Attorney Abigail V. Poole discusses upcoming speaking events for National Elder Law Month, on this edition of 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
Five Proposed Changes to the Estate and Gift Tax Laws
After the spending spree necessitated by the Coronavirus (think CARES Act, stimulus payments, vaccine development support, etc.), coupled with President’s Biden infrastructure building plans, it is not surprising that Congress has turned its focus toward revenue raising as we emerge from the pandemic. Revenue raising proposals usually mean finding a way to collect more tax dollars. At the end of March, Senators Bernie Sanders and Sheldon Whitehouse introduced a bill they call, “For the 99.5 Percent Act” which proposes sweeping changes to existing estate and gift tax laws. Read on for five of the most significant proposed changes.
- Reduce the current $11.7 million federal ESTATE tax exemption to $3.5 million. For the vast majority of Americans, the federal estate tax (the ‘death tax’) has been a non-issue since 2010 when the exemption was raised to $5 million and indexed for inflation. The exemption is the amount that each person is permitted to pass on free of any federal estate tax at death. Because $5 million was not high enough for some people, the exemption was increased to $11 million under President Trump, albeit with a sunset provision that reduced the exemption back to $5 million at the end of 2025. The Sanders/Whitehouse proposal calls for rolling that exemption back to $3.5 million and indexing it for inflation. While this rollback (if it happens) will mean that more estates will be subject to federal estate tax, the vast majority of estates will not be impacted because most Americans do not have an estate worth more than $3.5 million ($7 million for a married couple). Those folks whose estate is more than the proposed reduced exemption amount should keep an eye on this legislation and explore their options for undertaking some planning before the end of 2021.
- Increase the rate of taxation on federally taxable estates. Under the current federal estate tax law, taxable estates which exceed the exemption are subject to tax at the flat rate of 40%. That means that on a $20 million estate there will be federal estate tax payable of $3,320,000 ($20 million – $11.7 million x .40). Under the Sanders/Whitehouse proposal, the estate tax rate would be increase to 45% for taxable estates valued between $3.5 million and $10 million, 50% for estates over $10 million but less than $50 million, 55% for estates between $50 million and $1 billion, and 65% for estates over $1 billion. While these rates are super high, the number of estates subject to them will be very small.
- Limit total annual exclusion gifts to two-times the amount of the annual exclusion. The annual exclusion amount is the amount that each person may gift to any number of people in any calendar year without having to file a gift tax return and without reducing that person’s lifetime gift tax exemption. In 2021 that amount is $15,000 (a base amount of $10,000 indexed for inflation). For example, under the current law, I can give up to $15,000 to each of my two children, to my seven nieces and nephews, to my two siblings, and to my mailman, if I am so inclined, without any impact on my lifetime gift tax exclusion. There is no limit on the number of people to whom I can gift up to $15,000 in any calendar year. To the extent I give more than $15,000 to any one person in any one calendar year, I will ‘chip-away at’ my lifetime gift tax exemption. For example, if I gave my child $115,000 during the year, I will have made an excess gift of $100,000. This will reduce my lifetime exemption from its current $11.7 million to $11.6 million ($11,700,000 – $100,000 = $11,600,000).Under the proposed law, annual exclusion gifts would be limited to two-times the amount of the annual exclusion. That means that if the annual exclusion amount is $15,000, I could give each of my two children $15,000 in one year but could not give any other gifts in that year without reducing my lifetime gift tax exemption.
- Reduce the current $11.7 million lifetime GIFT tax exemption to $1 million. Under the current federal gift tax law, each person has an $11.7 million lifetime gift tax exemption, which is the amount they can give away during their lifetime before any gift tax must be paid. The proposed law would reduce the gift tax exemption to $1 million, meaning that cumulative excess gifts of more than $1 million during someone’s lifetime will incur gift tax. The reduction of the gift tax annual exclusion amount coupled with the proposal to reduce the federal gift tax exemption from its current $11.7 million to $1 million is likely to significantly curtail estate tax planning in the future if these provisions are enacted, since tax planning done to reduce the size of your taxable estate often involves gifting assets. People who have large estates and who want to undertake planning to reduce their federal estate tax should do so before the end of 2021 in order to take advantage of the current $11.7 million gift tax exemption amount, which will be reduced to $1 million under the new law.
