Articles Posted in Estate Planning

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According to a recent article published by ABC News, Americans “are living longer, in more comfort and in better health than ever before.” With a longer life expectancy, early financial planning has become even more critical to ensure that you will be comfortable and taken care of in your retirement. Also, although Americans seem to be healthier than we once were, nursing homes are full of residents and patients.

commerce-acts-books-477966-mThroughout the Commonwealth of Massachusetts there are over 400 nursing homes, with some of the highest ranked facilities here in the North Shore, including the towns of Reading, Saugus, Lynnfield and Peabody. Care at these facilities is expensive and can quickly drain your finances. A 2016 survey by Genworth Financial estimated the median annual cost for a semi-private room in a nursing home in Massachusetts to be more than $135,000.

Most seniors in need of long term healthcare are not able to afford the high costs without assistance. According to a study by the Massachusetts Medicaid Policy Institute, over 60% of residents of nursing facilities rely on MassHealth (the Massachusetts state Medicaid program) benefits to help them pay for long term healthcare.

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Long term healthcare and nursing home care are topics of concern for many with aging parents or grandparents.  A hot-button in the Commonwealth of Massachusetts, including the North Shore and towns such as Wakefield, Reading, Lynnfield, and Saugus, is MassHealth (Medicaid) and senior benefits. MassHealth is the government run health insurance plan in MA which combines Medicaid and CHIP (State Children’s Health Insurance Program) into one program. Qualified MassHealth members may be able to get doctor visits, prescription drugs, hospital stays, and many other important services.

commerce-acts-books-477966-m A recent court ruling from the Supreme Judicial Court (the highest court in Massachusetts)   presents some good news in determining qualification for certain benefits under MassHealth that may have an important impact on seniors. Daley v. Secretary of the Executive Office of Health and Human Services (Mass., No. SJC-12200, May 30, 2017) and Nadeau v. Director of the Office of Medicaid (Mass., No. SJC-12205, May 30, 2017).

For seniors to qualify for MassHealth, the general rule is that individuals must have assets of less than $2,000.00; and couples living together less than $3,000.00. This limit often requires individuals and couples to “spend down” or deplete their resources in order to qualify for Medicaid long-term benefits when they enter a nursing home.  One practice has been for seniors to engage in “‘Medicaid planning’ in an attempt to transfer or dispose of assets long before they need long-term care so that, when the need arises, they may satisfy the asset limit and qualify for Medicaid benefits.”  The purpose of Medicaid planning is essentially to give individuals whose assets exceed the aforementioned “limit” and would make them ineligible for long-term care benefits, the opportunity to qualify for Medicaid benefits.  Some transfer their assets to their children or other loved ones to meet the asset threshold and avoid using their own assets to pay for long-term care.  Medicaid rules enacted by Congress impose two restrictions on Medicaid planning, in an effort to prevent individuals from taking advantage of MassHealth benefits.  The first is the “look back” rule, which “imposes a penalty for any asset transfer for less than fair market value made by an individual within five years of the individual’s application for Medicaid benefits”.  For example, if elderly parents convey their home to their children for less than the fair market value.  The “look back” rule provides that if such a transfer were to occur within that five year period, the applicant would be “ineligible for Medicaid benefits for a period of time determined by dividing the value of the transfer by the average monthly cost of the nursing home facility”.

