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New Trust Laws in Massachusetts

By LUCY J. BUDMAN, ESQ.

Q.  I have heard that major changes in Massachusetts Trust Law were underway. Is that true? 

A.   Yes, you heard it right. After many decades under the old laws, Massachusetts passed a completely overhauled probate law that went into effect at the beginning of April. Now, in July, the new Massachusetts Uniform Trust Code is here and tackles Trusts also!

On Sunday, July 8th, the Governor signed a new law passing the Massachusetts Uniform Trust Code (MUTC). This law is effective immediately. The new law applies to all Massachusetts Trusts with only limited exceptions, whenever they were created. At Curley Law Firm, we have been following the implementation of the new law to help guide our clients who have Trusts or are thinking about Trusts as to how the new law impacts them.

The new law significantly overhauls how Trusts (revocable, irrevocable and testamentary) work in Massachusetts. If you are the Trustee of a Trust, the new law also creates serious new fiduciary duties. If you are acting as a Trustee you can be held personally liable for getting it wrong. Working with an expert Attorney helps the creator of a Trust protect themselves and their families and helps protect Trustees from accidentally breaching their fiduciary duties.

The law is complex and the full impact of some of the provisions is still not completely clear, but below are a two key changes that may apply to you if you have a trust or are acting as a Trustee:

  1. Trustees now have a duty to keep all Trust beneficiaries informed. That includes providing all beneficiaries with the name and address of the Trustee within 30 days of being appointed and providing annual accountings to current beneficiary who have not specifically waived the right. If you are the Trustee of a Trust, it is critical to make sure you are in compliance with your duties. We work closely with our Trustee clients to make sure they have all the tools they need to fulfill their responsibilities; and
  2. Trust modification has become easier. In many cases, if all the interested parties in an Irrevocable Trust agree, the Trust can be changed without special Probate Court intervention. For families who wish to change existing Irrevocable Trusts, the MUTC is intended to make the process more straightforward.

The new law carries a number of fixes for issues raised under the Massachusetts Uniform Probate Code (MUPC) which went into effect in April.  Two important issues that will apply to many of our clients include:

  1. Clarifying that so called ‘informal’ personal representatives will be able to sell real estate without a license if they are acting under a will with a power of sale. Previously, title insurance companies refused to give clean title without a formally appointed personal representative or a license to sell) ; and
  2. A new fee schedule. Fees for many types of probate court transactions are increasing. For many of our clients, the fees and time delays of the probate court are a reason to plan to avoid probate.

A well drafted Trust can protect you and your family from everything from probate to taxes, creditors and long term care costs, depending on your planning goals, but without planning with an expert, you may find that your Trust has unintended consequences under the new law.

Be sure that your attorney understands the ins and outs of the new Uniform Trust Code and can advise you about how to plan with a Trust for you and your family or how to carry out your duties as a Trustee.

(Lucy J. Budman is a Certified Elder Law Attorney and holds a Masters of Law in Taxation.  She practices law at Curley Law Firm LLP at 1 Common Street in Wakefield.  Do you have an Elder Law or Estate Planning question?  E-mail questions to Info@CurleyLawFirm.com to be considered for future columns)

New Probate Laws – Ins and Outs, Ups and Downs

(This article was originally published in the Wakefield Daily Item)

By LUCY J. BUDMAN, ESQ.

Q.   Does the new Uniform Probate Code make the probate process easier? 

A.   The new probate law was meant to simplify probate for families with simple situations, but in practice it is anything but simple.   

On April 2, 2012, after years of delays, the Massachusetts Uniform Probate Code (MUPC) finally came into effect for probates of wills and intestacies. One of the major goals of the new law was to simplify probates, shorten the process and make them cheaper and easier for most families.

Unfortunately, we have found that the more things change, the more they remain the same.   For many probate estates, probate remains a lengthy, stressful, and expensive process.  As a result, we still advise that our clients take steps to avoid probate by using Trusts.

