left to your heirs at death exceeds this amount, the federal estate tax is imposed at the rate of 40% on amounts over the applicable credit amount. For a riveting, although dated, history of the estate tax, read the IRS Publication: The Estate Tax: Ninety Years and Counting.

Like 1916, today’s federal estate tax does not affect many people because the estate tax exemption is so high. In 2013, approximately 2.6 million people died in the United States, but only 4,700 of those people filed a federal estate tax return.

If you are among the lucky few to have an estate large enough to be subject to the federal estate tax, make sure you consult your estate planning attorney about what you can do to minimize the impact of the federal estate tax on your estate and your heirs, as well as ensure that you have a plan for how any estate tax due will be paid at your death.

Coincidentally, 2016 marks the 40^th anniversary for the Massachusetts estate tax, which was enacted in 1976 as the successor to the previous Massachusetts inheritance tax. Stay tuned for a celebration of that anniversary with some interesting facts about the Massachusetts estate tax in my next blog post!

July 2016

Prince died without a Will – What?!

June 7, 2016 by Attorney Suzanne Sayward

Sue_144px In of 2014 I wrote an article following the death Philip Seymour Hoffman expressing amazement about his failure to create a proper estate plan despite having a large estate and young children. Apparently Prince missed that post because rumor has it that he died without a Will! While it is apparently true that many adults do not have a Will, it still surprises me to hear about people who are surrounded by lawyers, financial planners and other advisors, as Prince was, who still manage to die without a proper estate plan in place. I imagine that at least some of these advisors suggested to Prince that he should do some estate planning. So I wondered, ‘why don’t people make a Will?’ In order to find an answer to this perplexing question, I Googled it of course. Here’s what I learned from various sites on the internet:

People don’t like thinking about death. Ok, I get that – death is sad. But that is not a good reason to fail to make a Will. The point of making a Will is to make life easier for your family when you’re gone. If you die without a proper estate plan, including a Will, your family will not only be sad, they’ll be mad that you left them with a big mess.
It’s too expensive to make a Will. While it is true that lawyers are expensive and estate planning can be costly, for many people the cost of not planning (taxes, probate costs and attorney fees) far outweighs what it would have cost to create a plan.
My family knows what I want and I trust them to do the right thing. Really? I can’t tell you how many times two members of the same family have told me ‘what mom would have wanted’ and it’s two different things. Further, even if your family does know what you want, they may not be able to carry out your wishes if you did not grant them the legal authority to do so via your Will, or if you own assets in such a way that they are not consistent with those wishes.
I don’t have young children so I don’t need a Will. If you have minor children, then making a Will is not just a good idea, it’s your responsibility as a parent. However, even people who don’t have young children should have a Will to designate the person who will be in charge of settling their estate (Personal Representative) and to direct how their assets should be distribute at their death.

Making a Will need not be terribly complicated or expensive. Taking care of this important ‘life task’ will not only mean that you have left your family with a roadmap to settling your estate, it will give you a deep sense of satisfaction and relief for having put your affairs in order. To read more about why you should make a Will as well as to find other articles on estate and long-term care planning, visit the Articles page of our website and schedule an appointment to make your Will!

Five Things to Discuss With Your Elderly Parents

June 7, 2016 by Attorney Maria Baler

Maria_144px Last month was National Elder Law Month, which helps raise awareness about our growing senior population. Issues that affect our elders are getting more press recently, and for good reason. Here are some eye-opening statistics: In 2014, there were 46.2 million people in the United States age 65 and older, representing 14.5 percent of the total population and 3 million more than the year before. By 2060, 98.2 million people will be age 65 and older, nearly 25 percent of U.S. residents at that time! Of this number, 19.7 million will be 85 or older.

For most of us, the issues faced by seniors are brought into focus by our interactions with our own parents. This is particularly true with respect to issues related to health care and financial decision-making. Decisions regarding end-of-life care are particularly difficult, but also among the most important. I meet with elderly people every day who want to talk about this topic. Many have seen a spouse, friend or family member face the end of life, some with good experiences and some with bad, and have very clear ideas about what they want for themselves.

