Do I Need a Will or Trust, or Both? Answered by a Massachusetts Estate Planning Attorney

Do I Need a Will or Trust, or Both? Answered by a Massachusetts Estate Planning Attorney

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Do I Need a Will or Trust, or Both? Answered by a Massachusetts Estate Planning Attorney

Many people are familiar with the terms “will” and “trust,” however, they don’t exactly know the difference, nor do they know which is more appropriate to address their needs. Being proactive with your financial planning and asset protection is the first step to taking care of your assets and your family when you pass. The next important step is determining which type of protection and planning will fulfill your wishes and make the most sense for your individual set of circumstances. 

Do you need a will or trust, or both?

Specifically, while a will and a trust serve different purposes and can each be drafted individually for a client, they may also cohesively work together to make an airtight plan as well. To learn more about what type of estate plan is right for you, it is critical to hire an experienced and qualified estate planning attorney who can discuss all of your legal options to ensure you are adequately protected and secure.

Wills, Explained

When you die, a will protects and addresses any property that is in your name and not held in a trust or joint tenancy (with your spouse). It is important to keep in mind that a will must pass through the court system, specifically through the probate department. This means that the court will oversee the validity of the will and handle all distributions and allocations of the property stated therein. Considering that a will must be processed through the court system and in turn, becomes public record, this may or may not be the right estate plan for you.

Trusts, Explained

On the other hand, a trust only covers property that has been assigned or transferred into the trust; property is not covered automatically. A trust is a legal document and agreement set up by a “grantor,” providing a “trustee” with the duty of holding legal title to property for the benefit of another person, called a “beneficiary.” A trust can be created as revocable, in order to provide flexibility, or irrevocable (cannot be revoked), depending on the grantor’s needs and goals. Unlike a will, a trust does not have to go through the court system’s probate department, which can alleviate time and resources and also keeps the matter more private.

How a Massachusetts Estate Planning Attorney Can Help You

Let us help you achieve your unique estate planning goals, as our qualified Massachusetts Estate Planning & Probate Attorneys will assess your goals and needs to ensure you receive a plan that works for you. Call The Sullivan Firm, P.C. today at (978) 325-2721 to arrange a free-of-charge exploratory meeting. Together, we can preserve, protect and provide for your loved ones.

Troy Sullivan, Massachusetts Estate Planning Attorney

The Sullivan Firm, P.C. is a boutique probate and estate planning law firm serving the North Shore and Cape Ann of Massachusetts including Gloucester, Rockport, Manchester and Beverly. The firm concentrates on estate planning matters, including trusts, wills, healthcare proxies, life planning, probate, special needs trusts, and trust administration. 

Avoiding a Tax Bomb on Proceeds from a Life Insurance Policy

Avoiding a Tax Bomb on Proceeds from a Life Insurance Policy

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Life insurance is a contract entered into between a policy holder and an insurance company. Specifically, the life insurance policy holder makes set payments to the insurance company in exchange for the promise that the company will pay a designated sum of money to a beneficiary in the event that the policy holder passes away. All Massachusetts residents are subject to a state estate tax if their estate is valued over $1 million.

Your estate includes all of the property you own, including tangible personal property (your “stuff”), intangible personal property (bank accounts, IRAs, 401Ks, business interests, etc), and real property as well as any proceeds from a life insurance policy. Because the proceeds on a life insurance policy can be in the hundreds of thousands and even millions of dollars, these proceeds exponentially raise the value of your estate and the tax bomb that your estate faces.

Is there a way to avoid the estate taxes due because of the proceeds received from a life insurance policy?

You can avoid the tax bomb on life insurance proceeds if you set up an irrevocable life insurance trust (ILIT). The ILIT takes the life insurance policy away from your estate and places it in a separate trust. The policy is therefore no longer owned by you. Rather, it is owned by the trust. Because it is irrevocable, you cannot change your mind and dispose of the trust. While this finality may seem alarming to many, the ILIT does allow you to control many other decisions related to the ILIT.

For instance, you can designate beneficiaries. You can also dictate terms for when and how they will receive the life insurance proceeds. Under the regular scheme, payout upon death is immediate and in full. Under an ILIT, you can stagger payments. You can also dictate what exactly the proceeds are to be used for, such as for living expenses or education. This helps younger children or adults with budgeting issues.

How do I set up an irrevocable life insurance trust?

To set up an ILIT, you simply need the names of your beneficiaries, the name of your trustee, and all of the terms you wish to set out for the distribution of the trust (how, when, and how much). Then obtain a life insurance policy, making the ILIT the owner and beneficiary of your policy. If you already have a policy, transfer ownership to the ILIT.

