Tuesday, September 6, 2016
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.
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.
Tuesday, November 24, 2015
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.
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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.
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.
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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.
Thursday, January 29, 2015
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.
Thursday, August 21, 2014
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.
Wednesday, April 30, 2014
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.
Thursday, July 11, 2013
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.
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.
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