Here are five ways you can help your elderly parents ensure that financial and health care decisions will be made for them by someone they choose and trust, and that their wishes will be expressed clearly and carried out to the greatest extent possible.

Sign a Power of Attorney. A Durable Power of Attorney is a legal document in which the maker (the principal) designates a person (the attorney-in-fact) who will have the authority to manage the principal’s financial affairs. It is used to address the possibility of future incapacity. Without a Durable Power of Attorney in place, you will be forced to pursue a conservatorship through the probate court if your elderly parent is in an accident or suffers a medical event that makes him unable to handle his own financial affairs such as paying bills, signing a tax return, managing investments, filing an application for long-term care benefits, or paying for assisted living, home care or long-term care.

Sign a Health Care Proxy. A Health Care Proxy is a document by which your elderly parent can designate an individual to serve as her Health Care Agent. The Health Care Agent is the person who will make health care decisions for your parent if she is ill and unable to communicate with her doctor. An attorney can prepare a Health Care Proxy, or a form can be obtained from your parent’s physician or online – just be sure to use a Massachusetts Health Care Proxy as these documents are state-specific. The selection of a Health Care Agent is important. Your parent should choose someone with whom she can have frank discussions about her health care wishes, and who she can trust to carry out those wishes, even if other family members may object. Consideration should also be given to choosing someone who will be a good advocate within the health care system.

Sign a Living Will. A Living Will is a document that expresses wishes about end -of-life care in general terms. In Massachusetts, Living Wills are not legally binding on the patient’s doctor or Health Care Agent. However, this document is another way to ensure an elderly parent’s wishes are known. A Living Will can be created by an attorney, or simply by your parent expressing her wishes in writing to family members.

Talk to a Physician about MOLST. MOLST is an acronym for Medical Orders for Life Sustaining Treatment and is a medical document completed by a patient and her physician. If your elderly parent has a serious chronic or terminal illness, encourage her to meet with her physician to complete a MOLST form, which is a medical order confirming how certain aspects of a patient’s care should be handled. The form notes whether or not aggressive treatment should be employed to keep the patient alive under certain circumstances, and gives the patient and physician, after discussion, the ability to opt out of certain aggressive measures.

Have a Conversation about End-of- Life Care. The most important thing you can do for your elderly parents is to encourage conversations about how they want to be cared for at the end of their life. It is important to encourage your elderly family members to express preferences for care to their family while they are still able to do so. Most elderly individuals have opinions about the care they wish to receive and want to make sure their family members know their wishes and will carry them out when the time comes. Although these conversations are not always easy, your parents will feel better after making their wishes known and you will also feel better after receiving guidance from them. A family is put in a difficult situation when an elderly parent becomes too ill to make decisions about his own care and his family has no idea what type of care he wants to receive. The Conversation Project is a local initiative that encourages conversations about end-of-life care. To get started, visit theconversationproject.org and download the “starter kit.”

One of the most important things you can do for your elderly parents is to help them get their affairs in order. This will give them peace of mind that their wishes have been clearly expressed and a plan is in place. It will also give you peace of mind that you will know what to do and have the tools you need to assist your parents when assistance is needed. It will also help siblings maintain good relationships while having confidence they have honored the wishes of their parents. So, in recognition of National Elder Law Month, take your favorite elder out to lunch and have a conversation about what they can do to ensure their wishes are carried out if they become unable to make decisions for themselves.

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.

Estimating and Planning for Health Care Expenses During Retirement

May 6, 2016 by Attorney Steven Samuel

Steve_144px Health care expenses are among the largest and most difficult costs to estimate and control during retirement. Even those of us doing a good job saving, investing and estimating our retirement expenses may be underestimating the cost of our health care. In the years approaching retirement, it may seem that switching from a private health care plan to Medicare will result in big savings. However, HealthView Services’ 2015 Retirement Healthcare Data Report, drawing data from 50 million households, provides eye-popping projections of health care costs for people approaching or in retirement. The full report is available at www.hvsfinancial.com. Here are some key findings.