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The importance of estate planning and the benefits of preparing a Will have been discussed in our previous blogs. Proper estate planning and a carefully drafted Will can ensure that your last wishes are carried out as you intend, wish and instruct. But let’s not kid ourselves, facing one’s mortality is hard. Many of us find it difficult to think of the end of our life and estate planning is often on the bottom of the “to do” list. A recent article from Caring.com reported that nearly six out of ten Americans do not have estate planning documents. This is true across all socio-economic classes.  If you are part of that nearly 60% group of Americans without a Will, what happens to your possessions when you pass away? In Massachusetts, if you pass away without a Will, this is commonly known as dying “intestate”. Any assets or property you own at death will be probated in the county you resided in at date of death (if you lived in Essex County your estate will be probated as intestate in the Essex County Probate Court, if you lived in Middlesex County then it would be in the Middlesex County Probate Court and so on). Distribution of your property would be determined by statute and given to your closest legal heir(s) in a proportion as determined by Massachusetts intestacy law.

commerce-acts-books-477966-mThe Massachusetts intestacy statute is contained in the Massachusetts Uniform Probate Code (the “MUPC”).[1] The MUPC sets forth how your property will be distributed according to the makeup of your surviving family members. Many people believe that the Massachusetts intestacy statute simply divides the property in an estate equally among the surviving relatives, but the determination of “who gets what” is more complicated than that.

If the deceased was married, the portion of the decedent’s estate the decedent’s surviving spouse is entitled to depends on whether or not there are or were children; and in some circumstances, further affected by whether or not the decedent has a surviving parent. If there are no living children and no surviving parents of the deceased, a surviving spouse will get the entire estate. There is a second situation where the surviving spouse gets the entire estate: if all of the children of the decedent are also children of the surviving spouse and the surviving spouse has no other living descendants that are not descendants of the decedent. It gets even more complicated depending on whether or not there is surviving spouse, parents, or children or brothers and sisters of the deceased.  Here are a couple of examples:

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Testamentary Capacity is a legal term “used to describe a person’s legal and mental ability to make or alter a valid Will”.  In order to create a valid and binding Will or Codicil, you must have the requisite testamentary capacity. Throughout the Commonwealth of Massachusetts, including Essex County, Middlesex County or any of the towns and cities here in MA, there are two initial hurdles one must meet to have the testamentary capacity to make a valid Will: 1. be of sufficient age – which is generally 18; and 2. meet the mental capacity threshold; which means to have the ability to know the nature and extent of property, the natural objects of one’s property, the disposition that the Will is making and the ability to connect all of these elements together to form a coherent plan.

commerce-acts-books-477966-mAnother way to say it is one must have the mental ability to understand the nature and purpose of making a Will, have a general idea of what you own and what assets you have, and know who are members of your immediate family or other natural objects of your bounty.

Testamentary capacity requires that you have the ability to understand and to be mindful of the type of property and assets you own as well as who may inherit your property whether you have a Will or do not have a Will.  You are required to be of sound mind and free from any disease or weakness which could influence the way that you choose to dispose of your property. You are also required to have the ability at the time of the execution of the Will to comprehend the nature of the act of making a Will.  You must understand what you are doing by signing the Will.

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If you read this blog on a regular basis (who doesn’t!!) you may recall an article entry from a year ago about challenges one can face when contesting a Will.  In that entry we cautioned that a challenger to a probate estate can be held responsible for the other parties’ legal fees for an unsuccessful challenge.  Whether you are from Lynn, Saugus, Lynnfield, Peabody, Salem and seeking redress in the Essex Probate Court, or Wakefield, Reading, North Reading or elsewhere in Middlesex County; it is important to know your rights and what limitations and pitfalls could await you in contesting a Will or appointment of a personal representative.

commerce-acts-books-477966-mA recent Probate Court decision illustrates how tricky (and costly) an unsuccessful challenge in a probate court can be.  Here’s what went down in Giroux v. Laranjo, et al., Lawyers Weekly No. 15-007-16.

Ms. Giroux was the attorney in fact for the decedent during his life under a power of attorney and after his death was the estate’s personal representative.  While the decedent was living, Ms. Giroux amended the distribution percentages in the decedent’s realty trust so that her beneficial interest increased and the other beneficiaries’ interests decreased.  She did this under her power as attorney in fact for the principal.  This was apparently what the decedent wanted.

