The Probate Court Is Closed, But We Can Still Prepare & File Petitions

Whether you’re dealing with opening an estate, filing for guardianship or any other family law related proceeding, we can help. The probate court is now only holding proceedings on an emergency basis – and by electronic means for the most part – but our office can still prepare and file proceedings. The Court (as of now) will still accept these filings on a limited basis throughout the State’s quarantining efforts. While these efforts may expand, the State still understands work must continue.

In Person Meetings Are Risky – So We’re Leaning on Teleconferencing and Video Conferencing

While our attorneys will always prefer face-to-face meetings in safer times, video conferencing and screen sharing apps are plentiful and easy to use in 2020. Most of our clients, (if they haven’t already used these apps), learn within minutes how to use these tools, with little more than 2 or 3 clicks of the mouse to update their preferred internet browser. Using these apps enables the participants to share a document or screen with many parties, and talk simultaneously right through their computers. Our office is happy to help clients understand these new tools.

Employees are Working from Home

We’d already begun using secure cloud document management services years ago. This enabled us to work virtually anywhere with an internet connection, including of course our homes. Phone calls can now be forwarded to our cell phones or home phones, meaning clients can call the office no matter where we happen to be at that time.

The post 3 Ways Our Law Firm Is Operating To Overcome COVID-19 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.

Will the Estate Owe an “Estate Tax”?

The estate tax is based on the total assets owned by a person at his or her death. The assets include not only those that pass through probate, but also those that pass by operation of law. This includes assets in a revocable trust, and financial accounts that have a beneficiary designation. Generally speaking, an estate in Massachusetts will only be subject to this kind of tax if the total assets exceed $1,000,000. The federal estate tax is much higher at approximately $5.25 million, as of the beginning of 2013.

There are ways during life to avoid estate tax liability, but once an individual passes away these options basically disappear and that tax will be due. Still, while there are more families today than ever who should plan for this tax, there are many more whose estates do not rise to this level.

What About the Decedent’s Income Taxes?

Although many elderly individuals live their last years with relatively low income, it is still a good idea for a personal representative or other survivor to make sure that the last income tax return is filed. Even if the return contains mostly zeroes, this act will set the statute of limitations on IRS inquiries, investigations or audits.

This income, naturally, is limited only to the period of time that the decedent was alive. Social Security, pensions, dividends and other wages earned will be declared on the form by the responsible party. Income from sources that accrues after the individual’s death must be declared by the personal representative or other responsible party. This is known as a “fiduciary return.”

How Do I Know if a Fiduciary Tax Return is Necessary?

Income generated by an estate can often be nothing more than interest earned from a checking or savings account. In these instances, with interest rates as low as they are, it is safe to say that the income threshold has not been met for tax liability. And of course, the IRS likely has little interest in utilizing its resources to recover information about the estate’s earnings. Still, that estate has a separate EIN number for this purpose, so whether or not to file this return is ultimately on the shoulders of that fiduciary.

When an estate has significant assets, or perhaps assets held in a brokerage account or trust, the fiduciary will certainly need to pay close attention to the earnings made during the period of his or her tenure. These are the instances where the IRS will most certainly be looking for annual earnings information.

What About Capital Gains?

Capital gains will be due once the gain is realized, e.g. sold. The gain is calculated by subtracting the basis (i.e. purchase price) from the sale price. Capital gains will therefore only be due on the decedent’s income tax return if he or she sold that asset during the year. Capital gains will only be due on a fiduciary return if the fiduciary sells that asset during his or her tenure.

In all other instances where the asset is not sold, but transferred to another (by a gift or by operation of law, e.g. when someone passes away) there are no realized gains. Instead, the basis is transferred from the transferor to the transferee. During life, this basis is the same as the purchase price. If the asset is transferred upon or after death, however, its basis is “stepped up” to the market value on the date of death. The differences in tax treatment between these two methods creates reasons for and against both lifetime gifting or testamentary transfers for any given individual.

Treatment of Assets Having Deferred Income Tax

Many times one of the more significant assets in an estate will be an IRA, or 401K that was funded with pre-tax income. The dual purpose of these accounts, of course, is to reduce taxable income while an individual is earning and to provide a later stream of income when he or she is not. These assets can become a little more complicated, however, if they are not spent during an individual’s life

If significant tax-deferred assets remain after someone passes away, there are still some options that the estate may take. If the entire amount is liquidated, of course, that sum will be counted as income attributable to the beneficiaries taxable at his or her marginal rate. But the account can also in many instances be rolled over to separate beneficiary accounts, to be paid out in distributions to the survivors (within a certain accelerated period of years). To determine whether these situations apply one should speak to an attorney, CPA or the financial broker in charge of the accounts.

Among the many tax filings that may be necessary after someone dies in Massachusetts, there will likely be only one or two of these applicable in any situation. Having a knowledgeable MA probate attorney available is well worth the time to get things right and put a mind at ease. Feel free to call our office at any time for questions you may have.