A healthy couple, both age 65, retiring this year and covered by Medicare Parts B (physician) , D (prescriptions) and a supplemental (Medigap) policy should expect an annual cost of about $7,000. This amount is expected to rise steadily — from $8,000 to $10,000 annually when the couple is in their 70s, and from $12,000 to $14,000 annually when the couple is in their 80s. The total cost from age 65 to 85 for this couple, is estimated to be about $267,000. Remember that Medicare, even with a supplemental Medigap insurance policy, does not cover all dental, vision, co-pays and other out-of-pocket costs. If these additional costs are included, the HealthView study estimates that a 65-year-old couple retiring in 2016 will have paid a total of nearly $400,000 for their healthcare by the time they reach age 85.

Some people assume that Social Security benefits will easily cover their Medicare costs with room to spare. This is unfortunately not the case. This year, the average Social Security benefit is about $1,341 per month, before deduction of the Medicare premiums. HealthView estimates that a 65-year-old couple retiring today will pay more than 40 percent of their Social Security benefits to cover Medicare when they reach their 70s and that will increase to more than 80 percent in their late 80s.

Even large expenses, like those estimated above, can be managed for individuals and couples who start planning before retirement and manage their expenses well over decades of retirement. A good goal for addressing these large expenses is trying to follow the financial services industry rule of thumb of saving 15 percent of income annually, including employer-matching contributions to company retirement plans. While a 15 percent savings rate is especially difficult for people in their 20s, 30s and 40s when there are many competing needs for housing, family and education goals, making some contributions in those years, even well short of 15 percent is important. The varying amounts saved each year can be enough if combined with 15 percent or more annual savings in a person’s peak earning years in their late 40s, 50s and 60s.

For people who haven’t saved enough for the lifestyle and spending levels they hoped for, finding the least painful ways to reduce spending will not be easy. They should make some lifestyle and/or financial planning changes as soon as they can. For help with understanding how these issues will impact your life and well- being, consult a trusted advisor.

Samuel Financial LLC is located at 858 Washington Street, Suite 202, 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 advisor.

Five Examples of DIY Estate Planning Gone Bad

May 6, 2016 by Attorney Suzanne Sayward

Sue_144px Self-sufficiency and resourcefulness are admirable traits – knowing how to change a tire, wallpaper a bathroom, or use duct tape to fix any number of problems can save both time and money. However, not all tasks should be tackled at home – dental work, anything to do with electricity, and getting bats out of the attic are examples of tasks for which most people should hire a professional. With the proliferation of DIY (do-it-yourself) kits and forms available online these days, estate planning may seem like one of those items that could be handled at home and save a lot of money. Beware – the consequences of not getting it right can be worse than a do-it-yourself root canal! Here are five real examples of DIY estate planning gone bad.

DIY Power of Attorney resulted in the need for a court conservatorship. The children of an elderly woman who was in a nursing home contacted me to undertake planning to protect assets against complete spend down on long-term care costs. Because of this family’s situation, there was an opportunity to preserve the home by transferring it out of mom’s name even though she was already incapacitated and in a nursing home. Unfortunately, a few years earlier, the children had helped mom “save money” by having her sign a Power of Attorney form they found on the Internet. The Power of Attorney did not include the authority they needed to undertake the planning that would allow them to preserve mom’s $800,000 home against a lien for long-term care Medicaid benefits. Because mom no longer had the capacity to execute a new Power of Attorney, we had to file for a Conservatorship with the probate court. This took a long time, required a number of medical certificates from mom’s doctors, and was expensive. Further, the court appointed another attorney to represent mom’s interests, paid for by mom. All told, it cost more than $7,000 and took approximately eight months to accomplish what could have been done in less than a week for a fraction of the cost if there had been a comprehensively drafted Power of Attorney in place (which would have cost far less than $7,000).

