Estate Planning & Elder Law

According to Forbes, more than half of all Americans do not have the most basic estate planning documents. Reasons for putting off such simple planning can be its seen as a chore, it’s not necessary, “… my estate is too small…” and “…I don’t need to.”

Estate planning is just as important for the here and now as it is for the later. Should you become incapacitated (temporarily or permanently) unexpectedly, it can be some of the most difficult times for your loved ones. A proper Health Care Proxy and Power of Attorney will allow for quick action and avoid delays, while you are still able to make important decisions for your loved ones.

Your Last Will and Testament can save unnecessary probate costs and protect you and your family’s privacy.

Call us today so that we can ensure you are best protected today, not just tomorrow. Still have questions? Contact us today for advice or to schedule an appointment.

Ensure your estate is protected

Durable Power of Attorney

The Durable Power of Attorney is a document that allows an Agent to act for you. With most, the powers become effective immediately upon execution. But there are alternatives; requiring a doctor’s certificate before the agent can act. The powers here are quite broad. Generally, the agent has powers to lease, sell or transfer real estate, file income tax returns, and borrow or mortgage money on your behalf. In addition, your agent can exercise any rights under any policies or contracts that you have entered. Your agent can be sued or can sue on your behalf. Your agent may also make gifts to others on your behalf. Because of this power, the Agent has certain obligations; which apply to making changes to or transferring assets with your wishes in your Last Will and Testament being maintained and a consideration. Come in today and plan your life’s important financial situations, and those whom you want these decisions entrusted to, today!

Health Care Proxy

There are many variations to the Health Care Proxy. They become effective when the powers are invoked by your doctor when unfortunate circumstances render you unable to communicate your health care decisions. It can include a living will, allowing you to die with dignity; a very important clause if you do not want to be kept alive on life support machines. These documents are not legal in Massachusetts but provide a guidance for your agents and family. A Health Care Proxy can contain privacy release statements for children, brothers and sisters, etc. Also, due to recent changes in the Massachusetts laws, the agent in your health care proxy (and/or power of attorney) should have the authority to sign you in or to discharge you from a nursing home, rehab, or other medical facility. If your agent does not have this authority, it may be necessary for your agent to obtain a guardianship through the probate court. Come in today and let’s plan your life’s important health care decisions together.

MassHealth & Medicaid

The cost of a nursing home often goes overlooked to those that are not in need. However, some of the more expensive facilities can cost between $12,000 to $14,000 a month. MassHealth or Medicaid will pay for any long term care in these facilities but there is a sacrifice that is important to be aware of and to plan for. In Massachusetts, help can come from the form of MassHealth. However the process is very nuanced, involves a look back period of 60 months, and is subject to continuous changes. Whether you need help applying or appealing an eligibility decision, our law office can help!

Homestead

The homestead protects the equity in your home up to $500,000. The homestead protects your home from the claims of most creditors but does not protect your home from the IRS, Department of Revenue or if you go into a nursing home.

Living Will

Due to both scientific and medical advances, society has been presented with a variety of Bioethical issues. Some of these advances have provided physicians with enhanced control over the time and death of their patient. A living will is not legal in Massachusetts, but this document addresses some of these many challenges that are posed in making end of life decisions when you, or your health care agent, are unable.

Wills

Also known as your Last Will and Testament, this document is important to control who will receive your property and which property they will receive, and who will be in charge of not only gathering those assets but distributing them as well.

Trusts

People often use trusts to preserve their estate for their family. The two more common types of trusts are revocable and irrevocable trusts.

(a) Revocable Trusts

A revocable living trust is an agreement that a person will manage your assets for the benefit of another person for a period of time. The trust itself contains the terms that describe how the money can be spent and when the principal of the trust can be paid out.

The donor can change or revoke this trust at any point during his or her lifetime or prior to incapacity. You can put assets into the trust or take them out; and if assets are in the trust prior to your death, probate can be avoided. This is an extremely flexible document but does not protect assets from a nursing home.

Assets that are in a revocable trust are available for consideration when applying for MassHealth. It is not a planning tool for long-term care issues but can be used to avoid probate or distribute funds to the children overtime.

(b) Irrevocable Trusts

Irrevocable trusts are similar to the trusts described above. The primary difference is that you cannot change the terms of the trust once you have signed it.