- Limit generation-skipping transfer trusts to a term of 50 years. The generation skipping transfer tax (GSTT) is a tax imposed on transfers to ‘skip’ beneficiaries (think grandchildren). The GSTT is in addition to the federal estate tax and is assessed at the same high rate. In order to mitigate the harshness of the tax, there is an exemption from the GSTT which is currently equal to the amount of the federal estate tax exemption. That means that under the current law a person with an $11.7 million estate could leave his entire estate to his grandchildren and there would not be any GSTT payable. Typical GSTT planning involves creating trusts for multiple generations to shelter family wealth from diminution from the estate tax. In this way, the inheritance from grandpa may escape estate taxation for 100+ years, preserving family wealth for future generations. The Sanders proposal would limit the term of such trusts to 50 years, requiring the payment of estate tax every 50 years.
The above changes are only proposals and we don’t know what the final law will be. The revenue raising plan submitted by President Biden does not contain these provisions so perhaps none of them will be enacted. However, if you have an estate that you anticipate would be subject to federal estate tax if these proposals are enacted, and if you are interested in exploring options for reducing the tax in the event one or more of th`ese proposals become law, you should take action soon.
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 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.
May, 2021
© 2021 Samuel, Sayward & Baler LLC
Five Things to Know about Testamentary Trusts
By Attorney Maria C. Baler
Testamentary Trusts are less popular than their well-known cousin the Living Trust, but in the right situation 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 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.
Here are five things to know about Testamentary Trusts
1. What is a Testamentary Trust?
The word “testamentary” means “relating to or bequeathed or appointed through a Will.” The “testament” in the phrase “Last Will and Testament” comes from this definition. A Testamentary Trust is, as the definition implies, 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 maker of the trust (the “grantor”) during the grantor’s lifetime. Living Trusts can own assets during the grantor’s lifetime; Testamentary Trusts cannot. Assets owned by a Living Trust at the grantor’s death avoid probate which is one of the primary reasons for creating a Living Trust. 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.
Because Testamentary Trusts do not come into existence until after death, they cannot own assets during their creator’s lifetime. The assets that will be held in the Testamentary Trust after the creator’s death will pass through the probate estate of the testator, and into the Testamentary Trust as provided under the terms of the creator’s Will, to be held in trust for the benefit of the trust beneficiary.
2. Why Create a Testamentary Trust?
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?
The answer is in the regulations that determine whether assets held in a trust created by a husband or wife are “countable” when determining whether or not either will be eligible for Medicaid benefits to pay for nursing home care.
If a husband creates a 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 tries to qualify for Medicaid benefits to pay for nursing home care during their lifetimes. If the husband passes away, and if his 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 the wife may own, 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 assets 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 by the other spouse. In such a situation, if the caregiver spouse were to die, the ill spouse would almost certainly need a nursing home level of care as they could not live alone or care for themselves. In this case, if the caregiver spouse (the husband) creates a Testamentary Trust through his Will for the benefit of his wife, and if the caregiver spouse dies before his wife, any assets owned by the caregiver spouse in his name alone would pass through probate and fund the Testamentary Trust created by his Will for the benefit of his wife. The Trust assets could be used for his wife’s benefit during her lifetime, to pay for anything his wife needs that is not covered by Medicaid – things like flowers, books, hearing aids, haircuts, a new television, new clothes, companions or additional caregivers, or any number of other things outside of the cost of skilled nursing care. When the wife 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.
3. Who Can be the Trustee of a Testamentary Trust?
The Trustee of the Testamentary Trust is responsible to manage the Trust assets for the benefit of the Trust beneficiary – the wife in the previous example. Anyone other than the wife can be the Trustee of the Testamentary Trust for the wife’s benefit. 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.
