Estate Planning- Wills, Trusts, Probate

DO I REALLY NEED TO HAVE OR UPDATE A WILL AND CONSIDER OTHER ESTATE PLANNING DOCUMENTS AND PROTECTIONS TO SAFEGUARD MY SPOUSE AND FAMILY?

• Do I need to have or update a will and consider other legal documents?
  The process of making or updating a will, sometimes called estate planning, can involve one or several documents. Most people, even if most property is held in joint ownership, need a simple will and some will need a pour-over will into a revocable living trust. For estates of over $650,000, estate planning can involve consideration of a number of factors that include avoiding excessive estate tax of 37% to 55% federal estate taxes and Mass. Estate Tax based on the sponge tax! Deciding on how you wish your property to pass at your death is not necessarily unpleasant. Many feel a great relief in planning for the event of a fatal accident or a serious illness. Some find such decisions difficult and tend to put them off. Giving assets to a spouse or child may bring tax savings, but be hard to do. Having all property jointly owned by spouses or with an adult child may not be best.
  
  
• What does a simple will or a pour-over will and revocable living trust do?
  The will allows you to decide who will get your personal property and who will get your real estate, except jointly owned property which passes outside the will to the joint owner. You choose your executor, the person who will administer your estate; you also choose to whom and in what amounts your property will go. Even if you hold property jointly with your spouse, there may be some property that is not jointly held; and, in a common disaster, the property of each by law will pass, if the order of death cannot be determined, as if each spouse died before the other. You will wish to decide on a guardian of any minor children. Wishing "to avoid probate" with its costs or to have someone able to manage your property if you are disabled and make discretionary distributions when you are gone, involves a revocable living trust with its costs. Often the trust is unfunded in standby-mode with the availability of transfer prior to death by a durable power of attorney. A pour-over will "pours" over assets into your trust as a back-up for any property not transferred prior to death.
  
  
• What happens if I or my spouse die without a will?
  The deceased person's property passes under state intestacy laws which rigidly govern how property passes. They do not meet the average person's wishes. Without a will, they are the rules. They state that after funeral and final expenses and taxes and family allowances, the intestate’s property passes as follows: a. Without a will, if the deceased leaves a spouse and issue (children, grandchildren...), the surviving spouse takes one-half of the personal estate and real estate. The rests goes equally to children or other issue! b. If there are issue, but no surviving spouse, all property goes to the issue. c. If the decedent has no issue, but there are kindred (blood relatives), the surviving spouse takes all of the first $200,000 and one half of the remaining personal property and one half of the remaining real estate. The remainder goes to the heirs and next of kin in the order specified by law! d. If the deceased person leaves no issue and no kindred, the surviving spouse takes all. This is the way many

  Without a will, if the deceased leaves children, the surviving spouse takes only ½ of the personal estate and real estate. The rest goes equally to the children.

  couples would wish for their property to go under a. and c. above, while the spouse is living, but to provide for that requires a valid will. e. If the decedent leaves no spouse, no issue, and no kindred, then that person's property goes to the state. Many individuals in that situation would prefer to give their property to favored charities. To avoid the unwanted effects of intestacy laws is to have a valid will properly prepared and executed with the formalities of state law.
  
  

• How often should my will be reviewed?
  We suggest a review at least every five years or sooner if your circumstances or estate tax laws have changed. A will is in effect until revoked, changed, or destroyed. Changes in the family, the amount, type and valuation of property you own, and tax and probate law changes all call for a review and possible updating. A new marriage invalidates a prior will unless certain language is used. The original of the will must be kept in a safe place to be available for probate.
  
  
• How can you help the attorney to plan the right will and other estate planning documents?
  The attorney needs complete and accurate information about your assets and liabilities, income, life and other insurance, the deeds and mortgages to your real estate, the current estimated value of your property and needs to be notified of significant changes. You can add to the protections offered by a will by having adequate auto, homeowner's, disability, and umbrella insurance; a durable power of attorney and a medical proxy for medical decisions for a possible disability; a homestead exemption for $500,000 of home equity protection or $300,000 each for persons 62 or over; and, for married couples, a post-February 10, 1980 tenancy by the entirety to protect the home from sale by creditors while the nondebtor spouse lives there. You may wish to consider a revocable living trust, perhaps a QTIP trust, particularly if you and your spouse have assets above $650,000. Attorney advisories are available about these topics. While some prepare their own wills, this is very risky since there are formalities for execution and complex laws to be followed to assure a valid will and protection of your spouse, family and your property. Drafting these documents involves knowledge of many laws and experience gained through years of practice.

