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Careful Estate Planning

Work with an attorney who has been preparing family estate plans throughout his career. Our firm handles wills, health care proxies, powers of attorney, and life estates.

Simple estate plans include life estates that are created by drafting a new deed. The deed transfers the remainder of legal interest in a property to another person(s), while the legal interest for life rights to use, occupy, or obtain income from the property is retained by the person(s) making the transfer.

Below is a summary of simple estate plan issues for your reference:

Will

A will is a written instrument controlling the disposition (or division) of an individual’s property at death. The laws of each state establish the formal requirements for a will. In Massachusetts, as a general rule:
The maker of the will (called testator) must be at least 18 years old;
The maker of the will must be of sound mind;
The will must be written;
The will must be witnessed by two competent persons in a special manner provided by law. A beneficiary of a will or spouse of a beneficiary should not be a witness, because the beneficiary may lose benefits under the will as a result;
The technical requirements for the execution of a will must be followed precisely.
What happens to a person's property when there is no will?
When a person dies without a will ("intestate"), his or her property is distributed to his/her heirs at law according to the laws of Massachusetts. The laws are inflexible and make no exceptions for families with special situations. The law provides that after payment of the expenses of administration, funeral, last illness, debts, taxes and any family allowances, the deceased person's property is divided as follows:

The intestate share of a surviving spouse (living husband/wife) is:
The entire estate (all the assets) if:
No descendants (children or grandchildren) or parents of the deceased person survive the person who passed away;
All of the deceased person's surviving descendants (children or grandchildren) are also descendants of the surviving spouse (children or grandchildren of the marriage) and there are no other kids of surviving spouse from another marriage (step children).

If no other kids of deceased person survive the deceased, but the parent(s) of the deceased person is still living, the surviving spouse receives the 1st $200,000.00 plus ¾ of the balance of the estate.

If all of the deceased person's children or grandchildren are also children of the surviving husband or wife and the surviving spouse has one or more children or grandchildren from another marriage, the first $100,000.00 to the living spouse plus ½ the balance of the remaining estate.

If one or more of the decedent's surviving children/grandchildren are not children/grandchildren of the surviving spouse, the first $100,000.00 goes to the living spouse plus ½ of the remaining estate.

If there is no surviving spouse:
Then the estate goes to the children/grandchildren PER CAPITA. If there are no children/grandchildren, the estate goes to the deceased person's parent(s). If there are no children/grandchildren and no parents living, the estate goes to the deceased person's siblings (brothers/sisters) PER CAPITA. If there are no children/grandchildren, parents and no siblings, then the estate goes to the next of kin PER CAPITA. If no surviving relatives (at all), then the estate goes to the Commonwealth of Massachusetts.

Health Care Proxy

Under Massachusetts law, you may appoint another person (called your Agent) to make decisions about your health care if you should become unable to do so. The document in which you name this person is called a “Health Care Proxy.” This is very similar to what some call the “Living Will.”
• The person you chose as your health care agent will be called upon to make decisions about your medical care only if your health care providers determine that you are unable to make or communicate such choices for yourself. For example, you were unconscious.
• Your agent is required to make decisions that are consistent with your religious or moral beliefs, including any instructions you may have put in a living will.
• If your wishes are not clear, or if they fail to address the particular circumstance, your agent may exercise independent judgment about your medical treatment, taking into account your best interests. If you wish, you may write your health care proxy so as to place limits on your agent’s authority, or to list your preferences about different treatments.

Power of Attorney

Powers of Attorney are simply formal agencies by which an authorized person (called the Attorney-in-Fact) acts or holds the power to act on behalf of another appointing person (called the Principal). Thus the Principal appoints the Attorney-in-Fact to act on his/her behalf.
• Powers of Attorney are created in writing with a notarized signature of the appointing person (again, the Principal). The holder of the power (again, the Attorney in Fact) ordinarily does not need to sign the instrument for it to be valid.

