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    Why Everyone Needs an Estate Plan

    The surprising truth that many of us don't realize is that we all have an estate plan in place, even if we haven't created one ourselves. Every state has a set of laws that dictates what happens if a person is incapacitated or dies without estate planning documents. That means that the choice each of us faces is not whether or not to have an estate plan, but whether we can do better than the one the state provides.

    The "intestacy laws" of Massachusetts provide that when a person dies without a will, assets are distributed among a surviving spouse, children, and sometimes parents, siblings or other relatives. The assets are distributed right away unless someone who gets assets is under age 18. If a minor is entitled to assets, the probate court keeps control over the assets until he or she turns 18 - at that point, they are given to the 18 year old outright.

    Where there are no estate planning documents, the probate court makes an effort to determine, often based only upon blood relationships, who should be in charge. This may be as a guardian or conservator of the person during their lifetime, as a Personal Representative after death, or as guardian of minor children after the death of the children's parents.

    The probate court will oversee all of this to make sure that the assets are distributed in accordance with the law and by the people it deems appropriate to be in charge. The records related to this administration will be available to the public to review. After about a year, the person in charge of the estate can ask the probate court to formally end the estate and end that person's obligation to the estate and the beneficiaries.

    There are times when this "ready-made" estate plan is not right for you:

    • If you want assets used for a person after your death, but not given to them outright.
    • If you want assets divided in a way other than the laws provide.
    • If you want assets that are left to your family to be protected from creditors.
    • If you want to name specific people to fill specific roles in your estate plan.
    • If you want to pay Massachusetts as little estate taxes as possible - ideally, none.
    • If you want the distribution of your assets to be private.
    • If you want to eliminate the need to deal with the courts entirely.
    • If you have a family member with special needs, an addiction or mental illness, or who receives public benefits.

    If any of these apply, you should have a customized estate plan for you and your family. If you are interested in talking further about your estate plan, please contact us at 781-864-9977.


    Caring Committee: A Planning Tool for Clients Without Families

    Anyone who has ever sat alone in a doctor’s office and  attempted to listen to the physician’s diagnosis and suggested treatment, while simultaneously trying to remember which questions to ask, understands the challenge of coordinating ones’ own care. Never mind trying to do so while ill or suffering from cognitive impairments. Older individuals are particularly vulnerable in the health care arena. They often need assistance both with the big questions (Which treatment should I pursue?) as well as the more mundane ones (How will I get to my doctor’s office?).

    Family members at first glance are the most logical choice to assist elders with healthcare-related tasks, to advocate on their behalf, and to serve as surrogate decision makers in the event the individuals become incapacitated and can no longer make decisions for themselves. However, many elders are aging alone. Today, almost one third (28%) of all elderly individuals live alone, according to the Administration on Aging, a percentage that increases with advanced age. The combination of our increasingly mobile society, declining marriage rates and the often- referenced aging baby boomer generation ensures that the next 25 years will see an even greater number of elders living alone. These clients do not have the network of family, friends or personal connections that many of us take for granted. This begs the question, who will make decisions on their behalf?

    There are many discrete tasks involved in ensuring that we receive quality care; monitoring health, identifying care providers and medical personnel, scheduling appointments and arranging transportation, gathering medical advice, weighing information and making decisions regarding care, paying for care and ensuring proper insurance reimbursement, identifying the best setting for care, making end of life decisions – the list goes on and on.

    Even if a surrogate decision maker can be identified, he/she may decline the responsibility in the face of shouldering this burden alone. Professionals (social workers and attorneys) are often reluctant to serve as a healthcare agent for a variety of reasons. Creating a “Caring Committee”- a team of friends, family and professionals to assist the client and her proxy with the spectrum of health issues- is an attractive alternative to traditional models for healthcare assistance.