There may be a conflict of interest if Jack is also a beneficiary of the Testamentary Trust after his mother’s death, in that the fewer assets he uses for his mother’s benefit while she is living, the more that will be left for Jack and the other beneficiaries of the Trust after her death. This is something that should be considered when choosing the Trustee for the Testamentary Trust. It may be appropriate to choose someone who is not an ultimate beneficiary of the Trust after the primary beneficiary passes away.
4. Ownership of Assets is Key
In order for a Testamentary Trust to work properly, the creator of the Will that includes the Testamentary Trust – the husband in our example – must own assets in his name alone. Assets that are owned jointly will typically pass automatically to the surviving joint owner and will not pass through probate and into the Testamentary Trust at the husband’s death. Similarly, assets that name a beneficiary will pass automatically to the named beneficiary and not through probate and into the Testamentary Trust.
For this reason, if a Testamentary Trust is created, a change in the way assets is owned is often required. In our example, the home that is jointly owned by husband and wife should be transferred into the husband’s name alone, so that when he dies the home will pass via the husband’s Will into the Testamentary Trust for his wife’s benefit. Similarly, a joint bank account should be transferred into the husband’s name. Perhaps beneficiaries should be removed from CD accounts, etc. How assets should be restructured is specific to each person’s situation, and should be done only with the advice of an attorney. However, if assets are structured properly to fund a testamentary trust, those assets will be available to provide for the surviving member of the married couple even if they are receiving Medicaid benefits.
5. What are the Disadvantages of Using a Testamentary Trust?
One of the main disadvantages of using a Testamentary Trust is that the assets must pass through probate before they are protected under the Testamentary Trust. Probate is an expensive and time-consuming process, made even more time consuming by the impact COVID-19 has had on our probate courts in Massachusetts. For this reason, it may be best to make sure the intended Trust beneficiary has some assets in her name that can be used for living or care expenses until the Testamentary Trust is established when the probate process is complete.
If the husband in our example creates a Testamentary Trust, holding assets in his individual name in order to fund his Testamentary Trust at death will subject those assets to a Medicaid claim at the husband’s death if he receives Medicaid benefits during his lifetime. For this reason, Testamentary Trusts are typically created by individuals who have not and do not expect to receive Medicaid benefits during their lifetime, although their spouse likely will receive those benefits.
Finally, if the ownership of assets is not structured properly and thoughtfully, the Trust may not work at all, or may not work to its fullest advantage. For this reason, this type of planning should not be undertaken without advice from an experienced elder law and estate planning attorney.
Testamentary Trusts can be a very effective planning tool in a very specific situation – when one spouse wants to protect assets for the surviving spouse in the event the surviving spouse is expected to require a nursing home level of care and wishes to qualify for Medicaid benefits to pay for that care after the first spouse passes away. If this is your situation, seek out 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.
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 the current 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.
April, 2021
© 2021 Samuel, Sayward & Baler LLC
What Happens After the Death of a Person Who Received Medicaid Benefits?
Medicaid, also known as MassHealth, is the joint federal and state program that provides public benefits to pay for the care of individuals who are medically and financially eligible because they do not have sufficient assets to cover the costs themselves. If the individual was age 55 years or older and received MassHealth benefits during his or her lifetime, the MassHealth Estate Recovery Unit (“ERU”) is responsible for collecting reimbursement for the costs paid by the Commonwealth. Reimbursement comes from the deceased person’s probate estate. Under Massachusetts law, the ERU must be notified when probate pleadings are filed with the probate court. Thereafter, the ERU files a claim against the probate estate to reserve the right to be paid from the estate. As the recipient’s house is typically the largest asset remaining to be probated, the ERU is often reimbursed from its sale proceeds.