DIY long-term care planning meant loss of home to Medicaid lien. I recently had a very sad situation where a family lost the home that had been in their family for more than 100 years because they did not seek the advice of an elder law attorney when the mother of my client went into a nursing many years ago. Although Medicaid imposes a period of ineligibility for long-term care nursing home benefits if assets are given away within five years prior to applying for benefits, there are exceptions to that rule. This family would have qualified for one of those exceptions and the home could have been transferred to my client without any penalty. Had that been done, the home would have belonged to my client free and clear of any claim by the state for the cost of the mother’s nursing home care. Unfortunately, I was not consulted until after the mother had passed away. At that point, the Commonwealth had a lien against the ancestral home for an amount that exceeded the value of the property. Once the mother passed away, the opportunity to transfer the home to the daughter under one of the exceptions to the transfer rules and free of the Medicaid lien was lost. The house was sold and the family received nothing – all of the proceeds went to the state.

DIY estate planning meant loss of benefits for beneficiary with disabilities. I had a client contact me to help her settle the estate of her brother who had passed away at the age of 45 having never married and leaving no children. The brother had prepared his own Will leaving his estate to his two siblings. While it was good that he had the foresight to create a Will, it was not so good that he did not consult with an estate planning attorney. It turned out that one of the siblings was receiving needs-based governmental benefits because of a disability. Unfortunately, this sibling’s entitlement to an inheritance caused him to lose those benefits. While we were eventually able to requalify him for those benefits, we needed to go to court to do so. Further, the solution to the situation most likely means that a large part of the inherited wealth will be taken by the state when the disabled brother dies. With planning, the deceased brother could have created a trust that would have provided for his disabled sibling and ensured that any amounts remaining at his sibling’s death were distributed to his sister and not to the state.

DIY Will Necessitated Court Permission to Sell Real Estate. I had a client who came to see me because he was named as the Personal Representative (Executor) of his aunt’s Will. The Will left everything to four nieces and nephews, including my client. It was a fairly simple estate – aunty had only her home and a bank account. However, the Will did not grant the Personal Representative the authority to sell real estate. That meant that in order to sell the house, we had to file a petition with the court seeking permission to sell the real estate. This delayed the process and cost the estate several thousand dollars more than it would have cost to have a proper Will prepared by a lawyer.

DIY Realty Trust created defect in title to property. In the course of updating an estate plan for an new client whose husband had passed away and who had done all of their legal documents for them (no, he was not a lawyer), it was discovered that he had created a defect in the title to their home as a result of a series of transactions conveying their real estate in and out of trust. We had to engage the services of a real estate attorney to clear the title and record a variety documents with the Registry of Deeds. The cost of this was about $4,000 – far more than it would have been to engage an attorney to do it correctly from the beginning.

The above are just five examples of what I see in my practice on a regular basis. While it’s great to save money, be careful about being “penny-wise and pound-foolish” – getting it right the first time will usually save a lot of time and money in the long run. And remember, getting it right the first time requires seeking the assistance of an experienced estate planning attorney. Next to DIY documents, documents created by attorneys who do not practice primarily in this area can also create more problems than they solve.

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

Irrevocable Trust Update—Favorable Decision from the Massachusetts Appeals Court is a Battle Won but Not the End of the War

May 3, 2016 by Attorney Pamela Greenfield

Pam_144px My February 2016 blog post gave a bleak outlook across the battlefield of irrevocable income only trusts in a Medicaid context—it’s guerrilla warfare out there, there are no rules, and the Superior Court and fair hearing decisions are all over the map making it very difficult to advise seniors who want to protect their home from the high cost of long-term care. But on April 15, 2016, a significant battle was won and there was finally some good news. Actually, some really good news.

Heyn vs. Director of the Office of Medicaid (formerly known as the Roche case) was overturned by the Massachusetts Appeals Court, the second highest court in the Commonwealth. Eligibility for Medicaid benefits was initially denied by the Office of Medicaid, Board of Hearings and Worcester County Superior Court, each maintaining that the assets held in Everlenna Roche’s irrevocable trust were countable because the trust contained certain problematic provisions. For the most part, these were innocuous provisions that have been historically acceptable. MassNAELA submitted an amicus curiae brief in support of the applicant’s position that the trust was noncountable and the provisions in question did not make the trust principal available to Mrs. Roche. The Appeals Court decision came down in favor of the applicant, thus overturning the prior denials—a significant victory for Massachusetts seniors.

