IS IT TIME TO UPDATE YOUR ESTATE PLAN?

On March 31, 2012, Massachusetts completely overhauled its laws regarding wills. The new laws were meant to simplify the way lawyers and layperson alike dispose of property and provide for the care and support of a spouse and children after a loved one passes away.  Drafting a will, or updating an old will, can help protect your family and your property. Having a will assures your loved ones are cared for and your assets are disposed of in accordance with your final wishes after you pass away.

The task of preparing for your death and the distribution of your property is intimidating. Not taking the steps now to prepare means that the Court will make all the decisions regarding the distribution of your property and the care of your family.

Without a will, your assets will be distributed in accordance with Massachusetts law. The law is very specific about the rights of your family members to inherit property. The 2012 overhaul of the laws changed some “default” provisions that control the distribution of property when you die without a will.

 Some notable changes include:

1.       Surviving Spouse Share. The new laws increase the share to your spouse only if you die without any children or if your spouse is the parent of all of your children. A surviving spouse of a “blended family” is not entitled to all of your property if either your or your spouse have children from another marriage or relationship.

 

2.       Disinheriting a child. The laws make it more difficult to disinherit a child. A child may be entitled to a share of the estate whether or not they are mentioned in the will. Specific language is required to disinherit a child.  

 

3.       Marriage and Divorce. Marriage no longer cancels a prior will. A person who has a will then later gets married may need to take steps to assure their new spouse is provided for after their death.

 

Dying without a will means that your family may be burdened with the task and expense of reviewing and organizing your records. The quality of your relationships with specific family members will receive little to no consideration.

If you signed a will prior to 2012, it is important to have your documents reviewed by an estate planning attorney to make sure all of the provisions comply with the current probate terminology, laws, including digital assets and online accounts, and to review assets that may pass outside of the provisions of your will or trust.

How to get started

There are few requirements for creating a will in Massachusetts. Given the complexities of personal relationships and financial asset protection, working with an estate planning attorney to draft your will or update an old will assures your final wishes will be followed with minimal financial consequences or family disruption.

An estate planning attorney can assist you in achieving your estate planning goals by discussing your personal circumstances and find solutions to assist in the management and disposition of property and secure the continued financial support for your spouse and children after your death.

NOW IS THE TIME TO PREPARE YOUR ESTATE PLAN

NOW IS THE PERFECT TIME TO PREPARE YOUR ESTATE PLAN

     Discussing illness, death and a final distribution of assets is uncomfortable.  This is why so many people procrastinate and never plan their estates.  While the likelihood of any individual actually dying from COVID is very small, the outbreak has caused many procrastinators to prioritize planning their estate and schedule a meeting with their estate planning attorney.  Attorney client meetings are increasingly being held on zoom and other virtual platforms.  In Massachusetts, estate planning documents can be executed over zoom.  When zoom meetings and signings are not practical documents can be executed outside on a picnic table or in a well ventilated meeting room with all participants wearing masks.

     If you are a parent, planning your estate is critical to ensuring that your children are well taken care of when you pass away.  Your estate plan should address the care and custody of your children and protect their inheritance from waste and misuse so the monies will be available for their education and other major milestones such as purchasing a house or investing in a business.  Choosing the right guardian for your children is essential.  A guardian is the person who will take care of your children on a daily basis and provide for their basic education, medical and other needs.   The best way to protect your children's inheritance from waste or misuse is to create a trust.  The trust will contain provisions establishing when and how your children will receive their inheritance.  Many trusts provide that the child will receive one third of the inheritance at age 25, one third at age 30 and one third at age 35.  There are an unlimited number of ways to structure a trust.   You select a trustee or trustees who you trust will invest your children's money wisely and oversee expenditures appropriately.

     When planning your estate it is important to know how much your estate is worth.  In Massachusetts you will need to pay estate taxes if the value exceeds $1,000,000.00.  With proper planning a married couple can exempt $2,000,000.00.  If the proper trusts are in place, a married couple can leave $2,000,000.00 to their children or anyone without paying any Massachusetts estate tax.  The federal estate tax exemption is $11,580,000.00 per person for 2020 and $23,160,000.00 for a married couple.  Not too may individuals have estates in excess of $11,580,000.00 and not many couples have a combined estate in excess of $23,000,000.00; however, if you are one of those wealthier Americans, with proper planning you can save your beneficiaries very large sums of money.  When calculating the value of your estate, you must remember to include all of your assets, including retirement accounts, IRAs, 401(k)s, investment accounts, real estate and the proceeds of all life insurance policies you own.  Many people do not realize that the value of their estate includes the proceeds from all life insurance policies paid out when they die.  The estate of the deceased insured pays the tax, not the recipient of the proceeds.

     Over the past four to five months we have all been at home with our families.  For many of us, this has been a unique opportunity to appreciate and enjoy our families.  Please take this opportunity to reflect on the importance of a properly planned estate.

  

YOU CAN ESCAPE LIABILITY FOR YOUR SPOUSE'S TAX DEBT?