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Non-Probate Assets – Planned for Probate Avoidance

A discussion on when probate is required would not be complete without mentioning the fundamentals. These are the types of assets that we as probate attorneys review with all of our clients who are seeking strategies for probate avoidance, and are mentioned frequently throughout the cape-law.com website:

• Assets in a Trust – Any property placed under the ownership of a valid Massachusetts trust, whether a piece of real estate, a stock portfolio, or a bank account, will not need to be probated through the courts.
• Jointly Held Assets – Any assets that are held in the name of more than one person will automatically pass to the surviving owners upon the death of one. This again is commonly the case with bank accounts and most jointly held real estate.
• Beneficiary Designations – Most often used on all kinds of financial accounts, a beneficiary designation is usually simply a form on which the account holder directs the financial institution to pay to another upon his or her death. This is sometimes referred to as “POD or TOD (Payable or Transfer on Death). Deposits with assisted living facilities may also use these forms.

Probate Isn’t Necessary for Massachusetts Bank Deposits Less Than $10K

If at the time of someone’s death, they have nothing more than some money, say $9,000 in a checking account, then any Massachusetts bank may technically release that amount of money to the decedent’s surviving spouse or next of kin (with some proof of death and ownership of course). Most banks are not aware of the Massachusetts statutes that allow them to do so, however, so trying to withdraw this money might take a little extra legwork and communication with the bank’s legal department. Even so, banks aren’t necessarily required to release these deposits, and aren’t allowed to do so for 30 days after the date of death. An attorney on your side might help things along a bit.

Some banks will require that the would-be payee file for a form of “probate light” now known as “Voluntary Administration.” This is generally a simple method for legal property distribution when estates are less than $25,000 in value. The process still involves court interaction, but the costs and formalities are much lower. We’ve described this process and how it differs in our review of the new Massachusetts Probate Code here.

Wages and Salary for the Intestate Estate – No Need for Probate

If a person dies “intestate,” or without a will, that person’s employer can pay his or her wages to the surviving spouse or next of kin without requiring probate of the estate. The amount of money they’re permitted to pay, however, is not much at all so that most families will not find these statutes of much use. For any private employer, the amount of wages that may be paid to family in this manner is capped at $100.00. For employees of the Commonwealth of Massachusetts, however, or any of its “political subdivisions,” that amount is increased to $500.00. Much like the statutes on bank deposits, the Commonwealth does not require employers to pay families outside of the probate process, but rather it protects them up to a certain amount when they do.

Payments and Reimbursements from Health Service Corporations

There are frequently bills that an individual will incur for some kind of medical care in the weeks and months before passing away. And of course we all know that getting reimbursed for medical expenses by a hospital or insurance provider can take time, sometimes an inconveniently long time. In such instances, if a person dies before the reimbursement is processed, that health service corporation may pay outstanding amounts to the decedent’s surviving spouse or next of kin after 60 days have passed.

As with the Massachusetts statutory provisions on wages and bank deposits, naturally, the amount of money that may be reimbursed directly to such a qualifying family member is capped, in this instance at $2,000. And again, keeping in mind that these corporations are often extremely large and bureaucratic, it may be quite a chore to navigate communications towards someone who understands these particular provisions in Massachusetts law.

Automobile Transfers not Requiring Probate

Transferring a vehicle outside of probate is easiest by far when the decedent is married. Massachusetts has a statute that simplifies this transfer, and unlike many of the above “secret” provisions, this statute is relatively well known. The Registries of Motor Vehicles throughout the state in fact have a very simple application process, much like the traditional application for a new title, that will result in a new title issuance in the surviving spouse’s name. For any other family member, unfortunately, a probate (or voluntary administration) will be required to transfer ownership.

In fact, the laws of Massachusetts make other allowances with respect to motor vehicles without the need for probate. The registration of a vehicle, for example, is considered valid even after the registrant’s death until the earlier of the registration’s expiration date or a transfer of the title. Similarly, any automobile insurance policy still in force on the vehicle will cover all related persons to the decedent until the personal representative is appointed, at which point it will then cover that representative.

Closing Considerations

Foregoing the probate process is almost always a more straightforward and convenient option for surviving family members. Still, it never hurts to enlist the advice of an attorney who focuses in probate work, even if only at the beginning for a little bit of guidance. Please feel free to call our office at 508-888-8100 or visit the contact us page with any questions you may have on when probate is required or broader issues.

The post When Is Probate Required? Massachusetts Law and Probate Alternatives appeared first on McNamara & Yates.

Protecting the Massachusetts Trust under the New MUTC

Since this article covers how to terminate trusts, it makes sense to identify what steps the settlor (creator of the trust) still can take in order to protect trust provisions from attack. And that centers mainly on the language featured throughout the Massachusetts UTC statutes of “material purpose.” In the past, while many estate planning attorneys did advocate that settlors identify a trust purpose, those provisions in trusts had no actual legal effect. They were used to help courts and trustees interpret the settlor’s desires, but there were no laws calling for these provisions. Now, however, as we’ve been discussing, the laws do call for language regarding a purpose.