Setting up an irrevocable life insurance trust can be complex, and there are certain requirements that need to be met, but an experienced Massachusetts estate planning attorney can help you evaluate whether it is your best option. Contact The Sullivan Firm, P.C. today at (978) 325-2721 for a free consultation on trusts.

Troy Sullivan, Massachusetts Estate Planning Attorney

The Sullivan Firm, P.C. is a boutique probate and estate planning law firm serving the North Shore and Cape Ann of Massachusetts including Gloucester, Rockport, Manchester and Beverly. The firm concentrates on estate planning matters, including trusts, wills, healthcare proxies, life planning, probate, special needs trusts, and trust administration. 

Mental Incapacity and Estate Planning

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The common issue of mental incapacity is one of the most important reasons for beginning the estate planning process early. While you may work hard at taking care of yourself, you do not know what the future has in store for you. Estate planning allows you to ensure that your assets are protected and distributed in the manner you choose in the event that you become incapacitated later on in life. The Commonwealth of Massachusetts will not recognize any legal documents drafted or signed by individuals who are mentally incapacitated. A will is one such legal document. Mental incapacitation can occur due to mental illness, coma, physical ailment, or the side effects of prescriptions. Generally speaking, mental incapacitation occurs when you are unable to fully understand the terms of the document that you are signing due to a temporary or permanent mental issue. Mental incapacitation centers around the issue of consent. An individual who is mentally incapacitated cannot consent because they are unable to process decisions. When someone becomes mentally incapacitated, the court can appoint individuals to make decisions for the mentally incapacitated person, such as a health care guardian or financial conservator. In probate, mental incapacity has a specific definition with regards to an individual’s ability to draft a will or otherwise conduct any estate planning. According to the Massachusetts Supreme Judicial Court in Goddard v. Dupree et al., 322 Mass. 247:

[T]estamentary capacity requires the ability on the part of the testator to understand and carry in mind, in a general way, the nature and situation of his property and his relations to those persons who would naturally have some claim to his remembrance; freedom from delusion which is the effect of disease or weakness and which might influence the disposition of his property; and ability at the time of execution of an alleged will to comprehend the nature of the act of making a will.

Putting this in layman’s terms, a testator must have the mental capacity to understand the consequences of drafting a will and how he or she would like to distribute assets in a will. Unfortunately, mental capacity is a grey area in Massachusetts. While an individual who is in a coma cannot under any circumstances contemplate the nature of a will, an individual with a mental illness like bipolar disorder may. By only acknowledging wills of those who are mentally capable of drafting them, the Massachusetts probate courts seek to reduce the number of situations in which individuals use coercion or forgery to create wills for mentally incapacitated testators. If you suspect that someone coerced a loved one to draft a will while your loved one was mentally incapacitated, you need to consult with a qualified probate attorney immediately on how to prove mental incapacity and coercion in court. If you are in the process of drafting a will, it is important that you draft the will with the aid of a skilled probate attorney. The probate attorney can ensure that your will is valid and conforms with Massachusetts law. If you suffer from a disease such as dementia or mental illness that may raise mental capacity concerns, your attorney can assist you with creating a record of mental capacity should any disputes arise after your death. In addition, your attorney can help you create a comprehensive estate plan should you become incapacitated in the future. These additional documents include:

• Health Care Proxy: An agent appointed by you who can make treatment and medication decisions, pay medical bills, and obtain your records.

• Durable Power of Attorney: An agent appointed by you who can make financial decisions while you are mentally incapacitated.

• Advance Medical Directives: Instructions included in a living will that dictate what treatments are or are not permitted.

• Trusts: You can place some of your assets in a trust; develop a plan for how those funds are to be disbursed, to whom, and when; and appoint an individual to administer the trust.

If you or a loved one is or may shortly become mentally incapacitated, you need to consult with a probate attorney immediately on estate planning to avoid any issues regarding medical treatment, financial status or assets. The attorneys at The Sullivan Firm, P.C. have dedicated their careers to helping individuals preserve, protect and provide for their families’ futures. Call The Sullivan Firm, P.C. today at (978) 325-2721 to schedule a free exploratory meeting.

Troy Sullivan, Massachusetts Estate Planning Attorney

The Sullivan Firm, P.C. is a boutique probate and estate planning law firm serving the North Shore and Cape Ann of Massachusetts including Gloucester, Rockport, Manchester and Beverly. The firm concentrates on estate planning matters, including trusts, wills, healthcare proxies, life planning, probate, special needs trusts, and trust administration. 

Smart Estate Planning For A Family Business

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How Long Does the Probate Process Take?

