In a recent case argued before the U.S. Supreme Court, a New York-based trust challenged the North Carolina Department of Revenue’s ability to collect of state income taxes from the trust’s earnings. The State of North Carolina justified these taxes, collected even in years that a beneficiary living in the state did not receive any payments, based solely on the beneficiary’s home residence. The Court unanimously affirmed the lower court’s decision – holding that a beneficiary’s in-state residency alone, without actual receipt of income or the right to demand income from an out-of-state trust, did not establish sufficient contact to justify income tax liability from that state.

What does this mean for Massachusetts beneficiaries? That depends on your lawyer first, and your accountant second. As the Court noted, a beneficiary residing in a different state from his or her trust could be taxed if sufficient contacts were established. Their analysis seemed to center upon that beneficiary’s right or expectation of income from the trust, on whether the beneficiary’s home state had any reason to charge income tax. This appears to echo principles of basic common sense. Why would anyone believe that a trust, which was already paying taxes for income in its home state, would have any annual income tax liability in a state that it hadn’t paid income in?

Non-specialist lawyers might be forgiven for not having known these types of tax-related details. But for many Massachusetts accountants that work with clients in estate planning, this simply confirms what was already well known to those having experience in this field. In fact, that the U.S. Supreme Court even had to take up this question is an indication that expertise in the field of taxation may not be as common as it should be for many practitioners.

This reinforces the need for locating specific expertise when choosing professionals to advise on estate planning in Massachusetts. Understanding not only how to transfer, protect and assets, but also how to generally manage and prepare for related tax consequences that come from that, should be a basic requirement for anyone practicing in this field. Continuing education, and working on these issues in a regular basis, is the only guaranteed way to obtain the aggregated knowledge necessary for proper estate planning in Massachusetts. Consider calling our office soon to learn your family’s options with this, and other strategies we offer for estate & tax planning. Together we can discuss the most appropriate plan for your family to reduce legal exposure and potential tax liability. While there are several estate planning attorneys on Cape Cod, our office is definitely unique in using a tailored approach that we feel every family deserves from our combined decades of experience in the law, as well as a close relationship with trusted Cape-based advisors in tax planning.

The post Avoiding Massachusetts Income Tax with an Out-of-State Trust – SCOTUS Update appeared first on McNamara & Yates.

What Are the Beneficiary’s Rights in an Estate or Trust?

While a PR and trustee owe an absolute fiduciary duty to their beneficiaries, they generally also have very broad discretion on how to carry out this duty. In most instances, this means that the beneficiary cannot simply make a demand and expect that the fiduciary take a particular action. Instead, a beneficiary is only entitled to request very specific items from the personal representative or trustee. Language in the trust will identify these items in detail, but initial requests are ordinarily made for: a copy of the trust itself, an “inventory” of assets, and an “account” of all trust activity.

How Does the Beneficiary Obtain This Information?

When requesting items of the Trustee or PR, a beneficiary’s best strategy is to communicate the request in writing. The form may be in traditional mail or e-mail, but it’s important that the beneficiary has a record of the timing of the request. Asking the fiduciary to respond within a certain period of time is fairly typical also, which should correspond to the complexity of the request; for example a copy of the trust should be a very easy response whereas generating an account would require some time, e.g. to calculate expenses and reconcile accounts. While fiduciary duty does not require that a PR or trustee act in any fixed period of time, the beneficiary should expect a response to information requests within a reasonable timeframe.

What Happens if the Trustee or Personal Representative Ignores All Requests?

The next course of action will greatly depend on the circumstances, but a beneficiary who experiences difficulty with a trustee or PR would likely benefit from hiring an experienced estate and trust attorney specialist as soon as possible. General practitioners may be familiar with negotiation tactics, but a specialist in Massachusetts estate and trust law can leverage his or her knowledge with the laws – which are actually fairly new. The attorney can then weigh all options, and choose the best and fastest path forward to achieve the beneficiary’s goals. Most times this representation will begin with a letter from the attorney to the Massachusetts trustee or PR, or his or her attorney, with specific references to the duties of that fiduciary’s position, and of course specific requests made by the beneficiary. More often than not, this letter will lead to some communication and movement by the fiduciary.

Next Steps for the Beneficiary – After the Fiduciary’s Response

If the PR or trustee responds, the beneficiary together with the trust and estate attorney decides whether the response was adequate, and request additional information if needed. Then, if progress is made there may be an exchange between the parties, to craft a meaningful path forward that meets both the needs of the beneficiary and the obligations of the trustee. If instead the fiduciary did not respond, or is not meeting his or her obligations to the beneficiary, the next step may require Court intervention.

How Can the Court Address Problems with a Massachusetts Trustee or PR?

The Court may take any action requested by the beneficiary. There are a number of different strategies available for an experienced estate attorney to petition the Court in a probate matter, but they must correspond to the problem at hand to be successful: demanding sureties, requesting supervised administration, removal of the fiduciary and more. The upside of entering a probate case is that there are no court fees. There are similar options available for petitioning against the trust or trustee, but a filing fee to the Court must be paid to introduce the matter.