A recent decision by the Supreme Judicial Court of the Commonwealth of Massachusetts highlights the importance of understanding what happens when a person who has received Medicaid benefits during his or her lifetime passes away. In the Estate of Jaqueline Ann Kendall (SJC-12881, December 28, 2020), the Supreme Judicial Court held that the Commonwealth was not entitled to reimbursement from Ms. Kendall’s probate estate (consisting of 50% ownership of a house) because the ERU waited too long to file its claim. While it may seem that the decision favors procrastination for families whose loved ones were MassHealth recipients, this is not necessarily the case. The ERU is permitted under the law to file probate pleadings if no one else steps forward, and may become more aggressive in doing so following the Kendall case.
A better strategy for protecting your assets from nursing home costs is to be proactive and undertake long-term care planning. This may mean conveying property subject to a retained life estate, or crafting a so-called “Medicaid Trust” or “Irrevocable Income Only Trust”, or other options that best fit your needs and goals.
At Samuel, Sayward & Baler LLC, an elder care attorney knowledgeable in long-term care planning will guide you through the advantages and disadvantages of your long-term care planning options. Our estate planning attorneys can help you to avoid probating your house and the subsequent MassHealth claim, and preserve its value for the benefit of your children, in the event you require MassHealth benefits during your lifetime.
Attorney Abigail V. Poole is an associate attorney with the Dedham firm of Samuel, Sayward & Baler LLC which focuses on advising its clients in the areas of trust and estate planning, estate settlement and elder law matters. She is an active member and current Vice President of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (NAELA). This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney. For more information visit ssbllc.com or call 781/461-1020.
January, 2021
© 2021 Samuel, Sayward & Baler LLC
Five COVID-Inspired Estate Planning Resolutions
Looking ahead to this year’s resolutions, here are five estate planning resolutions that the COVID-19 pandemic has shown us to be more important than ever.
- Resolve to Have an Estate Plan
Most of the clients I meet who do not have a Will, Power of Attorney or other estate plan documents know they should have them, they have just put off this task – sometimes for much longer than they should, especially when faced with a global pandemic. I met many people in 2020 who had put off estate planning and were suddenly in a panic to get it done given what was happening all around them. If you are similarly situated, make it one of your goals for 2021 to get an estate plan in place. A simple plan (Will, Power of Attorney, Health Care documents) is better than nothing at all. If you have young children or assets in excess of $1 million, a Trust may be advisable to meet your planning goals. An experienced attorney who prepares Wills and Trusts as the primary focus of their practice will give you options and let you decide which plan is best for you at the moment.
If you already have an estate plan in place (good job!) resolve to review it this year to make sure the provisions of your plan still reflect your wishes. If it has been more than five years since the documents were signed or you have had changes in your personal or financial situation, meet with an estate planning attorney (virtually of course!) to identify any changes that should be made.
- Resolve to Get it Done Right
The advice of an experienced attorney is not cheap and estate planning attorneys are no exception. However, making sure decisions can be made for you if you are ill, making sure your assets go where you want them to go at your death, managing inherited assets properly for young beneficiaries, protecting assets for your family, avoiding probate and saving your beneficiaries as much income and estate tax as possible are important goals. The way your estate plan is carried out will have a significant financial and emotional impact – positive or negative – on you and your family. When something is this important, make sure it’s done right. The temptation to draft your own Will or other legal documents is there and is frankly a poor planning option. In my 33 years of practice, I have yet to see a Will drafted by a client that will accomplish what the client thinks it will. In fact, most self-drafted Wills create more problems than they solve. Proper estate planning is not something that can be done cost-effectively on your own. Seek the advice of an experienced estate planning attorney, not a general practitioner who prepares Wills along with divorce and personal injury law. Get it done right, and you will have the peace of mind that crossing this task off your list will bring.
- Resolve to make sure your Beneficiary Designations are Up-to-Date
Many of your most significant assets – life insurance, retirement accounts, annuities – will be paid to a designated beneficiary at your death. Properly designating those beneficiaries is more complicated than it may appear, and understanding the implications of certain beneficiary designations is crucial. Designating a trust as beneficiary for the benefit of a young or disabled beneficiary can be instrumental in avoiding a lengthy and costly court proceeding to appoint a guardian, or avoiding the loss of public benefits a disabled beneficiary may be receiving. Understanding how distributions from retirement accounts work after the death of the account owner, and how different beneficiary designations will impact the income tax payable on those distributions is critical to making appropriate designations, and is something that changed significantly when the SECURE Act became law on January 1, 2020. Ensuring your beneficiary designations are consistent with your overall estate plan is vital to accomplishing your estate planning goals.