            One advantage of being married is being able to file your income taxes using the married filing joint filing status.   Taxpayers filing single typically pay at a rate that is 1% higher than those who file married filing joint.  Taxpayers who file married filing separately typically pay at a rate that is 5% higher than those who file married filing joint.  When a married client wants to minimize the total amount of taxes paid, the married filing joint status is generally a good decision. Both spouses owe any tax liability and if there is a refund due, they share it equally.  When the spouses get along well and trust each other everyone is happy, the return is filed jointly and less tax is paid.

            When the parties do not trust each other, or maybe even hate each other, filing joint can create issues.  One spouses may question whether the other reported all taxable income or exaggerated deductions. With the advent of electronic filing, it is much easier for a spouse to file a return the other spouse never reviewed.   A spouse can try to hide a financial transaction by filing the return without the other spouse seeing the return.  When spouses are separated and/or getting divorced, there are many ways for a spouse to take advantage and create joint liability for a debt that should in all fairness belong to one person.  If that happens, the injured spouse should file an application for relief of an injured or innocent spouse under I.R.C. § 6015 (relief from joint and several liability on a joint return).   The I.R.S. will look at the following factors:

1. whether the requesting spouse knew of the error;
2. whether the requesting spouse should have known of the error;
3. the education of the requesting spouse;
4. whether the requesting spouse has a tax or financial background;
5. whether the requesting spouse was involved with the preparation of the return;
6. whether the requesting spouse obtained a benefit from the error;
7. whether the error should have been obvious;
8. the degree of evasiveness and deceit of the culpable spouse.

          In Taft v. Commissioner of Internal Revenue, T.C. Memo. 2017-66, the Unites States Tax Court granted relief to a spouse whose husband cashed out his company stock for $200,000.00 without the wife's knowledge and spent it all on his girlfriend.  He told the accountant to electronically file the joint return despite knowing the wife had not seen it.  The Court allocated the entire tax due to the husband and allowed the wife to collect a refund based on her income and tax payments.

           This blog does not constitute legal advice.  If you have a specific question please contact competent legal counsel.

CarenSLaw: DIVORCE- HOW TO DIVIDE THE ASSETS? ...

CarenSLaw:




DIVORCE- HOW TO DIVIDE THE ASSETS?

         ...: DIVORCE- HOW TO DIVIDE THE ASSETS?           Marriage can be hard.  Spouses frequently disagree regarding how to spend their mone...

DIVORCE- HOW TO DIVIDE THE ASSETS?

          Marriage can be hard.  Spouses frequently disagree regarding how to spend their money.  One spouse may be conservative wanting to save every extra dollar for the children's college fund, retirement or that "rainy day" fund.  The other spouse may be more inclined to enjoy each day to the fullest by joining expensive clubs and taking exotic vacations.  Inevitably, each spouse is totally positive he or she has the correct view of life and the other spouse is completely unequivocally wrong.  The stress caused by differing financial views and outlooks often leads to marital breakdown. And spouses may naively believe divorce will alleviate their financial tension.  Unfortunately, as hard as marriage can be, divorce can be even harder.

          One of the most contested divorce issues is how to divide assets acquired during marriage.  In other words, who gets what.  The general rule is that marriage is an equal partnership with all assets acquired during marriage divided equally.  A typical situation would be a relatively long marriage, perhaps ten to twenty years, with several children and two involved parents, one or both working and one or both participating in child rearing.  In a typical situation there is no physical, mental or emotional abuse, none of the parties or children suffer from physical or mental health issues or have unique needs and the parties both contribute equally to the marital enterprise.  In the real world, few marriages fit the typical model.  Or maybe one spouse believes the marriage fits the model perfectly while the other spouse believes their marital situation is unique. Because so many marriage do not fit neatly into the general model, the exceptions can be more important than the general rule.

           Even the general rules many not be obvious to everyone.  These rules may make complete sense to some and make no sense to others.   Most people understand a joint bank account in which both parties contributed is an asset that will be divided between the parties.  Less concrete assets like a partnership interest, unvested stock options and the proceeds from a personal injury case can be harder to conceptualize and harder to understand how a Court will divide. Adams v. Adams, 459 Mass. 361 (2011) is a recent Supreme Judicial Court case in which the husband thought he was not obligated to divide his lucrative partnership interest because his wife had little involvement with the partnership business.  With help from experts, the Court applied a complex formula to value the partnership interest and awarded half of the value to the wife finding the marriage was an equal partnership in which he worked and she raised the children.  In Baccanti v. Morton, 434 Mass. 787 (2001), the Court made it clear a portion of unvested stock options a spouse owns at the time of divorce will be divided.  The Baccanti case establishes a "time rule" for determining what portion of the unvested options belong solely to the option holder and what portion will be divided in the divorce.  And the February 7, 2017 case Ludwig v. Ludwig, 15-P-1177 (Mass. App. 2017) clarifies the rule that income received from unvested options after they vest should be included in the calculation of alimony and child support if the options were not divided in the original divorce. Finally, in Dalessio v. Dalessio, 409 Mass 821 (1991), the Court divided the proceeds of a personal injury award one spouse received during the marriage.

