Category Archives: Wills

Getting organized…

I want to re-finance my house, consolidate all those little IRAs and 401k’s from old jobs, get a new passport, make a will…What’s the common denominator?  When you start on any of these tasks, you need to be able to put your hands on paperwork, sometimes LOTS of paperwork.  Do you know where your birth certificate, bank statements, investment statements for the last three months are?  And I mean you can hand them to someone easily, not that you’re sure that they are in the big pile over there.

Or, could you tell someone else where to find your life insurance policy, homeowner’s policy, or auto insurance policy if you were away on vacation and you needed to file a claim? 

Join us for a complimentary seminar on May 26th, 2011 at 5 pm at the Cape Ann Savings Bank in Gloucester.  Gail Ramos, Senior Trust Officer at the 
Cape Ann Savings Bank and I will talk about getting a grip on organizing some of that paperwork…Networking from 5 to 5:30 and the program will go from 5:30 – 6:30.

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Capacity–Can she really make that decision?

Capacity Requirements

Proper execution of a legal instrument requires that the person signing have sufficient mental "capacity" to understand the implications of the document. While most people speak of legal "capacity" or "competence" as a rigid black line–either the person has it or doesn’t–in fact it can be quite variable depending on the person’s abilities and the function for which capacity is required.

One side of the capacity equation involves the client’s abilities, which may change from day to day (or even during the day), depending on the course of the illness, fatigue and the effects of medication. On the other side, greater understanding is required for some legal activities than for others. For instance, you need to have a higher and clearer amount of “capacity” to enter a contract than to write a will. 

Capacity to make a will was summed up by the Massachusetts Supreme Judicial Court:

Testamentary capacity requires 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. It requires freedom from delusion which is the effect of disease or weakness and which might influence the disposition of his property. And it requires ability at the time of execution of the alleged will to understand the nature of the act of making a will.

This is a relatively "low threshold," meaning that signing a will does not require a great deal of capacity. The fact that the next day the testator does not remember the will signing and is not sufficiently "with it" to execute a will then does not invalidate the will if he understood it when he signed it.

The standards for entering into a contract are different because the individual must know not only the nature of her property and the person with whom she is dealing, but also the broader context of the market in which she is agreeing to buy or sell services or property.  This is a more long range kind of understanding, and requires a more complex ability.

While the standards may seem clear, applying them to particular clients may be difficult. The fact that a client does not know the year or the name of the President may mean she does not have capacity to enter into a contract, but not necessarily that she can’t execute a will or durable power of attorney. The determination mixes medical, psychological and legal judgments. It must be made by the attorney (or a judge, in the case of guardianship and conservatorship determinations) based on information gleaned by the attorney in interactions with the client, from other sources such as family members and social workers, and, if necessary, from medical personnel. Doctors and psychiatrists cannot themselves make a determination as to whether an individual has capacity to undertake a legal commitment. But they can provide a professional evaluation of the person that will help an attorney make this decision.

Because you need a third party to assess capacity and because you need to be certain that the formal legal requirements are followed, it can be risky to prepare and execute legal documents on your own without representation by an attorney.

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Tell me again why I should do my estate plan?

Everyone has a different reason for beginning, updating, or implementing an estate plan.  Usually one very specific reason.  For some, it’s the birth of a child and the need to secure their future.  For another it might be a divorce and the need to separate in life and in death.  For a third, it’s the death or illness of a loved one that makes a client realize that planning can make a death either easier, or much harder for their family members.

For others it’s a chance encounter or event.  I have some friends who were first time homebuyers, excited about a great home, and in a hurry to move in with their young family.  Sadly, the elderly owner of the home passed away two weeks before the closing.  This could have completely derailed this family’s plans, but the home was held in a trust.  The home did not need to go through probate since it was legally owned by the trustees.  Because of this, the closing could continue, and the heirs and the family were able to finish the transaction quickly and efficiently.  You can be sure that the young family was much more enthusiastic about good estate planning once they had seen it in action.

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Law meets Life–An occasional blog for North Shore Residents

Pet Round UP: Dogs on the Beach, Dogs in your Will.

The Manchester-by-the-Sea Town Meeting is April 4 and 5, 2011. One warrant item will be whether or not to further restrict dogs on Singing Beach. Did you know that if you vote on the issue that concerns you, and leave the meeting, that the warrant can later be amended and a vote re-taken? If there is a subject of interest to you on the warrant, be ready to stay for the entire meeting.

On another pet related note, Massachusetts just became the latest state to pass PET TRUST LEGISLATION. We now have a statute that allows you to leave a sum of money specifically for the care of your animal when you die. Thank you to Bruce Tarr for co-sponsoring this legislation. More info can be found here:  Pet Trust article

Do you have a great pet sitter, vet, groomer, or pet trainer that you’d like to recommend? Please send along their info, and I’ll do a listing in the next Pet Round UP.