- Resolve to have Health Care Documents in Place
Much of the estate planning you do is for the benefit of your family or other heirs and will never impact you. Creating health care documents that reflect your wishes is one area of estate planning that will directly and significantly impact you if you experience a period of illness prior to death. This has never been more apparent than this past year, when so many people became incapacitated, and so quickly, by the COVID-19 virus. Designating Health Care Agents to make health care decisions for you if you are unable to do so, making sure the people you want to be able to get information from your physicians can do so and will not be obstructed by privacy laws, and determining your care preferences and communicating them to your Health Care Agents and physicians are all crucial to making sure your health care wishes are carried out. In Massachusetts, the legal document that we use to make sure these things happen are Health Care Proxies, HIPAA Authorizations and Living Wills. The person you name to make health care decisions for you is called your Health Care Agent. These documents are all part of a complete estate plan, and arguably the most important part from your perspective.
- Resolve to Make Sure People You Care About Have a Plan Too.
Estate Planning is important for anyone over the age of 18. College-age children and elderly parents should have Durable Powers of Attorney and health care documents that will allow someone to make financial and health care decisions for them, and have access to information if they are ill or incapacitated. This year underscored this need, as some college students fell ill far from home, and elderly parents were too sick to make decisions regarding their own care. Parents of young children should name guardians for their children and create a trust to manage assets for young beneficiaries to avoid a child receiving control of an inheritance at age 18. Parents who will leave a significant inheritance to their children should consider asset protection planning to protect inherited assets from a child’s creditors, divorcing spouse, etc. Older couples or others with large estates can save their heirs significant estate taxes in Massachusetts with proper planning. Elderly parents may want to plan to protect assets from long-term care liability.
Now that 2020 is behind us and a COVID vaccine is here, we look back on 2020 grateful that we were able to continue to do our work, happy to be able to provide some peace of mind to our clients in these uncertain times, and hopeful that there are better days ahead. For those of you who are fortunate enough to be alive and well in these challenging times, we recommend you take these resolutions to heart, and create or update your estate plan today. If a friend or family member needs some inspiration to make estate planning a 2021 resolution, share this article with them. Wishing you a Happy and Healthy New Year!
Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and the current 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.
January, 2021
© 2021 Samuel, Sayward & Baler LLC
What are Your Burning Questions When it Comes to Estate Planning?
5 Ways to Leave a Legacy (but not the Good Kind)
If you look up the definition of Legacy in the dictionary, it has two distinct meanings. The first is a gift by Will, especially of money or other personal property (e.g. “Her aunt left her a legacy of $50,000”). The second is something transmitted by or received from an ancestor (e.g. “He left a legacy of love and caring”). Both of these meanings are common in the estate planning arena. Clients often plan to leave money, real estate, jewelry, artwork, etc. to family or friends, and most people want to leave their families with fond memories and treasured traditions or customs.
However, legacies of the second type can also cut the other way. That is, rather than good will and fond memories, loved ones are left with feelings of anger and resentment. Often this type of legacy comes from poor estate planning or no estate planning.
Read on for 5 ways to leave a legacy of pain that lasts long after you’re gone.
1. Naming co-fiduciaries who cannot work together. A vital aspect of every estate plan is designating fiduciaries to carry out your wishes. In a Will, this is your Personal Representative, in a Trust it is the Trustee, and in a Power of Attorney it is your Attorney-in-fact. These positions can be held by one person or by two or more people. Sometimes clients feel that it is important to appoint all of their children to these roles because they don’t want to hurt anyone’s feelings by leaving them out. If your children do not get along or if they cannot work well together, naming them as co-fiduciaries is not going to heal that relationship and will probably make it worse.