But the inclusion of this concept of a “material purpose” doesn’t quite rise to the importance that a “settlor’s intent” once had. Instead, the term is merely used as a basis for all kinds of actions taken by Massachusetts trust beneficiaries; An agreement or petition to contest a trust, to modify a trust, or to terminate a trust must refer in some way to the trust’s material purpose. Many times, as in situations where no purpose is listed, the purpose might merely be “to hold property for the beneficiaries.”

Terminating or Modifying a Massachusetts Trust outside the Courtroom

A key provision to the new Massachusetts Trust Code pertains to common fact that after a settlor has passed away, nobody except the beneficiaries has any interest in what happens to trust property. Because trusts are for the most part private documents, and not part of any public record, the beneficiaries of a trust are usually the only persons aware of trust property. So, in lawyers’ offices throughout the United States, trusts of all kinds were “illegally” terminated and liquidated by consent of all beneficiaries. The new Uniform Trust Code provision merely acknowledges that fact, and allows for a “non-judicial settlement agreement.”

Still, such agreements are only valid to the extent that they do not violate a “material purpose,” whatever that may be. And they are only binding upon the interested parties that have been given notice to the agreement. Massachusetts Courts, still having jurisdiction over such agreements, can therefore be used to challenge a trust that was illegally or deceptively changed or eliminated.

But from a drafting perspective, the new provisions will require that a settlor considers reasons why she intends to create a trust. Doing so with the help of a crafty Massachusetts estate planning attorney would enable her to write a material purpose into the trust that could survive one of these informal agreements.

Changing and Dissolving Massachusetts Trusts by Probate Court Approval

There are many instances where a non-judicial settlement agreement is not available to parties seeking modification or termination of a Massachusetts trust. Perhaps the most notable instance, especially for trusts created after the enactment of the UTC, is a modification or termination that would violate a “material purpose” (whenever one is clearly present). But another conflict might simply be that the beneficiaries cannot agree that the trust should be modified or terminated.

In any of these situations, a trustee or beneficiary may nevertheless bring an action to change or terminate the trust in a Massachusetts Superior or Probate Court. In fact, even if the beneficiaries do not agree to modify or terminate a trust AND doing so would violate a material purpose, the petitioners still could bring a successful action against it.

Example 1: The Kids Aren’t Alright

Richard created a trust to hold his stock portfolio, to benefit himself during his lifetime, and to his two children when he passed away. If all that Richard wanted was to avoid probate, he could have simply named the two children as co-beneficiaries. In that scenario they would each receive an equal share upon his death.

But even though both children were over 18 when Richard created the trust, he observed that the two of them had very poor budgeting skills. Richard did not think that these were the type of spending habits that they would soon grow out of. Because of this, his attorney advised that he draft a “spendthrift trust.” In doing so, Richard’s attorney took special care to provide that the spendthrift clause would be interpreted by a court to be a “material purpose.”

When Richard would eventually pass away, any property that he transferred or willed into the trust would be subject to those spendthrift provisions, limiting the risk of the trust being used on frivolous expenses. If his children wanted to terminate the trust, they would not be able to do so by a non-judicial agreement. Instead, a petition would need to be filed with the Massachusetts Probate Court.

Example 2: Sibling Rivalry

Mary placed her residence, the family home in Barnstable, in a trust to be kept for the benefit of her three daughters. The trust directed that the daughters would have an equal interest in the home for the rest of their lives, and that after the last of them passed away, the house would pass in equal shares to the three daughters’ heirs.

Mary’s goal in drafting this trust was apparently to keep the home within the family for as long as possible. But she probably did not realize what was likely to happen when she died. Mary’s youngest daughter, with whom she lived until her death, remained living in the home afterwards as well. But Mary’s middle daughter was living across the country in California, and moreover was drowning in credit card debt. The oldest daughter, meanwhile, was married, living comfortably and needed neither a place to live nor money.

Under the old code, Mary’s middle daughter would have a long battle ahead of her in order to either force the sale of the house, or else compel the youngest & oldest daughters to buy her out. The court would focus on the settlor’s intent of the home as a crucial point in the proceedings. But with the new Uniform Trust Code, Mary’s middle daughter is able to simply file a complaint, with a strong likelihood of success. So long as all beneficiaries’ interests were protected under the proposed trust termination, the probate court will allow it.

Afterthoughts – Changes in Massachusetts Probate Practice

The Uniform Trust Code has not received nearly the amount of attention that the Uniform Probate Code first generated when enacted in Massachusetts. Perhaps the courts and attorneys are simply still trying to cope with the earlier changes. But these changes are in many ways a lot more significant, so that estate planning attorneys should be making very important modifications to the way they draft trusts from here on out.

If you’re looking to create a trust in the near future, make sure your attorney is among the informed. After reading this article you should be able to figure out an attorney’s UTC awareness simply by asking “What changes have you made to your trusts since the new UTC?”