So what does the Heyn case mean for the future of irrevocable income only trusts? First, as mentioned above, while exciting, this is merely a battle victory and unfortunately the war wages on across the Commonwealth. Every day, irrevocable trusts are denied for random, narrow, misconstrued provisions and clauses. Second, the Commonwealth may file an appeal with the Supreme Judicial Court (SJC) challenging the Heyn decision. If it does, and if the SJC hears the case and agrees with the Medicaid agency, this will sound the death knell for the use of some types of irrevocable trusts for long-term care planning and protection. So, the verdict is still out. In the meantime, perhaps (fingers crossed), the decision will begin to have positive effects on the lower court and fair hearing decisions that are pending. Time will tell as it will take several months before we start to see the implications of the Heyn decision beyond its own facts. For now, more waiting, more uncertainty…

If you would like to read the Heyn decision, click here. And if you would like to discuss your own trust or estate plan, please call or email Jennifer Poles at 781/461-1020 or poles@ssbllc.come to schedule an appointment.

May 2016

Five ‘Don’t-leave-home-without-them’ Estate Plan Documents

May 1, 2016 by Attorney Suzanne Sayward

Sue_144px When it comes to long-term planning, everyone’s family and financial situation is unique. There is no “one-size-fits-all” formula that applies to the masses, which is why it is so important to obtain advice from an experienced estate planning attorney about your particular circumstances. However, there are some basic estate plan documents that every adult should create and update every three to five years, or whenever a major life change occurs. I often refer to these documents collectively as “the-don’t-leave-home-without-it” plan. Here are the five essential estate plan documents.

Durable Power of Attorney. A durable Power of Attorney is used to appoint a person to act on your behalf with respect to your financial affairs. The person who creates the Power of Attorney is called the “principal,” and the person who is appointed to serve is called the “attorney-in-fact.” The term “durable” means that the Power of Attorney will remain in effect even if the principal becomes incapacitated. The purpose of a durable Power of Attorney is to authorize someone to handle tax matters, sign checks, access financial accounts, sell a car, make decisions about investments, manage retirement accounts and enter into contracts on behalf of the principal most often in a situation where the principal is ill, injured or incapacitated. In situations where a person is incapacitated and has not created a durable Power of Attorney, family members must file a petition with the Probate Court and ask to be appointed as the incapacitated individual’s conservator in order to obtain authority over financial assets and decision making. This is expensive, time consuming, and requires a public proceeding. Plus, the Court may appoint someone who you would not have wanted to serve in that position.

Health Care Proxy. A Health Care Proxy is the legal document used in Massachusetts to appoint a person to make health care decisions on behalf of another. The person signing the Health Care Proxy is called the “principal.” The appointed person is called the “Health Care Agent.” It is a good idea to appoint one or more alternate health care agents to serve in case the primary agent is unavailable. The Health Care Proxy is by law a “springing” document. That means that the authority of the Health Care Agent does not arise until the principal’s attending physician determines that the principal lacks the capacity to make or communicate health care decisions. Once that determination is made, the Health Care Agent will have the authority to confer with doctors, nurses and other caregivers, have access to medical records, and will be able to make all medical decisions.

HIPAA Authorization. As noted above, the authority of the Health Care Agent to make decisions about your care, gain access to your medical records, or obtain information from your doctor or other caregivers arises only after your physician has made a determination that you are not able to make or communicate health care decisions yourself. While it makes sense that no one should be able to make health care decisions for someone who is capable of making his own decisions, when someone is ill or elderly, it can be helpful if family members are able to consult with doctors and other caregivers. However, the federal Health Insurance Portability and Accountability Act (HIPAA) imposes monetary fines on caregivers who disclose medical information without authorization to do so. While this sounds like a good idea, unfortunately it can result in family members being denied any information about a loved one’s status. A HIPAA Authorization is used to list the people you would want your doctors to speak with in the event you are ill.