2. Naming fiduciaries who are not qualified to carry out the job. For most people it is not necessary to appoint a professional such as an estate planning attorney or a bank as Personal Representative of their Will or Trustee of their Trust. However, it is important to appoint someone who is conscientious, responsible and competent to carry out the tasks of settling the estate in a timely manner. These tasks often include updating bank and other financial accounts, gathering and organizing financial statements, making numerous phone calls to insurance companies and IRA custodians, cleaning out the house and readying it for sale, and working with professionals like attorneys and accountants, to name a few. If the person you are considering naming as a fiduciary does not do a good job managing her personal matters, chances are she is not going to do a good job performing these tasks for you or your estate.
3. Treating children differently. If you have more than one child, consider carefully the possible consequences of treating them differently in your estate plan. By that I mean leaving one child a greater portion of your assets and estate than another child, or directing that one child’s inheritance be distributed outright to her while another child’s share remains in trust to be managed for him. There are certainly compelling reasons to treat children differently in your estate, such as when you have a child who receives needs-based governmental benefits, a child who struggles with drug dependency, or a child with disabilities that impair her ability to manage assets. However, if there is not a compelling reason for treating a child differently than his siblings, doing so is likely to leave the child who is singled out feeling angry and resentful, and that anger is often directed at his siblings since mom and dad are no longer around. In my practice I have seen this result in a total breakdown of sibling relationships which extended into the next generation.
4. Not being clear about your wishes for your tangible personal property. If you’re a fan of the TV series Fargo, then you will recall how distribution of a parent’s tangible personal property in a manner that feels ‘unfair’ can create trouble (Season 3). Tangible personal property consists of items such as a car, jewelry, artwork, tools, collections/collectibles, etc. In Fargo, one brother received a valuable stamp collection and the other a Corvette. Sadly, many people don’t need a television show to experience the impact of family discord over the distribution of tangible personal property because they have experienced it in their own families. If you have valuable artwork, items that have sentimental value to your children, jewelry, or other possessions that could be a source of controversy, designating the recipients of those items rather than leaving it up to your children to ‘figure it out’ will go a long way in ensuring family harmony.
5. Conveying conflicting messages to family. Whether or not to share the details of your estate plan or legacy planning with family members is a personal decision. For some families, a family meeting to inform everyone of decisions regarding who will serve as Personal Representative of the Will and the distribution provisions of the estate plan is the norm. For other families, no information is shared. I see problems arise when a parent shares information, such as who is named as Personal Representative or to whom certain assets will pass, and later changes those decisions without telling family members about the changes. In my experience, it is a good idea to inform the people you are naming as your fiduciaries (Personal Representative, Attorney-in-fact, Trustee, etc.) in case they are not willing or able to serve – better to find out sooner rather than later. In addition, your named fiduciaries should be provided with some basic information that will enable them to help in the event you become incapacitated or when you pass away. This should include contact information for your professional advisors (accountant, estate planning attorney, financial advisor) and the location of your important documents. While you need not provide your family with information about the value of your estate, maintaining a comprehensive list of your bank and investment accounts, insurance policies, retirement accounts, annuities (including copies of the contract), etc. and informing your fiduciary of the location of that information will go a long way toward the smooth settlement of your affairs.
If you want to leave a legacy of love and fond feelings, take care to consider how your estate planning, or lack of estate planning, may impact those you leave behind. If we our estate planning attorneys can help you with that legacy planning, please contact us – we’ll help you leave a legacy that will live on in the hearts and minds of your loved ones in a good way.
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 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.
December, 2020
© 2020 Samuel, Sayward & Baler LLC
Happy Thanksgiving from Samuel Sayward & Baler LLC
Thirteen Estate Planning Terms You Need to Know
We recently celebrated National Estate Planning Awareness Week during the week of October 19-25, 2020. Although it is nice to have an entire week each year devoted to raising awareness of the importance of estate planning, I would argue that 2020 has been National Estate Planning Awareness Year, as the COVID-19 pandemic has brought the importance of estate planning to the forefront of everyone’s mind. Here at SSB we have had a busy year making sure our clients’ plans are up-to-date, and helping new clients put a plan in place so that they, too, can have the peace of mind an estate plan brings in these uncertain times.
