Some of the best reasons for living here are obvious in August. The days are dry and brilliantly sunny with the blue sky and blue ocean reflecting off each other. Kids are back from camps and appreciating their final days of freedom before school, commuters are enjoying the last few days of less traffic, the dog has a spring in her step. It’s a quiet week before the rush of school and Labor Day. In spite of the calendar, I always feel like September is a start of a new year. The cooler weather is energizing, but this week is for taking those long walks and really appreciating what’s important. I hope you all have the chance for some peaceful reflection before the hustle and bustle of September arrive!
KIDs and MONEY:
Financial Aid and College Planning for Middle School Parents
I recently found out that re-marriage could impact my children’s financial aid status; that investments in my business were not counted against my expected contributions, and that the last thing you want to do is re-finance your home to pay for college.
Who knows what other mistakes we’re making in these crucial five years prior to the BIG BILL. Join me for a small gathering to hear about the pitfalls and planning we should be considering right now. Robyn Samuels is a financial planner who specializes in helping parents to pay for college, without going broke. Please let me know if you’re interested, and I’ll get the details to you. Bridget@bmurraylaw.com
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.
A homestead protects a person’s home from certain creditors. In some states, this protection is automatic – when you purchase a home and live in it, you receive a certain amount of protection from creditors. In Massachusetts, you needed to declare a homestead, and file it with the probate court — until recently. On December 16th, 2010, Governor Patrick signed into law a bill containing a series of important amendments to the Homestead Act (Mass. General Laws, Ch. 188). The new provisions will be effective on March 16, 2011.
One important change is that homestead protection of $125,000 will be automatic; greater protection (up to $500,000) is available with the filing of a homestead declaration form. Forms are available to download from salemdeeds.com or from other county registry websites.
The other important change, particularly if you are doing estate planning (and really, why else would you be reading this blog?) is that a home held in a trust can now be protected by the homestead declaration. This provides clarity which has been lacking, and it tis a welcome change for homeowners who have elected to place their homes in trust. Next week I’ll talk about the benefits of putting your residence into a trust.
As reported in ElderLaw Answers, adult children in China would be required to visit their elderly parents on a regular basis under a proposed amendment to the nation’s Law on Protection of the Rights and Interests of the Aged.
Wu Ming, an official with the Ministry of Civil Affairs, is reported as saying that the amendment would allow elderly parents ignored by their children to go to court to claim their legal rights to be physically and mentally cared for.
China has 167 million citizens over age 60, half of whom live alone without children and 20 million of whom cannot take care of themselves. In traditional Chinese culture, filial piety — respect for one’s parents and ancestors — is one of the paramount virtues. But the longstanding tradition of children caring for aged parents is being challenged by history’s largest human migration, in which 130 million Chinese have moved to cities in search of jobs, leaving nearly 60 million growing up apart from one or both parents, according to a recent article in the New Yorker. In effect, capitalism appears to be undermining traditional values, and the state’s attempted solution is to legislate morality.
Wang Shichuan, a news analyst quoted by the site CriEnglish.com, questioned whether a moral issue is susceptible to a legal solution. Wang noted that many adult children work outside their hometowns and have little opportunity to visit their parents due to all-consuming jobs and few days off.
The Ministry of Civil Affairs is set to submit the proposed amendment to the Legislative Affairs Office of the State Council in the near future, according to the news site Global Times.
A recent Boston Globe article by Cheryl Costa highlights the importance of visiting your estate planning attorney. Looking forward to speaking with you soon! Time to Revisit your Estate Planning
1. What is a health care proxy?
A health care proxy names the person that you want to make your medical decisions if you become incapacitated.
2. Is a health care proxy the same as a living will?
No. A living will is a document that gives instructions about your medical wishes. In Massachusetts, the health care proxy has this power, and while it it easier for everyone if your wishes have been communicated in writing, the health care proxy is not bound by your living will.
3. Can I name both my children as proxies?
No, you can only have one health care proxy at a time. You may name successors if the first person becomes unavailable to serve as your proxy, but only ONE person can act as your agent at one time.
4. When does a health care proxy go into effect?
Usually your doctor “activates” your health care proxy by determining that you are unable to make your own decisions. This can happen, for example, to an elderly person who is suffering from dementia, or a young person who is unconscious after an accident or other illness.
5. Can I revoke my health care proxy?
Yes, you can revoke your health care proxy at any time. In addition, even if a doctor has determined that you are incompetent, if you don’t agree with your proxy’s decisions, YOUR decisions and wishes must be respected unless a court has determined that you are incompetent.
Figuring out the best way to treat your retirement savings plans can be a tricky proposition. Although they pass directly to the beneficiary you designated, thus avoiding probate, there can be negative tax consequences without some additional planning. In the blog post below, Chuck Epstein discusses setting up stretch IRAs as one tax planning strategy.