What is probate? Probate is the court process of transferring assets from the name of the decedent to their heirs. Probate happens whether or not you have a valid Will in place when you die. A valid Will simply gives direction to the probate court in terms of who is in charge of managing your assets and who will receive your property when you die. Without a valid Will, intestacy laws determine who is in charge and who inherits what you own and in what percentages (even if you have left oral instructions on how to distribute assets or a written note that fails to meet the requirements to qualify as a valid Will). In either case, your family must follow the elaborate rules of the probate court to get their inheritances.

The ideal of the MUPC is to remove some of the complexity from the probate process, but let’s review how it actually works for many people in the real world.

The Ideal: Probate is made simpler through the use of an “in and out” court process. Families with simple situations and no serious conflicts can take advantage of a limited “informal” probate. Wills or even intestate probates can be allowed right away by a court magistrate without ever seeing a judge. Once allowed, the Personal Representative (formerly called an Executor or Administrator) can pay the debts of the estate and distribute the property without having to seek court permission.

For complex or conflict heavy situations, a formal probate process, much like probate under the old law, can still take place. In addition to obvious problems such as feuding heirs or creditors at the door, many of our clients who have real estate in other states, minors in the family or incapacitated relatives find their situation is more complex than they had hoped.

The Reality:

  • The informal process is just not as fast as anyone would like it to be. Far from in and out, the Probate Courts are backlogged and have been hit especially hard by the State budget crisis. The Courts simply do not have the personnel to review probate filings, and we have found that for many of our clients, informal probates take weeks or months to be approved rather than days. Without the budget to hire more personnel at the Probate Courts, this may not change any time soon.
  • Informal probate is not good enough if your estate will include any real estate, even just your home!

The major real estate Title Insurance Companies, the companies responsible for Title standards, have all ruled that an informally appointed Personal Representative has no power to sell real estate unless at least three years have passed since date of death. Even if you have a valid Will giving your Personal Representative the power to sell real estate, it does them no good unless they have gone through the full, formal Probate Court process (in other words, something very like the old process). An informally appointed Personal Representative has to go back to court for a special extra power called a license to sell, a process that can costs thousands of dollars just by itself, especially if there is the time pressure of an imminent real estate closing.

  • Complex family situations are more common than you may imagine. If your family includes minor children or incapacitated seniors, a full, formal probate might still be necessary. If some of your family members are in conflict, they may request additional probate court supervision.  If your family tree is complex, probate can require genealogy efforts just to identify your heirs at law.
  • If you own property out of state (or out of the country!), your heirs are likely to need to open two probates, one here in Massachusetts and another in the place the property is located.
  • Going through formal probate can be more expensive than it was a few months ago, not less. With the recent change of the probate process to “in and out” the probate court can collect additional fees at each stage of the process, including transactions that did not have associated fees under the old process, such as closing probate after a final account has been filed.

The good news is that going through the probate process is a choice each person makes. We all have the option to plan in advance to avoid the court process entirely.  After meeting with us, the large majority of our clients decide they would prefer to save their families the time, stress and expense of probate by pursuing other planning, such as Living Trusts. A well drafted Trust can protect you and your family, not just from probate, but from taxes, creditors and long term care costs, depending on your planning goals.

Without planning, you are guaranteed a probate. Be sure that your attorney understands the ins and outs of the new Uniform Probate Code and can advise you about whether avoiding probate is the right move for you and your family.

 

Power of Attorney – What you Need to Know

(This article was originally published in the Wakefield Daily Item)

By LUCY J. BUDMAN, ESQ.

Q.   Should I sign a Power of Attorney? 

A.   Yes, you should have a POA but make sure it contains all the powers necessary to achieve your goals.   

 A Power of Attorney (POA) is a critical Estate Planning tool.  By signing a POA, you authorize an Agent (aka attorney-in-fact or POA), to make certain legal and financial decisions for you. Your Agent’s powers are spelled out in the POA.  When you hear the term “durable POA”, it is “durable” because it continues to be effective even if you become incapacitated.

If you do not have a valid POA and you become incapacitated (e.g. stroke, dementia, or car accident), no person is automatically authorized to make decisions for you. Your spouse and children have no rights over your assets.  For example, if your name is on a real estate deed, your family cannot simply sign your name to convey the property even if it is jointly owned by a spouse or child.  If you have an IRA or 401k, your family cannot manage it, even to take out required minimum distributions.