P.S. Manchester residents: Dog licenses need to be obtained from Town Hall by March 31st.

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Putting a residence into Trust

First, a trust is a form of ownership that separates legal title from beneficial ownership.  So something held in trust is “owned” by trustees for the benefit, according to the terms of the trust, of the beneficiaries.  A trustee is a fiduciary, and is required to follow the terms of the trust.  Trusts have been around for centuries, and are used to serve several different purposes.

You might consider putting your home in a trust so that when you pass away it will go directly to the beneficiaries, without going through probate.  You might also put a residence into trust so that you don’t technically own it anymore, but you can still benefit from it in some way (you might be able to continue living there, for example).  Assets held by trusts often provide protection from creditors.  If your son is a beneficiary of a trust, a creditor or divorcing spouse typically could not reach the principal of the trust, as he does not technically “own” the assets.  People also put homes into trusts for Medicaid planning, or for estate tax planning.  These types of trusts need to be irrevocable and carefully drafted. 

Trusts take on-going work and administration once they have been created.  Irrevocable trusts, in particular, require their own tax ID number, and tax returns must be filed annually.

When you put a residence into trust, you take the title of the property from your name, and put it in the name of the trustees.  This is accomplished by drafting and executing a deed which is then recorded in the local registry of deeds. 

Trusts can be confusing or relatively straightforward; they can provide asset protection, a way of planning your legacy, or a way of protecting your family from unexpected events.  They’re an outstanding way of creating structure for a family member who has special needs, or unpredictable spending habits.  If you decide to do trust planning, choose your attorney carefully, and be certain that your advisor has experience working with the type of trust you need.

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Estate Administration

Probate is the process by which a deceased person’s property, known as the "estate," is passed to his or her heirs and legatees (people named in the will). The entire process, supervised by the probate court, usually takes about a year. However, substantial distributions from the estate can be made in the interim.

The emotional trauma brought on by the death of a close family member often is accompanied by bewilderment about the financial and legal steps the survivors must take. The spouse who passed away may have handled all of the couple’s finances. Or perhaps a child must begin taking care of probating an estate about which he or she knows little. And this task may come on top of commitments to family and work that can’t be set aside. Finally, the estate itself may be in disarray or scattered among many accounts, which is not unusual with a generation that saw banks collapse during the Depression.

Here we set out the steps the surviving family members should take. These responsibilities ultimately fall on whoever was appointed executor or personal representative in the deceased family member’s will. Matters can be a bit more complicated in the absence of a will, because it may not be clear who has the responsibility of carrying out these steps.

First, secure the tangible property. This means anything you can touch, such as silverware, dishes, furniture, or artwork. You will need to determine accurate values of each piece of property, which may require appraisals, and then distribute the property as the deceased directed. If property is passed around to family members before you have the opportunity to take an inventory, this will become a difficult, if not impossible, task. Of course, this does not apply to gifts the deceased may have made during life, which will not be part of his or her estate.

Second, take your time. You do not need to take any other steps immediately. While bills do need to be paid, they can wait a month or two without adverse repercussions. It’s more important that you and your family have time to grieve. Financial matters can wait. (One exception: Social Security should be notified within a month of death. If checks are issued following death, you could be in for a battle. For more on Social Security’s death procedures, click on http://www.ssa.gov/pubs/deathbenefits.htm)

When you’re ready, but not a day sooner, meet with an attorney to review the steps necessary to administer the deceased’s estate. Bring as much information as possible about finances, taxes and debts. Don’t worry about putting the papers in order first; the lawyer will have experience in organizing and understanding confusing financial statements.

Below are some of the steps in probate:

1. Filing the will and petition at the probate court in order to be appointed executor or personal representative. In the absence of a will, heirs must petition the court to be appointed "administrator" of the estate.

2. Marshaling, or collecting, the assets. This means that you have to find out everything the deceased owned. You need to file a list, known as an "inventory," with the probate court. It’s generally best to consolidate all the estate funds to the extent possible. Bills and bequests should be paid from a single checking account, either one you establish or one set up by your attorney, so that you can keep track of all expenditures.

3. Paying bills and taxes. If an estate tax return is needed—generally if the estate exceeds $1 million in value—it must be filed within nine months of the date of death. If you miss this deadline and the estate is taxable, severe penalties and interest may apply. If you do not have all the information available in time, you can file for an extension and pay your best estimate of the tax due.

4. Filing tax returns. You must also file a final income tax return for the decedent and, if the estate holds any assets and earns interest or dividends, an income tax return for the estate. If the estate does earn income during the administration process, it will have to obtain its own tax identification number in order to keep track of such earnings.