In summation, fiduciary duties are very simple and commonplace in everyday life, but where few are familiar with them, they are also frequently abused. Beneficiaries nevertheless have valid rights under trusts and estates, and a good fiduciary should honor them with diligence and regular communication. Contacting an experienced Massachusetts trust and estate attorney can be a critical source of support for those with concerns about their beneficial interests, or the behavior of a trustee or personal representative.

The post When a Massachusetts Personal Representative or Trustee Disregards the Beneficiaries appeared first on McNamara & Yates.

How Does it Work?

Like any trust, this year’s lottery trust must have three elements: A trustee, the corpus or property of the trust, and a beneficiary. The trustee (or trustees) holds legal title (i.e. official control) over the corpus. The beneficiary holds equitable title (i.e. ability to enjoy) the corpus. In most Massachusetts lottery trusts, we’ve seen professional attorneys act as Trustees. Hiring an unaffiliated attorney for this purpose ensures not only that outsiders would not be able to identify the winner, but also that the winnings are held by a professional with fiduciary experience (and preferably protected by a professional liability insurance policy).

The trust can be written so that the beneficiary will be paid as much as he or she requests at any given time, giving the lottery winner actual control over the whole amount. In fact, if drafted correctly the beneficiary could potentially liquidate the trust as soon as the money is transferred into the trust. The key, of course, is to preserve anonymity upon receiving that original award. As an extra step in this process, it is recommended to also obtain a separate tax Id number from the IRS, rather than use the winner’s social security number.

Having put even the most simple trust in place, the winner can avoid any media attention, harassing phone calls or even hard feelings from friends and coworkers. The attorney-trustee simply visits the office in Braintree, gets his or her picture taken and drives off with a big check to deliver to the beneficiary.

Additional Benefits of a Trust for Lottery Winnings

Apart from anonymity, a trust can provide additional support to an individual (or a family) that may want to protect the money from their own bad habits. Drafting the trust in such a way that restricts the trustee from accessing principal, and paying beneficiaries only the trust income, is actually a common practice in traditional trusts. To avoid unforeseen circumstances, the trustee could be empowered to distribute principal at his discretion “for the health, well being and maintenance” of the beneficiaries.

While reducing taxes might be a goal that most lottery winners desire, there really isn’t much a trust can do in this respect. For any prize over $5,000, the Massachusetts lottery commission must inform the IRS of the award. Further, it will ensure that the form W-2G, complete with a social security number and 25% of the prize, is sent to the agency. Should the trust begin to generate income from year to year, it is even possible that the trust would be a disadvantage. One exception to this would be for purposes of estate taxes, but that is the subject of an entirely different article. And in any case, this is actually a conversation that necessitates CPA attention and input for each particular individual.

Accounting for Multiple Winners of a Lottery Ticket

It is often the case that a Powerball or other lottery ticket holder has pooled resources and formed an agreement with a bunch of friends or co-workers. While we hope this agreement was in writing to begin with, the trust can be an extremely valuable tool to ensure that everyone of the “winners” is treated equally by an independent and disinterested third party trustee. In this way, since no one of the actual partners holds the keys to the prize proceeds, an extra layer of protection is achieved.

What Are the Drawbacks of a Mass Lotto Trust?

While there really isn’t any downside for the lottery winner, there are general concerns that many in government and the public have with this practice. One of the main requirements for a successful lottery is that it be transparent, so that the game players are confident the process is fair. The public needs to know that prizes are not being awarded to government insiders, or worse still, employees of the lottery commission itself.

Why Don’t All Winners Form One?

While there is no clear answer to this question, one could speculate that the reason is the same as why so many lottery winners go bankrupt; that they are generally unprepared. Like any financially successful individual, the most common trait for any lottery winner that preserved his or her winnings has a lot to do with the formation and adherence to a solid plan. A 2001 study cited in US News and World Report found that on average, lottery winners kept only $0.16 of every dollar won, and that bankruptcies for many of these folks is quite common.

All of those trends and statistics aside, the use of lottery trusts in Massachusetts is reportedly on the rise. The Massachusetts Lottery spokesman, Christian Teja, was quoted as saying that “Typically, people are choosing not to have a spotlight on them and trying to maintain a level of privacy, and it is completely within the legal boundaries. All the better for our clients.

To learn more about lottery trusts, or what kind of safeguards can be put in place within one, please don’t hesitate to call our office.

The post Powerball Privacy Protection – Forming a Massachusetts Lottery Trust appeared first on McNamara & Yates.

What Happens When You Form a Trust in Massachusetts?

When a trust is created, there are a few titles that are recited in the document. The “Settlor” is the individual or entity who creates the trust. The “Grantor” (often used synonymously with “settlor”) is the individual or entity who funds, or places property into the trust. Afterwards we have the “Trustee” who manages the trust as a fiduciary on behalf of the “Beneficiaries.” It cannot be stressed enough that the Trustee as a fiduciary has an absolute obligation, even over his own interests, to administer the trust for the benefit of the beneficiaries.