WHY IS A DURABLE POWER OF ATTORNEY SUCH A USEFUL PROTECTION AGAINST MENTAL OR PHYSICAL DISABILITY?

• What is a Durable Power of Attorney, and why is it such a useful protection against mental or physical disability? 
  A Durable Power of Attorney is a document provided for by Massachusetts General Laws, Chapter 201B, ' 1-7. It allows a person to appoint another person to be an agent with all of the powers specified in the Power of Attorney. Thus, it can be tailored to a specific set of circumstances, or it can be as broad as to allow all powers to transact business and make decisions that an individual has. The form of Durable Power of Attorney that our office utilizes has 27 different powers including the powers to buy and sell real estate, conduct banking transactions, make most business decisions, and various other powers. The Attorney - in - fact is the person appointed and has nothing to do with an Attorney at Law.
  
  
• Who should I appoint as my attorney-in-fact under the Durable Power, and should I have a successor attorney-in-fact?  
  You should appoint someone whom you trust to conduct business on your behalf. This probably would be your spouse, an adult child in whom you have trust and confidence and who has good sense, or a another close relative or wise friend. It is wise to specify successor attorneys so that if the first one is unable to serve, the next person may. You may want a trusted professional and the Power does allow for compensation of the Attorney - in - Fact.
  
  
• When does the Durable Power of Attorney come into effect? 
  The Durable Power of Attorney, under one form, comes into effect only if you are mentally or physically disabled as certified by your disinterested physician. Thus, it is sometimes called a springing power. It is called Durable because unlike earlier powers of attorney that ended upon disability, the durable power is useful during such disability. It ends upon death. You may decide to use a "regular" Durable Power of Attorney as a "stand-by" power with powers and under circumstances as narrow or wide for whatever period you designate. It has greater ease of use in not having to have a physician’s making a decision and certifying about disability before it comes into effect since that certification that may be difficult to obtain. You can cancel any Power of Attorney whenever you wish.
  
  
• How does the Revocable Living Trust differ from a Durable Power of Attorney? 
  The Durable Power of Attorney lasts only as long as you are alive and arises upon your disability or during any other time as spelled out in the Power of Attorney. The Revocable Living Trust is an instrument that is intended to survive your death and provide for the management of your property for you and your spouse while living, and for children or others after death. In fact, under the Durable Power of Attorney, property may be transferred as needed by your attorney-in-fact to your Revocable Living Trust in the event of your disability.
  
  
• When Should I Have a Durable Power of Attorney prepared? 
  We usually prepare one when doing a complete estate plan which may include a homestead exemption, insurance coverage "check-up," simple will or pour-over will and standby living trust, and medical proxy to appoint a medical agent to make decisions about medical care if you are unable to.
  
  

WHAT IS A REVOCABLE LIVING TRUST AND HOW MAY IT FIT IN MORE COMPLETE ESTATE PLANNING THAN HAVING A SIMPLE WILL?

• What is a Revocable Living Trust, and how might it fit into my estate plan?
  A Revocable Living Trust is a legal document that allows you to set up ownership of potentially all of your property in your own trust usually with you and/or your spouse as initial trustees. It has many advantages over a will or power of attorney, although they are all used together in a complete estate plan. You can always amend or revoke a trust by its terms and make a new will and/or trust. It allows more flexibility and control than a simple will. Property that is transferred to the trust avoids going through the probate process upon death. It thus preserves privacy, for instance, avoiding the public record of what your estate contains and to whom you leave it. During your life, if you are disabled, your co-trustee or successor-trustee may make all of the decisions that you could make to run your financial affairs. It avoids the need and costs of appointment by the probate court of a conservator/guardian. Language in the trust may typically provide for your spouse and children or other beneficiaries and, depending on your instructions, may provide more income or principal in different amounts and in different times. It can and should state the circumstances for termination of the trust and guidelines for the trustees’ discretion in making distributions. You may also specify certain property to go to charities or friends as beneficiaries, particularly if your closest relatives predecease you.
  
  
• Do I need a Will if I have my property in a Living Trust? 
  With a Revocable Living Trust, we recommend a Pour-Over Will to collect any property that is not transferred to the trust and to "pour any such property" into the Trust. In fact, many persons prefer to avoid the cost of transferring all property and to leave the trust unfunded for the time being. If you have a Durable Power of Attorney that allows your attorney-in-fact to transfer property at a time that you might become disabled, the standby nature of the living trust is particularly useful.
  
  
• Do I need a bank or other professional trustee with my spouse or other personal trustee? 
  If you have any question about the business sense and abilities of your personal trustee and can afford a bank or professional co-trustee or simply prefer it, it may make sense. Professional trustees charge a certain amount each year so that the estate or principal in the trust should be a sufficient size to justify the annual trustees fees. Fee schedules and other information are available from the trust department of banks having them.
  