Through an irrevocable trust, you can control the ultimate distribution of the trust assets if a child passes away or divorces. The “income-only” trust would be established with some of your funds. You would contribute a certain amount to the trust. The funds in the trust would be used to provide you with an income only. The principal would not be paid out. It is important to note that once this trust is funded, the irrevocable trust CANNOT be changed.

If you need to apply for long term care assistance from the state, MassHealth will scrutinize the trust to make sure the donor does not receive a benefit from the trust. If the donor is entitled to income only, this income will be countable.

Other trusts are testamentary trusts – these are often found in your will. The assets that you have will pass through probate and into your will.

(c) Irrevocable Life Insurance Trust

This type of trust requires you as the donor to establish a trust that is irrevocable. You name a person or entity to manage the assets in the trust. Generally, the trustee will purchase life insurance on the life of the donor rather than transfer existing life insurance into the trust. If the trustee purchases the insurance, the donor could die shortly after the purchase of the insurance, and the value of the insurance would not be included in his or her estate. If the policy used in the trust is an existing policy, and the donor dies within three years of making the transfer, the proceeds would be included in his or her estate. This is the result that we try to avoid.
The trustee will pay the premiums annually for the insurance in this trust. In order to do this, the donor will make gifts to the trust based on the number of beneficiaries and the premium due. The beneficiaries are given a certain time during which they can withdraw these gifts. If the money is not withdrawn, the trustee has the money available to pay the premium.

This technique is referred to as “crummy powers”. It is an effective way to provide for gifts into trusts to be used as premium payments.

The advantage of this estate planning technique is that the trustee can “purchase” assets from the estate alleviating the need to have a “firesale” or spread the payment of estate taxes over a ten or fourteen year period.

(d) Charitable Remainder Trusts

These types of trusts involve establishing a trust for the benefit of a charity of your choice. During your lifetime, you use or direct the use of the trust funds for your benefit or that of another. The payment that you receive is based on either a fixed percentage or a variable one. At your death, or the death of the other beneficiary, the funds will pass to a charity.

The advantage of this trust is that the Federal and state governments allow the estate a deduction for the gift that passes to a qualified charity. This technique is often used in a situation where the donor has a specific charity that he feels compelled to make a gift. Generally, the entire value of your gift is allowed a credit, reducing or eliminating the estate tax.

In addition to or as an alternative to a remainder trust, you can make outright gifts to your favorite charities. These gifts can be specific dollar amounts or a per cent of the estate. The gifts can be made during your life or at death.

(e) Special Needs Trusts

These trusts are used when you have a loved one with special needs. The trust is designed to provide extras to your loved one that will not interfere in his or her benefits.

Gifting: The federal government allows a person to make annual gifts to an individual. This amount is currently $15,000 and increases based on inflation regularly. A couple can each make this gift. This is a way to reduce the size of an estate by gifting assets or cash to your children/beneficiaries. The Commonwealth of Massachusetts does not have a gift tax presently.

Estate Tax: When a person dies, the Federal and the state governments impose an estate tax on your assets. The Federal estate tax has significantly increased the threshold on when an estate will be subject to an estate tax. This amount (currently $11 million) is scheduled to disappear in 2026 unless Congress votes to extend it.

However, the Massachusetts estate tax is assessed against an estate that exceeds $1 million. This is a progressive tax that is assessed on all assets from dollar one when the estate exceeds $1 million.

There is a deduction for all assets that pass to the surviving spouse that will eliminate the estate tax at the first death. This is called the marital deduction. This marital deduction is available both at the state and the federal levels.

In addition to the marital deduction, there is also an exemption for the threshold amount or the “unified credit amount”. The Federal exemption amount is tied to the current estate tax threshold. The exemption amount in Massachusetts is $1 million. As a result, it is possible to set up an estate plan that funds a trust to shelter each person’s “unified credit equivalent or exemption amount”. This type of plan presently allows a couple to shelter a total of $2 million. The balance of the estate can pass to the surviving spouse and qualify for the 100% marital deduction.

The use of separate trusts may not be the option you pick. The funds in the trust are beyond the control of the surviving spouse. You may opt to keep all of the assets under the control of the survivor. At the death of the surviving spouse, the estate will be responsible for estate taxes. This amount will vary based on a gifting plan or charitable contributions.

The estate tax liability is due nine months after death. If there is cash in the estate, this would be used first to pay the taxes, and then assets in the estate may have to be sold to pay the liability in total. The IRS does allow this liability to be paid over a period of time at a modest interest rate.