At a very basic level, a Trust is an instrument that separates ownership of assets, generally into 1) Legal Title and 2) Equitable Title. This can be thought of as separating the legal authority to control assets for the trustee from the actual right to enjoy assets for the beneficiary. In the case of an asset as simple as a bank account, the Trustee has the authority to manage and distribute money, while the beneficiary has the right to receive the benefits of that management and distribution.

What are the Differences between Revocable and Irrevocable Trusts?

As the names describe, a revocable trust is one where the settlor/grantor can at any time terminate the trust and take assets back. A true irrevocable trust, by contrast, would not allow such flexibility. Wherever the distinction is important, the law determines the existence of one or the other of these trusts with questions of control:

Does the individual or entity that placed assets into the trust have the power to take them back? Does the individual or entity that created the trust have any authority to direct the trustee how to distribute? Many legal issues are based on these questions with respect to the language contained in a trust, and the answers can depend on type of legal issue concerned.

Does Placing my Home in a Revocable Trust Protect From Creditors?

Generally speaking, the answer to this question is a resounding no. In litigation for damages, personal injury or divorce, the counsel for a plaintiff or else the court itself will require that a party’s financial status be disclosed during the proceedings. Regardless of the circumstances, the party from whom such information is requested is required to list assets held in a revocable trust, since he or she still has complete control over those assets.

Even if the grantor transfers assets out of his or her control into an irrevocable trust, a court might still declare the transfer a “fraudulent conveyance” if it was made at a time when the litigation was being contemplated. In certain circumstances a properly and timely constructed irrevocable trust can provide protection, but we almost never consider a trust as a strategy for creditor protection.

What Is The Purpose of a Revocable Trust?

People and families form revocable trusts for several reasons. The most common reason that we’ve created a trust for our Cape Cod trust clients is avoiding probate. Creating and funding a trust in advance ensures that the courts (and public) will not need to be involved in the distribution of assets after someone passes away. In addition, the filing fees and legal costs for opening a probate matter almost always exceed the cost of creating and funding a trust. And furthermore, the distribution of assets in a trust can be instant whereas a probate matter will last at least a year before distributions are possible.

Another common purpose for a revocable trust relates to the capacity and competence of the beneficiaries. A trust that provides that a qualified trustee manages and distributes property, rather than the beneficiary alone, is an extremely effective tool to guarantee that the beneficiary uses the assets wisely and does not squander property that he or she might otherwise own outright. These trusts are frequently used for disabled individuals, minor children, and even older children.

While a revocable trust might provide some protection from the discovery of assets by creditors considering litigation, again, it is not an effective tool for protecting the assets themselves. As we mentioned above, the irrevocable trust is really the only way to avoid unforeseen risks in the future.

How Can an Irrevocable Trust Protect My Assets?

Whether from creditors, divorce, or even the MassHealth/Medicaid look back rules, a properly drafted irrevocable trust can at times guard against certain risks. It is worth mentioning again that timing is everything; We do not create and fund trusts in contemplation that litigation or other liability may be coming, but rather, looking farther down the road to ensure that certain assets will be guaranteed to certain beneficiaries regardless of what happens to our assets. It is therefore illustrative to consider that placing assets in a true irrevocable trust is much like giving them away altogether:

• The grantor loses legal title to the assets.
• The grantor no longer has complete equitable title over the assets (generally only income for his/her life).
• The grantor is unable to take the assets back into his name.

Although irrevocable trusts along with other gifting strategies can effectively overcome the so-called “five year MassHealth lookback rule,” they can just as often cause problems for families who have created them. If at any time within five years, property is placed into an irrevocable trust, that property may be considered a “disqualifying transfer” again just as though it were a gift. The effect of this is to disqualify the applicant for an equivalent period of care. It is then the responsibility of the MassHealth applicant to get that property back, but it is ultimately up to the Trustee whether or not the applicant will in fact have the property refunded.

For these reasons we usually only recommend an irrevocable trust for individuals or families who have significant assets. Most of the time anyway, people are naturally hesitant to give away control of any significant percentage of their estates. For while irrevocable trusts can remove the risk of creditors taking assets of the grantor, they introduce the risk of impoverishing the grantor to begin with. Discussing the particular use of these instruments deserves an in-person meeting with one of our estate planning attorneys, but for this article readers should be aware that irrevocable instruments are to be rarely used.

The post Should I Place My Home and Assets Into a Revocable or Irrevocable Trust? appeared first on McNamara & Yates.

Attorneys are not typically involved in burial and funeral decisions, but it is our job to make our clients aware of potential issues down the road. Without clear instructions, a death in the family can cause all kinds of unnecessary events. There may be a disagreement between siblings on what the deceased family member wanted. Feelings of guilt, too, can also lead a grieving family member to spend a lot more on a funeral than the decedent would have wanted. So outside of the will, there is a very important gift that everyone should leave for their loved ones; pre-planned and pre-paid funeral arrangements.