  
• When Do I need a more complicated Trust such as a QTIP Trust to provide estate tax savings? 
  If a person's individual estate exceeds $650,000 in value, you should consider Marital Deduction, sometimes called QTIP , Trusts and credit shelter trusts to assure best use of each person's credit shelter amount, $650,000 in 1999, that passes estate tax free. Federal estate taxes range from 37% to 55%. By combining the unified credit with the marital deduction, the estate of the first spouse to die will pay no estate tax. The way in which you and your spouse hold your property, not necessarily wisely in joint ownership, can result in substantial Federal and Massachusetts estate tax savings. Your estate includes life insurance owned by you, equity in real estate, the value of a business, mutual funds and investments, and usually one-half of jointly owned property, and may involve planning for an "expectancy," property you expect to receive from parents or other relatives. Your careful and fully disclosed statement to your attorney of assets and liabilities is crucial to his or her making valid and fully informed recommendations. Health and family issues should be discussed openly. Thus, planning for one generation may wisely call upon the parents to inform adult children of their expectancy so that they may do such estate planning.
  
  
• Why Do most spouses prefer the QTIP Trust to provide estate tax savings, assuring income to the other for life and then distribution to their own children or grandchildren or other beneficiaries? 
  There is no gift or estate tax for transfers between married persons with some exceptions. For married individuals having property in excess of the $650,000 credit shelter amount for 1999, considerable savings can be achieved through a marital deduction trust, commonly called a QTIP Trust. If a couple has between $600,000 and $1,200,000 and up in value between them, such planning may include a recommendation to transfer some joint property to best take advantage at least of each person’s $650,000 credit shelter amount. This can often be accomplished by ownership or transfer by one spouse of life insurance on the other spouse’s life, if one spouse does not want certain assets transferred. In case of joint deaths of a couple, such ownership may provide for tax free or lesser taxed transfer of all property to the children and grandchildren.
  
  A QTIP Trust for each spouse is the most common tool of such estate tax planning. Each spouse is protected by the requirement of federal law that all income annually go to said spouse during his or her lifetime. It assures that each spouse’s individual, as opposed to jointly owned property, will eventually pass to the children from the marriage. It thus prevents the passing of the deceased spouse’s property to a surviving mate’s second spouse and/or a new family or children of a prior marriage, if the surviving spouse should remarry or had children of an earlier marriage. Distributions of principal from the trust require the decision of a disinterested, usually a professional trustee, who also owes a duty to the children and grandchildren as well as to the spousal beneficiary. Professional co-trustees are often chosen to co-manage large trust with a family trustee. Federal and Massachusetts estate tax law spell out the requirements for such estate planning, involving knowledge of wills and trusts, tax law, real estate, and often business law .and years of experience and judgment.
  

WHAT IS A HEALTH CARE PROXY, AND DO I NEED ONE AND A LIVING WILL?

• How Does a Health Care Proxy Allow Me to Choose the Person Who Will Make Decisions Regarding My Health Care If I Am Not Able to Do So? 
  A health care proxy is a document executed under M.G.L.A. Chapter 201D which names another person, referred to as the Health Care Agent, to make health care decisions for the person, if that person should be incapacitated. The principal, the person appointing an agent, must be 18 years of age, of sound mind, and under no constraint or undue influence. There must be two witnesses to the execution of the principal’s signature or of another persons signing as directed by the principal. Every adult is presumed to be competent to sign a Health Care Proxy and every proxy is presumed to be executed properly.
  
  
• When Does a Health Care Proxy Go into Effect? 
  A health care proxy becomes operational only if the person making the appointment becomes incapacitated. Such incapacity is determined by the attending physician, as defined in the statute. Incapacity is defined as the inability to communicate health care decisions or the inability to understand and appreciate the nature and consequences of health care decisions, including the benefits and risks and alternatives to any particular health care, and to reach an informed decision. Even after the physician declares a patient to have incapacity, if the patient objects to a health care decision made by the agent, that decision will govern unless the patient is determined by a court to lack capacity. The agent’s authority to make decisions ends on the patient’s recovery.
  