The post Contesting a Trust in Massachusetts | How the New MUTC Works appeared first on McNamara & Yates.

One of the greatest uncertainties for probate clients, probate attorneys and the probate courts after implementation of the new Massachusetts Uniform Probate Code [MUPC] concerns how to deal with the real estate of a decedent’s estate. Under prior law, the executor or personal representative simply needed to apply for a license to sell through the court, no matter the proceeding. Now, however, the MUPC has led to different sets of rules for the different types of probate and related circumstances. And in the short amount of time that has passed since the MUPC’s passage, certain trends and processes have emerged among probate practitioners. Below is our probate attorney summary on how to sell real estate through the Massachusetts probate process.

Selling Real Estate – Massachusetts Probate Law vs. REBA

The MUPC lists thirty-seven authorized transactions for the personal representative’s powers, none of which include selling real estate. But this listing does not restrict the personal representative’s authority, rather it leaves the door open for a will to grant further authorities. This is why at the outset most probate practitioners believed that when the MUPC was enacted, the personal representative could sell real estate, so long as that power was written in the will. But entrusting a probate practitioner to write the rules on clearing real estate title is like asking a carpenter to draft architectural plans. Such rules are best left to the experts.

So it was necessary for the Real Estate Bar Association, or “REBA,” to weigh in on the subject. Prior to the MUPC, under the old Massachusetts probate code a personal representative had to give notice of the will to all interested parties in advance of applying for appointment, in addition to filing an inventory and account with the court at intervals during the following year. And if real estate were to be sold during this time, she would also need to apply for a “license to sell,” once again giving notice to all interested parties before gaining that authority. The MUPC sought to minimize all of these technical hurdles if possible, through the use of the “informal” probate process.

While there are several differences between the informal and formal probate processes, REBA was mainly concerned with differences between statutes of limitations. That is, once a formal probate is closed, which can occur as early as 12 months from its opening, any contest or further litigation on the estate will be barred. This is an important point. Because with informal, by contrast, the estate is not finalized in the same way until the later of 12 months after the estate is closed, or 3 years after the date of death. The latter informal process therefore adds an extra 1-2 years of uncertainty on the finality of the estate. And so if real estate is involved, its title is not clear for that same period of uncertainty.

License to Sell Still Required in Most Massachusetts Probates

As a result, REBA issued Title Standard number 78, in addition to Title Standard numbers 10, 14, 36, 41, 43, 50 and 71 as of May 7th, 2012. We will not write those standards out here, but suffice it to say that the options available to those seeking to sell real estate out of a probate estate are somewhat confusing. Nevermind that different title insurance companies (those entities primarily concerned with the validity of deeds) might require more stringent standards for their own policies. Our recommendation to probate clients who plan to sell Cape Cod or south shore real estate out of a probate estate is simply to initiate the formal process from the beginning.

But just to be concise, the Title Standards technically allow for real estate to be probated in Massachusetts under the following three situations:

1. If the decedent died intestate (without a will), only after petitioning the court for a separate license to sell real estate – whether under the formal or informal process.
2. If the decedent died testate (with a will), but the will does not grant the personal representative a power to sell real estate, only after petitioning the court for a separate license to sell real estate – whether under the formal or informal process.
3. If the decedent died testate, and the will does grant the personal representative a power to sell real estate, no separate petition to sell real estate is required – but only if the probate is initiated under the formal process.

When Real Estate Under Massachusetts Probate May be Sold

There are no formal requirements on when to sell a home out of a probate estate in Massachusetts, but individual circumstances will dictate timing. In order to apply (“petition”) for the license to sell, for example, the petitioner must have an offer pending from a potential buyer. The agreed upon purchase price is in fact an essential element of the license to be granted. That means of course that if for some reason, the agreed upon price of the subject real estate is modified under a license to sell, another petition for a license to sell must be granted before the sale can proceed.

In addition, a license to sell real estate under Massachusetts is not granted indefinitely, but for a fixed and certain period of time. Again, the assigned time period ensures extra certainty on title, and on who is legally empowered to convey the property. Under ordinary circumstances the length of this license would yield plenty of time to conduct the sale of real estate. The nature of Massachusetts probate however, as we frequently tell our clients, is that the process can be very unpredictable.

When someone passes away there are often very few, if any, family or friends who have a complete understanding of that person’s debts and assets. Accordingly when probate is filed, an unknown creditor’s claim may come in. Equally unpredictable is the behavior of a collection of beneficiaries who may be family members with hard feelings, or may simply have different financial needs and/or desires. The best way to navigate these difficult hurdles, of course, is to enlist the services of an experienced probate attorney. Personal representatives seeking expertise in this area should always feel free to call Attorneys Tim McNamara and William Yates for a free consultation at our Sandwich law office, 508-888-8100.

The post How to Probate Real Estate in Massachusetts | Informal vs. Formal appeared first on McNamara & Yates.

