Guiding you every step of the way
Estate planning, as difficult of a topic as it can be to think about, is one of the most important things someone can do for both themselves and their family. It gives a family peace of mind knowing that: property and assets will be protected and distributed as intended; that children will be taken care of both financially, and if they are a minor or disabled, protected and secure; and ensuring that when the time does come, that the transition will be as simple and straightforward as possible.
Let us help you preserve and protect your legacy, and ensure your wishes for your family are secure.
We can help draft:
- Wills and Trusts
- Powers of Attorney
- Health Care Proxies
- Living Wills
- Guardianships and Conservatorships
Schedule Free Initial Consolation
Plan Selection and Document Drafting
Estate Plan Document Overview
A will is the backbone of any estate plan, and is included in all our estate planning packages. If your plan includes a Trust, your will is typically referred to as a “pour-over will” because it ensures that your assets will “pour over” into a previously established trust.
Contrary to popular belief, wills do not avoid probate.
Wills are a matter of public record and afford little to no privacy.
In your will you, among other things, name your executor/personal representative of your estate, appoint guardians for your children, and direct to whom you wish your assets be distributed.
Trusts are documents establishing a fiduciary relationship in which a trustee holds assets of the grantor (the person funding the trust) for the benefit of the beneficiaries.
Trusts generally come in two forms: revocable or irrevocable.
Depending on the specifics of one’s estate, and their goals, trusts can be used, among other things, to:
- Hold property during lifetime;
- Receive property upon death;
- Plan around estate taxes;
- Plan for Medicaid/MassHealth (nursing home) needs; and
- Ensure a level of privacy greater than a will as the schedule of beneciciaries of the trust usually remains private, with exceptions.
The beneficiaries of a trust receive the property pursuant to the terms of the trust as desired by the grantor, and any property distributed through a trust WILL avoid probate, though it may still be necessary to file a probate for such an estate for different reasons.
A revocable trust, often times referred to as a “living trust” or “revocable living trust,” is a trust that can be amended or revoked by the grantor at any time during the grantor’s lifetime.
Revocable trusts are often used to hold, manage, and distribute assets and property to, and for the benefit of, the beneficiaries.
An irrevocable trust is a trust which cannot be amended or revoked by the grantor. These trusts are generally reserved for MassHealth/Medicaid planning in order to remove assets from an individual’s name so that they are not “countable” – meaning Medicaid/MassHealth will not lien the property or otherwise require it to be used to pay for nursing home care. Timing is important with this planning as there is a five year lookback period.
Irrevocable trusts may also be used to provide some creditor protection for the grantor, and further, with larger estates, to try to minimize, or otherwise eliminate, estate tax exposure.
A Power of Attorney (“POA”) is a legal document in which a person (“Principal”) appoints an Agent or Attorney-in-Fact to handle financial, legal, and sometimes medical, responsibilities on behalf of the Principal. Effectively, the Attorney-in-Fact steps into the shoes of the Principal. A Principal can also appoint a Guardian and/or Conservator should the need for one arise. It is important to make sure the POA is made “durable,” meaning that the Power of Attorney will remain in effect until the death of the Principal, otherwise the Agent’s/Attorney-in-Fact’s power is immediately revoked upon the Principal’s incapacity or incompetency. Other considerations revolve around whether the power immediately goes into effect, or whether it is “Springing,” which means the POA only takes effect upon the incapacity of the Principal
Typically, we recommend a POA become effective immediately because in emergency situations when it is necessary for an Agent to use the POA, a delay will occur due to the need for doctor verification of incapacity, and because many financial institutions will not accept a springing POA because they do not want the responsibility of determining whether the Principal is actually incapacitated, even with a doctor note, or the exposure that may come from making the incorrect determination. This is why it is extremely important to appoint someone trustworthy as an Attorney-in-Fact.
In a Health Care Proxy an individual (“Principal”) appoints an agent to make medical decisions on their behalf when they are incapacitated and/or when a doctor determines that the Principal is unable to make or communicate medical decisions on their own.
Some of the powers typically conferred upon a Health Care Agent include, but are not limited to, the power to:
- Obtain and review medical records and information;
- Talk to doctors about the Principal’s medical condition(s);
- Authorize admission and discharge from medical facilities;
- Consent to or withhold certain medical procedures and treatments; and
- Do anything Principal could do as if it were the Principal themself.
A living will is a document which outlines your end-of-life health care wishes if you are to fall terminally ill, and cannot make these decisions on your own. Living Wills detail which treatments you want, and those you do not, including whether you want your life to be artificially prolonged, when a determination is made by your doctors and/or other health care providers that you are in a permanent vegetative state and are unlikely to recover, or you are at the end of a terminal illness.