  
• What Are the Powers of an Agent, and When Do They End? 
  The law permits the agent to make all health care decisions for the principal, specifically including withdrawal or refusal of life-sustaining treatment. The Health Care Proxy may describe the limitations, if any, that the principal intends to impose upon the agent’s authority. The agent should make decisions after full consideration of the alternatives in accordance with the agents assessment of the patient’s wishes, or, if those wishes cannot be known, in accordance with the agent’s determination of the principal’s best interests. The principal may revoke a Health Care Proxy at any time, either orally or in writing. The health care proxy will also be revoked by the execution of a subsequent Health Care Proxy, or, if the Principal names his or her spouse as agent, by divorce or legal separation. A physician who is informed of or provided with a revocation of the Health Care Proxy shall immediately record it in the medical record and notify orally and in writing the agent and any health care provider known by the physician to be involved in the care of the patient. Any agent or nursing staff informed of or provided with a revocation shall immediately notify the attending physician of the revocation.
  
  
• What Other Protections Does the Statute Provide and how does a Living Will play a role? 
  The statute also provides that no health care provider or employee shall be subject to criminal or civil liability or charges of unprofessional conduct for carrying out, in good faith, a health care decision by an agent pursuant to a health care proxy. Also, no person acting as an agent shall be subject to such liability for making a health care decision in good faith. The statute also provides that it does not preclude any medical procedure deemed necessary by the attending physician to provide comfort care or pain alleviation, including, but not limited to, treatment with sedatives and pain killing drugs, non-artificial oral feeding, suction, and hygienic care. The law also provides that a health care provider, conservator, or guardian, members of the principal’s family, a close friend, or the public health commissioner may institute court proceedings with respect to any dispute under the statute. A living will is a non-binding document that expresses an individual’s wish to refuse to accept extraordinary medical treatment, such as artificial life support, nutrition, or hydration. While a living will is not officially recognized by statute, it does provide written evidence of the principal’s wishes. Frequently a Proxy refers to a living will.
  
  
• What Are the Parameters for a Determination That a Principal Lacks the Capacity to Make or to Communicate Health Care Decisions? 
  The determination by the attending physician of incapacity is to be according to accepted standards of medical judgment. The decision is to be in writing and to contain the attending physician’s opinion regarding the cause, nature, extent and probable duration of the principal’s incapacity. If the incapacity relates to mental illness or developmental disability, the attending physician must consult with an appropriate health care professional.
  

WHAT IS INVOLVED IN PROBATE OF A WILL AND OTHER STEPS IN ESTATE ADMINISTRATION AND HOW LONG WILL IT TAKE?

• What Is Probate of a Will or Administration of an Estate without a Will and Why is it Done?
  After a person dies, probating a will involves locating the original and having an attorney prepare a petition for probate, naming the persons interested and heirs and next of kin and asking for the person(s) named as executor(s) to be appointed by the Probate Court. If a person dies without a will, "intestate", then administration of the probate estate without a will is begun. Notice of the probate is sent to interested persons and published in a local paper. The executor or administrator is responsible for administering the estate, paying debts, seeing to the transfer of the property as per the will or the intestacy laws, and filing an accounting with the Court.
  
  
• What Purpose Does Probate Serve and Why Is it Necessary?
  

  When a person dies, all property not passing directly to others such as jointly owned property or life insurance, passes through a court proceeding called probate to protect the beneficiaries, the personal representative, and creditors, including the tax collectors.

Probate proceedings serve four basic functions. (1) To collect the decedent’s probate assets (2) To protect and preserve the estate’s property (3) To pay all debts and taxes, and (4) To determine who is entitled to the probate estate and distribute it to them. It seeks to assure that all property of the deceased is accounted for, taxes are paid, and persons entitled to the property receive it, and finally that the executor or other personal representative obtains the protection of court approval. The probate estate includes all property owned by the decedent which does not pass directly to others such as jointly owned property and life insurance (called nonprobate property).

• What Is Involved in Administering an Estate and What Are Related Steps?
  The person seeking appointment as a personal representative, executor for a will or administrator if there is none, employs an attorney for preparation of estate administration documents. There are complicated rules of law that govern the procedures and rights and duties of the parties. Once the appointment has been made, the personal representative with the help of the attorney generally does the following: 1. Takes possession of and preserves the personal property of the decedent, including applying for a Federal Tax ID Number and opening an account for the estate, 2. Obtains appraisals of property to show the value at date of death, 3. Collects income and debts and files claims due to the decedent, 4. Completes any pending lawsuits, 5. Follows the orders of the Probate Court, 6. Computes and pays all state and federal estate and income taxes, 7. Pays the valid claims of creditors, and, if necessary, sells property to raise funds to pay claims, and 8. Distributes the remaining assets to the proper persons. The probate procedures and related steps require the preparation and filing of a number of legal documents, the publication of notice, sometimes hearings in the Probate Court, and finally the proper transfer of all assets and the preparation and allowance of an accounting, frequently done only once at the end of the procedure and called a first and final account.
  
