Gifts

The Do’s and Don’ts of Estate Planning According to the Movie Knives Out

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Over the holidays, I had the pleasure of seeing the movie Knives Out in the theater.  Knives Out is about an elderly author who dies shortly after a family gathering, and the subsequent inheritance of his multi-million-dollar estate.  The plot slowly reveals that the author’s death and his relationships with his family members and employees may not all be as they first seem. Naturally, I was curious to see the extent of artistic license taken versus my “real world” perspective as an estate planning attorney and probate administration attorney with regard to the inheritance and dealing with large estates. Here are a few do’s and don’ts of estate planning according to the movie Knives Out in comparison to the actual practice of estate planning and administration (warning – spoilers ahead).

Do Update Your Estate Plan Regularly to Reflect Your Wishes. In the movie, the author updates his Last Will and Testament shortly before his death and drastically changes who will inherit his estate from his family to an employee, thereby cutting off his family members from receiving any portion of his estate.

Practically, his family members could contest his Last Will and Testament in court for several different reasons in an effort to invalidate the Will and inherit the estate instead.  To combat an anticipated challenge to the Will, a so-called “no contest” provision (also known as an “in terrorem” or “poison pen” provision) may be included in a Will.    The no contest provision basically states that if any person who stands to inherit a portion of your estate challenges the Will he or she will receive nothing.  Such a provision is most effective when a person has something to lose in the event of a contest and it is clear that the Will creator intended to include the provision.  Not all states recognize these provisions as valid but Massachusetts does. Incidentally, part of Knives Out was filmed in Massachusetts at the Ames Mansion in Borderland State Park located in the towns of Easton and Sharon.

Don’t Tell Your Family Members That They Are Disinherited Otherwise It May Result in Your Untimely Demise If You Are A Rich Author. The author tells some of his family members that they are disinherited from his estate and will no longer receive financial support from him while he is alive. This leads to the author’s demise, which is investigated by an eccentric and cunning southern gentleman detective to determine if the author was, in fact, murdered, and by whom. The detective’s quest to discover the murderer leads him to the employee who is named to inherit the estate, which brings us to the last avenue by which the family could inherit the author’s estate: the so-called “slayer statute”. Under the slayer statute, if the person who stands to inherit from an estate is convicted of the deceased’s first-degree murder, second-degree murder or manslaughter, he or she is prohibited from receiving the inheritance (G.L.c. 265, §46).

In reality, it is your decision as to the information you wish to share with your family members about your estate plan. If it is important to you to be transparent about your wishes and you are comfortable sharing that information, you may wish to speak with each family member alone or hold a family meeting or simply provide copies of your estate plan. At the very least, provide your family members with your estate planning attorney’s contact information so they know who to call for guidance after your death.

Do Share Information About The Inheritance After The Person’s Death If You Are The Personal Representative. The Personal Representative (Executor) of the deceased’s estate must administer the estate according to the deceased’s Will or the state intestacy laws. One of the Personal Representative’s administrative duties is to inform those who will be receiving inheritances from the estate. The Personal Representative should work closely with an attorney to administer the estate properly, including filing probate pleadings, to ensure he or she completes all the necessary tasks according to certain deadlines to reduce the risk of liability.

Don’t Expect A Reading of The Will To Learn About Your Inheritance. The reading of the author’s Will is a pivotal and dramatic moment in Knives Out. In reality, readings of Wills rarely take place after the deceased’s death. Instead, copies of the Will are provided to the recipients of the estate by the Personal Representative.  Additionally, the original Will is filed with the probate court along with the pleadings and becomes public record.

If you have some free time and enjoy movies with well-crafted dialogue delivered by a talented multigenerational cast, surprising plot twists and turns, and filmed in Massachusetts, I suggest you see Knives Out. It is not only entertaining but also highlights the importance of having an up-to-date estate plan in place.

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 estate planning, estate settlement and elder law matters such as long-term care planning. She is an active member 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 www.ssbllc.com or call 781/461-1020.