What Can Happen Without Prepaid Funeral Arrangments – Learning the Hard Way

I also have personal story on how important these arrangements can be.

When my mother passed away, my father had to deal with all of the arrangements for my mother.  But, I could sense the pain and grief in his voice as he explained to me the arrangements that he had made.

So before my father passed away, he made sure to inform me and my siblings that he had made all of his funeral arrangements in advance with the local funeral director. To this day I still maintain that it was one the best gifts that my father left us.

After his death, we did not have to experience the process of going to a funeral home to decide what kind of casket, or what arrangements would be made for the funeral.  We did not have to wonder who was going to pay for the funeral or decide where he would be buried.  He had already made those decisions on his own, and paid for them in advance.

The loss of a loved one is a painful and traumatic time.  There are so many things that have to be accomplished in a short period of time. So for many families, having to spend time with a funeral director, making decisions and preparing the obituary can add extra trauma and exaggerate an already painful time.

Omitting a Prepaid Burial Plan – And Depleting the Estate Plan

I have not only experienced this personally, but with many of my clients, friends and family.

One of my friends was something of a “pinch penny” all of his life, saving everything to make sure his family would have the resources they needed when he passed away. But he failed, however, to take this one simple yet critical step.

So when he passed away prematurely at age 58, his wife was so stricken with grief that she spared no expense for his arrangement upon meeting with the funeral director. Now, I am not saying that funeral directors will take advantage of grieving family members, but why take the chance.  My friend is probably rolling over in his grave because of what his wife spent!

Most spouses have discussed their wishes with each other, but it will still lessen the burden of the surviving spouse and/or the children if each and every adult takes this extra step to complete their estate plan with pre-planned and pre-paid funeral arrangements.

Where to Turn for Help in Prepaid Funeral Arrangements on Cape Cod

There are funeral homes all over Barnstable County that will meet with anyone seeking to have these arrangements completed and finalized. And although we do not generally “endorse” other businesses, we have worked with and assisted Doan Beal & Ames of Hyannis, and some of their clients, on a number of occasions. Mark Tomkins, the President there, is an excellent resource for all of your prepaid funeral service needs. He can be reached at mark.tomkins@dignitymemorial.com

The post Prepaid Funeral Arrangements on Cape Cod – Saving Unnecessary Heartache appeared first on McNamara & Yates.

Advanced Directives and Medical Orders

1. Do not resuscitate (DNR) orders – in-hospital.
2. Comfort Care DNR verification form – out-of-hospital.
3. Health Care Proxy (HCP) and Living Wills.
4. Medical Orders for Life-Sustaining Treatment (MOLST).

DNR Orders

1. Do not resuscitate (DNR) orders are medical orders issued by an attending physician in a hospital setting after the doctor consults with the patient to ensure the patient (or his guardian/HCP) is aware of the consequences of the order.
2. DNR orders address the use of extra-ordinary efforts, cardiopulmonary resuscitation (CPR), intubation, artificial ventilation, cardiac resuscitation with drugs and defibrillation, in order to keep patients alive when they experience life threatening medical conditions.
3. DNR orders are only valid in the facility where they are issued.
4. Once the person leaves the facility, the DNR order is no longer valid.

When a patient is in a non-hospital setting, Emergency Medical Technicians (EMTs) are required to provide emergency medical care and to transport patients to appropriate health care facilities. Emergency Medical Services (EMS) personnel are required by law to provide treatment to the fullest extent possible, subject to their level of training.

Comfort Care DNR Order Verification Protocol (Comfort and Care DNR)

1. The Comfort Care DNR is designed to allow EMTs and first responders to honor a DNR order in an out-of-hospital setting.
2. Before 1999, when Massachusetts implemented its Comfort Care DNR protocol, there was no mechanism to enable EMT’s and other first responders to recognize DNR orders in a non-hospital setting. So EMT personnel were always obligated to perform full resuscitation measures when they encountered a patient unable to convey directions regarding medical treatment.
3. The Comfort Care DNR protocol provides for a statewide, uniform DNR verification protocol.
4. The purpose of the Comfort Care DNR is to: (a) provide a verification of DNR orders to enable EMTs and first responders to honor DNR orders, (b) clarify the role and responsibilities of EMTs and first responders at the scene and/or during transport of patients who have a valid current DNR order, (c) avoid resuscitation of patients who have a current and valid DNR, (d) provide for palliative/comfort care measures for patients with a current Comfort Care DNR order verification form.
5. Comfort Care DNR order verification forms must be completed and signed by the patient’s physician, authorized Physician’s Assistant or Nurse Practitioner.
6. The patient must post the Comfort Care DNR where any EMT or first responder can easily find it. (Usually the patient’s refrigerator, or taped to the patients bedroom door. The Department of Public Health stopped issuing Comfort Care DNR bracelets in 2007, but the Department’s approved form contains bracelet inserts that can be used in generic wrist bracelets.
7. The Comfort Care DNR Order Verification form can be accessed by anyone, in downloadable format from the Massachusetts Department of Public Health/Office of Emergency Medical Services website, at: http://www.mass.gov/eohhs/gov/departments/dph/programs/hcq/oems/comfort-care/public-health-oems-comfort-care-verification.html. But the form must be fully completed and signed by the attending physician, authorized nurse practitioner or authorized physician assistant as proscribed by the regulations.