    Many clients already have an informal Caring Committee. Consider a client who lives in New York City. She has a daughter in California and a niece in Connecticut. The daughter hires an Aging Lifecare Manager to oversee the mother’s care and the niece comes in to check on her aunt on weekends. Although it’s not named such, the Caring Committee already exists for this client. Although the Caring Committee document is not legally binding, it provides the members, and all those involved a “road map”, developed when the individual is well and able to articulate and inform their decisions. Through a thoughtful and holistic process, led by a Lifecare Manager, scenarios and desires are determined, which eliminates the guessing that is often inflicted on representatives during a crisis. All clients need a network of connections to help them as they age. By naming the network as the Caring Committee, everyone is better able to recognize its importance and how it should function on behalf of the client. The Committee is intended to share the responsibilities typically shouldered alone by the client or by her appointed agent. In addition to sharing the tasks, the Caring Committee should also advise the agent in making decisions, monitor the agent’s actions and, finally, hold the agent accountable.

    As advocates for our clients, part of our job is to make our clients aware of the planning tools available to assist them in achieving their stated goals. From our past experience, we may be able to anticipate that, for some of our clients, their healthcare proxy alone may not be enough to meet their needs. For these clients, the Caring Committee can be an effective addition to their estate plan. The Caring Committee’s success can be measured in part by the quality of care the client receives and in how care is experienced for the various members. Many Committee members find the experience to be enriching. Keeping this in mind, we may find that in recommending the Caring Committee we are not only helping our clients, but also helping ourselves.

    If you are interested in talking further about the Caring Committee, please contact our office to discuss further.


    What Is An "Estate Plan" Anyway?

    Maybe you've decided that this is the year when you create an estate plan - your financial advisor has "complete estate plan" on your to-do list at your regular check ins, your friends and family members have told you they recently "had their estate plan done," or an article you read mentioned the importance of a comprehensive estate plan.

         Often, people know they need to "have an estate plan done," without knowing exactly what that means. Estate planning is a process that will, in most cases, result in the creation of certain estate planning documents. There are five basic documents that are often part of a core estate plan:

    1.    Will (and, if minor children, an Emergency Guardianship Proxy);

    2.    Revocable Trust;

    3.    Health Care ProxyHIPAA Authorization and Living Will;

    4.    Durable Power of Attorney; and

    5.    A Declaration of Homestead.

         Many people who call our office tell us they are calling because they "need a will" or "someone said they should have a trust." It is true that almost all adults in Massachusetts need a will, and many could benefit from the appropriate type of trust. However, these documents are just the end products of the estate planning process.

         During the estate planning process, you learn about the basic documents listed above (and maybe a few others, depending upon your needs), share your family's goals, values and concerns with your estate planner, and thoroughly review the type and amount of assets you own and expect to own. Your financial advisor, insurance advisor and accountant, if you have them, are often part of this process. Estate planning also continues beyond producing and having you sign those documents - your estate planner will talk with you about how to make each document, and your overall plan, most effective.

         If you are interested in talking further about your estate plan, please contact us at or 781 864-9977


    2017 - Estate and Gift Tax Planning Considerations

    There are a number of planning techniques that individuals should consider now that the first of the year is behind us, to take advantage of estate and gift tax savings opportunities.  


    Gifts to Individuals

    Individuals may limit the growth of their taxable estates by making annual lifetime gifts. The 2016 limit on such gifts was $14,000 per donee and this limit will remain for 2017. Married couples may gift up to $28,000 to each donee in 2017, if each spouse gives the limit individually or if the donors agree to split joint gifts for tax purposes.  It is important to remember that a donor is not limited to a certain number of annual exclusion gifts every year.  By making annual gifts to multiple beneficiaries, individuals may transfer significant wealth over time.  The gift is considered to be made on the date the donee receives the gift.  However, in the case of checks, the donee must cash the check before the end of the year. Since the gift tax annual exclusion is based on a calendar year, individuals may wish to make 2017 gifts in early January.

    Individuals interested in creating or adding to 529 Plan accounts for children or grandchildren should consider front-loading the accounts with five years’ worth of annual exclusion gifts. 

    Individuals wishing to pay a beneficiary’s medical or educational expenses should make payments directly to the institution, not to the individual.  If the payments are made this way, they will not be counted against the donor’s annual or lifetime gifting limits, so the donor can do both. 