But bear in mind that just because you signed a document that has POA written on the top does not mean you are protected. Your POA is only as effective as the specific powers it contains.  In other words, just because you might have signed a POA in the past does not mean that your POA gives your agent the authority to achieve all of your goals.

What should your POA accomplish?  It should authorize all the basics like paying your bills, managing your bank accounts, and handling retirement accounts.  But if you are like most of our clients, you want to be certain the POA grants the authority necessary to protect your assets to the maximum extent allowed under the law if you become incapacitated and require long term care at home or in a nursing home.  Without these long term asset protection powers, your POA puts your home and savings at serious risk.

Unfortunately, nine out of ten POAs we review at our initial consultations fail to achieve those asset protection goals.  This always comes as a complete shock to clients.  Sure, their existing POA may authorize their agent to pay their bills, but it squarely fails to authorize the actions necessary to prevent MassHealth from recording a lien on their house or taking all their savings if they require nursing home care.

I explain that the drafting attorney was not acting maliciously by omitting that authority.  Unfortunately, their prior attorney was not a specialist in asset protection and long term care planning so he or she did not realize what precise authority must be listed in the POA.  Sometimes the client says they found the POA on the internet or printed it off some software they bought.  The problem is that those run-of-the-mill POAs are not designed for clients who want to protect assets in the event they require long term care.

If the client is fortunate, they have come to us with full decisional capacity so we can prepare a new POA that does in fact achieve their long term asset protection goals.  We call this an Asset Protection POA.  In contrast to the two or three page POAs that we often see in our practice, our POAs will often exceed 20 pages to ensure that we have covered all possible authority to protect our clients’ assets and to avoid a Conservatorship in Court.

But if the client never took action while they had capacity, often their family comes to us in crisis, the elder is incapacitated already, and the elder has either an inadequate POA or no POA at all.  Now the family must file a Conservatorship Petition at the Probate Court and seek special authority to preserve the elder’s assets.  This Court process is time-consuming, stressful and expensive and the appointed Conservator must file annual accountings with the Probate Court.  Worse still, there are no guarantees that the judge will allow the agent to protect the elder’s assets against MassHealth and the nursing home.

While part of our practice is successfully protecting assets in Conservatorship proceedings when it is too late to plan ahead, the process is exponentially more expensive to families than the cost of a well-drafted POA signed in advance of any incapacity.

Be sure that your attorney has extensive experience with MassHealth planning and applications, as well as tax planning, so you can feel confident that the POA will contain the necessary authority in the event it is ever needed.

When do I need Health Care Directives?

(This article was originally published in the Wakefield Daily Item)

By PATRICK G. CURLEY, ESQ.

Q.   My wife has been in and out of the hospital over the last year and now she is scheduled for major surgery.  What kind of health care legal planning do we need? 

A.  You need carefully drafted health care directives.

You have asked about your wife but the reality is that both of you need planning.  In fact, all people age 18 and over should sign the health care directives outlined below.  Because accident or illness can strike people of all ages, it is vitally important to plan for that possibility.

You need to sign a Health Care Proxy.   In this document you can appoint a health care agent to make decisions for you if you become incapacitated.    Without a valid Proxy, if you become incapacitated, no person is authorized to make decisions for you, not even your spouse or your child.

You have to sign this Proxy while you have capacity – that means you should have this in place today rather than waiting for a crisis.

If someone becomes incapacitated and has no valid Health Care Proxy, a loved one must petition to be appointed Guardian in the Probate Court. The Court process is lengthy, costly (often thousands of dollars!) and burdensome, especially in an emergency.  And when all is said and done, there is no certainty that the judge will appoint the person that you would want to make your health care decisions.

I remember observing a contested Guardianship Court hearing involving a young man who had been in a motor cycle accident and left brain damaged.  His immediate family had split into two camps with the patient’s brother and his mom squared off against the patient’s sister and the dad.  It was tragic watching them fight about who should serve as health care agent.  All of that could have been avoided had the young man signed a Proxy while he was healthy.