Upon confirmation of a current/valid Comfort Care DNR Order Verification Form:

If the patient’s heartbeat and breathing are adequate, but there is some other emergency illness or injury, the EMS personnel shall provide full treatment and transport as appropriate.

If the patient is in full cardiac or respiratory arrest, the EMS shall not resuscitate, which means they will not:

• Initiate CPR;
• insert an oropharyngeal airway
• provide ventilator assistance
• artificially ventilate the patient
• administer chest compressions
• initiate advance airway measures such as intubation
• administer cardiac resuscitation drugs
• defibrillate.

If the patient is not in full respiratory or cardiac arrest, but the patient’s heart beat or breathing is inadequate, EMS personnel shall not resuscitate but shall provide:

• emotional support
• suction airway
• administer oxygen
• application of cardiac monitor
• control bleeding
• splint
• position for comfort
• initiate IV line, and
• contact Medical Control, for further orders, including medication.

If EMS personnel have any question regarding the validity or applicability of the Comfort Care DNR, the EMS personnel shall:

• verify with the patient, if the patient is able to respond
• provide full treatment
• contact Medical Control for further orders.

EMS personnel are not to honor any Comfort Care DNR where the form is void or not intact. A patient may revoke their valid Comfort Care DNR at any time, regardless of mental or physical condition by the destruction or affirmative revocation of the Comfort Care DNR.

If an individual identifying him/herself as the health care agent or guardian revokes the Comfort Care DNR, EMS personnel shall resuscitate, since this raises an issue of doubt as to the validity of the form.

If there is any indication that the patient has revoked the Comfort Care DNR or if the EMS personnel have a good faith basis to doubtthe validity of the Comfort Care DNR, they are required to provide treatment to the fullest extent possible, subject to their level of training.

The post Massachusetts Advance Directives – What is the Law? Part 1 of 3 appeared first on McNamara & Yates.

The Commonwealth of Massachusetts has been very busy over the past few years overhauling much of its probate code to reflect modern family circumstances. With respect to traditional estate planning, for example, the code changes Massachusetts estate distribution to ensure that all children in mixed marriage families receive some inheritance (if no will is present). And with the more recent enactment of the Uniform Trust Code, Massachusetts now provides for very specific trusts without beneficiaries under any legal definition of the word. And the most talked about version of such a beneficiary-free trust is one that provides for one or more animals after the grantor’s death, commonly known as the “pet trust.”

For Massachusetts estate planners, the idea of a pet trust can be somewhat strange. In order for a trust to be valid, again, it must have beneficiaries. And while most pet owners would argue that their pets should be legally entitled to some form of beneficiary status, that option quickly falls apart when faced with the mechanics of a traditional trust. A beneficiary has rights, and the trustee has certain obligations related to those rights. But the only party who can legally make sure the trustee fulfills those obligations is the beneficiary itself. And a dog cannot demand that the trustee provide an accounting of trust funds and investments, nor would it be appropriate for the trustee to voluntarily provide such information to a dog. Similarly, a horse that lives in a barn needing roof repairs could hardly communicate this to anyone, let alone understand what his needs are in the first place. The same problem arises when a non-beneficiary, e.g. a pet owner’s child, challenges the trust, for someone must exist to defend that animal’s interests.

Massachusetts Pet Trusts – Identifying the (Human) Parties

And so the pet trust is necessarily structured in a different way than a traditional trust. As described above, it is too problematic to employ the traditional rules; Where a grantor (creator/funder of a trust) conveys legal title of her property to a trustee (administrator of the trust), for the benefit of a beneficiary. Instead, the uniform trust code provides for different parties that fulfill different roles.

Note: While reading about these roles, keep in mind that one person could fulfill multiple roles in a trust, or even all of them. The main goal in a pet trust is to both protect the interests of a pet from the potential interests of outsiders, and to split the responsibilities of any persons involved according to expertise and interest, with appropriate compensation.

• Trustee: Trustees in pet trusts are exactly the same as those under regular trusts. This position can be held by a person or an institution, and simply executes the terms of a trust instrument for the beneficiary (see below on “Trust Enforcer” for more on pet trust beneficiaries).
• Caretaker: Of course, after a pet’s owner passes away, someone needs to actually take care of that pet. The best person to do so should have the following characteristics, in their order of importance: 1) Animal lover, 2) Close ties with the pet, 3) Close ties with the pet owner. Simply nominating the pet owner’s own close friend ignores the realities of caring for the pet, the needs of the pet or the needs of the friend.
• Monitor: A monitor is a third party who can periodically check on the pet’s well being with respect to the trustee and caretaker’s duties. The trust can also be structured to permit this monitor to resolve disputes between these two parties. Often, the pet’s veterinarian is nominated as the monitor.
• Trust Enforcer: The new Massachusetts Uniform Trust Code enables the instrument to name an individual (person) who may enforce the terms of the trust. In the alternative, anyone “having an interest in the welfare of the animal” can ask the court to appoint such a person, or initiate proceedings to have that person removed. This trust “enforcer” is often termed a “qualified beneficiary,” meaning a person who for all intents and purposes can legally act on the pet’s behalf, and can compel the trustee to act.