            For a variety of reasons, certain assets may not be divided in a divorce.  Medical and law licenses are not assets subject to being divided in a divorce.  Drapek v, Drapek, 399 Mass. 240 (1987).  The grant of a patent is not an asset subject to being divided in a divorce. Yannas v. Frondistou-Yannas, 395 Mass. 704 (1985).  Inheritances, trusts and other assets acquired prior to marriage or during a period of pre-marital co-habitation may not be subject to division, depending on the circumstances.  Liebson v. Liebson, 412 Mass. 431 (1992) and Moriarty v. Stone, 41 Mass. App. Ct, 151 (1996).  Inheritances, trusts and pre-marriage assets may be divided one spouse acquiring more than a 50% interest in that asset.  Many states automatically exempt pre-marital assets for being divided in a divorce.  In Massachusetts, all assets whether acquired before or during the marriage are included in the marital estate and subject to being split between the parties.

          If you have questions, call Caren Z. Schindel at 508-655-1707 or email at cschindel@southnaticklaw.com

http://masscases.com/cases/sjc/459/459mass361.html
https://casetext.com/case/ludwig-v-lamee-ludwig



       

IF FINANCIAL HARDSHIP CAUSES YOU TO TAKE AN EARLY IRA DISTRIBUTION WHAT TAXES CAN YOU EXPECT TO PAY


           Have you ever needed a significant amount of cash on an emergency basis?  Perhaps, you were sued or needed to file a lawsuit and needed a retainer for an attorney.  Or maybe, you lost your job and could not afford the rent.  Perhaps, NSTAR was threatening to turn off your gas and/or electricity.  Physical and mental illness frequently results in financial hardship.  All too often, divorce destroys the financial health of both spouses.  The possible emergencies are endless.  And if you have an IRA liquidating it early, before the age of 59 1/2, just might be your only viable option.  Because IRAs are simple to liquidate and the proceeds are available quickly, for many people an early IRA distribution is the only way to get through a crisis.   Unfortunately, for most the price of an early distribution in terms of income, additional and other taxes can be daunting.           

          The IRS has general rules for taxing IRA distributions and early IRA distributions with some limited exceptions.  If an individual deducted an IRA contribution from taxable income at the time of contribution (Traditional IRA), future withdrawals from that IRA are taxable as ordinary income at the time of withdrawal.  If the individual did not deduct the contribution when made (Roth IRA), future withdrawal are taxable as to interest and appreciation of the contributed funds but not taxable as to amounts originally contributed.  To discourage the use of IRA distributions for purposes other than retirement , the IRS assesses a 10% additional tax in addition to the ordinary income tax due on the distribution.  And if the correct tax is not paid, the IRS may tack on one more tax, a 20% accuracy-related penalty. 

          In certain situations, an exception to the additional tax may apply.  The ten generally applicable exceptions are as follows:

                     1.  Rollovers from an IRA to another qualified retirement plan;
                     2.  Distributions to an estate or beneficiary at the IRA owner's death;
                     3.  Distributions on account of a disability;
                     4.  Distributions as a part of a series of equal payment for life;
                     5. Qualified first time home buyer distributions;
                     6. Distributions for qualified higher education expenses;
                     7. Distributions for medical insurance premiums paid while unemployed;
                     8.  Certain medical expenses paid in excess of 7.5 % of adjusted gross income;
                     9.  Distributions as a result of an IRS levy;
                    10. Distributions to a qualified reservist.

          A common misconception is that an emergency financial hardship is an exception.  As you can see, financial hardship is NOT on the list.  On January 3, 2017, the United States Tax Code in Elaine v. Commissioner of Revenue, T.C. Memo 2017-3, imposed the 10% additional penalty on an unemployed divorced woman of two who was not receiving any child support.  She took early IRA distributions because she had no other way to feed her children. The taxpayer argued the additional tax was not due because she withdrew the monies due to a financial hardship.  She further argued, the IRS had audited her return the prior year and never raised that issue. The Court held that I.R.C. § 72 (t) imposes the additional tax and if the monies are not used for one of the above enumerated purpose, then it is due. Financial hardship simply is not on the list, and the IRS will not deviate from the list.

          Not  only is ordinary income tax and an additional tax due, but the IRS may also impose a 20% accuracy-related penalty under I.R.C.§ 6662 (a) in the event of a "substantial understatement.  Substantial understatement is defined as a deficiency amount equal to 10% or more of the total tax due on the return or $5,000.00.  The accuracy related penalty can be avoided if the taxpayer had reasonable cause to believe the return was correct and acted in good faith.  In the Elaine case, the Court found Ms. Elaine was not a professional tax preparer and reasonably believed financial hardship was an exception to the additional tax rule.

           If you or someone you know is taking early IRA distributions, make sure the monies are being used
 for one of the above listed purposes and that detailed records of how the monies are being used are being maintained.
     
