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Estate Planning Resolutions for 2014

Posted on: January 22nd, 2014 by Debra Rahmin Silberstein

During these first few weeks of the new year, we’re apt to think afresh about our lives, our health, our families, and our goals for the coming year. If you’re engaged in this kind of thinking, take some time to think about your estate plan by taking a look at our five estate planning resolutions for 2014:

1. Check your beneficiary designations

If you have retirement assets (401(k)s, 403(b)s, IRAs), life insurance, annuities, or any other asset that has a beneficiary designation, check with the applicable financial institution that your accounts name the correct beneficiaries. Think about whether anything has changed since you opened the account that might make you want to modify who will receive these assets. Further, for important income tax reasons, note that retirement assets should not generally name your Trust as a beneficiary. If a Trust is named as beneficiary of your retirement asset, call us or your tax advisor to confirm that this designation should not be changed, and to discuss the income tax implications.
2. Make or update your Health Care Proxy; Have that conversation with your family

While you’re thinking about your health – perhaps you’re trying to drag yourself to the gym or trying healthy eating – think about what your choices might be for medical treatments and procedures while you’re incapacitated. A Health Care Proxy appoints someone to make those decisions on your behalf if you cannot communicate your wishes to your physician. If you don’t have one in place, consider who you’d name, and call us to put one in place. If you already have one, talk with your named agent about your wishes regarding health care, and consider whether the person you named is still the person you would want to make those decisions for you.
3. Consider Whether your Estate Plan Addresses your Digital Assets

If you have an existing estate plan, you might want to think about your online accounts, from eBay and Amazon businesses to Facebook, Gmail and iTunes accounts. While the law remains unclear as to who owns these assets after your death, there are simple steps that can be taken to ensure your loved ones can access these accounts if something happens to you. Be sure to make lists of usernames and passwords, and keep them in a safe place. We can also assign digital assets to revocable trusts, and grant powers over digital assets to your power of attorney.
4. Update your estate plan to reflect the changing needs of your children and loved ones

Many people make estate plans when their children are young, when they don’t know what the future will bring. Whether it’s disability, addiction, marriage, or divorce, your estate plan might need to be updated to better serve the needs of your beneficiaries. For example, if your children receive government benefits, leaving him or her even a modest legacy, without further planning, will almost certainly affect his or her eligibility. So think about whether changes in circumstance might warrant an update.
5. Review the growth in your assets to determine whether you might benefit from state or federal estate tax planning

While the American Taxpayer Relief Act of 2013 largely settled the federal estate tax question for estates of less than $10.6 million, Massachusetts residents may still face a state estate tax if their estate is worth more than $1 million. It’s easier to get to that number than you might think. Life insurance proceeds may very well be included in your estate for estate tax purposes. For a rough calculation of your estate’s worth, add up all your assets – including real estate, retirement accounts, investment accounts, and cash – and add to it the death benefit value of any life insurance policies (term or whole life). If you’re anywhere near the million dollar mark, estate tax planning might make sense for you.

SJC Confirms Mass Trustees Have Decanting Power

Posted on: December 10th, 2013 by Debra Rahmin Silberstein

In Morse v. Kraft¸ the Massachusetts Supreme Judicial Court held that Richard Morse, the sole trustee of the Kraft Family Irrevocable Trust (the “1982 Trust”), had the power to transfer, or “decant”, the assets of one irrevocable trust to another.

The 1982 Trust created separate sub-trusts for each of the settlor’s children, and each child was an income beneficiary of such sub-trusts. However, despite the fact that Morse believed the children were capable of managing the management and distribution of the funds held in their respective sub-trusts, the terms of the 1982 Trust forbade any interested beneficiary from exercising control over distributions.

Believing it to be in the beneficiary’s best interest, Morse wanted to transfer the assets of each sub-trust to a new 2012 Trust, retaining the same beneficiaries, but allowing each child to manage and distribute their own trust assets. Because the power to decant was not explicitly authorized in the 1982 Trust, Morse sought the Court’s interpretation of the Trust to determine whether it included the power to decant.

Although the Court noted granting the decanting powers would essentially allow the Trustee to “amend an unamendable Trust,” the SJC held that the decanting power was inherent in the terms of the 1982 Trust. Citing the Trust’s broad, discretionary language, which limited the Trustee’s power only in that his distributions must be “for the benefit of” the beneficiaries, and affidavits from the settlor and the drafting attorney, which stated that it was the settlor’s intent to give the Trustee decanting power, the Court held that the terms of the 1982 Trust authorized distributions to new sub-trusts.

The Court declined, however, to adopt the proposal of the Boston Bar Association, which, in an amicus brief, encouraged the court to recognize an inherent default power of trustees of irrevocable trusts to distribute property in further trust unless otherwise restricted by the terms of the Trust. Citing a recent trend of state legislatures to adopt trust decanting statutes, the Court reserved for the legislature the judgment of whether to recognize such a default power.