Last Will and Testament. It may be surprising to readers that I did not list a Will as the number one “don’t-leave-home-without-it” document. The fact is, for many people, a Will is not the most important estate plan document. Don’t misunderstand me – I definitely advise clients that they should create a Will as part of their estate plan. However, a Will only controls the distribution of probate assets, which are accounts or property titled in a person’s name alone and for which there is no designated beneficiary. Many married couples have no probate assets when one spouse dies because all of the assets are either jointly owned, held in a trust, or the surviving spouse is named as the beneficiary of assets such as IRAs, life insurance and annuities. Even if you plan to leave no probate assets, a Will is still recommended, as you may not be able to control whether you have probate assets. For example, your employer may owe you salary or vacation pay, your estate may receive a refund on your car insurance or health insurance premiums, you may be owed money on a contract, etc. Also, your Will is the document used to appoint the Personal Representative (formerly called Executor) of your estate. Your Personal Representative is usually charged with the task of distributing your tangible personal property and filing final income tax returns. Lastly, if you have minor children, you would name the individuals who you want to serve as guardian and conservator of your children in your Will.

Living Will. A Living Will is the document used to express a person’s wish that no extraordinary measures or artificial means be used to prolong life in circumstances where the individual is suffering from a fatal or terminal illness and where such measures would not improve the quality of life. We do not have a Living Will law in Massachusetts, meaning that your physician will not act on the wishes you express in your Living Will, but will only take direction from your health care agent named in your Health Care Proxy regarding these types of decisions. Despite that, many people choose to sign a Living Will because they want to give their health care agent and other family members guidance regarding end-of-life decisions if they are not able to make those decisions for themselves.

While no one likes to think about these types of situations, it’s important to keep in mind that creating or updating these documents now will help alleviate worry later on and allow you to focus on your loved ones — not unfinished administrative work. Everyone’s situation is different and your estate plan is no doubt very different than your neighbor’s or your sister’s plan. Consult with a qualified estate planning attorney to make sure these documents are reflective of your own needs, wishes, and goals.

May 2016

Five Ways Governor’s Proposed Budget Will Impact Senior Homeowners

April 1, 2016 by Attorney Maria Baler

Maria_144px Have you ever wondered how you would pay for long-term nursing home care at a cost of $350 to $500 a day or more? Medicaid, also known as MassHealth in Massachusetts, is the combined federal and state benefit program that pays for nursing home care for individuals who do not have assets to pay for their care. An individual applicant can have no more than $2,000 of countable assets in order to qualify for Medicaid benefits. A married individual’s spouse who lives in the community may own up to approximately $120,000 of countable assets. The home of a Medicaid applicant is considered a non-countable asset and may be owned by an individual, or a married couple, without impacting eligibility.

Under current law, if a Massachusetts resident over the age of 55 receives Medicaid benefits, whether for care in the community or to pay nursing home costs, the Commonwealth may recover those costs from the recipient’s probate estate at death. This is called “estate recovery.” Probate assets do not include assets that are owned jointly with another person, or are owned by a trust, or a home in which the Medicaid recipient may have a life estate interest.

Governor Baker’s Fiscal Year 2017 budget includes a proposal that would expand estate recovery to allow Medicaid claims to be made against any asset in which the deceased owned an interest at the time of death. Here are five ways this proposed change to the estate recovery law could impact you:

Recovery against Property in which a Medicaid Recipient holds a Life Estate. A life estate is an interest in real estate that allows the “life tenant” to live in a property or collect any rental income the property generates. The life tenant is responsible to pay property taxes and maintain the property during his lifetime. Many parents who are concerned about protecting their home or its value for children will transfer their home to their children (holders of the “remainder interest”) and reserve a “life estate” that will ensure they can live in the property for their lifetime. At the death of the life tenant, the life estate ends and the property is owned by the holders of the remainder interest. Under current law, if the life tenant receives Medicaid benefits during his lifetime, the property is not subject to estate recovery because the property will not be part of the life tenant’s probate estate. Governor Baker’s proposal would allow the state to file a claim against real estate in which a deceased Medicaid recipient held a life estate interest immediately before death, and recover the value of that life estate interest from the remainder interest holders.

