Attorney Suzanne Sayward discusses the importance of updating your estate plan during life’s happy moments, for 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.
I see clients every day who sheepishly tell me they have been meaning to update their Wills and Trusts for years, but just haven’t found the time to do so. First things first – let the guilt go. Procrastinating about estate planning is nothing new and is understandable in many ways. Talking about illness, death and taxes is not most people’s idea of a good time (except for us estate planning attorneys). That being said, there are times in life when it’s time to move updating your estate plan off the “to do” list and on to the “done” list. Here are those times:
- You have Young Children
If you have young children, your estate plan needs to do two important things: address the care and custody of your minor children (under age 18 in Massachusetts) should you pass away, and address the management and distribution of the assets you will leave them. Your Will is the document in which you name a guardian for your minor children. The guardian is the person who will decide where your children live and attend school, what type of health care your children 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 someone as your children’s guardian. The Court will have the difficult job of choosing among those who ask to be appointed without the benefit of your input. Don’t lose the opportunity to put your children in the right hands by neglecting to speak with a lawyer who has experience drafting Wills and Trusts for families with young children!
After you have made sure that the right people will be raising your children, you need to make sure that the inheritance you leave them is preserved and protected for them. Creating a Trust that sets out when and for what purpose your children will receive the inheritance you leave them, and names a responsible person (a Trustee) to manage those assets is the best way to do this. Estate planning and 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. An experienced estate planning attorney can help you set up a Trust for your minor children. While funds are held in trust for your children’s benefit, the Trustee may use them for a child’s education, living expenses, health care, or other purposes you specify.
- The Value of your Estate is more than $1 million
If you are a Massachusetts resident and the value of your “estate” (your home, retirement accounts, life insurance, bank and investment accounts) is more than $1 million, your estate will pay an estate tax to the Commonwealth of Massachusetts at your death unless your assets are left to your spouse or to charity. The estate tax is a graduated tax. With tax rates ranging from 6.4% (for estates just over $1 million) to 16% for estates in excess of $10 million, the tax bill can be significant. Estate taxes and estate planning are closely connected. Whether you are married or single, there are planning strategies that can be employed to reduce the estate tax payable at your death. If you are married, this planning must be done while both spouses are alive.
For example, Jim and Sue have assets of approximately $1.5 million. If all assets are owned jointly or left to the surviving spouse at the first spouse’s death, the surviving spouse will have $1.5 million of assets at her death and will pay Massachusetts estate tax of approximately $70,000. If instead the first spouse to die leaves $700,000 of assets in trust for the benefit of the surviving spouse, the surviving spouse will have a taxable estate of only $800,000 ($1.5 million minus $700,000), and no estate tax will be payable at the surviving spouse’s death. In this example, creating and funding the right type of trust will save Jim and Sue’s family $70,000 in Massachusetts estate tax, while at the same time ensuring all of the assets are available for Sue’s use during her lifetime.
- You Created your Estate Plan Documents before 2012
In 2012, after decades of probate and trust laws that estate planners had come to know and love, the Massachusetts legislature made big changes to the laws that govern Wills, probate and Trusts in our state. These changes in the law were favorable in many respects. Although these changes did not make Wills and Trusts created prior to 2012 obsolete, the law did change terminology (Executors are now called Personal Representatives) and also gave us the opportunity to streamline and customize in many respects the way Wills and Trusts are administered after death. If you have estate plan documents that were created before 2012, it is a good idea to have those documents reviewed, and consider updating them to include some of the new administrative provisions that will make things easier for your fiduciaries and your heirs after your death. While you are at it, you can also include digital estate planning provisions that give your fiduciaries necessary authority to deal with your digital assets (email accounts, photo storage accounts, social media, online banking, etc.) if you become incapacitated or pass away. This will protect your fiduciaries from running afoul of federal “hacking” laws that do not look kindly on unauthorized access to online accounts, even if the person has your username and password.