Another Option: Form a Pet Panel, a Kitty Committee, or a Canine Commission

To provide more flexibility in the trust the pet owner might incorporate some kind of “pet panel,” allowing a group of people interested in the animal’s welfare to exercise discretion in administering the trust. Many events can occur that will fall outside of the trust’s text that will require decisions. For example, what if a pet runs away? Or what if a pet becomes unable to move – Does the caregiver receive more compensation for more work? Is there a time when euthanizing the pet becomes in its best interest? Particularly if multiple pets are involved in the creation of a trust, there can be many variables that affect the trust’s administration down the line, and entrusting a panel to make certain adjustments in the future can be very advantageous towards enhancing a pet or pets’ lives.

The creation of a panel might also operate as a check on the powers of a caretaker, trustee or enforcer if their judgments are not entirely sound or trusted. While many day to day decisions are best left to a single individual, there are also many that might require deliberation from more than one person’s perspective.

Drafting a Life Care Plan for your Pet

An essential element to the trust, in addition to those provisions relating to its administration, is the life care plan which provides necessary guidelines towards the pet’s care. Especially if the trust does not form a panel as described above, this will be the only guidance the caretaker and trustee have. Certain expectations should probably be met, for example, with respect to the pet’s food (both quantity and quality). Other considerations include the provision of medication and degree of grooming to be given to the animal. And on a related note, we usually recommend some clearer guidelines just like our Massachusetts health care proxies, describing the level of medical treatment to be administered at a time of illness or injury.

The pet trust life care plan also explains some of the logistics for the pet trust’s administration. That is, if for some reason the caretaker and trustee disagree on how to carry out the trust’s terms, the life care plan can resolve the dispute – or better yet it can explain the process for resolving disputes.

Final Thoughts – Get Counseling!

This first part of our article series on the new Massachusetts pet trust statutes is intended to provide an outline of what pet owners can and should expect to think about when planning for the future care of their extended families. In the next article, (we’re working on it), we’ll get to more specifics such as how to draft a care plan, and how to set up compensation and budgets in the trust. But as always, please be mindful that calling a Sandwich estate planning lawyer as soon as possible is really the best strategy for putting a working pet trust together. Call us at 508-888-8100 or use our contact us page if it is more convenient.

The post The New Massachusetts Pet Trust | Ensuring Your Animals are Cared for Part 1 appeared first on McNamara & Yates.

Goals of Massachusetts Estate Planning – Not Just to Avoid Probate!

Families form estate plans and review every 4-5 years for a reason. If avoiding probate was the only goal in writing a will, then estate plans wouldn’t provide much value. And although we’re getting a little off-topic, it needs mentioning that creating a durable power of attorney and comprehensive health care proxy in Massachusetts is almost more important for families seeking an estate plan.

But this article is focusing more on the goals of the will. More precisely, we are examining the three most frequent goals in distributing and protecting assets, of which avoiding probate is the first. The other more specialized goals are 1) Lessening Massachusetts and federal estate tax burdens and 2) Reducing risk of Medicaid (MassHealth) liability. Each of these objectives deserves a greater description, many of which are addressed in other articles on this website under Medicaid planning and estate planning.

Avoiding Probate to Lower the Cost of Probate

Depending on the complexity and size of an estate, the probate process may be an expensive proposition for the family. And if there are many beneficiaries involved, meaning that there is a greater chance of disagreement on the asset distribution, then the will could be challenged in formal proceedings. The cost of a formal challenge would be the same as the cost of any litigation, that is to say unpredictably expensive.

But most modest estates that we encounter on Cape Cod do not go through such proceedings, and stay in the “informal” track. And for some, the cost of probate can be reduced even further with a less burdensome process known as “voluntary administration” available to Massachusetts estates less than $25,000 and without real property. These estates are often ones where a basic plan was created, with a home placed in a trust, but assets over the years came into the estate.

Speeding up Distribution of Assets with Probate Avoidance

Another good reason for avoiding probate is to speed up the process of getting property into heirs’ hands. Again how long Massachusetts probate process lasts is variable upon the same factors mentioned above, and so the complexity and agreement of an estate and its beneficiaries will ultimately determine the timeline to be followed.

Of particular interest to many operating under the MAUPC (enacted in April of 2012), is the prospect of having to sell real estate through the probate process. While the MAUPC intended to make sales quicker and easier, that has not been the case in practice. So if at all possible, we usually recommend that our estate planning clients form a trust and put any real property within it to save on these potential setbacks.