Recovery Against Assets held in Irrevocable Trusts. The same principals apply to real estate or other assets owned by an irrevocable trust created for the purpose of transferring assets in trust to children or other family members. Often, the person who establishes the trust retains the right to receive the income generated by the trust assets for his lifetime, or in the case of real estate, the right to live in the property. Under Governor Baker’s proposal, the state would be able to make a claim against the irrevocable trust assets to recover Medicaid benefits paid on behalf of the person who establishes the trust to the extent of their interest. How that person’s interest in the trust would be valued is unclear.

Recovery Against Joint Tenancies. Life estates and irrevocable trusts are typically strategies used by individuals who have taken steps to protect assets from liability for future long-term care expenses. However, almost every married couple owns their home jointly (either as joint tenants or tenants by the entirety), whether or not they have ever thought about planning for long-term care. Joint ownership ensures that the surviving spouse will automatically become the owner of the jointly held property at the death of the first spouse, without the need for a probate proceeding. The survivor is free to sell or mortgage the property, or continue to live there. Governor Baker’s proposal will jeopardize the surviving spouse’s security in the home by permitting the state to place a lien against the home of a married couple for Medicaid benefits paid on behalf of one spouse. If the surviving spouse wants to sell the home (whether to downsize, move closer to children, or move to assisted living), she will have to address the state’s lien. This will have a far-reaching negative impact on surviving spouses, many of whom have no significant assets other than the home, especially if their spouse has received nursing home care for several years.

Impact on Real Estate Titles. Apart from the risks to the home, the Governor’s proposal will create serious title problems for Massachusetts real estate. Because the Governor’s proposal will allow the state to lien real estate, this will create uncertainty as to whether the title to property is clear. Anything that could create a “cloud” or a question about whether a property owner has clear title to property will have a severe negative impact on the owner’s ability to sell or mortgage the property. This proposed law, if enacted, has the potential to wreak havoc with the ability of owners to buy, sell or mortgage real estate if an owner (even a deceased owner) has received Medicaid benefits. Potential buyers may shy away from properties where this is an issue. Serious delays are likely to occur when closings are held up until surviving spouses or other owners negotiate with the state to release liens or claims on the property. Since ‘time is of the essence’ in almost every real estate sale, this has the potential to be a real disaster. This is just one example of the far-reaching impact of this proposal.

Lack of Grandfathering. Governor Baker’s proposal will make these new estate recovery rules applicable to anyone over the age of 55 who becomes eligible to receive Medicaid benefits after July 1, 2016. This aspect of the proposal penalizes those who have planned in advance for the possibility of long-term care by conveying property to their children reserving a life estate or by transferring assets to an irrevocable trust they created many years ago, in reliance on current law which would protect those properties from estate recovery. The proposal also penalizes people who have not done any long-term care planning. In those cases, a surviving spouse who owned property jointly with a Medicaid recipient prior to the Medicaid recipient’s death will be faced with the prospect of a claim by the state against her home for her deceased spouse’s Medicaid benefits. This will impact the surviving spouse’s ability to sell or mortgage that property for the rest of her life.

Although the focus has been on real estate, Governor Baker’s proposal would allow the state to file claims against jointly held bank accounts, assets held in trust, and assets such as IRAs received by a beneficiary after a MassHealth recipient’s death (not including life insurance or annuities). This proposal is a serious and significant departure from previously settled Medicaid law, and will have a wide-ranging negative impact on surviving spouses and families of Medicaid recipients. It will significantly impact the planning that elder law attorneys are able to do for their clients, especially with respect to protecting the family home for the benefit of the surviving spouse or children.

Governor Romney made a similar proposal in 2003, which was enacted but repealed a year later by the legislature after numerous attempts at implementation showed that the law was seriously flawed and had significant unintended consequences. More recently, New York State had a similar experience.

Read more information about the Governor’s proposal and what you can do to register your objection here.

April 2016