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Is a HIPAA-release required for Massachusetts Health Care Proxies?

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What is a HIPAA Release?

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) is a federal law that protects the privacy and security of individuals’ medical records in the United States. Generally, HIPAA prohibits health care providers and insurance companies from disclosing a patient’s medical information to third parties without the patient’s prior written authorization in the form of a HIPAA Release. However, what happens if you become incapacitated and cannot provide written authorization to allow your health care agent to see your records?  The experienced and knowledgeable attorneys at The Sullivan Firm, P.C. will draft the necessary documents as part of your estate plan to ensure that your health care agent can review your medical records if the need ever arises so they can make an informed decision about your treatment.

What is a Health Care Proxy?

In Massachusetts, any person over the age of 18 may execute a health care proxy. A health care proxy is a legal document that designates an adult, called an agent, to make medical decisions on behalf of another, known as principal, if the principal becomes incapacitated. An agent can be almost anyone but is the most frequently a spouse, child, parent, relative, or close friend. According to Massachusetts General Law chapter 201D, §5, known as the Massachusetts Health Care Proxy Act (the “Act”), an agent is responsible for making health care decisions for the principal as if the principal was making them personally.  An agent may be asked to make decisions about life-support, such as ventilators, feeding tubes, artificial hydration, or other medical treatments.

Keep in mind that the agent cannot make those decisions without guidance. Specifically, Section 5 of the Act instructs him or her to consult all of the principal’s health care providers and consider acceptable medical alternatives regarding “diagnosis, prognosis, treatments and their side effects.”  After consultation, the agent makes a treatment decision in accordance with the principal’s “religious or moral beliefs,” or if those beliefs are not known to the agent, then the agent must make a decision based upon the agent’s perception of the principal’s best interests.

When would I need both a HIPAA and Health Care Proxy?

An agent may need to consult the patient’s medical records to make the best decision for the principal. While Section 5 of the Act grants the agent the right to review confidential patient information  to make this decision, the HIPAA privacy rule, as stated above, appears to conflict with Massachusetts Health Care Proxy law if there is no authorization on file with the health care provider. Analysis of the HIPAA rules, however, reveals that a principal’s personal representative, as designated by state law, may review confidential patient records. Therefore, in Massachusetts, a health care provider may allow an agent to review a principal’s medical records without prior written authorization.

Is there a better alternative?

There are alternatives to relying upon statutory analysis to resolve this conflict. The better practice for an estate planning attorney to follow when drafting a health care proxy for a client is to include language in the document itself expressly permitting the agent, in accordance with Massachusetts law and HIPAA, to review all confidential medical documentation necessary to make an informed decision.  Additionally, people suffering from a life-threatening illness should consider having their physician write a “Medical Order Regarding Life-Sustaining Treatment” (“MOLST”).  As the name indicates, a MOLST is a medical order written by your physician obligating health care providers to follow if the need arises. A MOLST becomes effective as soon as it is signed, unlike a health care proxy which only becomes effective after incapacitation. A MOLST may not be a viable option for everyone. Therefore, you should consult your physician to see if your medical condition meets the specific legal requirements.

What happens if you die without an estate plan?

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Creating an estate plan is not an easy subject to broach, especially with someone who is young and healthy. Human nature allows us to always think we have time. Unfortunately, life is unpredictable, and as such, people can be caught off guard and die without ever executing even a simple will. If that is the case and you die without an estate plan (intestate), the Commonwealth of Massachusetts will determine how your assets are distributed.

Given the aforementioned, the Massachusetts Uniform Probate Code (MUPC) sets forth the procedure for administering an intestate estate. Before assets can be distributed, a petition must be filed in the probate court of the county in which the deceased resided, along with a request for an administration. This can be formal or informal. The court then appoints an administrator or personal representative to identify and gather the assets and liabilities of the estate and report them to the court, sometimes referred to as an accounting. This process can be very lengthy and costly. The court may also direct the personal representative to sell real property, wind up any business concerns, pay final debts, and file final income and estate tax returns.  The ultimate cost will depend upon how much work the personal representative must perform to administer the estate.

Once the final accounting is complete, the MUPC establishes the parameters for distribution of the intestate estate’s assets. The decedent’s surviving spouse has priority under the MUPC.The decedent’s surviving spouse takes the entire estate when the decedent has no surviving children or surviving parents. Additionally, if the decedent left surviving children who are also children of the surviving spouse, then the spouse will get the entire share. Lastly, the surviving spouse will get the entire share if the surviving spouse’s children (the decedent’s step-children) do not survive the decedent.