Keeping Out of Probate Means Keeping Matters and Assets Private and Secure

When assets are distributed via the probate process through either a will or intestacy, that process is a public affair. The personal representative who files for the probate or administration of an estate must publish his or her petition in the newspaper, send notice to beneficiaries, and also to all known creditors. All documents are required to be filed with the court, and any person may view that file accordingly.

In addition to keeping matters private from creditors, avoiding probate in Massachusetts means protecting the assets themselves from creditors. If an individual dies leaving debts outstanding, and also has no assets in his probate estate, then his creditors no longer have the ability to recover from that individual. Any property placed in a trust, for example, will belong only to the beneficiaries of that trust. Similarly, the designated beneficiaries and joint owners of an IRA or bank account respectively will be the sole owners upon the owner’s death.

Final Considerations in Avoiding Probate in Massachusetts

Probate matters brought to us, even with some clients who came to us for estate plans, often include an analysis of several non-probate assets forgotten long ago, dating back as far as 60 years. Ordinarily this isn’t a problem, but consider for a moment the risk that this highlights: Updating the will or a trust in an estate plan has no effect on non-probate assets. So while we always tell our clients to review their estate plans after a birth, marriage or death, it is still entirely in their hands to change beneficiaries on life insurance, IRA and investment accounts.

Consider, for example, the young couple who take out life insurance policies on one another, subsequently divorce, and later remarry. Without any change in beneficiaries, each former spouse’s policy will remain as a benefit to the other – and not to the current spouses. And because there are no “augmented estate” provisions under the Massachusetts UPC, existing spouses have no cause of action on non-probate assets. The possibility of such a situation might seem rare, but a busy family with many assets outside of the probate estate could easily make this same mistake.

This article should have provided you with some initial thoughts on why avoiding probate in Massachusetts might be (or might not be) a good idea. For more detailed questions, Attorney Tim McNamara and Attorney William Yates are always willing to take your call. Please don’t hesitate to contact us through the website, email or by phone at 508-888-8100.

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A History of Real Estate Values in Sandwich

Almost no community in the United States was untouched from the real estate bubble and subsequent crash in 2007. As the below chart shows, real estate in Sandwich shows almost no overall gain over the period of a decade from January 2001 to January 2012. But factors like inflation, population increases, increased scarcity of buildable lots on Cape Cod, and the baby boomer generation reaching its retirement age demonstrate that there should be several upward forces in this market that will show at some point.

Still, the median sale price for a home in Sandwich as of March 2012 was about $340,000 or $455,000 in East Sandwich. We’ll just call the amount $400,000 to keep things simple. Also, to keep things simple (and conservative), we’re going to assume that home values appreciate each year at the rate of inflation, and assume (again conservatively) that the rate of inflation is 5%. At this rate, if a Sandwich homeowner couple lived for 20 years from today, then his or her house at this low appreciation rate would by itself be $1,061,000, (over the 1 million dollar limit).

Assets of a Husband – Retired with a 401k

In this example we have a husband who has worked twenty years at the local power plant, and has a healthy retirement account of approximately $300,000. Many of our clients for estate planning in Sandwich have retirement accounts with higher and lower amounts (some none), but for this example it seems like a good amount to demonstrate the Massachusetts estate tax hazard when the first of a couple passes away. So in this case we’ll assume that the husband during his life spent some of his retirement until about $150,000 was left, and that there was another $20,000 for his share of the couple’s joint checking account at a local Sandwich bank.

Keep in mind that under Massachusetts law, if a spouse in a married couple dies without a will, he leaves the entirety of his estate to his wife. And under both state and federal tax laws, a spouse can leave an unlimited amount to his or her survivor without estate tax liability.

Assets of the Surviving Wife – Retired with an IRA

The wife in this example is a local Sandwich school teacher who had saved enough by the time her husband passed away to have about $200,000 in an IRA account. She also, as we described above, inherited a total of $170,000 from her husband when he died, bringing her total assets, with her share of the joint checking account to about $390,000.

It is imperative to note here that the difficulty of estate planning for people in Sandwich or anywhere else, is the inevitable consideration that we are not going to live forever. This is often what most affects our clients’ ability to develop a comprehensive estate plan. And while young couples are able to brush the exercise off under a “just in case” mentality, older couples often to take these decisions quite a bit more seriously.

Other Unforeseen Sandwich Estate Planning Tax Risks

• If a family has a second home, this may be a good indicator that there will be some tax assessed on their estate.
• In addition to the appreciation of real estate, money in such assets as stock portfolios might also bring unexpected tax consequences on an overall estate.
• Inheritances from family members that predecease the estate holders might also bring asset thresholds over the 1 million dollar Massachusetts mark.