January, 2020

© 2020 Samuel, Sayward & Baler LLC

Taking the Mystery Out of Gift Giving

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We are often asked about the tax rules around gift-giving, especially as the end of the year approaches.  These tax rules are governed by the federal gift and estate tax system, which is wholly separate from the income tax system.  There is no Massachusetts gift tax.

If you give a gift, the money you give is not income taxable to the recipient, nor is the gift tax-deductible by you (the person who makes the gift, who we’ll call the “donor”), unless it is made to a qualified charity.

Federal gift tax, if any, is paid by the donor, not by the recipient.  For federal gift and estate tax purposes, under current law every US citizen has a combined $11.4 million exemption (in 2019) from gift and estate tax. This means that each person can give up to $11.4 million to others, either during their lifetime or at death, without paying any federal gift or estate tax.  A gift tax is payable only after the donor has made combined lifetime and death time gifts of more than $11.4 million.

In addition, certain gifts are exempt from the gift tax.  Exempt gifts include:

  • so-called annual exclusion gifts which currently allow a person to gift $15,000 (in 2019) to any number of people in any calendar year,
  • unlimited gifts to a spouse (provided the spouse is a U.S. citizen),
  • unlimited gifts to qualified charities, and
  • unlimited payments of health care expenses or tuition for another as long as those gifts are paid directly to the educational institution or health care provider.

These exempt gifts do not require the donor to file a federal gift tax return. If a donor makes a non-exempt gift, a federal gift tax return must be filed, even if no gift tax is payable, to track how much of the donor’s gift and estate tax exemption has been used.

The gift tax is complicated, but for most people who want to make gifts to children or grandchildren, the gift tax will not be an issue. If you wish to make a non-exempt gift, it is best to consult with your estate planning attorney and accountant before making the gift so that issues such as timing, and estate, gift and capital gain tax implications can be thoughtfully considered prior to making the gift.

Let Your Loved Ones Thank You for Giving Them the Gift of Your Estate Plan

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The holiday season is here and with it comes an excellent chance to talk with your loved ones about your estate plan – really!  The holidays are often the time when family members scattered all over the country for most of the year come together in one place.  In addition to catching up on the latest happenings, spreading good cheer and eating too many sweets, consider taking time to talk with your loved ones about estate planning you have done and instructions you have left.  Read on more about the two most critical times for planning:  during your life and after death (that’s a little estate planning humor).

1. Making important decisions in advance

People who do not plan for the possibility that they may suffer a period of incapacity during their lifetimes doom themselves to suffering in the public eye due to the need for a Probate Court proceeding appointing a guardian and/or conservator to provide oversight.  Don’t let this happen, and try to avoid probate if you can.  Create the legal documents you need to appoint the people you trust and want to make your health care decisions, pay your bills and manage your property or investments if it becomes necessary.

A Durable Power of Attorney is a legal document that designates one or more people to manage your financial matters.  Select a trusted friend or family member with strong financial skills.  A Health Care Proxy appoints people to make health care decisions for you if you are not able to do so for yourself.  Choose people who will respect your wishes.

2. Planning for After Death – Wills

Wills are the basic estate plan document that determine who receives your assets on your death.  Note your Will only controls the distribution of probate assets – assets owned in your individual name and that do not have a beneficiary designated to receive them.  A Will does not determine how jointly owned assets and assets that have a named beneficiary (such as retirement plans and life insurance) pass.  The Personal Representative you name manages your probate assets after your death.  This person will identify and consolidate your assets, pay your debts and taxes and distribute assets as you direct in your Will.

Your Will also controls the distribution of your tangible property, i.e. the things loved ones often fight over. Reduce the likelihood of controversy by writing down your wishes about where this special stuff should go so your family knows what you want.

An experienced estate planning attorney can craft your Will. Give your loved ones a gift of peace this holiday season by creating your own estate plan if you do not have one or making sure your existing estate plan represents your intent.  They will thank you from the bottom of their sugar-plum fairy hearts!