As we described in an earlier article, calculating the Massachusetts Estate tax (imposed on estates over about $1 million) is not an easy task. So it should be no wonder that families find it difficult to form an estate plan that incorporates a Massachusetts estate tax strategy. Actually avoiding such a tax (also called the death, inheritance or succession tax) is not very difficult, since the methods are fairly straightforward. Determining your estate planning goals is where the major brainstorm comes in, and where an experienced Massachusetts estate attorney can make the difference. But enough of the sales pitch, here are some of the methods that we use:

Lifetime Gifting and $13,000 – The Magic Number

To begin with, Massachusetts has no gift tax. But under IRS rules there is a limit to the amount someone can give each year – and that is $13,000. Any gift valued above that triggers the requirement for the donor to file a gift tax return. There is no tax due at the time of the gift, but if an individual gave $14,000 to a friend for example, the extra $1000 would be entered in the IRS database, reducing his estate tax exemption (up to a $5 million estate in 2012) by the same amount. This exemption – that combines the lifetime gift tax exemption and the death tax exemption – is called the “unified credit.”

Please take note that many of our MassHealth (Medicaid) long term care clients mistakenly believe that they can give away up to $13,000 per year for a Medicaid spend down to qualify for benefits. This is not true, and in fact a gift of any amount will be deemed a disqualifying transfer for those seeking long term care benefits. Information on Medicaid and spending down is featured in our MassHealth guidance, or contact us on the web directly for expert Medicaid advice.

The Split Gift Provision – Doubling Your Gifts

While it is simple to understand the basic gift tax exemption, knowing the details and nuances of this exemption can be even more valuable. As we discussed before, the goals and circumstances of each family is different, meaning different options are available. For instance, if a married couple would like to make a gift, they may in effect double the amount. Furthermore, each donor can use this exemption for as many donees as he or she would like. How does this play out in practice? Well, for example, a mother and father could each give $13,000 to their son, his wife and their single grandchild every year without triggering the gift tax return requirement. By doing so, the couple is able to give up to $78,000 away each year without triggering the gift tax requirement! A couple with more children could give more still. Naturally, this is a frequently used tool for those with larger estates.

For families with assets well over the estate tax threshold, other options exist. Creating limited liability entities to hold these assets is a strategy that many attorneys employ to reduce the assets’ market value. In a simple example, a piece of real estate could be placed in an LLC or S Corp, whose members have little to no voting rights. The absence of these voting rights mean that few outside investors would want to purchase any interests, bringing their market value down. Because of this unique “family business” structure, the parents are free to give away such real estate interests having a reduced market value, but the children holding those assets after their parents’ death could sell the asset for a higher actual value.

Avoiding Massachusetts Inheritance Tax with the Marital Deduction:

In Massachusetts, just like at the federal level, upon death there is no estate tax due – when everything passes from one spouse to another. This protection is afforded in consideration of the fact that many married couples consider their major assets to belong to both of them. Imagine, for example, if a wife had to sell the family home that they’d lived in together all their lives, simply because its value triggered an estate tax. Instead, both Massachusetts and federal tax laws permit surviving spouses to inherit an estate of any value without any estate tax liability.

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Massachusetts Bypass Trust Succession Tax Strategies

In addition to using the marital deduction, couples can use more complex estate planning vehicles to ensure that both spouses of the marriage are able to use the maximum estate and/or gift tax exemptions available to each. As we discussed before, the Massachusetts estate tax applies to estates over $1 million. And again, just as the federal gift tax (unified credit) exemption is available to each spouse, so too is the Massachusetts estate tax exemption. We’re therefore able to exempt up to $2 million from Massachusetts death tax liability, if planned well.

This brings us to the concept of a Massachusetts bypass or family trust. What that means, in essence, is that the trust is reserved only as a benefit for the surviving spouse during life (e.g. it will provide interest income), but that it will terminate and pass to other beneficiaries afterwards. Any funds from the estate of the first spouse to die would go into this trust rather than outright to the surviving spouse. In certain Massachusetts estates that exceed $1 million, this tool can be quite useful.

As an example, let’s assume that a couple together are worth $2 million. The husband could pass away and leave his half outright to his wife, leaving her alone with $2 million. But if she were to pass away leaving such an amount, their children could lose a significant sum from the estate tax on that entire amount! Instead, our Massachusetts estate planning attorneys might have achieved the following:

• Leave half of the estate in a family trust up to the $1,000,000 Massachusetts estate tax amount (perhaps the family home and an amount of money in an investment portfolio). The wife has a right to the income during life, but the children are the ultimate beneficiaries.
• Leave the remaining $1,000,000 to the wife outright, a sum that should allow her to live as comfortably as before, and that qualifies for her estate tax exemption when she passes away.

Both spouses in the above situation utilized their maximum individual estate tax exemptions, and the surviving spouse had the ability to remain in her house, while still having plenty of funds in her own name. Again, such a trust could contain the family home as well as some investments, providing modest income during her life.