Unfortunately, not all Health Care Proxies are created equally and many we see are too simple to fully achieve most peoples’ goals.  Many hospitals hand out form documents to every patient they admit. This form is generic and limited and may not address all your concerns, such as who makes end of life decisions and which other family members you wish for your health care providers to share information with. We recommend that you consult a Qualified Elder Law Attorney to make sure that your Health Care Proxy covers all the important decision making authority you need.

In a Living Will you can detail your end of life decision making wishes.  Most of my clients do not want their moment of death artificially prolonged.  I warn them that with today’s technology, we have machines and computers that can keep essentially dead people alive for months or years.  A Living Will can help avoid this result by giving clear direction to your Health Care Agent.

The infamous Terri Schiavo case in Florida shows what can go wrong when a patient has no Living Will.  Mrs. Schiavo was kept alive by artificial means from 1990 to 2005. Her case ended in a battle between her husband and her parents and finally involved everyone from the Florida Courts and Governor to the United States Congress and the President, all trying to determine her end of life wishes.  If Mrs. Schiavo had signed a Living Will expressing her wishes one way or another, it all could have been avoided.

A ‘Do Not Resuscitate’ Order is a special form signed by your physician telling your health care providers NOT to perform CPR if your heart or lungs stop. CPR can range from basic mouth to mouth to advanced techniques such as breathing tubes and a machine to move air through your lungs. Without a valid DNR signed by your physician, even if you have a Health Care Proxy or a Living Will, in an emergency situation your health care providers are required by law to give you CPR.

While CPR can be a life saving technique for younger, healthier people in some circumstances, studies show that for others, especially seniors and the terminally ill, CPR is extremely unlikely to be successful.  Even a ‘success’ can mean brain damage severe enough to keep a patient on a machine for the rest of their lives. Talk to your physician about a DNR order.

Once you sign your health care directives, please be sure to provide a copy to your physicians so they have them on file.  We provide clients with a plastic wallet card entitled “Emergency Medical Information” that is linked online to their health care directives.  This gives our clients (and their families) the peace of mind of knowing that emergency responders and medical institutions can quickly access their Health Care Proxy and Living Will and contact their health care agent in an emergency.

 

What is a Life Estate?

(This article was originally published in the Wakefield Daily Item)

By LUCY J. BUDMAN, ESQ.

Q.   Is a Life Estate deed the best way for me to avoid probate of my home? 

 A.  While a Life Estate can avoid probate, you should also consider other probate avoidance strategies that can offer you more flexibility and protection.   

For most people their home is their most valuable asset and the one they want to make sure passes to their loved ones upon their death.  Before you can decide whether or not a Life Estate deed is right for you, you must consider your goals and the costs and benefits of a Life Estate deed.

A “Life Estate” means that you sign a deed conveying your home to someone else – let’s say your children – and you reserve a Life Estate for yourself (and your spouse, if married).  This guarantees you (the “life tenant”) the right to use and occupy your home for the rest of your life, then upon your death, the home passes outside of Probate directly to your children (the “remaindermen”).

Sounds simple, right? It can be if everything goes exactly right. But, if you want to refinance, move, or sell the property before you die, a life estate can cost a lot more than you expected. Some issues that can come up include:

  1. A Life Estate deed is irrevocable and you cannot undo the transfer without permission from the remaindermen, in this case your children.  If you decide that you want to sell, you must get permission from your children.  While you may trust your children implicitly, what if they become incapacitated or die, or what if they simply think they know what is better for you?
  2. Beware of negative capital gains tax consequences for your children if you sell the home during your lifetime.  Federal tax laws offer very favorable treatment for homeowners selling their primary residences.  But in the case of Life Estate deeds, the remaindermen do not typically live in the property so it is not their primary residence.  As a result, your children could owe tens of thousands of dollars of capital gains taxes upon the sale of your home if you sell it while you are alive.
  3. If you and the remaindermen agree to sell the home during your lifetime, you are entitled only to a portion of the proceeds based upon IRS tables, and the rest of the proceeds go to the remaindermen.
  4. Beware of refinancing because in most cases you will need the remaindermen’s permission and they must agree to be liable on the mortgage. Some banks simply refuse to offer financing for Life Estate property.
  5. If you do not keep your end of the bargain (paying real estate taxes, utilities and reasonable maintenance) for any reason, the remaindermen can sue you for damaging or wasting “their” property.
  6. MassHealth can deny your application and disqualify you for MassHealth benefits if you require MassHealth nursing home benefits within five years of the date of the Life Estate deed.  When you sign a Life Estate deed, you are making a substantial gift to your children.  MassHealth imposes gift penalties on all gifts within the five year look back period.
  7. Even if more than five years have elapsed since you signed the deed, if you require MassHealth nursing home benefits, MassHealth can record a lien on the property.  If the property is then sold during your lifetime, the MassHealth lien must be paid off.  Also, MassHealth will not allow you to use your income to maintain the home if you are in a nursing home, thus your children will not be able to sell the home, but will need to step up and cover the home costs including taxes, utilities and insurance.
  8. While most people will not pay an actual gift tax for singing a Life Estate deed, they are often still required to file a special gift tax return with the IRS. You should check with your tax advisor to understand your personal situation.