December, 2018

© 2018 Samuel, Sayward & Baler LLC

Five Ideas to Consider when Leaving a Vacation Home to Heirs*

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Sue_144pxWith full summer upon us, thoughts turn to vacationing.  Whether you love the mountains, the beach, or fishing on the lake, everyone wants to take time to recharge during the carefree days of summer.  Some people are fortunate enough to own a vacation retreat where family members are regularly invited to get away from it all.  Whether it’s a cabin in the woods or a waterfront mansion, passing this beloved property on to future generations in a way that is fair and likely to result in years of happy memory building by generations of family members is a challenge.  In fact, sometimes it is so challenging that the owners die without doing any planning for their vacation home, which can lead to serious conflicts among heirs.

Here are five ideas to consider when a vacation home is part of your estate.

  1. There’s no such thing as setting aside too much money to support the property.     One of the primary areas of discord among co-owners of vacation property is money.  When mom and dad bought the cabin, they factored in the costs of maintaining the property when making the decision to purchase it.  However, for heirs who inherit a percentage of a property, there was no such consideration.  It costs money to maintain the cabin, including paying taxes, insurance, utilities and repairs – and not all inheritors are of equal means.  If you have a vacation home you want to leave to multiple inheritors, plan to leave funds to pay for the upkeep of the property for at least a few years following your death.
  1. Involve the next generation in the planning. When planning for the future of your vacation home, talk to your children about your plans and encourage them to be honest with you. Although you dearly love spending time at the cottage, your children may not feel the same way and they may be reluctant to tell you for fear of hurting your feelings.  Even if your children also love the family vacation home, they may recognize that because of where they live or because of their personal financial circumstances, ownership of the property is just not realistic.  As painful as this may be for parents to hear, knowing who wants to keep the property and who has no interest in owning a second home is vital information in planning.
  1. Consider tax reduction strategies.  In some sad situations, the next generation would love to keep the vacation property, but the estate taxes payable at the parents’ deaths are so steep that they cannot afford to do so.  These days, it is not uncommon to find that the humble lakeside cottage purchased 30 years ago for short money is now worth $2 million or more.  If you are lucky enough to have one of those properties, consider undertaking planning to reduce the tax bite at your death.  Common planning techniques include granting a conservation easement, charitable planning with part of the property, or using a Qualified Personal Residence Trust (QPRT) or other gifting vehicle to reduce the tax value of the property in the parents’ estates.
  1. Transfer during lifetime or at death? Many vacation home owners intend to remain as the sole owners of the property during their lifetimes and leave the property to their heirs at their deaths.  They reason that by doing so, they remain as the sole decision makers and keep all of their options open: they could sell the property, rent it out, change their minds about who will inherit it, etc.  However, transferring ownership to the next generation during the parents’ lifetimes can be good tax planning (see #3 above) or a good way to protect the property from having to be sold to pay for a parent’s long-term care expenses.  Transferring interests to children during the parents’ lifetimes can also serve as a “practice-run” for management of the property.  The parents can tweak their vacation house plan to address issues that arise during their lifetimes while they are still around to do so.
  1. The devil is in the details, or who gets the week of July 4th? In most cases, a vacation home is a seasonal use property.  Even if the Cape house is winterized and can be used in February, not many seek out the beach in the dead of winter.  Whether it’s skiing or beaching, there are usually a limited number of “prime” weeks during which everyone wants to use the property.  Along with the money (see #1 above), deciding how to divvy up these weeks among the inheritors is a key element to planning for the vacation home. The challenge increases exponentially with the greater the number of people involved.  By putting a system in place, parents can reduce the friction that may arise among children with competing interests who are trying to work this out after mom and dad are gone.

If you have a vision of your descendants enjoying your beloved cottage and building memories there for generations to come, take the necessary steps now to make your wishes a reality.  Failing to plan and simply hoping that your children will “figure it out” is the clearest path to family discord.  An experienced estate planning attorney can help you craft a plan that will have your heirs lounging lakeside or speeding down the slopes for years to come.

* Special thanks to my friend and colleague Attorney Timothy Borchers whose work and guidance in the area of planning for the family vacation home has been invaluable to many of us.

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. 

Wills • Trusts • Elder Law • Long-Term Care Planning • Estates

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