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It has been a red-hot residential real estate market all over Massachusetts. Homes in good locations that are updated and priced fairly are going under contract quickly. The weather may be turning colder as we head into 2017 but the sale prices of good housing throughout the North Shore, including Lynnfield, Saugus, Danvers, Lynn and Wakefield have stayed firm.  As New Englanders know, after a snow-filled winter, a warm spring is always welcome.  Traditionally the housing market heats up once the snow begins to melt. However, with the small inventory of available homes today, potential buyers may wish to keep close watch on new listings during the winter too. If 2017 is the year you will buy your house, be mindful that there are many complications involved with purchasing a home, from start to closing. An experienced and knowledgeable real estate attorney to represent your interests only, throughout the process, can be valuable. Actually, is a lawyer required for closing?

commerce-acts-books-477966-mMassachusetts is one of the few states in the country that is considered an “attorney state” for residential real estate transactions. That means that home buyers and sellers in Massachusetts typically have an attorney represent them (unlike other states where most matters are handled by a real estate agent and a title company). An attorney’s involvement is required by G.L. c. 221, s. 46A, which prohibits the unauthorized practice of law by non-lawyers.

The MA Real Estate bar Association (REBA) takes the position that real estate closings conducted by non-attorneys, often called “witness-only closings” or “notary closings”, are not in the best interest of the consumer or buyer.  “Decisions made by home buyers and other mortgage borrowers are particularly susceptible of improper influence, and even predatory behavior, by individuals who are unqualified to give legal advice.” REBA strongly recommends that the Buyer and Seller each have their own attorney in addition to the attorney conducting the closing, to prevent an issue of conflict and to assure that each side is adequately represented.

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Tax planning is an important component of an overall estate plan. Depending on the type and the value of assets owned, the services of an attorney and a tax specialist may be appropriate.  Throughout the Northshore of Massachusetts, including Saugus, Danvers, Wakefield and Lynnfield, it may save significant money and gifts for heirs if one works with an experienced estate planning lawyer. Any number of life events may provide a good time to trigger setting up an appointment to review your estate and discuss options – marriage, divorce, an addition to the family, health issues or simply natural aging.

commerce-acts-books-477966-mOne example of a tax planning issue to consider is the taxable basis at death of assets acquired during one’s lifetime, such as stocks, a home and real estate. A properly prepared estate plan may enable the heirs to use a legal step-up in basis so that the starting point for valuation of an asset will be the value at the date of death – instead of the value at acquisition or some other starting value.

What is a step-up in basis and how does it work?

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The North Shore has a number of outstanding facilities to assist in the care and education of special needs minors. For example, the Northshore Education Consortium, with facilities in Beverly and Peabody, is one of the largest provider of special education programs for children with emotional, behavioral or developmental disabilities in Massachusetts. See https://www.nsedu.org/

commerce-acts-books-477966-mFor many parents, their top priority when planning for the future is to ensure that their children will be cared and provided for. The issues may be complicated when there is a child with disabilities as part of the family. Planning for children with disabilities presents unique challenges and considerations. The two main concerns presented by gifting or leaving funds directly to a disabled child are: first, a child with disabilities may be unable to appropriately manage funds themselves; and second, such a gift or inheritance may cause the child to lose important government benefits. A properly drafted Special Needs Trust, also known as a Supplemental Needs Trust, can address these issues and ensure that a disabled child is cared for and financially protected.

Perhaps the main benefit of a Special Needs Trust is that assets held by the trust for the disabled individual are not considered “countable assets” for the purposes of means-tested government benefits. Means-tested government benefits include Supplemental Security Income (SSI), Medicaid (also known as MassHealth in the Commonwealth), and certain housing assistance programs. For example, in order to receive SSI an individual must not have countable assets worth more than a total of $2,000.00.[1]