    
 

CarenSLaw

CarenSLaw

IRREVOCABLE TRUSTS AND DIVORCE

      Until this summer, I would have told you an irrevocable trust could very well be included in your divorce estate and subject to equitable division.  That is because until last month, the relevant case law in Massachusetts awarded to the Wife sixty percent of an irrevocable trust in which the Husband was the beneficiary of a one eleventh share.  The Massachusetts Appeals Court in Pfannenstiehl v. Pfannenstiehl,  concluded that the Husband could support himself well on his greater income and two million dollar interest in his father's trust while the Wife did not have the ability to acquire the additional income and assets necessary to support the lifestyle they had achieved during the marriage. Therefore, the Court awarded more than half of his interest in his father's trust to the Wife.  But in August of 2016, the Supreme Judicial Court, the highest Court in Massachusetts, vacated that Appeals Court decision on the grounds that the Husband's interest in his father's irrevocable trust was too speculative to value.

      The Supreme Judicial Court found the value of the trust too speculative to value for several reasons.  One reason is that the class of beneficiaries is open.  The beneficiaries of the trust are the Husband and his siblings and their children and potentially their children's children.  The current beneficiaries total eleven; however, the number of beneficiaries could increase in the future when and if additional grandchildren are born.  Future generations may also be included.  Thus, the Husband's interest in the trust at the time of termination could be significantly more or less than one eleventh of the trust.  Another reason the trust value is speculative is that there is no set trust termination date and the value could be higher or lower depending on the value of the assets inside the trust when it is terminated.   Additionally, the value of the Husband's income interest is also speculative.  Whether or not the Husband receives income and the amount of income he receives is within the discretion of the trustee who is subject to an "ascertainable" standard.  What this means is that in any given year the Husband may or may not receive income from the trust and he is not in control of whether or not he receives income.

     Until the Supreme Judicial Court's opinion in Pfannenstiehl, Massachusetts law on the inclusion of trusts in divorce was murky at best.  Unlike states with specific statutes excluding trusts, Massachusetts Probate Courts often included and divided trusts as part of an equitable division.  Even if a trust was not included and divided, the value of the trust at the time of divorce was a consideration and factor in dividing and balancing the assets that were included in the marital estate. Now it appears more likely a tightly worded irrevocable, spendthrift trust will not be included in the marital estate, though the Court left open the questions of how the trust would be considered and factored in connection with establishing child support and alimony orders.

        If you are getting divorced and you or your spouse have an interest in a trust, make sure your attorney investigates the terms of the trust and the impact on your divorce.

SO YOU WANT TO REDUCE YOUR CHILD SUPPORT OBLIGATION  !!!

          We all know finances are constantly changing.  Salaries go up and they go down.  Parents lose their job.  New jobs come along, but the pay may be reduced.  Income throughout a career is not necessarily on a constant upward trajectory.  Mental and physical disorders and diseases can impair the ability to earn.  As parents get older, it can become harder and harder for some to find decent paying work.  For the lucky parents, rxpertise and increased earning power come with age. For the not so lucky parents, suble age discrimination can render it nearly impossible for parents who are over fifty years of age to find stable employment.  Expenses go up and down too.  Children go to college.  Some go to public institutions and receive loans and scholarships.  Others undertake expensive private school educations.  The financial challenges are never ending.  And for that reason, a child support obligation that was fair and reasonable when entered may not be fair at all five or ten years down the road.  If you believe your child support obligation is not fair or reasonable and you are considering filing a modification and requesting a reduction here are some issues to consider.

1.  An order is an enforceable order until the court changes it.  You cannot decide on your own your order is too high.  If parents agree to a change, make sure it is in writing and filed with the Court pursuant to the Court's new rules for filing agreements for judgment.

2.  The Child Support Guidelines apply for children age 18 and younger living at home.  When your children are in college, the rules are different and a change may be appropriate.

3.  When a child or children are in college a support reduction may be appropriate; however, it is unlikely support will be completely terminated.

4.  The income of a parent's new spouse is not included in the guideline calculation; however, you want to make sure the Court is aware of the situation.

5.   Retroactive changes are rarely if ever allowed, though it never hurts to ask.

6.  Increases and deceases in the income of the parent receiving support generally do not affect support significantly.

7.  Increases and deceases in the income of the parent paying support generally do affect support significantly.

8.  If the parent of a college student houses the student during summer, spring and Christmas break support will in all likelihood continue, though it may be reduced.

9.  The newest version of the Guidelines provide for a more significant increase for additional children.  In the past support for one child was only 1-3 percent less than the support for 2 children.  That has changed.

10.  Increases in daily living expenses are not generally a grounds for reducing support. 

11.  In general, support is calculated using the Child Support Guidelines and the parent's expenses are not a factor in the formula.

12.  Identifying support as alimony and not child support can be a tax benefit to both parties.
. 
THIS ARTICLE DOES NOT CONSTITUTE LEGAL ADVICE AND CANNOT BE RELIED UPON.  IF YOU WANT LEGAL ADVICE CONCERNING YOUR PARTICULAR SITUATION, PLEASE CONTACT AN ATTORNEY.  IF YOU WANT TO DISCUSS THESE ISSUES IN MORE DETAIL OR SCHEDULE A CONSULTATION, YOU CAN CALL ME AT 508-655-1707 OR E-MAIL ME AT CSCHINDEL@SOUTHNATICKLAW.COM.

