Make Reviewing Your Estate Plan One of Your New Year's Resolutions
December 1, 2021

Estate planning is all about five essential documents.

The beginning of a new year is a good time to take a look at your estate plan to make sure it is up to date. Less than half of people actually have any estate planning documents in place and many of those people may have outdated documents. Documents that were created when your children were born may need updating 20, 30, or 40 years later, after your family and financial situation have changed entirely.


Estate planning is all about five essential documents. Here they are in order of importance:


1. The Durable Power of Attorney

The most important estate planning instrument for taking care of you and your family during life, as opposed to after death, is the durable power of attorney. This appoints one or more people you trust to step in and handle your finances and legal matters in the event of your incapacity, whether through illness, dementia, or an accident, and whether the incapacity is temporary or permanent. In the absence of a durable power of attorney, family members often must resort to going to court to be appointed conservator. This causes delay and expensive and unnecessary legal fees. It can also cause infighting by family members since you have not chosen who should step in.


While the concept of the durable power of attorney is simple – I appoint you as my agent for financial and legal matters in the event of incapacity – the devil, as always, is in the details. You have to make decisions about how many agents to appoint, whether to have alternates, whether to allow gifting, when the power of attorney should take effect, and whether to grant trust powers. Your attorney can help you with these details.


2. Health Care Proxy

Like the durable power of attorney, a health care agent steps in for you to make health care decisions when and if you become incapacitated. Unlike a durable power of attorney, it only takes effect when a doctor determines that you are unable to make decisions yourself and you can only appoint one individual to serve at a time. This is so that there will be a single point-person in dealing with medical professionals and no possibility of disagreement or stalemate between co-health care agents. You can and should name one or more alternates to the principal agent.


The main problem with health care proxies is that agents often have no idea or only a vague idea of what decision the patient would make in a particular circumstance. This can be addressed in one or more of these ways: a medical directive, a conversation between the potential patient and the agent, and a number of available workbooks (see below). A general medical directive can be included with the health care proxy that says either (1) pull the plug if I’m in a vegetative state or irreversible coma, (2) balance the potential benefit and discomfort of any proposed treatment, or (3) do whatever you can to keep me alive.


Part of the problem with giving guidance to one’s agent is that it’s hard to predict situations that may occur and treatments that may be available. A number of organizations have developed workbooks to provide more detailed guidance than simply “keep me alive at all costs” or “do nothing.” They include: The Consumer’s Toolkit from the American Bar Association and Five Wishes from Aging with Dignity.


3. HIPAA Release

In addition to a health care proxy, everyone needs a HIPAA release. The HIPAA law bars medical practitioners from releasing medical information to anyone, even to the spouse of a patient, without a release. You may well ask why a heath care proxy isn’t sufficient. There are a few answers: First, the health care proxy is “springing” in that it doesn’t get activated until or unless the patient is declared incapacitated. Second, while the health care proxy may only name one person at a time, you may well want a much broader group of people to communicate with medical providers. The agent may not always be available or may not be the first person on the scene.


All too often we have seen medical providers hide behind HIPAA to avoid having to deal with family members, sometimes to great harm to the patient. Especially in emergency situations, family members often have vital information about the patient, whether it’s the medications he is taking, allergies he may have, or his usual physical and mental health. HIPAA does not say that medical personnel cannot listen to this information, but it can be misconstrued in that fashion. It’s best to eliminate the whole issue by having a HIPAA release signed and available in case it’s ever needed.


4. Your Will

Your will says who will get your stuff when you die and who will be in charge of paying your bills, filing your tax returns, gathering your stuff and distributing it according to your instructions.


But here’s the irony: although the will gets all the recognition and there’s a whole set of laws governing the so-called “probate” process, these days most assets pass outside of probate. What the will says does not apply in many situations, including: joint accounts that pass to the other joint owners, retirement plans and life insurance policies that go to designated beneficiaries, and property in trust that passes to the beneficiaries named in the trust document. Only what you own in your own name alone passes under the will. In addition, while the will requires a lot of formality – two witnesses and a notary all signing at the same time – these other forms of passing on property usually require only the signature of the owner, or sometimes simply filling out a form online. 