As Estate Planning Attorneys, we know Estate planning is incredibly important and not just for the wealthy. Estate planning is something every adult should do. Estate planning can help you accomplish any number of goals, including appointing guardians for minor children, choosing a health care agent to make decisions for you should you become ill, appointing an agent to handle your financial and legal matters if you become incapacitated, minimizing taxes so you can pass more wealth on to your family members, and stating how and to whom you would like to receive your assets when you pass away.
While it should be at the top of everyone’s to-do list, estate planning can often feel overwhelming, and estate plan documents can sometimes seem to be written in their own language. Here are some important estate planning terms you should know as you think about your own estate plan.
Assets
Generally, anything a person owns, including a home and other real estate, bank accounts, life insurance, investments, retirement accounts (IRAs, 401ks), annuities, furniture, jewelry, art, clothing, and collectibles.
Beneficiary
A person or entity (such as a charity) that is designated to receive assets from an estate, trust, account, or insurance policy.
Distribution
A payment in cash or assets to a beneficiary who is entitled to receive it.
Estate
All assets and debts left by an individual at death.
Fiduciary
A person with a legal obligation (duty) to act primarily for another person’s benefit, e.g., a trustee or agent under a power of attorney. “Fiduciary” implies great confidence and trust, and a high degree of good faith.
Funding
The process of transferring (re-titling) assets to a living trust (a trust created during the creator’s lifetime). A living trust will only avoid probate at the trust creator’s death with assets that are funded into the trust during the trust creator’s lifetime, or that will be automatically payable to the trust (i.e. by beneficiary designation) at the trust creator’s death.
Incapacitated/Incompetent
Unable to manage one’s own affairs, either temporarily or permanently; often involves a lack of mental capacity.
Inheritance
The assets received from someone who has died.
Guardianship / Conservatorship
The court-supervised process of appointing a guardian / conservator to make decisions on behalf of an incapacitated or incompetent person, including health care and financial decisions.
Marital deduction
A deduction that may be taken on the federal and Massachusetts estate tax returns, it lets the first spouse to die leave an unlimited amount of assets to the surviving spouse free of estate taxes. However, if no other tax planning is used and the surviving spouse’s estate is more than the amount of the federal and/or state estate tax exemption in effect at the time of the surviving spouse’s death, estate taxes will be due at that time.
Settle an estate
The process of winding down the affairs of a deceased person, and includes identifying and valuing of assets, paying debts and taxes, and distributing assets to beneficiaries.
Trust
A fiduciary relationship in which one party, known as the trust creator, settlor or grantor, gives another party, known as the trustee, the responsibility to hold property or assets for the benefit of another party, the beneficiary. The trust should be memorialized by a written trust agreement which specifies the trustee’s duties and powers, the trustee’s obligation to the beneficiary, and the beneficiary’s rights to income or principal from the trust.
Will
A written document with instructions for disposing of probate assets after death. A Will can only be enforced through a probate court. A Will may also include the nomination of guardian for minor children.
If you have any additional questions about estate planning, or would like to consult with an experienced estate planning attorney about your own estate plan, please contact our office. We will be happy to assist you in creating a comprehensive plan that is tailored to your unique needs and goals, so that next year when National Estate Planning Week rolls around, you will have something to celebrate!
November, 2020
© 2020 Samuel, Sayward & Baler LLC
Five Estate Planning Steps to Prioritize Now
Five Estate Planning Steps to Prioritize Now
By Attorney Maria C. Baler
Attorney Maria C. Baler discusses Five Estate planning steps to prioritize during the global pandemic.
Living through a global pandemic is an anxiety-producing experience. For many people, making sure their estate plan is in order is one way to exercise some control over the situation by providing some certainty around what will happen if they become sick or pass away. As a bonus, this exercise generally gives people peace of mind and reduces anxiety since they know they have done what they can to make sure things will be taken care of if the unexpected happens.