Why should I sign this completely unfair pre-marital agreement

SHOULD I SIGN THIS  COMPLETELY UNFAIR PRE MARITAL AGREEMENT?

          This is how it all starts..  A young starry eyed lover walks cautiously into my office clutching a large manilla envelope in one hand and my card in the other.  "My Father (or it could be mother or friend or boss, even) told me to have you read this over before I sign it.  I'm getting married next month and my "intended" told me I should sign it  We agreed everything my future spouse owns right now will not be divided if we get divorced.  We're not getting divorced, so I'm sure it's all okay, but I promised my Father ( or other older more experienced person) I would have you look at it".

            After admiring the ring or other evidence of everlasting love, I sit my lovestruck client down and probe a little further.  I need to know who prepared the agreement, why it needs to be signed, what you have in the way of assets and debts and what your spouse to be has in the way of assets and debts.  I also need to know about family businesses, trusts and potential inheritances.  Present and expected future incomes are important as well as the likelihood of children.  We should discuss any discussions you have or have not had with your "intended" concerning the raising of children and the handling of family finances.  After reviewing your answers to these questions and many others, I will undoubedly recommend that you NOT sign the proffered agreement.  My reasons will likely include but not be limited to the following:

              1.  Unless you have been married before and already have chidlren, there is no reason to give
                   away rights Massachusetts law bestows upon divorcing parties.

             2.  Unless you and your fiancee are equally wealthy at the time of marriage, 
                  your financee is probably using the agreement to guilt you into giving up important rights.

             3.  The Courts are not likely to enforce an agreement that is so unfair as to be considred
                  unconsionable.
             
             4.   If the agreement is single spaced, exceptionally wordy and more than fifteen pages in
                   length it was probably drafted by a big city attorney who charged $500.00 per hour or
                   more to create an unfair document favoring the attorney's client. The attorney is paid
                   whether or not you sign the agreement so the attorney has no interest in drafting a
                   fair agreement .
            
             5. If you sign this agreement it will come back to haunt you!  When you want to get rid of the
                 obnoxious spouse who made you sign it, negotiating a fair settlement will be more difficult
                 and contentious. Your spouse will be convinced the agreement is enforcebable   Prooving
                 otherwise will be an expensive uphill battle.

               If I cannot convince you to walk away from the agreement or your finance,  just remember, the more unfair the agreement is the less likely a court will enforce it.  A few days ago, the Massachusetts Appeals Court affirmed a Probate Court Judge who refused to enforce a twenty year old pre marital ageement giving the wife the beat up house with no equity and the husband the gorgeous multimillion dollar marina.
 

ESTATE PLANNING OPTIONS FOR INDIVIDUALS WHO ARE REMARRYING AND     HAVE CHILDREN FROM A PRIOR MARRIAGE

           Getting married a second or third or even a fourth time can be exciting if you have found your soul mate and learned from you mistakes, but before you take what you hope will be your final plunge into marital bliss, consider whether you want your children or your new spouses's children to inherit your estate when you pass away.  Without proper planning, your new spouses's children could inherit your estate while your children receive nothing!  Or, your spouse could deplete your estate so there is nothing left for your children. Even worse,  after you die your second spouse could remarry again and your estate could belong to the spouse she married after you died.  The unpleasant possibilities are endless.

             With proper planning, your estate will pass according to your wishes.  You can establish a plan in which your children inherit your estate and your new spouse's children inherit your new spouses estate.  If you want your estate combined with your new spouses's estate with all of the children sharing equally that can happen too if you plan accordingly.  Or you might want your spouse to inherit everything along with the ability to decide how your estate will ultimately be shared when your spouse dies.  Here are some options:

          1.  You can set up a trust that pays income to your surviving spouse while preserving the balance of your estate for your children or other beneficiaries.  If you live in Massachusetts and your combined estate is $2,000,000.00 or more the trust will need to be a qualified terminable interest property trust so the assets in that trust are not taxed.  All that means is that the surviving will receive trust income for life.  The principal of the trust can remain in tact for your final beneficiaries.  If your combined estate is less than $2,000,000.00 you are not worried about tax issues so your spouse can receive as much or little from the trust as you find appropriate.

         2.  You can draft your simultaneous death provision so that if you and your spouse die together your estate goes to your beneficiaries and your spouse's estate goes to his or her beneficiaries.  The correct wording depends upon whether or not your estate is taxable.  If you do not have a taxable estate you want a presumption that you survived your spouse.  Otherwise, your estate goes first to your spouse then to your spouses's heirs.  If you have a taxable estate, you might want a presumption that your spouse survived so you can take advantage of the marital deduction and other planning options available to married couples.  Marital deduction planning only works if you have a surviving spouse.

        3.    If you want to leave everything to your spouse with maximum ability to use assets during life and decide who will be the ultimate beneficiaries, you want to set up a trust with a power of appointment allowing your spouse to decide by his or her will who your ultimate beneficiaries will be.

      4.  Finally, you could leave everything to your spouse outright (not in trust) or in a trust your spouse completely controls, even to the extent of removing all the assets from the trust.