That said, wills are important in terms of distributing your tangible personal property – stuff you can touch, such as furniture, jewelry, tools, clothing, boats, and cars. Your will appoints your executor or personal representative who is in charge of carrying out your wishes. This can be very important in avoiding squabbling among children. And your will can be used to appoint guardians for minor children. A will permits you to make charitable or other specific bequests. Finally your will can serve as a failsafe in case other means of passing on property fail.


5. Revocable Trust

The documents listed above may be enough, but you may also want a revocable trust, sometimes called a "living" trust. A trust is a construct under which one or more people, the trustees, manage property or investments for the benefit of one or more people, the beneficiaries. In a revocable trust, typically at the start the same person acts as the creator of the trust, the grantor or donor, as trustee and as beneficiary. Not much changes in their lives after they set up the trust. But it avoids probate by naming successor beneficiaries after the initial beneficiary passes away. While probate is not the worst thing that can happen to people, avoiding it can save heirs time and trouble.


But more importantly, a trust is a terrific tool for intervening in the event of incapacity. Financial institutions that are resistant to accepting durable powers of attorney appear to be more comfortable with trusts when a successor trustee is named. But it works even better when a parent names one or more adult children as co-trustees. The parent then does not give up any rights or autonomy, but permits the child to begin participating in financial management. Even if the child does nothing, he or she can view accounts and step in immediately if a problem arises. This can be especially important in the event of dementia or scams. Seniors are the primary victims of scams and having a trusted family member with access to accounts can help identify scams and permit intervention to limit their effect.


In addition to probate avoidance and incapacity protection, trusts are infinitely flexible in terms of how they are drafted. They can state any number of specifics on who receives property when, for instance, permitting its distribution over time to children and grandchildren. The options and opportunities for creativity are limitless

As you can see, most of these documents are about life not death. Of course, they’re still about planning for an unwanted event – incapacity of some sort. It’s like insurance to make sure that you and your family are taken care of if an unfortunate accident occurs.

Contact us in Belmont, Massachusetts, at (617) 489-5919 for comprehensive estate planning from attorneys with experience.

Is Downsizing the Right Choice for You?