5. Distributing property to the heirs and legatees. Generally, executors do not pay out all of the estate assets until the period runs out for creditors to make claims, which is a year after the date of death. But once the executor understands the estate and the likely claims, he or she can distribute most of the assets, retaining a reserve for unanticipated claims and the costs of closing out the estate.

6. Filing a final account. The executor must file an account with the probate court listing any income to the estate since the date of death and all expenses and estate distributions. Once the court approves this final account, the executor can distribute whatever is left in the closing reserve, and finish his or her work.

Some of these steps can be eliminated by avoiding probate through joint ownership or trusts. But whoever is left in charge still has to pay all debts, file tax returns, and distribute the property to the rightful heirs. You can make it easier for your heirs by keeping good records of your assets and liabilities. This will shorten the process and reduce the legal bill.

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Will Basics

What exactly is a will, and what does it do? 

A will is a document that disposes of a person’s property after death.  In addition, it names fiduciaries, including an executor, maybe a trustee, and a guardian of your minor children.  A will can spell out specific gifts (I give my engagement ring to my granddaughter Alice); charitable bequests (I leave $500 to the First Parish Church of XYZ); and dispose of whatever is left in the way that you direct.

A will comes into effect at the death of the testator (person making the will).  Prior to death, the testator can change or amend their will at any time, presuming that they remain mentally competent.  A will must be executed EXACTLY according to state law, there is very little wiggle room to accommodate mistakes in execution.

In Massachusetts, once you pass away, your original will must be located and presented to the probate court of the county you live in within 30 days.  This is important for two reasons.  The first being that someone needs to know where you keep your original documents.  A safety deposit box is not a good place for an original will, unless someone else has access to it.  (This means they’re “on” the safety deposit box, a notation in a power of attorney will not work once you have passed away).  The second important point is that time is, as they say, “of the essence”.  While probate can seem like a long process, getting started should happen pretty quickly.  Once your will is filed, it becomes a public document.  Under no circumstances should you put private financial information into this document!  I say this because there are “do it yourself” kits that insert social security numbers into the will, which is obviously an unwise thing to do.

So here is your “to do” list:

— Think about guardians for my children

— Who would I want to be the executor of my estate?

— What charities or special bequests do I want named in my will?

— Have a will drafted by an attorney I trust

— EXECUTE MY DOCUMENTS

— Put them somewhere safe, and tell someone where they are

 

I will write about the other documents in a basic estate plan in later posts.

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What’s in a “Basic Estate Plan”

I know that lawyers hate to admit that there is any such thing as a basic, vanilla estate plan.  The truth is, there is such a plan and some people have a need for one.  Equally true, however, is that you should probably have some good advice before you decide that you are one of those people.  When I talk about “basic”, I’m talking about the following items (this is somewhat specific to Massachusetts residents).  In later posts, I’ll describe each in some detail and give tips for getting organized to create one.

— Will

— Trust (maybe)

— Health Care Proxy

— Power of Attorney

— Emergency Guardianship Proxy (if you have minor children)

— A complete review beneficiary forms

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Getting Organized

Are you the kind of person that makes New Year’s resolutions?  If so,  getting your finances and planning organized is a great goal for 2011.  I often provide clients with a “document organizer” which is essentially a list of your various important papers and where you store them.  This is useful when you re-finance your house, when you prepare taxes, meet with your financial planner, or if someone should need to step in and find something on your behalf.  Feel free to contact me if you’d like to receive one.  (bridget@bmurraylaw.com; put “document organizer” in the subject line.)

Below is a list of other action steps to take as you think about getting your estate plan in order for the New Year.  (I once met a woman who spent every New Year’s Day putting together her filing system for the coming year, I can’t personally claim to do that, but she WAS one of the most organized people I had ever met…)

1.  Get organized! Put your papers somewhere all together, label as appropriate, and then tell someone where they are.

2.  Communicate! If you have special wishes, let your family, or loved ones know what they are; if you plan to treat children differently, let them hear about it from you, along with your reasons, to prevent resentment later.

3.  Plan! The best way to create a legacy, to be assured that your wishes are followed out, and that your family is cared for as you want is to make sure all this information is known, communicated, and executable.

Best wishes for happiness, peace and prosperity in 2011.

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What about my pet?

I’ve got a great dog, a turtle who will live for 80 years, and three opinionated cats.  Right now there are several household members who will take care of them should I get in an accident, or have to go into the hospital.  What should someone who lives alone be considering for their pets?  I can’t imagine anything worse than coming from the hospital to find malnourished (or worse) pets.  One tool is a Pet Care card.  Carry it in your wallet to let people know who to call if you wind  up in the hospital .  Also consider posting one on your fridge for first responders in the case of a medical emergency at home.  Send me an e-mail with your mailing address, and I will send you the card that I give my clients.

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