Using the “Q-TIP Trust” in a Massachusetts Estate Plan

Another, more complex estate tax avoidance strategy developed in Massachusetts is the Q-TIP Trust. Good to know, but not necessarily helpful in understanding this trust is that the acronym Q-TIP stands for Qualified Terminable Interest Property. This trust would be used in Massachusetts estates that exceed $2 million.

It is difficult to summarize article how exactly the Q-TIP trust works as part of a greater article on the various Massachusetts estate tax avoidance strategies. But readers should be aware that this is one planning tool that provides the greatest Massachusetts succession tax benefit, while also helping to preserve the greatest federal unified credit, which happens to be a more volatile figure given the actions of Congress these days. Anyone with funds nearing this amount should call our offices for an appointment for a more in-depth description.

Creating an Irrevocable Trust as an Avoidance Strategy

Our last Massachusetts estate tax avoidance tool is comparatively easy to understand from some of the others we’ve talked about, but their use is so varied that again, an article such as this can’t really summarize them well. Generally though, assets are placed in an irrevocable trust during the life of the donor so that they are not includible in the taxable estate.

The drawback to irrevocable trusts, of course, is that they are not revocable. This means that any assets placed within them are then under the control of the trustee, who may not be so friendly as to give them back to the donor in the event they are needed. In fact, irrevocable trusts are mainly used in situations that require the donor have little or no say in their proceeds. Homes, bank accounts, and even life insurance policies are examples of assets that people put in trusts.

Final Thoughts – Maintaining the Massachusetts Estate Attorney Relationship

No matter what size a family’s estate happens to be, a family’s assets tend to increase over time. Keeping in touch with the family estate attorney should be on the schedule at least every 4-5 years. So feel free to call our Sandwich law office for Massachusetts estate tax questions whenever you have a question.

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Fast Appointment of the Personal Representative – Informal Probate Process in Massachusetts –

Theory: The new code provides that there will be much faster appointment of the personal representative in a Massachusetts probate proceeding, due to the informal probate process option. Prior law presented a very cumbersome and lengthy process before appointment; Where the personal representative had to file with the court, then wait for the court to send a “citation,” then send notice of the citation to all interested parties, then file proof of the notice back with the court, then wait for the appointment. An appointment in this timeline would normally take about 6 weeks. The new law cuts almost all of this out, requiring generally that the personal representative send notice out, then 7 days later submit his petition for appointment. An appointment now in theory can be finalized within 7 days from the date of death.

Practice: Actual timelines for an informal appointment may be a bit longer. Recent conversations at the Plymouth and Barnstable Probate courts, for example, have shown that the courts are still very much in the midst of trying to implement the new process. A petition may be submitted for approval on the seventh day, but the case itself will need to be placed in the queue of other probate cases that came before it. A reasonable expectation for an informal appointment is therefore probably more like 14 days – Perhaps not as quick as might be possible, but still about 3 times faster than the old law!

For Small Estates – A Cheaper Option in the Voluntary Administration Statement

Theory: A voluntary statement, also known as “Collection of Personal Property by Affidavit,” allows for a more efficient procedure than even the informal probate appointment. Under the prior law, this affidavit was an available option for any estate under $15,000 plus a vehicle. The new Massachusetts Uniform Probate Code expands this value threshold another 33% up to $25,000 plus a vehicle. And although as before the filer must wait 30 days after the date of death to file the affidavit, the appointment itself may apparently issue on that day if the court will permit it.

Practice: In practice although the court will accept all papers for the appointment after the 30 day waiting period, the filer should again expect that the processing may take another week or two. Therefore this option for the personal representative doesn’t provide any added benefits in terms of speed for the personal representative, but still offers the same more liberal alternative to regular informal & formal probate process. And of course, as mentioned, this alternative is now available to slightly larger estates. The voluntary affidavit route is likely cheaper than even the informal petition in practice because there are no notice requirements, and in certain situations the entire estate can be wrapped up almost immediately.

Protecting Assets from Probate Creditors – Property Exemptions and Family Allowances

Theory: Though former law made some considerations for survivors from the death of a family’s primary earner, these provisions were not very clear. Labeling the law “necessaries,” the legislature essentially allowed a judge to set aside some portion of an estate to temporarily maintain the spouse, or else up to $150 per child. Also included was the right to stay in the property for up to 6 months after the date of death. These exceptions to normal distribution procedures were quite small, but in reality the personal property of many modest estates is simply distributed to members of the household without the court’s involvement.

The new law nevertheless provides far greater number values for “exempt property,” where either the spouse or children may keep up to $10,000 outside the normal distribution, and thus the reach of creditors. For the family’s maintenance, the law also creates a “discretionary family allowance” in a lump sum of $18,000 or $1500 montly.

Practice: These new provisions may not be very useful, except in the case of much smaller estates and those falling under voluntary administration statements (described above). If in such an estate, the only assets left (after administration expenses) were valued below the combined $10,000 property exemption and $18,000 family allowance, then technically the personal representative could distribute all remaining funds and file a sworn “closing statement” almost immediately to close the estate without notifying creditors.