Further, the Court explicitly put drafting attorneys on notice that if a future settlor intends to give a Trustee decanting power, it is expected that the power will be explicitly granted by the Trust. Although the Court declined to answer the question of whether omitting the decanting power suggests intent to preclude decanting, it stated that “in light of the increased awareness, and indeed practice, of decanting, we expect that settlors in the future who wish to give trustees a decanting power will do so expressly.”

Estate Planning Implications

Therefore, trust settlors who wish to give trustees the flexibility – consistent with their fiduciary obligations – to decant trust assets into further trusts, should ensure that their trust instrument explicitly grants the trustee such powers.

Likewise, grantors who may be wary of Trustees altering the terms of a trust by decanting trust assets into further trusts without specific limitations on distributions or investments, for example, may wish to explicitly preclude the Trustee from decanting.

Revocable trusts may be amended at any time during the grantor’s life to accomplish the above changes, and under the Massachusetts Uniform Trust Code (“MUTC”), unless a trust expressly states that it is irrevocable it is interpreted as being revocable.

The MUTC also provides flexibility for the trustees of irrevocable trusts. Unless otherwise provided in the terms of the trust, irrevocable non-charitable trusts may be amended upon the consent of all beneficiaries and the settlor, with the approval of the court. As such, should a court construe the terms of an irrevocable trust to preclude decanting powers, the beneficiaries and the settlor may be able to modify the terms of the trust, provided that they all agree. Further, if the settlor does not consent, the beneficiaries may be able to modify the terms of the trust if the court concludes that modification is not inconsistent with a material purpose of the trust.

Such an option may have been available to Morse, had the SJC decided that the 1986 Trust precluded the decanting of trust assets, however there were potential triggers to the generation-skipping transfer tax (“GST”).

Estate Planning for Digital Assets

Posted on: September 20th, 2013 by Debra Rahmin Silberstein

Although you might think your estate plan is in order, have you thought about estate planning for digital assets? RDTN-750

While the agent appointed under your power of attorney and the personal representative of your estate have wide-ranging powers to manage your tangible, real-world affairs, it remains unclear whether they have the authority to access and manage your online accounts in the case of your incapacity or death.

A Lack of Planning for Digital Assets Can Lead to Difficulties for Family Members

More and more people are going “paperless” with their banking and investment accounts, and rarely visit physical branches, preferring to conduct their transactions online on desktops, laptops, tablets, and other mobile devices. Likewise, our personal lives are increasingly lived online. Memories are stored in Facebook, Instagram, and Flickr accounts, and e-mail archives are taking the place of old shoe boxes filled with correspondence. As we embrace these new technologies, however, the trouble arises when our agents and representatives try to access our digital assets.

Bank of America, for example, has taken the position that a power of attorney does not grant the appointed person access to an incapacitated person’s online banking accounts. In order to protect the customer and mitigate risk, the Bank allows only account holders to access online accounts. Other institutions follow similar policies, leaving family members unable to manage the financial affairs of incapacitated loved ones.

Legal Uncertainty Remains Regarding Personal Representatives’ Authority to Take Control of Digital Assets

Further, a recent Massachusetts case has left open the question as to whether personal representatives should be able to access the decedent’s email accounts. The terms of service imposed by the major online email providers – including Yahoo! and Google – purport to limit access to the account-holder only. In Ajemian v. Yahoo!, Inc. the Massachusetts Appeals Court declined to answer the question of whether the emails contained in the decedent’s Yahoo! email account were property of the estate, remanding the issue to the trial court. The Court did find, however, that the personal representatives of Ajemian’s estate were not bound by the account terms of service, as Yahoo! failed to reasonably communicate the terms to the decedent.

Practical Steps to Save Future Difficulty

As we stay tuned for a decision from the trial court in the Ajemian case, there are practical questions to answer – what should you do to make sure your family members don’t have to worry about this?

The first step is to identify the assets you have – make a list of all accounts, including how they are held, along with usernames, passwords, and the answers to “secret” security questions. Traditional wills are unsuitable places for storing this kind of information, as they become a part of the public record during the estate administration process.

A more suitable option may be a separate document, either paper or electronic, which is kept in a safe place with your other estate planning documents. This should list all of the above information, and should be audited quarterly – adding any new accounts, removing any old one, and updating other changes accordingly. Providing this information directly to your agent or personal representative will ensure seamless administration of your digital assets, and save family members much frustration and heartache.

For questions about estate planning for digital assets, or any other estate planning matter, contact our Andover, Massachusetts Estate Planning Attorneys at the Law Office of Debra Rahmin Silberstein on (978) 474-4700.

2013 Estate Tax Portability for Remarried Surviving Spouses

Posted on: September 20th, 2013 by Debra Rahmin Silberstein

Federal Estate Tax Portability, made permanent by Congress in 2013 legislation, means that where a deceased spouse does not use his or her entire federal estate tax exemption – currently $5.25 million – the balance can be used by the surviving spouse. This is great news for tax efficiency, but without attention to the details of the law, certain people can lose out on the advantages of portability.

