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Boston Elder Law Blog

Facing mortality is necessary to protect your assets for heirs

Like most people around the country, Massachusetts residents do not want to contemplate their own mortality. This often stops them from protecting their assets so that their chosen heirs ultimately inherit them. Without some estate planning, those assets could unintentionally end up with some family members while other loved ones, friends and charities receive nothing.

Furthermore, without some planning, an estate can be significantly diminished by taxes and other financial obligations that could exist when an individual passes away. In addition, surviving loved ones will be left to deal with everything without any instructions or preparations. Under these circumstances, the probate process can quickly become time consuming, frustrating and expensive.

Too few engage in long-term health care planning

Based on the information gathered by the U.S. Administration on Aging, approximately 70 percent of the country's population that is already or will be turning 65 could need assistance with day-to-day activities as they age. In contrast, only around 40 percent of the people polled believe that they will need long-term care, and at least some of them could be here in Massachusetts. Therefore, too few people are engaging in long-term health care planning.

One source estimates that the cost of one year of long-term care ranges between $17,680 (adult day care) and $92,000 (nursing home private room). Many Americans are confident that they will be able to afford long-term care based on arrangements they have already made. Even so, one woman who purchased a long-term care insurance policy in the 1990's now realizes that the benefits will be woefully inadequate.

Dealing with debts during the probate process

In 2013, it was reported that the median amount of debt held by people over the age of 60 in the United States -- including many here in Massachusetts -- is approximately $40,900. It is possible that amount has risen in the last three years, which means that an individual's assets could end up being used to pay off debts during the probate process. Therefore, any assets intended to go to heirs could be significantly diminished before any distributions are made.

Many people fear that they will be held responsible for the debts of their loved ones after they pass away. However, in most cases, surviving family members are not responsible. Even so, creditors and collection agencies may attempt to convince people that they are liable for the debts.

Protecting your assets from estate taxes

The estates of most people will not reach the threshold for the federal estate tax exemption, which is currently $5.45 million for an individual and $10.9 million for married couples. However, here in Massachusetts, the state estate tax exemption is well under that amount at $1 million. Fortunately, your estate plan can help protect your assets.

Under Massachusetts law, if your estate goes even one dollar over the exemption amount, the entire estate becomes taxable. The tax rates vary between 15 and 25 percent. However, the transfer of assets under your estate plan also need to be accomplished in a way to help eliminate -- or at least minimize -- any tax ramifications.

Having a will and a revocable trust is not enough

Massachusetts residents who engage in estate planning often feel that their job is done once they sign on the dotted line. However, having a will and/or a revocable trust is not enough to ensure that the assets will end up with the proper heir or beneficiary. The property needs to be properly titled and beneficiary designations on other accounts need to be in line with the rest of the estate plan.

Retirement accounts, such as 401(k)s and IRAs, require that a beneficiary be designated when they are opened. Regardless of what a will or trust might say, those accounts will be distributed to the person designated. Other accounts, such as bank accounts, could have payable on death (POD) or transfer on death (TOD) designations. Therefore, they need to be reviewed periodically or whenever a change is made to the remainder of the estate plan to ensure that the funds are still going to the intended person.

Estate planning is essential to asset protection

Even if many Massachusetts residents have estate plans, that does not mean that all of their assets will pass to loved ones in accordance with their wishes. Even so, having an estate plan is better than not having one at all, since estate planning is essential to asset protection. Some people might be surprised to know that state law can dictate where some or all of a person's assets will go after death -- even if an estate plan is in place.

Not having an estate plan at all means that assets will pass in accordance with Massachusetts' laws of intestacy. Laws also dictate that some assets, such as life insurance policies and retirement accounts, pass to beneficiaries in accordance with designations on file for the accounts, regardless of what the account holders' wills and/or trusts might say. Therefore, it is imperative not only to have an estate plan in place but also to review it occasionally to ensure that it still reflects current wishes.

Before executing powers of attorney, consider this

Now that people are living longer thanks to medical advancements, more Massachusetts residents should consider what would happen when they are no longer able to carry out daily activities without assistance. Most people consider powers of attorney for a time when they are completely unable to care for themselves or make decisions on their own. However, most people who are ultimately considered to be incapacitated experienced a decline in mental function that did not happen overnight.

Therefore, it might be a good idea to consider providing a trusted agent with the ability to perform certain functions on an individual's behalf when it becomes necessary. This would allow the individual to continue to handle certain aspects of his or her finances while obtaining assistance where needed. For example, it might become difficult to write due to debilitating arthritis or a stroke. The individual would maintain control over the decision-making process, but he or she would have help in carrying out those decisions.

Don't forget about digital assets when creating an estate plan

Many Massachusetts residents have a significant online life. When estate planning, those digital assets need to be taken into consideration just like any other assets. Failing to ensure that family members, or at least the executor of the estate, have access to online assets could be disastrous since current law has yet to catch up to technology and obtaining access to certain accounts (financial or social) can be problematic. 

There are a number of services with which a person's digital information can be stored online. This would allow a designated person -- or persons if desired -- access to all of the necessary information. Otherwise, tracking down digital assets could be just as problematic as gaining access without a username and password. Some will even help with estate planning documents, but they cannot account for every individual's needs.

No will? The fate of Prince's assets could take years to resolve

By now, nearly everyone across the globe has heard about the passing of music legend Prince. Considering how protective the artist was when it came to his music, it might surprise Massachusetts readers that it appears that he had no will. It could take years before the fate of his assets is decided.

His sister has already petitioned the court to appoint an administrator to handle his estate. In it, she reveals that the music legend had six full or half siblings (that number includes her). Whoever ends up with the rights to his music will have the freedom to do what he, she or they want to with it despite how Prince protected it during his life.

Estate planning for a second marriage focuses on asset protection

Finding love for the second time can be exciting, but it can also create an estate planning challenge -- especially if there are children from a prior marriage involved. When a Massachusetts resident is getting married for the second time, asset protection becomes a focal point. Many people want to provide for their new spouses in the event of their deaths, but they also want to ensure that their existing children are not denied their inheritances.

By law, surviving spouses are entitled to a certain percentage of a decedent's estate in the absence of a will and other estate planning documents to the contrary. In this eventuality, the children from a prior marriage might not receive what the deceased spouse would have wanted. Therefore, it is essential that estate planning documents be updated to recognize the new spouse and protect children.

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