But however convenient, our experience as Cape Cod probate attorneys does not support that clients should elect such a method to close the estate in practice. For technical reasons this closing statement opens up the personal representative to additional risk that would not be present in the traditional probate closing “complete settlement.”

Ongoing Changes

These faster probate procedures in Massachusetts are still undergoing a great deal of testing, and the amount of time and money that will ultimately be saved is still up in the air. After enough time has passed, the learning curve for court staff and Massachusetts probate attorneys alike should flatten, letting the system return to its previous efficiency. But it’s important to note that the results we’ve seen in the past month have certainly been promising.

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As we noted in our Part 1 assessment of the new Massachusetts Uniform Probate Code (a.k.a. “MAUPC”), the legislation has been delayed yet again by the Massachusetts Legislature, this time until April 1 of 2012. Still, there has been no shortage of talk relating to the expected effects of these laws among Massachusetts probate attorneys in anticipation.

The delays stem from unresolved ambiguities that the courts will need to address when implementing the code, but this article will only talk about the basics. Generally, the purpose of this new probate regime is to integrate the efficiencies in probate law that have developed throughout the United States. In the end, the goal is to ensure that the process is not too costly or burdensome for the Massachusetts Probate Courts and families alike.

So the MAUPC’s provisions aim to make a number of improvements in order to achieve this goal. Some changes deal merely with inflation, like the increases in family exemption and involuntary probate thresholds noted in Part 1 Massachusetts Uniform Probate Code Assessment. An example of a more complex change is the distinction between “informal” and “formal” probate, where the probate court very minimal role with fewer technical requirements in uncontested estates. Below we have noted some more of the changes to take place.

Adjustments in the New Massachusetts Uniform Probate Code – Who Takes?

As a general overview the order of inheritance from an decedent’s (deceased person) estate will pass as follows 1) The spouse, 2) Any descendants, 3) Parents, 4) To parents’ descendants (decedent’s brothers and sisters) and 5) Next of kin (closest blood relations).

The new MAUPC seems to not only account for the modern costs attributed to family and probate, but also for the modern family itself. In essence it simplifies the older law that relied on a formula to divide the inheritance among spouse and children. At the same time, it creates exceptions for distributions when a family is comprised of children from other relationships.

In many instances, e.g. when the decedent leaves no children or parents, or if all children left were had between the decedent and spouse, the entirety of the estate will go to the surviving spouse. In other instances the spouse’s share will be reduced, to a small extent if the decedent leaves parents behind, and to a greater extent if either the decedent or surviving spouse have children from both within and outside the marriage.

Adjustments in the New Massachusetts Uniform Probate Code – How Much?

A minor adjustment to the laws of intestacy (meaning death without a will) in Massachusetts is the manner by which later generations will take a share in the estate. Under the traditional “Per Stirpes” system each child would take an equal share, and any grandchildren of a deceased child would take an equal share of that share. So if there were 3 children, and one of the children was already deceased leaving 2 grandchildren to inherit, each grandchild would take a 1/6 share of the estate.

A good and memorable phrase that describes the new system is “Equally Near is Equally Dear.” It is similar to the old system, except that after shares are distributed to the survivors of the first generation, they are pooled together and then distributed equally again to any survivors of successive generations. So if 2 of the original 3 children were already deceased under this system, and had left a total of 3 grandchildren to inherit, those 3 grandchildren would take an equal share of the 2/3 pooled from the deceased children (1/3 x 2/3 = 2/9, so each child gets a 2/9 share under this system). This new system is called “Per Capita at each Generation.”

Priority for Appointment

If a will exists, or even if there is no will, the Massachusetts Uniform Probate Code has in place a “ladder” or a prioritized list of people who may be appointed as the personal representative. This person is necessary in both formal and informal probate proceedings, and the ladder is in place in the event that the named person in a will is unable or unwilling to serve.

Generally the order is as follows: 1) The nominated person under a will, 2) The surviving spouse of the decedent who is also a devisee (receiving a gift) in the will, 3) Other devisees in the will, 4) The surviving spouse in the will, 5) Other heirs of the decedent, 6) If all else fails, the court will appoint a public administrator.

Exemptions and Allowances

The new Massachusetts Uniform Probate Code incorporates additional provisions that operate to protect the spouse and family immediately after the time of death. These protections are enhancements to earlier laws that provided merely a basic level of sustenance to surviving family members.

An example of this protection is the spousal exemption for up to $10,000 of personal property owned by the decedent. Just as it sounds, the surviving spouse (or child, if no surviving spouse) may retain personal property (e.g. furniture or vehicles) valued up to that amount of money regardless of other claims on the estate.

In addition, the personal representative can make use of what is called a “discretionary family allowance.” This allowance provides for up to $18,000 in a lump sum or $1500 per month to be paid to the spouse or child during the first year of administration.