        With proper planning almost anything is possible!

           Please let me know if this blog is helpful or interesting!  I appreciate any and all feedback.

An easy way to protect ytour home from creditor claims

                      AN EASY WAY TO PROTECT YOUR HOME FROM CREDITOR CLAIMS

            Filing a homestead with the Registry of Deeds is a quick, easy and inexepnsive way to protect your home from creditor claims.  A homestead will not protect against claims filed prior to filing the homestead and it will not protect against monies due on your mortgage, for taxes, child support or monies due Mass Health.  The filing fee for a homestead is only $35.00.  A homestead declaration can be prepared by an attorney or an individual can prepare it without an attorney by using the forms available online.  A homestead protects the equity in your principal residence.  Ahomestead can be filed to protect equity in a home that is owned by a trust.  Unfortunately, it does not protect a second home or a vacation home.  To be valid, the declaration must be filed with respect to the home you make your residence.  You can only have a homestead on one home.

            In March, 2011, the homestead law was revised to provide some protection even if you do not file a declaration with the Registry of Deeds.  The new law provides homeowners with an automatic $125,000.00 homestead. Homeowners who do file obtain homestead protection in the amount of $500,000.00.  This means up to $500,000.00 of equity is protected against creditors.  The homeowner's spouse is also protected even if his or her name is not on the deed or the mortgage. 

               The homestead for seniors who are 62 years of age or older is $500,000.00 per ower meaning that a married couple who are both over 62 years of age now can protect $1,000,000.00 in equity.  If you have a homestead that was filed when you were not yet 62 years old and you are now 62 years old, you should re-file to ensure protection under this section providing additional coverage for individuals 62 years of age and older.  There is no limit on how many seniors can live together and claim the $500,000.00 homestead.  For example, if 4 individuals each 62 years of age or older live together in a home with $2,000,000.00 of equity all $2,000,000.00 of equity is protected from creditor's claims. 

            If you have not filed a homestead with the Registry of Deeds, you should file one.  If you do not know, if one if filed,  we can go online and find out. 

DO I WANT A REVOCABLE OR AN IRREVOCABLE TRUST?

Clients are always asking me to explain the difference between an irrevocable and a revocable trust.  After I explain the differences, the next questions is which is the best one for me.  There is no right or wrong answer.  The best trust is the one that accomplshes your goals while allowing you to retain the maximum amount of control. 

If your goal is to avoid probate, establish an organized plan for the management of your assets when you become disabled or to protect the privacy of your property and beneficiares, a revocable trust may be perfect for you.  If you have a disabled child, spouse or relative and you want a vehicle for management of that person's property, a revocable trust may also be perfect.  Putting your assets into a revocable trust allows you to enjoy these many important benefits without giving up control of your assets during your lifetime.

If you goal is to qualify for government benefits such as Mass Health or reduce your estate tax liability by reducing the value of assets in your name, than an irrevocable trust may be your only option.  The benefit is that you and your heirs and beneficiaries can save hunderds of thousands of dollars by protecting your assets from the cost of a nursing home or taxation under the estate tax laws.  An irrevocable trust provides all the benefits of a revocable trust as well as the cost savings benefits unique to an irrevocable trust.  The disadvantage is that you need to give up some measure of control of your assets.  Assets put into an irrevocable trust should be the ones you do not need for daily living.  In order to protect your assets from nursing home costs and/or estate tax, you must give up access to the trust principal.  In other words, if you have property you want your heirs to inherit and you do not need it during your lifetime, but you do not want your heirs to have this property until after you die, you should consider putting the assets into an irrevocable trust.   If you want Mass Health or the taxing authorities to treat the assets as if you do not own them, you cannot act like a complete owner.  It makes sense.

The most important difference between a revocable and an irrevocable trust is that a revocable trust can be amended or changed at any time and an irrevocable trust cannot be changed, or certainly not easily or freely.

This article is not meant to be construed as legal advice and should not be interpreted in such a manner and does not create an attorney client relationship.  If you want legal advice about your specific situation, please contract an attorney with expertise in estate planning, trusts and/or Mass Health eligibility.

CarenSLaw: HOW WILL I EVER PAY FOR NURSING HOME CARE?

CarenSLaw: HOW WILL I EVER PAY FOR NURSING HOME CARE?:      Have you ever wondered how you will pay for a nursing home should the need arise?  All of us have thought about this subject briefly ...

HOW WILL I EVER PAY FOR NURSING HOME CARE?

     Have you ever wondered how you will pay for a nursing home should the need arise?  All of us have thought about this subject briefly at some point.  Some people believe the government will pay.  Many people believe Medicare will pay the cost.  Other people believe their health insurance will pay.  And others believe they will pay for nursing home care from their own pocket.  I will summarize the options and the advantage and disadvantages of each.

      First, it is important to know that Medicare will not pay for custodial long term, nursing home care.  If you or a loved one is discharged from a hospital to a nursing home, Medicare will pay for up to 90 days of care as long as the nursing home is providing essential services and your condition is improving.  Once you cease to improve or the 90 day period expires, Medicare will no longer pay the bill.  As important as it is to have health insurance is, your health insurer will not pay for care at a nursing home.  Once your Medicare benefit has expired you must examine other options.