The bottom line is that while a Life Estate deed can help some people, you need to first consider all of these issues so you can make an informed decision.  You might save some money upfront setting the deed up, but tax costs, family issues and a lack of flexibility can end up costing you a lot more down the road. Other alternatives, such as Trusts, may be more costly to set up but save you stress and headaches as your life and situation changes.

If you already have a Life Estate deed, you may be better off leaving it the way it is but be sure to consult an attorney before selling the home or changing the deed in any way.

Many people say they never want to sell their home, but no one has a crystal ball—five, ten, fifteen years down the road, do you really want to be locked in? Before considering a Life Estate deed, speak with a qualified Elder Law Attorney to discuss the pros and cons both today and down the road.

“The Total Woman” Cable Access show hosts Curley Law Firm’s Lucy J. Budman

Cheryl Webb Scott recently hosted local Certified Elder Law Attorney Lucy J. Budman for two Elder Law segments on the public access TV show “The Total Woman.”

One of only 21 Certified Elder Law Attorney’s in Massachusetts, Lucy focused on how she helps her clients with legal planning to protect their independence as they age.  During the program, Lucy noted that as people live longer, they require specialized estate and elder law planning.  It is imperative for seniors that they have estate planning to ensure that their assets are protected through careful legal planning to maintain them over the long term.  She also raised the importance of people of all ages signing advance directives for health care and financial decision making.

Cheryl Webb Scott said “We have looked for someone in this specialty field of the law for quite some time.  With Baby Boomers making their way into retirement in record numbers, the need for legal information and understanding of the numerous options available to them is a critical issue. Lucy has done a terrific job of helping narrow that gap of information for our viewers and helping them to recognize how important it is to have an organized legal plan for their future and the future of their loved ones.”

After the tapings, Lucy said, “it was a great pleasure to work with the women who make Total Woman possible. I thank Cheryl and her crew for recognizing how important estate planning and elder law is to their audience.”

Lucy practices law with father and son attorneys Mark and Patrick Curley at Curley Law Firm in Wakefield, where she focuses her practice on estate planning, asset protection planning, and specialized estate and capital gains tax planning.

The Total Woman is a cable access program, started in 1992 and produced out of Stoneham Cable Access Station by an all-female, all-ages crew. Cheryl Webb Scott interviews women from all over the world and from all walks of life to discuss issues relating to their work and their lives. The highly successful program is now circulated to cable access stations in 52 communities throughout the Eastern and Mid Western states.

Check your local cable access listings to see when “The Total Woman” elder law programs will be airing, or watch online by visiting Curley Law Firm’s YouTube Channel.

What Trust is Best?

(This article was originally published in the Wakefield Daily Item)

By PATRICK G. CURLEY, ESQ.

Q .  I signed a Trust but I’m not sure if it is Revocable or Irrevocable.  Does it matter?      

A.  Yes, there is an enormous difference.  Both can accomplish excellent goals so let me spell out the key differences.   

If you establish a revocable trust, it means that you can change it by revoking or amending it during your lifetime. Revocable trusts are most commonly known for helping avoid Probate upon death.  In addition, the revocable trust offers the grantor (the person establishing the trust) 100% control during their lifetime.  Since you are in full control, the revocable trust cannot offer any asset protection.