Reasons for creating a Power of Attorney:
• Powers may be created as a convenience in order to complete a transaction in the absence of the Principal. Real estate closings often are conducted in the absence of a principal provided that the Attorney in Fact can present the Principal’s original power of attorney.
• Another example, individuals who travel frequently may grant someone else the authority to manage their bank accounts or pay certain debts while they are away. Yet another example, Powers of Attorney are usually signed as part of an individual’s estate plan to allow family members to act on the individual’s behalf.

Life Estate

In a simple estate plan, a Life Estate is created by drafting a new deed which transfers all of the remainder legal interest in a property to another person(s), while the legal interest for life rights to use, occupy or obtain income from the property is retained by the person(s) making the transfer.

Benefits:
• Protects the grantor (person transferring);
• Step-up basis at death;
• Reduced value for MassHealth transfer purposes;
• No Probate – no estate recovery;
•Currently able to obtain reverse mortgage from most lenders.

Disadvantages:
• Loss of independence – cannot refinance or sell without signatures of others;
• If the property is sold, a portion of the proceeds must be paid to the life tenant;
• Portion paid to the life tenant will be eligible for the capital gains exclusion but will also be a countable asset for MassHealth;
• Portion paid to life tenant may be subject to recovery under lifetime lien.

Homestead

Homestead laws are designed to benefit the homestead declarant and his or her family by protecting the family residence from the claims of creditors. In Massachusetts there are two separate kinds of homestead, (i) the regular homestead and (ii) the Elderly/disabled homestead; are both covered under General Laws Chapter 188.
Note, the Homestead law has recently been revised as of March, 2011. The main highlights are as follows:

THE REGULAR HOMESTEAD
An individual receives an automatic $125,000.00 exemption on his/her primary residence. The exemption is for an individual and his/her family;
The $125,000 is apportioned according to the number of owners;
An individual may “declare” a homestead by filing the necessary document at the registry of deeds; if an individual files a homestead, he/she and family receives a $500,000.00 exemption on a primary residence;
Family includes married individuals, non-title spouse and minor children;
Joint tenant & tenant in common owners may all file for homestead protection, but receive an apportioned $500,000.00 exemption(they do not receive $500,000.00 each);
Trusts may now receive the homestead protections.

THE ELDERLY/DISABLED HOMESTEAD
The second kind of homestead in Massachusetts applies to elderly and disabled persons and is set forth in G.L. c. 188. This type of homestead also provides protection in the amount of the first $500,000 of equity realized in the property. The statute defines elderly persons to be individuals who are sixty-two years of age or older. The Law provides that each individual who qualifies under this section will, upon the filing of a declaration, receive homestead protection. For disabled persons, the law also requires a certificate of disability as set forth in the statute.
The elderly-and-disabled-persons homestead may provide spouses together with a larger dollar exemption than the regular homestead in circumstances where each of the spouses records a claim of an exemption as an elderly or disabled person. Thus, the protection may be considered stacked on the same property.

Trusts

A trust is a legal relationship set up by a donor (the person forming the trust) under which one or more persons (the trustee) holds property (often under a written instrument) for the benefit of one or more others (the beneficiary).

People are motivated to create trusts for various reasons:
• To provide for management of assets both before and after death as part of a comprehensive estate plan;
• To protect the beneficiary by giving control of the trust fund to the trustee and by limiting the beneficiary’s rights to receive income or principal;
• To reduce income or estate taxes by transferring to another both the benefit and tax liability of certain property;
• To assure stand-by protection in the event of illness or disability; and
• To help reduce administration and probate costs and delays at death.

If you are thinking of creating a trust for the benefit of yourself or another, you should ask: What do I hope to accomplish? Will a trust help? How much will it cost to establish and administer such a trust? Whom shall I select as trustee?

Realty/Nominee Trusts

A nominee trust establishes a fiduciary (high level) relationship between the beneficial owners and the trustee. The primary characteristic of a nominee trust is that the trustee serves under the express direction of the beneficial owners and for their sole benefit; thus, attributes of an agency relationship are often ascribed to the parties.

The nominee realty trust is commonly used to conceal the identity of the true owner or owners of property. Since the nominee trust instrument need only identify the trustee, the names of the beneficial owners of the real estate need not be publicly recorded.
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