A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a "trustee," holds legal title to property for another person, called a "beneficiary." If you have been appointed the trustee of a trust, this is a strong vote of confidence in your judgment and probity. Unfortunately, it is also a major responsibility. Following is a brief overview of your duties:
Fiduciary Responsibility. As a trustee, you stand in a "fiduciary" role with respect to the beneficiaries of the trust, both the current beneficiaries and any "remaindermen" named to receive trust assets upon the death of those entitled to income or principal now. As a fiduciary, you will be held to a very high standard, meaning that you must pay even more attention to the trust investments and disbursements than you would for your own accounts.
The Trust’s Terms. Read the trust itself carefully, both now and when any questions arise. The trust is your road map and you must follow its directions, whether about when and how to distribute income and principal or what reports you need to make to beneficiaries.
Investment Standards. Your investments must be prudent, meaning that you cannot place money in speculative or risky investments. In addition, your investments must take into account the interests of both current and future beneficiaries. For instance, you may have a current beneficiary who is entitled to income from the trust. He or she would be best off in most cases if you invested the trust funds to generate as much income as possible. However, this may be detrimental to the interest of later beneficiaries who would be happiest if you invested for growth. In addition to balancing the interests of the various beneficiaries, you must consider their future financial needs. Does a trust beneficiary anticipate buying a house or going to school? Will she be depending on the trust income for retirement in 15 years? All of these questions need to be considered in determining an investment plan for the trust. Only then can you start considering the propriety of individual investments.
Distributions. Where you have discretion on whether or not to make distributions to a beneficiary you need to evaluate his current needs, his future needs, his other sources of income, and your responsibilities to other beneficiaries before making a decision. And all of these considerations must be made in light of the size of the trust. Often the most important role of a trustee is the ability to say "no" and set limits on the use of the trust assets. This can be difficult when the need for current assistance is readily apparent.
Accounting. One of your jobs as trustee is to keep track of all income to, distributions from, and expenditures by the trust. Generally, you must give an account of this information to the beneficiaries on an annual basis, though you need to check the terms of the trust to be sure. In strict trust accounting, you must keep track of and report on principal and income separately.
Taxes. Depending on whether the trust is revocable or irrevocable and whether it is considered a "grantor" trust for tax purposes, the trustee will have to file an annual tax return and may have to pay taxes. In many cases, the trust will act as a pass through with the income being taxed to the beneficiary. In any event, if you keep good records and turn this over to an accountant to prepare, this should not be a big problem.
Delegation. While you cannot delegate your responsibility as trustee, you can delegate all of the functions described above. You can hire financial advisors to make investments, accountants to handle taxes and bookkeeping for the trust, and lawyers to advise you on questions of interpretation. With such professional assistance, the job of trustee need not be difficult. However, you still need to communicate with those you hire and make any discretionary decisions, such as when to make distributions of principal from the trust to one or more beneficiaries.
Fees. Trustees are entitled to reasonable fees for their services. Family members often do not accept fees, though that can depend on the work involved in a particular case, the relationship of the family member, and whether the family member trustee has been chosen due to his or her professional expertise. Determining what is reasonable can be difficult. Banks, trust companies, and law firms typically charge a percentage of the funds under management. Others may charge for their time. In general, what’s reasonable depends on the work involved, the amount of funds in the trust, other expenses paid out by the trust, the professional experience of the trustee, and the overall expenses for administering the trust. For instance, if the trustee has hired an outside firm for investment purposes, that expense would argue for the trustee taking a somewhat smaller fee. In any case, it makes sense to consult with a professional experienced with trust work who can guide you on what would be normal fees considering all of the circumstances.
In short, acting as trustee gives you a wonderful opportunity to provide a great service to the trust’s beneficiaries. The work can be very gratifying. Just keep an eye on the responsibilities described above to make sure everything is in order so no one has grounds to question your actions at a later date.
There are millions of attorneys out there in the world, probably thousands who could answer the question or deal with the problem you’re confronting. How do you choose the one that’s right for you? An attorney will often be hearing about things that are private, personal, and/or deeply disturbing to you. This is true if your legal issue involves an estate plan, a divorce, a will contest, a personal injury, or a dispute with a neighbor. The attorney that you choose will be privy to things you don’t routinely talk about.
Perhaps the single most important thing to consider is whether you feel comfortable enough with your attorney to share these details. How you arrive at that comfort level should include some research on their credentials and an understanding of whether or not they specialize in the area your problem falls into. An attorney who focuses on divorces will know the current law, have forms and procedures tailored to that practice area, and will be more efficient and more effective than one who occasionally handles divorces. An estate planning attorney will understand the sweeping changes that are taking place in Massachusetts probate law; a real estate attorney will be able to provide you with a smooth and professional closing.
Will the attorney you meet actually work on your case, are your calls and concerns responded to promptly and thoroughly, do you like and trust the attorney? These are all worth considering before you write that first check.
1. Is this attorney an expert in my area?
2. Am I comfortable discussing my issue with this person?
3. Was I given a clear idea of how much the service might cost, and what the possible outcomes are?