Although Living Wills are not legally binding in Massachusetts, meaning that doctors and medical professionals are not legally required to follow their instructions, they are nevertheless an essential part of an estate plan because they provide your health care agent, family, clergy, doctors, and other health care providers, with clear evidence and guidance of the treatment methods you desire, and those you do not. These documents are highly customizable, and as such, can be tailored to say almost anything someone may want.
Living will language may sometimes be added into a Health Care Proxy, but we have found that most individuals prefer to keep these advance directives separate from their Health Care Proxy as they may wish to change their minds later, and not have these directives on file at their medical facilities at all times.
A Guardian and/or Conservator is a person appointed by the court to care for an individual when they are determined to be permanently or temporarily mentally or physically incapacitated (the “ward”). A Guardianship/Conservatorship of a minor would be appointed when there is need for an adult to watch over them, or to manage their property and assets if their parents are unavailable. A Guardianship and Conservatorship can be either full or limited and tailored to the specific needs of the individual.
Guardians make the personal day-to-day decisions for the ward concerning their education, general well-being, medical care and insurance, ensuring they are fed and clothed, among other things. A Guardian, however:
- Cannot remove a Health Care Proxy;
- Cannot spend or give out the incapacitated person’s assets or income;
- Isn’t personally responsible for the incapacitated person’s expenses.
On the other hand, a Conservator handles the financial matters for the ward, including, among other things:
- Paying bills;
- Handling taxes;
- Managing bank and investment accounts; and
- Dealing with social security, pensions, disability, and other benefits.
Frequently Asked Estate Planning Questions
No. Contrary to popular belief, wills alone do not avoid probate. A will names your executor/personal representative, directs where and to whom you wish your assets be distributed, and can appoint guardians/conservators, among other things. If avoiding probate is your goal, trust planning is appropriate. Think of a will as a blueprint. It tells the World where and to whom you wish your assets be distributed. It does not remove or retitle assets from your estate, which is necessary for that asset to avoid probate.
Generally speaking, yes, but there may still be a need to start a probate matter in Court. Depending on what you have, and how your plan is established, a properly drafted trust can help to retitle assets (a home, bank account, retirement account, etc.) and remove them from your probate estate. Once that occurs, the property and assets in the trust “avoid probate,” meaning they pass to the designated beneficiary without needing to go through the probate procedure, although as with anything, there are always exceptions and extreme circumstances in which probate may still be necessary even with a trust. However, it may likely still be necessary to file a probate to, at the very least, appoint a personal representative, and to handle any property and assets outside the trust.
If someone passes away without having done any advanced estate planning, they are said to have died “intestate.” If you pass away without a will, state law dictates, by statute, to whom your assets pass, and how much they receive. The State effectively creates a will for you.
No way! One of the biggest issues we’ve seen is a misconception by younger adults who don’t think they need an estate plan for any number of reasons, the main one being they feel as though they have no assets, and everything will end up going to their spouse or parents.
Everyone has assets they can distribute, it doesn’t have to be a lot of money in the bank. The most important thing, however, is to name fiduciaries (health care agent/attorney-in-fact) in case of incapacitation. Further, it is extremely important for for parents to name a guardian for their children. Although likely correct about the ultimate beneficiary, not having an estate plan in place, even a basic will plan, will result in a time-consuming, expensive, intestate probate procedure, and for younger parents, can result in significant family issues/fights over who will take custody of their children – and the Court may not make the decision they would have.
Both Massachusetts and New Hampshire law allow for a child to be disinherited. In order to do so, the will must make it extremely clear that the child is being disinherited so that the probate court fully understands this was the intention, otherwise the pretermitted child statute will provide for this disinherited child because it will be deemed an oversight that the child was not mentioned in the will.
There can be numerous reasons why someone may choose to disinherit a child, but it must be done carefully, with specific language included in the will. It is also important to consider any issues this may cause for a family, and be understood that this may lead to a will contest.
Spouses cannot be disinherited.
An irrevocable trust will protect a grantor’s assets from creditors. This is because and irrevocable trust is a separate entity, and the assets placed in an irrevocable trust are removed from the grantor’s estate. This is why irrevocable trusts are used to shield assets from estate tax. HOWEVER, it is important to note that a trust can be dissolved if it is deemed to have been created fraudulently – meaning, you cannot create a trust for the sole purpose of avoiding paying bills.