A surviving spouse’s share can be reduced if the decedent had other family members. The surviving spouse’s share will be reduced if the decedent had surviving parents, but no children. In that case, the surviving spouse will take the first $200,000, plus 3/4 of the balance of the estate. The remainder will go to the decedent’s surviving parents. The surviving spouse’s share will be $100,000, plus 1/2 of the remaining balance if all of the decedent’s children are children of the surviving spouse and the surviving spouse has at least one child that is not also a child of the decedent. The surviving spouse will be awarded the same amount if the decedent has at least one child who is not a child of the surviving spouse.

If the decedent dies without leaving a spouse, the decedent’s descendants get first priority. Next, if there are no children or grandchildren, then the surviving parents have priority. If there are no surviving parents, then the decedent’s siblings get priority. If the decedent dies without siblings, then the next of kin will get priority.

Troy Sullivan, Massachusetts Estate Planning Attorney

A Knowledgeable Estate Planning Attorney Can Help Avoid Unintended Results

Attorney Troy Sullivan, an experienced and knowledgeable estate planning on Boston’s North Shore, can help you avoid the unintended results, and potentially exorbitant costs to your family, of dying intestate. Call The Sullivan Firm, P.C. today at (978) 325-2721 to learn how careful estate planning can expedite or even avoid probate and dispose of your estate in the manner in which you want.

What Happens in Massachusetts When a Will Cannot Be Found?

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In Massachusetts, a lost or misplaced will can present many problems for the family of the deceased. Losing a will may create lengthy and costly litigation among family members who each claim the estate of the deceased. Contentious litigation may drive a wedge through the family and could prevent the deceased’s true intentions from being carried out. As an estate planning specialist, Attorney Troy Sullivan can work with you to draft an effective estate plan and ensure that your wishes are carried out.  This will save everyone who has suffered the loss of the deceased from the stress and effort of attempting to prove what the person would have wanted.

Even though a will cannot be found, it can still be probated, although it is not a simple process. Under the Massachusetts Uniform Probate Code (MUPC), the proponent, or the party asking a court to probate a will, has the burden of proving the contents of the will. According to the MUPC, a formal petition for probate must be accompanied by the original, signed will or by an authenticated copy if the original will is not already on file in the courthouse. If the petition is not accompanied by the will or authenticated copy probated in another jurisdiction, then the petition must include the language of the will along with a statement that the will is “lost, destroyed, or otherwise unavailable.”

Trying to recreate the contents of a lost document is obviously fraught with problems such as inaccurate recitation of the will contents, fraud, or misrepresentation. Unless all the potential heirs agreed that the petition accurately recited the will contents, one or more of the potential heirs likely will file objections to the petition.

The potential heirs who object to the petition for the probate of a lost will have the upper hand under Massachusetts law. The law presumes that a lost will has been destroyed by the deceased with the intent of revoking it. The presumption may be rebutted by evidence to the contrary. The proponent of the lost will must prove by a preponderance of the evidence, i.e., satisfying the burden that the alleged facts are more likely than not, that the deceased had a will or access to the will and did not destroy the will with the intent of revoking it.

Whether the evidence offered by the proponent of the lost will is sufficient is dependent on the specific and unique facts of each case. Factors that a court can consider when determining if it is likely that the deceased did not intend to destroy or revoke the will are:

·       Whether there is evidence that the lost will was executed with the formalities required to execute a will;

·       Whether a copy of the original will was found;

·       The competency of the decedent and the timeframe between when the will was originally signed and the date of death.

As with any lawsuit, the judge will also consider the credibility of the witnesses when they testify to determine truthfulness, bias, and motivation to lie. If, based upon the court’s analysis of all of the facts, the proponent fails to rebut the presumption that the decedent destroyed the lost will, then the decedent’s estate will pass according to Massachusetts’ intestate succession laws.

The testator can keep the will in a bank safety deposit box or in a fireproof safe in the home. A recommended practice is to notify trusted family members where the will is being kept for safe keeping and making certain your family has access to that location in the event of the death of the testator.

Troy Sullivan, Massachusetts Estate Planning Attorney

Contact a Trusted Estate Planning Attorney for Further Information

A trusted estate planning attorney from The Sullivan Firm, P.C. can help you avoid the stress that is placed on your loved ones when a will is lost. Call Attorney Troy Sullivan today at (978) 325-2721.

How Long Does the Probate Process Take in Massachusetts?

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When someone in Massachusetts dies (the “decedent”), their property and ownership rights are passed along to heirs and beneficiaries through a process known as probate. The extent to which a decedent’s estate will need to be probated depends upon how their property was titled and if they had a will. In most instances, at least some of the assets from a decedent’s estate eventually wind up being distributed in probate court.

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