      One option is to pay for the nursing home yourself.  There are some advantages to this alternative.  Certain nursing homes do not accept residents whose stay is being paid by the government.  The government pays the nursing home much less than an individual pays the nursing home, so in some instances the nursing home does not want to accept a reduced payment and will not accept government pay residents.  This is legal as a nursing home is a private entity.  The advantage of being a private pay is an increased availability of nursing home placements.  In certain situations, a private pay resident might receive better care than a government pay resident.  The disadvantage is the cost.  It costs approximately $100.000.00 per year to be a nursing home resident.  For a married couple, the cost is approximately $200,000.00 per year.  Residents needing more than basic nursing home care can pay as much as $180,000.00 per year per person.  If your total estate is $3,000,000.00 or higher you will probably be a private pay unless you do some sophisticated planning at least 5 years before you are admitted to a nursing home.

    The second option is to have your long term care insurer pay.  Depending on the level of benefit you purchase your long term care insurer can pay a significant if not all of the cost of the nursing home.  The advantage of this option is that you keep your assets and you can pass them along to your hiers when you die.   Another advantage is that if you have long term care insurance at a certain minimum level, the government will not force you to sell your home in the event government benefits are provided.  Additionally, if you have long term care insurance the government will not try to collect from your probate estate any balance due for government benefits provided.  And finally, any long term care premiums you pay will be tax deductible.  The disadvantage of having long term care insurance is that it can be expensive. And of course, like any insurance product, you may never need it.

     The final option is to qualify for government benefits  In Massachusetts this joint federal state program is called Mass Health.  Mass Health provides medical care for low-income aged, blind and disabled persons.   If you own assets worth $2,000.00 or less you qualify.  Your social security or other income will be paid to the nursing home and you will be left with a very small needs allowance.  If the value of your assets total more than $2,000.00 your can gift them and/or put them in a trust, but you must do this at least 5 years before you enter a nursing home.  If you are close to needing nursing home care and your assets exceed $2,000.00 in value, you can convert them from countable assets to non-countable assets.  For example, you can take $10,000.00 in cash and put it into a burial plan or your spouses's home.  If you are married, your spouse can keep at least $115,920.00 of assets.  Excess assets can be put into a special private annuity.  Qualifying for Mass Health can be complicated so you should seek professional advice.  The rules are complicated, they change often and intrepration is not consistent among Mass Health employees.

      I hope my summary helps you or a loved one decide which option is best in his or her unique situation.

    TEN MISCONCEPTIONS ABOUT CHILD SUPPORT AND ALIMONY

1. Your expenses are relevant in a determiantion of the appropriate level of child support.
   Truth:  In general, expenses are not relevant.

2.  Child support must be used on the children, and the receipient must account to the payor.
     Truth:  The recipient can use child support for family expenses and expenses of the recipient.

3.  If the payor loses his or her job, the obligation to pay support ceases.
      Truth:  If the payor loses his or her job that party must file a modification action.

4.  You can't get blood from a stone.
      Truth;  The Court has ways of making deliquent parents pay.  Ask me.

5.  If a party gives up a career to raise the children that party is entitled to alimony.
     Truth:  Only if other factors apply.

6.  If the payor has no realionship with the children there is no obligation to pay support.
      Truth:  The amount and/or duration of support is not related to the quality of the payor's relation-
                  ship with the children

7.  Child support can be determined by a simple mathematcial calculation
      Truth: There are many factors that go into the calculation and often times the calcuation is not
                  simple.

8.  Once the parties agree on a child support amount it cannot be changed.
     Truth: Child support may be increased or deceased upon a change or circumstance.

9.  When one child is emancipated, child support is dramatically changed.
      Truth:  The change is not automatic, you must go to court, and the percentage of the change
                   is not large.

10.  If you are entitled to an alimony termination under the new Alimony Reform Act, you can just
        go into court and terminate alimony.
        Truth:  There are dates before which an alimony termination case may not be filed and the dates
                     are based upon the length of the marriage and the age of the payor.

REAL ESTATE ISSUES IN DIVORCE

            When a couple divorces, frequently the biggest issue is how to handle the real estate.  Most couples own a home which in the divorce court is referred to as the marital home.  In many cases, the divorcing parties also own income property.   How the real estate is handled depends to a large extent on whether or not the real property has equity.  The options can be summarized as follows:  

MARITAL HOME WITH EQUITY

1.     Parties can sell the property and split the equity;

a)     Either the parties agree or the Court orders it;

2.     One party can re-finance and buy-out the other party;

b)     Either the parties agree or the Court orders it

3.     The parties can agree to sell when the children graduate high school;

c)     Generally, the Court will only order this if the children will be graduating in the next few years;

4.     The parties can agree to sell when the children graduate college

d)     Generally, the Court will only order this if the children will be graduating in the next few years.