- You have Significant Wealth in Retirement Plans
An important estate planning concept to understand is that your Will and Trust do not necessarily control all of the assets you own at your death. First, assets that have beneficiary designations – such as life insurance policies, annuities, and retirement accounts (IRA, 401k) – will be paid to the beneficiary you have designated at your death, regardless of the provisions of your Will or Trust. For this reason, a crucial part of a comprehensive estate plan is to carefully review how beneficiaries are designated on these types of assets, and be thoughtful about making any necessary changes. Second, retirement accounts are subject to their own, complicated set of rules regarding how and when distributions from those accounts will be made to the beneficiaries you have designated. These rules are about to change when Congress passes the SECURE Act, which is expected to happen when Congress returns to session in September. If you have significant assets in a retirement account, you should understand how these new rules will impact the distribution of these funds to your beneficiaries, and if necessary, make appropriate plans to manage those accounts for those who may not be capable of managing that wealth on their own, with an eye towards minimizing the income tax that will be payable on those distributions. Finally, keep in mind that these assets are still considered part of your estate for estate tax purposes. The estate tax provisions of your Will and Trust will need to specify whether the recipient(s) of those assets, if different (or in different proportions) from the beneficiaries of the assets controlled by your Will and Trust, will pay their share of the estate tax in proportion to what they receive.
- You are Concerned about the Cost of Long-Term Care
Estate and tax planning can be inconsistent with long-term care planning. The estate plan you created 15 or 20 years ago when your family was young is most likely no longer adequate for the issues your estate plan should address as you age. It is important to get educated about issues relating to long-term care while you are still healthy and able to take whatever long-term care planning steps may be necessary. An experienced estate planning and elder law attorney can help you think through questions like – What is your plan if you or your spouse need care? Do you intend to stay in your home? If so, how should it be owned? Do you intend to move to a different state to be near children, or to a CCRC? Do you have or should you look into purchasing long-term care insurance? Will you be or do you wish to be eligible for public benefits to pay for long-term care? Are there planning steps you should take now to position yourself to be eligible in the future? What will public benefits pay for and what won’t they pay for, and is eligibility for those benefits the best planning strategy? Depending on your answers to these questions, your estate plan can be updated to plan appropriate for your future. In addition to these issues, the importance of a good Power of Attorney (for financial decision-making) and updated health care documents (such as a Health Care Proxy) cannot be overstated.
Take the time to consider whether your estate plan is due for a review and update. If you have never created an estate plan, now’s the time! Put your mind at ease, cross this important item off the “to do” list, and contact an experienced estate planning attorney today to get the process started! You will be glad you did.
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.
© 2019 Samuel, Sayward & Baler LLC
Clients often ask how often they should review and update their estate plan. Here’s a quick reference guide of when you should call us to schedule a time to review your estate plan:
- It has been more than five years since you last reviewed your plan
- Your health has changed
- The health of one of your beneficiaries has changed
- One of your named fiduciaries (i.e. Personal Representative, Trustee, Attorney-in-fact, Health Care Agent) has died or is no longer the right choice
- Your marital status has changed
- You received an inheritance
- You have a new baby
- Your child(ren) reach the age of majority – click here for Attorney Poole’s blog about the three documents that are vital for your 18 year old child
- The value of your assets has changed significantly
The above list is not meant to be exhaustive as everyone’s situation is unique. If you are wondering if it’s time to come in for an update, it probably is. Call Jennifer Poles at our office to schedule an appointment with one of our attorneys to see if any updates are necessary.
© 2018 Samuel, Sayward & Baler LLC
Vacation season is upon us, and in my experience, the prospect of boarding a plane is a great motivator to review my estate plan. Although (in 31 years of practice) I have not lost a vacationing client, I understand the anxiety that vacation travel can provoke.
If you are planning a vacation this summer and it has been more than a few years since you reviewed your estate plan, take the time to do so before you leave. Here are a few questions to ask yourself. Are the people named in your Will as guardians of your children and as the executor (now called Personal Representative) of your estate still alive and well and appropriate to do those jobs? Do the instructions about how assets are to be distributed at your death still accurately reflect your wishes? Have you purchased real estate or had children since you last updated your plan? Is a beneficiary battling substance abuse or money management issues that would make a Trust appropriate? If your family is traveling together, do you know who would inherit your estate if you all perished? Have you created a Trust as part of your plan but never funded it?
For these or any number of other reasons, it is probably time to touch base with your estate planning attorney and make sure things are in order before you depart. Of course, updating your estate plan (or creating one in the first place) is not optimally done while in a pre-vacation frenzy. Contact your estate planning attorney now, before summer is in full swing, and get your estate plan in order so you will have a worry-free vacation!
If you need some motivation, check out Death by Selfie and Other Avoidable Vacation Tragedies. Safe travels!
© 2018 Samuel, Sayward & Baler LLC
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.