  
• How Long Does Administration of the Probate Estate Take?
  The first step is petitioning for the allowance of the will or administration of the estate without a will, and appointment of a personal representative. It usually takes 6-8 weeks from the date of the filing. A temporary appointment may be obtained if necessary. State and Federal estate tax returns and payment of taxes are due nine months from date of death unless an extension is timely filed with payment of the taxes. Although partial distribution of probate property to beneficiaries or heirs may sometimes be made prior to the settlement of the estate, final settlement can take one and a half to two and a half years, depending on the complexity of issues and the need to obtain closing letters from the tax authorities. For the average simple estate, most of the work is completed within the first year to year and a few months. Creditors have one year from the date of death to bring claims. The preparation of the Massachusetts and Federal estate tax returns or affidavits stating that no taxes are due must be completed and recorded to clear title to real estate. Preparation of the estate tax returns for estates of a certain size is required even if there is no probate estate, since jointly owned property, life insurance, and certain transfers by the decedent before death are subject to estate taxes.

HOW DOES A POST-1980 TENANCY BY THE ENTIRETY PROTECT THE NON-DEBTOR SPOUSE'S INTEREST IN THE HOME AGAINST CREDITORS?

• A tenancy by the entirety is a special form of joint ownership of property that can only exist between a husband and a wife. It is created by filing an election of tenancy by the entirety, signed by both husband and wife, notarized and recorded at the Registry of Deeds. A married couple can protect their principal residence from sale to pay the debtor spouse’s debts so long as the non-debtor’s spouse is alive and the home is his or her principal residence. To be effective, the deed creating the Tenancy by the Entirety should be recorded February 11, 1980 or later or a separate election referring to the earlier deed should be filed. An exception to this protection states that both spouses shall be liable jointly or separately for debts incurred on account of necessaries furnished to either spouse or to a member of their family.
  
  
• What Are Other Protections Offered under Tenancy by the Entirety?
  The statute providing for the Tenancy by the Entirety protection, M.G.L.A. Ch. 209, Section 1 states that a husband and wife shall be equally entitled to the rents, products, income, or profits and to the control, management, and possession of property held by them as tenants by the entirety. It also provides that real and personal property of any person shall, on marriage, remain the separate property of such person, and that a married person may hold, manage, and dispose of the property as if they were single. There is further protection in that neither the husband nor the wife can, by a separate act, defeat the right of the survivor to the entire estate held by tenancy by the entirety on the death of the other spouse. While a creditor may attach the debtor spouse’s interest in the home, and thus prevent a refinance or sale without payment of the debt, the creditor cannot sell the property to meet the debtor spouse’s obligations until the non-debtor spouse has died, divorced, or no longer holds the home as the primary residence. A recent case in the Land Court further clarified the protections to the non-debtor spouse. The court held that an election under Chapter 209 Section 1A after execution, the court paper establishing the judgment lien against the debtor spouse, but before sale, operates to bar the sale by a creditor.
  
  
• How Does the Tenancy by the Entirety Work in Practice?
  Thus a couple can utilize this retroactive remedy, even after one of them has been subject to a judgment and/or attachment. While the election won’t void any attachment, it will prevent the creditor from taking possession of the property until the marriage is over, either through divorce or death. This case affirms how valuable a Tenancy by the Entirety is in Massachusetts. It provides protections that a Declaration of Homestead alone, with its limitations of $500,000 or $600,000 for those 62 or over, does not. The creditor, in the above case, attempted to set aside the election for such a tenancy as a fraud upon creditors, under the Uniform Fraudulent Transfer Act , on the grounds that the election does not come under the definition in the U.F.T.A. of "transfer", but the Court denied this relief. The Tenancy by the Entirety is terminated only by a conveyance of the property by both spouses, by divorce, or death. Upon the death of the non-debtor spouse, any attachments or other liens may then be satisfied by creditors of the surviving debtor spouse. In the event of the death first of the debtor spouse, the non-debtor spouse, with his or her right of survivorship, takes the property free and clear of all liens held against the debtor spouse. Couples should check the date of the deed to their homes to be sure it is no earlier than February 11, 1980 and that it has language describing them as "husband and wife as tenants by the entirety." If the deed is dated earlier than February 11, 1980 and/or the couple is not listed as tenants by the entirety, an election of Tenants by the Entirety should be prepared and recorded as soon as possible. The recent decision by the land court, suggesting the election may be filed even after a lien is recorded against the property, is being appealed and wisdom suggests that couples not wait until a debtor spouse faces an attachment or other lien to obtain this protection