    The federal estate, gift and generation-skipping transfer (GST) tax lifetime exemptions are each $5 million per individual ($10 million per married couple), increased for inflation. After adjusting for inflation, the exclusion amount for deaths in 2016 was $5.45 million and for 2017, the tax-free amount will be $5.49 million per person.

    The lifetime exclusion provides significant opportunities for lifetime gifting beyond the annual exclusion, educational and medical care gifts outlined above. Lifetime gifting is an effective strategy for the tax-efficient transfer of wealth because gifts remove future appreciation on transferred assets from an individual’s taxable estate.  In states like Massachusetts where there is an estate tax, but not a gift tax, individuals can reduce their state-level estate taxes if they transfer assets through gifts instead of relying on testamentary transfers.

    Although the current federal estate and gift tax laws were enacted with the goal of providing permanence to the federal transfer tax laws, it is possible that changes could be on the horizon. President-elect Trump is in favor of eliminating the estate tax altogether and reducing the “step-up basis” that dramatically reduces capital gains tax bills heirs pay after inheriting appreciated assets.  Although the likelihood of these changes being enacted is uncertain; they are worth keeping in mind for the coming year. It is important to note that Massachusetts has its own estate tax system that may or may not be affected by any change to the federal system.

    Gifts to Charities

    Gifts made to charities enjoy the dual benefits of reducing estate tax exposure and yielding current income tax deductions.  Such transfers must have been made on or before December 31, 2016 in order for donors to reap the tax benefit in 2017, when 2016 tax returns are filed and income tax is due to be paid.  It is important that donations were actually delivered to the charity before December 31, 2016, as the deduction is recognized on the date the charity receives the gift, not the date the check was written. The tax benefits of charitable gifting can be enhanced by gifting appreciated assets. By donating appreciated assets, the donor avoids capital gains tax that would have been realized upon a sale of the property.  The charity can sell the property and benefit from its value without paying this tax. However, if a donor sells the asset and then donates the proceeds to charity, the donor would be subject to the capital gains tax on the sale. 

    There are certain charitable giving techniques by which individuals can make charitable donations and obtain a charitable deduction, but retain an interest in the property for life or a certain term.  Depending on the individual’s goals, these can be structured in many different ways.

    Gifts of Family Business Interests

    On August 2, 2016, the IRS issued proposed regulations under Internal Revenue Code section 2704, designed to eliminate the use of valuation discounts in connection with gifting of family business interests.  If enacted, the regulations will increase the tax values of gifted assets and reduce some of the benefits associated with transferring these types of interests.  Due to the result of the recent election, there is uncertainty, but the regulations may become final and effective following a public comment period and a public hearing, which was held December 1, 2016.  There is a brief window of opportunity before the changes are scheduled to go into effect.  We urge those who are considering making significant gifts to family members to contact us as soon as possible to discuss these issues.  It is critical to take immediate action to implement planning techniques that take advantage of valuation discounts while they remain available. 

    Review of Estate Planning Documents

    It is advisable for individuals to review Wills, Trusts and other estate planning documents periodically. The end or beginning of each year is a good time for this.  When reviewing estate plans, individuals should consider these questions:  

    1.      Do the provisions still accomplish your goals?

    2.      Have your documents been updated to take advantage of changes to tax laws?
    3.      Do your documents contain provisions that provide asset protection to your children, grandchildren and other loved ones? 
    4.      Are the fiduciaries named (Personal Representative/Executor, Trustee, Power of Attorney/Agent-in-Fact, Health Care Agent) still appropriate? 
    5.      Are your Durable Power of Attorney and Living Will on file with family members and health care providers?
    6.      Have estate planning concepts, funeral arrangements and decisions on anatomical gifts been discussed with family? 
    7.      Are your life insurance policy and retirement plan beneficiary designations still appropriate and in line with your overall estate plan? 
    8.      Are bank accounts and other assets titled in line with your overall estate plan?
    9.      For business owners, are buy-sell agreements and the related valuations and life insurance policies up to date? 

    Please contact us if you would like to discuss any of these matters.