Here are five things to do now to reduce that pandemic-related anxiety for your estate plan:
1. Make sure your Health Care Documents are in Order. One of the things we are all worried about is getting sick, and especially getting sick enough to be hospitalized. If you are ill and unable to make or communicate your health care decisions, your physician will look to someone else to make those decisions for you. A Health Care Proxy is the document that appoints a person you select (your health care agent) to make health care decisions for you in this situation. Without a Health Care Proxy, the Court may need to appoint a guardian for you in order for health care decisions to be made on your behalf. A HIPAA Authorization will grant your family members access to your medical information and give them the right to confer with your physicians if you are not well enough to give permission. A Living Will, although not binding in Massachusetts, is a way to express your wishes about end of life care.
2. Distribute Health Care Documents and Discuss Health Care Wishes. After you have created your health care documents, make sure that each of your health care agents, your primary care physician, and any other specialists you see on a regular basis has a copy of your Health Care Proxy, and that the document is scanned into your electronic medical record. If possible, encourage your health care agents to save a copy of your proxy to their phone to make access easier in the event of an emergency. If you have signed a Living Will expressing your wishes about end of life care, you should provide a copy of that document to your health care agents as well. Finally, have a conversation with your physician and your health care agents about your wishes regarding health care in general, treatment for any specific medical conditions you may have (including COVID if that arises), and specifically regarding end of life care so that your wishes will be carried out if you are unable to make decisions for yourself.
3. Review your Estate Plan and Update if Necessary. In addition to making sure your health care documents are up to date, take time to review your Power of Attorney (for legal and financial decision-making), your Will and any Trusts you may have created to confirm those documents accurately reflect your current wishes. If they don’t, update them. If you have Trusts, review how your Trusts are funded, and whether any newly-acquired assets should be titled in your Trust. Review beneficiary designations on life insurance and retirement accounts and determine if any changes are needed. If you don’t have an estate plan, now is a good time to meet with an estate planning attorney to discuss your particular situation and create documents that are appropriate for you and your family.
4. Create a List of Your Assets and Organize your Documents. Whenever you pass away, it will be important for your family members or beneficiaries to be able to quickly and easily identify and locate your legal documents and identify the assets you own. An easy way to do this is to create a list of those assets (real estate, bank accounts, investment accounts, retirement accounts, annuities, life insurance, etc.) and keep it in a place where it will be easily found. Keeping your financial records in one central location (such as a filing cabinet, desk or fireproof box) is a good idea. If you have a trusted person you can inform where to find this information, that is also a good step to take.
5. Don’t forget about Digital Assets. As more of our lives move online, it is important to leave instructions about how any digital assets that you may own should be dealt with at your death – email, photo and document storage accounts, social media, etc. As important as those instructions are, if your loved ones don’t have access to these accounts those instructions cannot be carried out. In addition to your legal documents giving authority for access, it is important to leave instructions regarding access, including usernames and passwords or how to gain access to them. Again, identify a trusted person and let them know where these instructions can be found.
You may think that planning for illness and death is not the most uplifting of activities, especially in the time of a global pandemic. However, I have clients tell me every day how good they feel after getting their estate plan in order. Even starting the process feels like a weight has been lifted since they know they are taking steps to make sure they are protected and their family will have an easier time of it in the event they become ill or pass away. Take some time to review your existing plan or move forward to create one – it’s not as painful as you think, and both you and your family will benefit in the long run.
Maria Baler, Esq. is an estate planning and elder law attorney and partner at Samuel, Sayward & Baler LLC, a law firm based in Dedham. She is also a former director of the Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA), and currently serves on the Board of Directors of the Massachusetts Forum of Estate Planning Attorneys. For more information, visit www.ssbllc.com or call (781) 461-1020. This article is not intended to provide legal advice or create or imply an attorney-client relationship. No information contained herein is a substitute for a personal consultation with an attorney.
September 2020
© 2020 Samuel, Sayward & Baler LLC