2013 Estate Tax Portability Rules Could Mean Potential Pitfalls for the Unwary

For example, suppose a husband dies and doesn’t use any of his $5.25 million amount (because he leaves everything to his wife, taking advantage of the unlimited marital deduction). When the wife dies, her exemption amount will be her own $5.25 million plus the $5.25 million that the husband didn’t use. The wife can therefore leave up to $10.5 million to whomever she wishes without paying any estate tax.

However, should the wife remarry, she can no longer take advantage of the inherited exemption amount if the new spouse dies first. Instead, she will inherit the exemption amount of the second spouse. As a result, if she marries someone with no exemption, for example, she’ll lose the $5.25 million she inherited from her former husband, and only be left with her own $5.25 million exemption.

Potential Planning Opportunities

There are opportunities to plan around such circumstances, however. If a widow who inherited a large exemption happened to marry someone with a much smaller exemption, there would be the opportunity to use up her large inherited exemption during her life by making substantial inter vivos gifts, thereby avoiding hefty estate taxes that may result if she waited until her new spouse’s death.

In Any Event, Filing an Estate Tax Return Is Crucial

Whether or not the spouse intends to remarry or not, filing a federal estate tax return is required to ensure that the surviving spouse inherits any unused exemption. Therefore, to achieve maximum tax efficiency, an estate tax return should always be filed, even if no tax is due. Who knows – you might win the lottery!

For questions about estate tax portability, or any other estate planning matter, contact our Andover, Massachusetts Estate Planning Attorneys at the Law Office of Debra Rahmin Silberstein on (978) 474-4700.

State Legislature Enacts Massachusetts Uniform Trust Code

Posted on: September 19th, 2013 by Debra Rahmin Silberstein

On July 8, 2012, Massachusetts became the 25th state to officially adopt some form of the Uniform Trust Code. The Code, drafted by the Uniform Law Commission and adopted in various forms by state legislatures, aims to promote clarity and uniformity in state trust law, and replaces the trust law provisions of the Massachusetts Uniform Probate Code which became effective in March of last year.

A New Rule Book, Not Too Many New Rules

The Massachusetts Uniform Trust Code contains a variety of new rules that govern the formation and administration of trusts in Massachusetts, and represents a significant overhaul for the Commonwealth’s trust law, which has a rich history dating back prior to constitutional ratification. One of Massachusetts’ early trusts was settled by Benjamin Franklin, who named the City of Boston as a beneficiary in the amount of $2,000. Under the trust’s terms, much of the money was not distributed to the city until 1990. In the interim, however, the balance had grown to almost $6.5 million.

As a result of the Commonwealth’s highly developed trust law – which influenced the development of trust law around the country – much of the Massachusetts Uniform Trust Code’s substance tracks prior Massachusetts law. In fact, one of the most revolutionary aspects of the new law concerns the way it is recorded. When enacted, the Code replaced centuries of recorded court decisions – formerly the only source of trust law in Massachusetts – with clear and concise rules which, for the first time, are located in one place. However, the codification does bring with it some significant substantive changes, the majority of which apply to all trusts, whenever created.

Substantive Changes Increase Efficiency and Flexibility

Many of the Code’s substantive changes function to enhance the efficiency of trust administration , and to reduce unnecessary costs for beneficiaries and trustees. For example, the Massachusetts Uniform Trust Code allows for out-of-court settlements of certain disputes including trust interpretation, trustee liability, and trustee powers. The Code also permits minors or other legally incapacitated individuals (in certain circumstances) to be represented by parents or legal guardians, reducing the need for court-appointed guardians ad litem.

Other changes alter the default rules for trusts created on or after July 8, 2012. Reversing a longstanding rule in Massachusetts, new trusts are now presumed to be revocable unless the trust document indicates otherwise. Additionally, trustees of new trusts may act on the basis of a majority vote, while previous Massachusetts law required trustee unanimity unless the terms of the trust provided otherwise.

In line with prior Massachusetts law, the Code authorizes a court to approve modification or termination of an irrevocable, non-charitable trust upon receiving consent from all the beneficiaries, with the caveat that the proposed changes must not be inconsistent with a material purpose of the trust. In contrast to prior law, however, the Code also permits modification or termination even if inconsistent with a material purpose of the trust with upon consent of all beneficiaries and the settlor.

Trusts for Pets and Non-Charitable Purposes

Purpose trusts, which were invalid and unenforceable under prior law, are now specifically authorized in the Code, allowing Massachusetts settlors to create a trust that has no specific beneficiaries, but exists solely to further one or more legal, non-charitable purposes of the settlor. Such a trust could be used to provide for the maintenance of a settlor’s prized collection of antiques, for example, or for the maintenance of a vacation property to benefit future generations. Pet care trusts are also authorized, allowing for trusts for the care of one or more animals.

For questions about how the Massachusetts Uniform Trust Code affects you, or any other Trusts and Estates matter, contact our Andover, Massachusetts Estate Planning Attorneys at the Law Office of Debra Rahmin Silberstein on (978) 474-4700.

Welcome!

Posted on: June 20th, 2012 by Debra Rahmin Silberstein

Welcome to the newly redesigned website. In general, we wanted to make the site a lot easier to find what you’re looking for. We hope you’ll tour around and let us know how you think we can further improve the site.