On the other hand, if your trust is irrevocable, you may not amend or revoke it and you give up a significant degree of control.  Because of this loss of control, irrevocable trusts are less common than revocable trusts and often misunderstood. Irrevocable trusts can offer protection that revocable trusts cannot. For many families the benefits outweigh the loss of some control.

By way of example, we often prepare irrevocable trusts for seniors because their desire to protect their home against nursing home costs and Medicaid far outweighs the loss of control imposed by the trust.  This is especially true after we show clients that we can customize the irrevocable trust to ensure that the client can continue to live in their home, that the trustee can sell the home if downsizing is desired, and the client can change the trustee to make sure the trust is well managed.

Because of the control limitations of an irrevocable trust, we do not advise that people put all their assets in an irrevocable trust.  In fact, we often recommend a mix of both an irrevocable trust and a revocable trust.

Both irrevocable and revocable trusts can be drafted to include a number of other beneficial provisions.

If you sell your home, you owe capital gains taxes on the gain in value, which is loosely defined as the difference between what you paid for your home and the sale price.  The government grants a tremendous tax benefit to homeowners under which unmarried individuals can exclude $250,000 in capital gains on the sale of their primary residence, and married folks can exclude $500,000.  Irrevocable and revocable trusts, if drafted correctly, can preserve this capital gains tax exclusion. Other types of planning, such as life estate deeds or transferring a home to a child, can reduce or eliminate the tax benefit.

Both revocable and irrevocable trusts can be drafted to include estate tax planning benefits for married couples, which can effectively double the amount of money they can pass tax free to their beneficiaries.  Instead of paying more than you need to the government in taxes you can preserve your savings for your family.

Another feature that attracts a lot of interest from clients is the ability to protect their family’s inheritances under the trust.  Upon the elder’s death, rather than the inheritance passing directly to the beneficiary, the inheritance stays in trust for the benefit of the beneficiary.  The funds can be used for the beneficiary’s health, education, maintenance and support.  But the funds are protected against a number of risks including lawsuits against a beneficiary, claims by a beneficiary’s creditors, and demands by a beneficiary’s spouse in a divorce settlement.

If a trust beneficiary is a minor or has special needs, we can ensure that their share can be protected too. Without this planning, an 18 year old beneficiary would receive his full inheritance — and potentially blow it on expenses you would not approve (flashy car, gambling, vacations, etc.).  Likewise, without this planning, an inheritance can cause a special needs beneficiary to lose eligibility for public benefits programs they may be receiving now or need in the future.  With careful planning, the inheritance can be used for the benefit of minors or special needs beneficiaries without jeopardizing benefits eligibility or being subject to wasteful spending.

Because of the range of design options, it is vital that you consult a Qualified Elder Law Attorney to discuss how these trusts can benefit you.


Contact Us!

Do you have an Elder Law or Estate Planning question? E-mail questions to Info@CurleyLawFirm.com or call 781.245.2222 x10 to be considered for future columns).

About Curley Law Firm LLP

Serving clients throughout Massachusetts, Curley Law Firm LLP draws upon more than four decades of combined Estate Planning and Elder Law experience to ensure that you can achieve your planning goals.

Attorneys Patrick Curley and Lucy Budman are two of fewer than two dozen Certified Elder Law Attorneys (CELA) in Massachusetts. Attorney Mark Curley has practiced in the areas of Estate Planning and Elder Law for over three decades.

The value of working with a firm with CELAs on the team is the peace of mind you receive - knowing that you will get the very best advice available to protect yourself, your family and your assets. A CELA is a recognized expert in legal matters dealing with Estate Planning and Elder Law including Trusts, Wills, Asset Protection against Medicaid and nursing home costs, Medicaid (MassHealth) benefits planning and applications, Probate and Trust administration, Guardianship and Conservatorship, and VA benefits planning.

At a time when many lawyers claim to practice "elder law", having a CELA-led team working on your planning means having one of the very few experts in the Commonwealth on YOUR team.

For experienced representation and quality service from attorneys who will help you achieve your planning goals, please schedule a confidential Initial Consultation by calling us at (866) 406-8582 or visit our website at www.CurleyLawfirm.com

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