    What Executors and Personal Representatives Need to Know About Basis Reporting

    With the March 31, 2016 deadline for estates required to report basis information now behind us, personal representatives, executors and their advisors are scrambling to make sure they properly comply. The new basis reporting requirement was created by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, effective for estate tax returns required to be filed after July 31, 2015, in an effort to ensure that estates and their beneficiaries are reporting the same values to the IRS. New Sec. 1014(f) requires consistent basis reporting between an estate and a beneficiary, and new Sec. 6035 imposes a reporting regime whereby an executor of an estate who is required to file a federal estate tax return must also provide statements to the IRS and to each beneficiary reporting the values of estate property.


    Since the legislation passed, and to provide additional guidance, the IRS delayed the initial deadline for estates required to report basis information to March 31, 2016; though, generally, the deadline would be only 30 days from the earlier of the date the estate return is required to be filed or is actually filed. On March 2, 2016, the IRS issued the guidance everyone was waiting for — proposed regulations (REG-127923-15), which may be relied upon. While many aspects of the legislation would be clarified in the proposed regulations, unexpected new burdens would arise should the proposed regulations be finalized. Here’s what executors and their advisors need to know when it comes to basis reporting:

    • Reporting: A final Form 8971Information Regarding Beneficiaries Acquiring Property From a Decedent, and its Instructions were issued at the end of January. An executor must file Form 8971, including all Schedules A, with the IRS. A separate Schedule A (but not a Form 8971) must be provided to each beneficiary receiving property from the estate. According to the proposed regulations, for trust, estate, or entity recipients, Schedule A would be provided to the trustee, executor, or entity, respectively.

    • Undistributed Property: As stated above, Form 8971 and Schedules A are generally due shortly after the filing or due date of the federal estate tax return. It is often the case at that point in time that estates have not yet distributed property and cannot yet identify the property that will be eventually distributed to each beneficiary. The proposed regulations would address this problem by requiring an executor to list on a beneficiary’s Schedule A all property that could potentially be used to satisfy the beneficiary’s interest. However, there is speculation among practitioners that without a better explanation on Schedule A, this reporting method could be confusing to beneficiaries and cause them to believe they are entitled to more property than they will be receiving. Once an estate’s distributions are determined, an executor would not be required to file a supplemental Form 8971.

    • Returns Filed But Not Required: The proposed regulations would clarify that basis reporting would not be required for estates that filed a federal estate tax return merely for purposes of electing portability, making a GST exemption allocation, or any other reason.

    • Excluded Assets: Under the proposed regulations, certain assets would be excluded from the basis consistency and basis reporting requirements, such as: (1) cash (other than coin collections); (2) items of income in respect of a decedent (IRD); (3) tangible personal property with a value of under $3,000; and (4) property sold, exchanged, or otherwise disposed of by the estate in a taxable transaction. While property that qualifies for the federal estate tax marital or charitable deductions would not be subject to the §1014(f) basis consistency requirement because it would not increase the estate’s federal estate tax liability, such property would still be subject to the §6035basis reporting requirement.

    • Subsequent Transfers: Perhaps the most significant proposed regulation would be the additional filing obligation for certain subsequent transfers of property that were subject to the basis reporting requirement. If the beneficiary receiving the property subsequently transfers the property to a family member or controlled entity, the beneficiary-transferor must file a supplemental Form 8971 with the IRS (and sometimes the executor) and provide the transferee with a Schedule A within 30 days of the transfer. The IRS explained in the preamble to the proposed regulations that it is concerned about opportunities to circumvent the purpose of the statute. However, many practitioners worry that those that would be affected by the rule, i.e., the original beneficiaries of the property, are unlikely to know they have a filing obligation.

    • Zero Basis Rule: Another surprising rule found in the proposed regulations would give beneficiaries a zero basis, rather than a step up in basis, for estate assets an executor fails to report on a federal estate tax return before the expiration of the statute of limitations, either because the property was later discovered or otherwise omitted. Additionally, where a federal estate tax return was never filed, the basis of property would be zero until the final value is determined.

    This likely will not be the last you hear on the proposed regulations. Comments on the proposed regulations were due June 2, 2016, and a couple of organizations made submissions to urge the IRS to further delay the initial reporting deadline. Stay tuned.....