By Dale Tamburro • October 2, 2024
Common Reasons to Downsize Your Home? Knowing it is time to downsize your home is a very personal subject! With the size of the average home in the U.S. bigger than ever, many owners are finding themselves in living spaces that are more expansive than they want or need. Whatever the reason for buying a bigger home, if you are now thinking of going smaller, you are not alone. As life goes on and your needs change, finding a less demanding home can be ideal. When you're considering downsizing to a smaller home, a condominium, over 55 community or an assisted living community, the questions below will help make the decision easier. Does downsizing your home make sense right now? Downsizing is a question only you can answer. 1. Have the kids moved out of the house? One of the top reasons why so many people go big with their house purchases is to fit a growing family. But when the kids go away to school or move out of the house to start their lives, it can leave many bedrooms sitting available – rooms that have to be cleaned, spaces that wind up being heated and cooled with no one in it. If you no longer need a four or five-bedroom home, it may be prudent to downsize to something smaller and cheaper. In fact, you may find that a significant amount of money is going out the door to pay for your kid’s college degree and the home has become a financial burden. Money is often a motivating factor for knowing it is time to downsize your house. 2. Do you want to keep costs down? Expenses are a major reason people downsize their homes. Big houses are expensive to maintain, to insure and costs more in property taxes. Big houses also lead to higher utility bills. With a smaller home, you will save money on your monthly and yearly costs. If you are close to retirement or you are already retired, these savings can make your retirement funds go much, much further. If your house repairs are being done with short term rather than long term goals it might be time to move on. 3. Are you worn out from taking care of your property? Large houses require a lot of upkeep, as do big yards. Keeping a big home clean and in good working order is a lot of work. Mowing an expansive lawn takes a lot of time, and cutting the grass only gets harder as you get up there in years. Raking up the leaves in the fall is tedious even when you are young and fit. Keeping up with the leaves when you 5/8 are older is tiresome. You may pay for landscaping and cleaning services to take care of all these things, or you may just be resolved to working for hours each week on keeping up your property. Either way, you may be wondering if there is an easier option. A small home takes less effort to keep up, and a townhouse or condo is even less work because the exterior work is handled by the management company. You should get a complete understanding of which housing choice makes the most sense a home or a condo. Have to look at the advantages as well as disadvantages of homes vs. condominiums. If you travel a lot of just don’t have the time necessary to keep up with a home, a condo may be the best move. If on the other hand, you can’t stand the thought of losing control what goes on around you, a home may be the wisest choice. When downsizing these are subjects that should be thought through thoroughly. 4. Do you need to be in a different area? Your life is changing all the time, which means your priorities and the demands of your day will change too. Sometimes downsizing is necessary to accomplish a primary goal. You may have grandchildren you want to be close to, or another family member or loved one that you either want or need to be nearby. You may have obligations to a group or organization that are hard to meet in your current location. Or you might want to be closer to things you know you are going to need in the future, like healthcare. Selling your current home and moving into something smaller is usually the best way to get close to the things that are important to you. Your willingness to go with a smaller property gives you options. 5. Is the design of your home no longer conducive to your present needs? One of biggest problems as you age can be mobility. If your home is designed for multiple floor living It may be time to move, even if the monetary change is marginal, having the one floor living, or elevators can be critical. 6. Do you have a lot of equity in your home? If your house is paid off, or if you have a considerable amount of equity in your property, you may be able to sell your home, buy a smaller house in a cheaper area, and still have a sizable amount of cash left over. Depending on where your home is located, the market and how much the home as appreciated in value, you may find that your house is now worth far more than you imagined. You can find a smaller, less expensive home and add a lot to your retirement – or use the money for whatever you need it for. Let’s face it not having the burden of a mortgage feels good as well! Do, however, make sure you are up to speed on capital gains tax laws for real estate. This is one of the best home ownership perks from a financial standpoint, given the fact you can exclude up to $250,000 in profit if single and $500,000 if married. As great as the tax code is, if you live in a large, expensive home with tons of equity, you could have a good size tax bill. 7. Do you want a change of scenery? A big, lovely home can start to feel like an anchor. Sure, the home is impressive, but even the most impressive home can start to drag you down if you are ready to move on to a different area. You may want to live next to the ocean, or in the mountains, in a city or out of one. Many times, people want something different, which is perfectly OK. Maybe hot desert air is calling to you, or you want to relax in a small, quiet town. Whatever location you are looking at, chances are if you sell your big home you will have the ability to settle there in a small, modest home. When folks get older in life, they may also find that instead of having one big home they would rather have two smaller properties. Sometimes people don’t want to leave the roots of their hometown, so they will and buy a smaller property in the same location. They will, however, also buy a second smaller place in an area they have vacationed in and simply love. Maybe downsizing sounds appealing to you for this exact reason. If you believe it is time or will be in the near future to downsize what other considerations should be forefront on your mind? SELLING AND WHERE TO GO/DOWNSIZING Like any person Selling there is basic but crucial information required prior to Selling. · How much is your home REALLY worth? · Are there any liens on the property? · Are there title issues that you are not aware of? · What are the tax ramifications of Selling? · Is hiring an experienced realtor, attorney, accountant, and financial advisor advisable? · What are you going to do with years of personal property and who can help you? · Once you have identified these items you have a better idea how much money you will have, how long it might take to be ready to sell and then you move forward to: Where do I go? · Moving in with the kids? A smaller home? A condominium? Assisted Living? Are you going to Rent? · Should I take a mortgage out? · How should I own the property? In a Trust? What kind? · do you need a formal living room in your next home? · Look through your current home and look at everything you can get rid of! · Sell items you know you will not be taking with you. A garage or yard sale is one of the best exercises when moving to a smaller home. Buying a Smaller Home pros and cons Renting pros and cons Assisted Living Pros and Cons Buy a Life Estate in your Child’s Home Build an addition and make improvements to your child’s house. Set up Personal Care Contracts to Pay your children to help care for you.  Can you live with them?
Do Living Trusts Need To File Their Own Tax Returns

Do Living Trusts Need To File Their Own Tax Returns?

December 10, 2021
One of the many advantages of a living trust is its simplicity at tax time. Before 1981, a revocable living trust had to file its own tax return (Federal Form 1041) and apply for and use its own Taxpayer Identification Number (TIN). In 1981, however, the Internal Revenue Service issued new regulations that not only permit the creator (grantor) of a revocable living trust to use his or her own Social Security number and file Form 1040 only but also specifically encourage them to do so.
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