Unresolved Issues and Delay for Implementation

Unfortunately many of the new provisions are so far untested within the State of Massachusetts, so that local practitioners are not yet sure how actual probate cases will play out under the new Massachusetts Uniform Probate Code. While most, (like the Cape Cod probate attorneys at this particular office), would like to see the law passed as soon as possible in order to iron out the kinks, the Massachusetts legislature has delayed the MUPC enactment on 2 different occasions already.

The issues that need resolution before the bill goes into effect mainly involve the passage of the Massachusetts Uniform Trust Code (MUTC). Like the MUPC, the MUTC implements well thought out measures to significantly overhaul existing State laws for better accessibility and understanding to the public. Because these codes overlap with one another, the legislature and many practitioners would prefer to pass the whole bill all at once. We shall see.

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The new set of laws, scheduled for adoption by Massachusetts starting April 1, 2012 (pushed back from Jan 2), are known as the Uniform Probate Code (or “MAUPC” or “UPC”). They are designed to clarify the law and to incorporate the more useful advancements in probate law made over the years throughout the United States. Overall, the adoption of these laws should promote a speedier and more efficient liquidation of estates, cutting both time and cost for the benefit of those who stand to inherit.

In order to achieve these objectives, the MAUPC provides for a variety of useful options. One example is that in an uncontested estate (where no interested parties disagree), the probate court will have a very minimal role with fewer technical requirements. Other changes deal more with inflation, such as the increase in family exemption and involuntary probate thresholds. And while Massachusetts probate attorneys are generally optimistic about these changes, the new laws still leave many left for the courts to decide. Here are some of the more important changes to note.

Difference between Informal and Formal Probate or Appointment in Massachusetts

One of the biggest and most obvious changes that the Uniform Probate Code will make to probate process in Massachusetts is the dual “formal” and “informal” processes. As we mentioned above, the courts wanted to foster a less invasive alternative to traditional probate. Doing so would save time and money for families, but also for court staff. So where there are no expected disagreements in an estate, families can opt for the informal process. Characteristics of this process include reduced filings, fewer notice requirements, and little need for judicial involvement.

On the other hand for those estates with a greater need for court intervention or supervision, any interested party may petition for a formal proceeding in Massachusetts probate court. This might occur for many reasons: e.g. where there are competing claims to the estate, or with a contest to the appointment of a personal representative.

Expanding Duties of the “Executor” as a Personal Representative

Another obvious change the MAUPC makes is to cease using the label of “Executor” in favor of the more descriptive “personal representative.” This not only removes the confusing distinctions previously made between administrator and executor, but also the gender references (i.e. execu–tor vs. execu–trix). Now that the personal representative is the sole label for the administrator of an estate, the potential for ambiguities is greatly resolved.

On a related note, the default powers of a personal representative have been expanded to allow for greater autonomy in managing assets and paying claims. The personal representative therefore now has authority without any additional court approval to: settle claims, to continue an unincorporated business for up to 4 months, to incorporate a business, and to distribute cash and assets in kind. Notably, however, a license is still required to sell real estate.

Statutes of Limitations under the Massachusetts Uniform Probate Code

But with the new powers and freedoms granted under the UPC, personal representative and families also have greater responsibility. Coupled with these enhancements are the changes the UPC makes to Massachusetts probate timelines and statutes of limitations. These are naturally also designed to streamline the probate process.

The general rule is that a will can be probated for up to three years from the date of death. This greatly reduces the time previously allowed, since a will in Massachusetts could be probated up to 50 years after the date of death! The result of this significant reduction will be to increase the certainty of ownership of assets distributed from an estate. There are exceptions to this rule, for example when assets of the estate are later discovered, but as Cape Cod Probate Attorneys we typically advise families to be vigilant about 1) making sure a will is discoverable upon death and 2) understanding that the probate process should be initiated with some expediency.

For Small Massachusetts Estates, A Voluntary Probate Expansion

Both old and new Massachusetts probate codes provide for “Voluntary Administration,” for smaller estates. Somewhat confusingly, the statute previously labeled the process as “informal,” but it is now known as “Collection of Personal Property by Affidavit,” and the administrator is known as the “voluntary personal representative.” The threshold for filing is now significantly higher consistent with inflation.

The provision is meant primarily for estates that do not contain real estate, and the threshold for filing is basically up to $25,000 in assets plus one vehicle. And although the will is still filed with the probate court, voluntary administration is not considered a true probate action. Many families who have made efforts to avoid probate by placing most estate assets in trust or with beneficiary designations can take advantage of this low cost alternative to traditional probate.

Massachusetts Uniform Probate Code Delays

While these laws were scheduled to go into effect on several occasions already over the past year, the Massachusetts State Legislature has chosen to delay their implementation. The issue is that these laws will eclipse a solid body of case law made by the Massachusetts Courts over the years that resolved uncertainty in statutory interpretation. We will continue to cover the new Massachusetts Uniform Probate Code as these developments continue to arise.

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