A revocable trust will provide a beneficiary with an opportunity to protect their inheritance from creditors – bankruptcy, gambling debts, divorce, medical bills, etc. It may not provide 100% protection, but a properly drafted trust with a “spendthrift” provision, and keeping the assets in the trust rather than distributing them outright to the beneficiary, will give the beneficiary a much better opportunity to protect their inheritance from creditors than an outright distribution of the assets would.
Generally speaking, in both Massachusetts and New Hampshire, a divorce decree automatically revokes a will (or provisions naming a former spouse as personal representative/executor, distributions to former spouse, etc.) this means that if you do not update your will after a divorce is finalized, the law of intestacy may apply. You should also be sure to change any beneficiary designations on trusts, life insurance policies, bank/retirement/investment accounts, etc. Further, you should update any power of attorney and/or health care proxy in which your ex-spouse is named as your agent.
The estate tax, often times referred to as a “death tax,” is a tax on the transfer of an individual’s assets upon their death. There is a federal estate tax, which as of 2022 the exemption is $12.06 million for individuals and $24.12 million for married couples, and also as of 2022, currently 16 states and the District of Columbia have estate or inheritance taxes – of which Massachusetts is one.
New Hampshire DOES NOT have a state estate or inheritance tax. An estate in New Hampshire is only taxable federally.
The Massachusetts estate tax exemption is currently the lowest threshold in the Country at One Million Dollars ($1,000,000), though there is currently a push to increase it. The Massachusetts estate tax exemption really isn’t even a real exemption – if an estate is valued at over $1,000,000 the estate is taxed on effectively 100% of the amount, not just the amount exceeding the $1,000,000 threshold (though there are deductions, etc.). This means that if your taxable estate is valued at $1,000,001, you will be taxed on all $1,000,001 – not just the $1 exceeding the $1,000,000 threshold. Further the Massachusetts estate tax is not adjusted for inflation, nor is it portable between spouses, meaning that upon the death of the surviving spouse, the exemption is still only $1,000,000.
Quoting directly from the IRS website:
“The gift tax is a tax on the transfer of property by one individual [the donor] to another while receiving nothing, or less than full value, in return. The tax applies whether or not the donor intends the transfer to be a gift.
The gift tax applies to the transfer by gift of any type of property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.”
The tax is paid by the donor, not the recipient, though it is possible for an agreement to be made where the recipient pays the tax – speak to an accountant or tax specialist for more information.
As of 2022, the federal estate tax exemption amount is $16,000 per recipient. The lifetime exclusion amount is $12.06 million. For each taxable gift made, you must file IRS Form 709.
Neither Massachusetts nor New Hampshire has a state gift tax.
That being said, Massachusetts does like to get cute with taxable gifts. Without getting too lost in the weeds, if you make a taxable gift, Massachusetts will take the amount over the gift tax exemption and add it back into your estate for purposes of calculating the Massachusetts estate tax. This means that if the value of your taxable estate is below the $1,000,000 threshold, but you made taxable gifts, the total of the taxable gifts above the gift tax exemption will be added back into your estate, and may result in an otherwise non-taxable estate being taxed.
Gifts between spouses are unlimited and do not trigger the gift tax.
Gifts to non-profits are generally considered charitable contributions and not taxable gifts (depending on the type of organization/charity).
Beyond the Estate and Gift taxes, there are other taxes which may need to be considered when determining the best way to hold assets and distribute your estate. A deep dive into these taxes and their application is beyond the scope of this FAQ (and highlight the importance of speaking and hiring an accountant or other tax professional to ensure the best possible tax treatment), but three such of these taxes that need to be considered include:
- Income Tax – including trust income and retirement accounts;
- Short and Long Term Capital Gains Tax; and
- Generation Skipping Tax – which occurs, for example, when a grandparent specifically leave a devise to a grandchild skipping over their parent.
For the most part, yes.
Generally, life insurance proceeds made payable to the estate are included in gross estate calculations for estate tax purposes.
If other beneficiaries are named, if the deceased exercised a sufficient “incidence of ownership” over the policy, then it is includable in the deceased’s gross estate. An incidence of ownership can include actual ownership, the ability to change a beneficiary, or the ability to access the cash value of the policy (by actually cashing out the policy or borrowing it).
Our general rule of thumb is that every five or ten years, an estate plan “check-up” be conducted. It is also important to see if an update or amendment is necessary following what we call “significant life events.” This could be: marriage; divorce; buying/selling a home/vacation home/other real estate; increased/decreased income; hitting the lottery; receiving an inheritance; getting a new job; losing a job, etc.