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Upon the death of a family member, a question often arises as to who is entitled to receive the assets of the deceased. Whether there is a Will or not, family and friends may squabble over the property, and descent and distribution of estate gifts may be the subject of disagreement. On the North Shore of Massachusetts there are probate courts in Salem and Lawrence for Essex County, Cambridge for Middlesex County and Boston for Suffolk County.  Probate of the estate and any disagreement over the estate will likely be handled in the Probate Court for the county where the deceased resided at date of death.

commerce-acts-books-477966-mThe deceased may have expressed his or her wishes for the disposition of property by making a Will and specifying who gets what. The assets may be divided up depending on many factors, including value, type of property (real estate, bank accounts, stocks, cars, personal property or intangible property), or perhaps on the number of heirs, closeness of family, financial need of family members, or just the whim of the decedent.  If no Will is found then the property is divided according to law or state statute, and will generally follow lines of consanguinity (family bloodlines or relatives).

With or without a Will, surviving family, friends and institutions such as charities or religious groups, may seek to claim an interest in the assets of the deceased. Disputes as to where the property and assets go may arise from promises made during the lifetime of the deceased, expectations of presumed recipients of the gift(s), the mental capacity of the deceased or possibly from alleged failure of the fiduciary of the estate to properly carry out the handling of the estate or assets.

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There are so many beautiful areas throughout Essex County, Middlesex County and the North Shore.  Raising a family, owning a home or renting an apartment, working or working out; all of these activities can result in the need to sign legal documents, Deeds, Wills and the like.  Often a signature on a legal document will require an acknowledgment from a notary public.  So just what is a notary acknowledgment?

commerce-acts-books-477966-mAccording to Revised Executive Order No. 455 (04-04) Standards of Conduct for Notaries Public a “Notary public” or “notary” means any person commissioned to perform official acts pursuant to Article IV of the Articles of Amendment of the Massachusetts Constitution and a “Notarial act” and “notarization” shall mean any act that a notary public is empowered to perform under this executive order.  An “Acknowledgment” is a notarial act in which an individual, at a single time and place: (a) appears in person before the notary public and presents a document; (b) is identified by the notary public through satisfactory evidence of identity; and (c) indicates to the notary public that the signature on the document was voluntarily affixed by the individual for the purposes stated within the document and, if applicable, that the individual had authority to sign in a particular representative capacity.

The notary acknowledgment is the same whether it is on a deed to a home, a mortgage, a Will, or even an Affidavit.  The acknowledgment is used to prove that the person who signed the instrument was the person intended to sign the instrument, that the signature is genuine, that the signor understood what they were signing and did so of their own free will and voluntarily.  It is important that the notary acknowledgment be properly completed because if not, the instrument could be rendered ineffective.  For example, as found in a recent bankruptcy case in Massachusetts (see Massachusetts Lawyers Weekly, Mortgages—Acknowledgement—Voluntariness by Tom Egan), In Re: Reznikov, Fanni (Chapter 7 Case No. 14-10589-FJB; Adversary Proceeding No. 15-1003-FJB) the Chapter 7 trustee challenged the validity of a mortgage arising from a question on the sufficiency of the notary’s acknowledgment.  The Chapter 7 trustee sought to “avoid a mortgage held by James B. Nutter & Company” granted to James B. Nutter & Company by the bankruptcy debtor, Fanni Reznikov.  The trustee argued that the “mortgage was defective under Massachusetts law because it does not express that the debtor executed the mortgage voluntarily or as “her free act and deed”.   James B. Nutter & Company as the holder of the mortgage tried to refute the trustee and argued that because the Acknowledgement stated that the Debtor ‘duly acknowledged to [the Notary] that [she] executed the [Mortgage].’ that should be “sufficient to express that the Debtor indicated to the Notary that she executed the Mortgage voluntarily or as “her free act and deed”.  The Bankruptcy Court judge disagreed and ruled that the notary acknowledgement was “materially defective because it fails to represent that the Debtor indicated to the Notary that she executed the mortgage voluntarily or as her free act and deed”.  The mortgage was deemed not a valid lien.