5.     The parties or the Court can allocate the marital home to one party.

MARITAL HOME WITH NO EQUITY

1.     One party accepts ownership and refinances to remove the other from the deed;

2.     Parties can agree to sell;

3.     The Parties or one party can agree to retain the property and sell at a later time;

MARITAL HOME UNDER WATER

1.     Parties agree to a short sale;

a)     Court may order the sale so property is not foreclosed;

2.     One or both parties agree to pay arrears;

3.     Court can order one or both parties to pay arrears;

4.     One or both parties can apply for a loan modification;

5.     Parties cannot agree and property is foreclosed;

a)     This is not a good option.

INCOME PROPERTY

1.     All the sale, re-finance and buy-out, retention and/or allocation issues are available depending on equity;

2.     Income can be allocated to one party or split;

3.     Expenses can be allocated to one party or split;

4.     Income can be held in escrow by an attorney.

If you have any questions, call or e-mail Caren Z. Schindel at 508-651-1000 ext. 214 or Cschindel@mrmbw.com

                         BIGGEST DIVORCE SETTLEMENTS EVER


1.  Mel and Robyn Gibson- Robyn received $425 million
2.  Michael and Juanita Jordan- Juanita received $168 million
3.  Neil Diamond and Marcia Murphey- Marcia received $150 million
4.  Greg and Laura Norman- Laura received $105 million
5.  Tiger Woods and Elin Nordengren- Elin received $100 million
6. Steven Speilberg and Amy Irving.  Amy received $100 million
7. Madonna and Guy ritchie- Ritchie received $92 million
8.  Harrison Ford and Melissa Mathison- Melissa received $85 million
9.  Kevin Costner and Cindy Silva- Cindy received 80 million

10. James and Linda Cameron- Linda received $50 million

         The divorce laws that apply to celebrities are the same as the ones that apply to the rest of us.  Just like the real world, in 9 of 10 celebrity cases, the Husband paid a settlement to the Wife.  In one case (Madonna v. Ritchie), the Wife paid the Husband.  The celebrities fight about money and children just like the rest of us.    If you ever feel the laws and the Courts are not fair, just remember no one can escapes the divorce laws.  

                                   

                                           Governor Patrick signs long term care insurance bill

                        The Massachusetts Chapter of the National Academy of Elder Law Attorneys (MassNAELA) today announces a legislative victory for seniors, as Governor Deval Patrick has signed into law a bill protecting individuals from losing their homes if they choose to use long-term care insurance for community-based care before entering a nursing home. Bill S.2359 grants an exemption from MassHealth estate recovery claims whether an individual uses their long-term care insurance for at-home or nursing home care. Prior to this bill, the MassHealth estate recovery exemption only applied when long-term care insurance policies were used for nursing home care.

Marriage and Divorce Agreements

MARRIAGE AND DIVORCE AGREEMENTS

Premarital Agreements – executed in contemplation of marriage

1.     Validity of Agreement

            -recognized in when signed

            -freedom to contract

            -permitting parties to arrange their financial affairs as they deem fit

            - agreement could so unreasonably encourage divorce as to be against

              public policy

2.     Judicial Review of Agreement

            -generally approved

            - parties are free to reject an unsatisfactory agreement

3.     Fraud and Coercion

            -not enforceable if tainted by fraud and coercion

            -party alleging fraud and coercion must prove it

            - parties are considered to be dealing at an arms’ length

            - were parties informed

            - was signature voluntary

4.     Disclosure of Assets

            -full and fair disclosure

            -informed decision

            -written statement

                        -significant assets with approximate value

                        - approximate annual income

                        -significant future acquisitions or changes in income

                        - disclosure need not be exact

5.     Waiver

            -meaningful choice

            - representation by counsel

            -adequacy of time to review agreement

            -party’s understanding of rights       

6.     Fair and Reasonable Terms

            -fair and reasonable when signed and when enforced

Postmarital Agreements- signed during marriage

1.     Validity of Agreement

            - recognized in now

2.  Judicial Review

            - carefully scrutinized

            -choices are different when spouse attempting to save a marriage

            -situation full of opportunity for one spouse to sue threat of dissolution to                           bargain themselves into a position of advantage

                        - parties not at an arms length

                        -knowing and explicit agreement to waive the right to equitable division

            3.  Fraud and coercion

                        -burden shifting analysis

                        -intensity of negotiations

            4.  Disclosure of Assets

                        - duty of absolute fidelity

                        -confidential relationship

                        -fiduciaries without the safeguard of divorce obligations and court-ordered                           disclosure

            5.  Waiver

                        -knowing and voluntary relinquishment

            6.  Fair and Reasonable Terms

                        - context of agreement

                        -purpose of agreement

                        -disparity of income and assets

                        -may not be equal bargaining power

                        - consideration of divorce factors

Separation/Divorce Agreement- signed in anticipation of divorce judgment

1.     Validity of Agreement

            -recognized since 1976

2.     Judicial Review

            -parties have full protection of divorce laws

            - Court will review every term

            -considered in light of your Judge’s experiences

3.      Fraud and coercion

4.     Disclosure of Assets

            -required by statute

            - more than approximate values

5.     Waiver

6.     Fair and Reasonable Terms

            -influenced by views of your Judge