Basic Considerations for Sandwich Estate Plans

Clients in this practice come from a background as diverse as the customers you would find in the local Stop & Shop grocery store. And accordingly these people and their families have an equally diverse set of principles and goals. For purposes of estate planning (versus Medicaid planning) we can split the groups into three categories:

1. 1. Simple Estates – Needing merely a health care proxy, power of attorney, and a will that determines to whom personal property should go.
2. 2. Moderate Estates – Where there is a family home, we are now recommending that the home be placed in a trust to avoid the new messy MUPC provisions governing real estate.
3. 3. Larger Estates – For any estates closing on the $1 million Massachusetts threshold, an estate tax avoidance plan is an important consideration.

And since we can hardly recommend which estate planning techniques to employ on a website, we encourage you to call our Sandwich estate planning attorneys today, or email at atty.mcnamara@comcast.net to schedule a free consultation.

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Recently, a personal representative client of ours reached yet another exasperating obstacle in an already long and drawn out process. To begin with, the estate was comprised of several small life insurance accounts, each of which required a great deal of time, effort and paperwork to surrender. Fortunately, because of the estate’s relatively low total value, our client of the will was able to employ Voluntary Administration procedures under Massachusetts law. Then unfortunately, when we were nearly finished with consolidating those accounts, a new asset suddenly appeared that kicked the estate out of Voluntary and into formal probate process. In short, our client the personal representative had to start the entire process again.

Still, when I had to tell her the bad news over the phone, she was able to keep her spirits up. “That’s alright,” she began, “I now tell all my friends, if there’s someone out there you don’t like very much, name him as your personal representative.” But she and I knew that, in truth, the reason she was having so much trouble is that the decedent had kept extremely poor records, leaving no directions to the family about his property apart from the will. This story illustrates why careful planning is extremely important not only for your family, but for whomever gets the task of administering your estate.

How does the Testator/Testatrix Normally Choose a Personal Representative?

People tend to pick a personal representative for a whole host of reasons. The person could be a very trusted individual, and often is closely related to the testator (writer of the will). But there are actually many more important considerations than finding a confidante or blood relation. This is because the responsibilities of a personal representative are as important as they are numerous. What follows are 3 helpful tips one should consider when choosing the personal representative, and in helping that personal representative succeed.

Always Make Sure the Personal Representative Has Both Time & Money

While it is true that any person technically can serve as a personal representative, few are the best qualified to do so. A problem that few stop to consider is that being a personal representative can be a very time consuming task. So part of what makes a person qualified is having the extra time and resources necessary to spend hours on paperwork, filings, visiting banks, calling financial institutions and visiting with a Massachusetts probate attorney. And while having money is not really a necessity, someone struggling to make ends meet would not be ideal for this position.

People who regularly update their wills with some frequency should consider some of their retiree friends. These are people who, after having spent a significant part of their lives working, now might have some extra time on their hands. In addition, much of this time off is usually during business hours, when most probate matters must be handled with courts, banks and attorneys. Conversely it often doesn’t make much sense to nominate a son or daughter as a personal representative, when they are often already working and supporting a family full time.

A Personal Representative’s Dream: Consolidate, Centralize and Don’t Hide Your Assets!

While picking a personal representative requires some thought, so too does preparing your estate for the personal representative. One of the greatest hurdles a personal representative will encounter is trying to locate records, passwords and other pieces of identification relating to financial assets. As estate planning attorneys on Cape Cod, we frequently give advice to clients who want to make sure their families are not overly burdened with red tape at an already stressful time. Some of the easiest steps to take towards this goal are to consolidate assets, centralize records, and make these records known (or at least easily discoverable) to the personal representative:

• Consolidate Assets – It is not unusual to find an estate with multiple checking accounts, several IRAs, a number of CDs, some brokerage accounts and life insurance policies. While certain assets like real estate cannot realistically be combined, there is often little reason to have many different accounts of a single kind of asset.
• Centralize Records – Keeping assets in several different accounts can be just as much a burden as keeping the records for various accounts in several different places. We often advise clients to find someplace safe in the house to keep such documents along with the will, healthcare proxy and power of attorney.
• Make Records Known – Some families elect to put their wills and other documents into a safe deposit box at a bank. Unless permission to open that box is granted to another person, this is a very bad idea. A bank will not allow someone without authority to access to another’s safe deposit box, so if the proof of that authority (the will) is contained within the box, the personal representative has a catch 22. Keep records safe, but make them accessible too.

Who Would Make a Good Personal Representative?

In addition to finding someone comfortable in terms of time and money, there are certain other characteristics a personal representative should have. A more detail-oriented individual who keeps meticulous records and doesn’t get easily stressed out is a good start. Also, it is important to keep in mind that the decedent’s will is going to be probated in the county of his or her residence. For that reason, nominating a personal representative who also lives within the county can be very beneficial for all parties involved.

Lastly, if it becomes difficult to find someone who fits these criteria, some people choose to appoint a trusted professional for the position. These are people who can expedite the probate of an estate because they have dealt with the process before. Financial advisors, accountants and attorneys can be very capable personal representatives if there are absolutely no other options. Of course, unlike someone as close as a family member, these people should be notified that they are being named in the will. Again, because this position can be so burdensome at times, proper notice to a named personal representative is essential.

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