Why Avoid Probate?

Kristen R. Testaverde, Esq., krtestaverde@gmail.com

People often approach me with estate planning questions because they have been told by others that they need to “avoid probate.”  Then, they ask me “what is probate?”  In its most simplistic terms, probate is the court process for administering estates.    

Assets subject to probate are those titled in the deceased’s  name alone.  Bank accounts are a great example.  An individual bank account is passed via probate, whereas ownership of a joint bank account goes directly to the survivor, without court intervention.   Similarly, a life insurance policy or retirement fund without named beneficiaries will pass through the probate estate, but a proper beneficiary designations will allow these funds to pass directly to the beneficiaries. 

So what exactly are the reasons for avoiding probate if the assets are distributed to the beneficiaries one way or another?  Here are a few of the most common reasons:

1.  Publicity – documents filed with the probate court are public record.  Avoiding probate can enhance confidentiality. 

2.  Delays – avoiding probate can avoid the gap between when the individual dies and when the heirs/beneficiaries receive the property. 

3.  Costs - planning ahead can prevent future costs of administration, including filing fees.                                                                                                                                                                       

4.  Retaining Flexibility – assets placed in a trust, for example, may be more easily managed and dispersed than under a will, and definitely more so than an intestate estate.  In addition, trusts can be changed more easily than a will, which has more formalities to amend. 

5.  Isolation from a will contest- non-probate transfers tend to be more resilient than wills, though they can be attacked on the same grounds. 

Note that avoiding probate will not help avoid estate taxes.  These are two separate issues to address at a person’s passing. 

Considering planning your estate?  Are you the executor/executrix of an estate that requires administration?  Contact me  to set up an appointment.

New Massachusetts Laws will Change Property Distribution for Individuals without Wills

Kristen R. Testaverde, Esq., krtestaverde@gmail.com

In 2012, Massachusetts will be adopting its version of the Uniform Probate Code in regard to the administration of estates.  Included in this change will be a change to the intestate statute.   A person is considered ”intestate” when he/she passes on without a will.  That person’s property is distributed in accordance with state law.  When the new laws are adopted, the method of passing property to heirs under present law will change. 

Some background:  Traditionally, property is passed “per stirpes,” which is most clearly explained with an example.  Parent, a widow, dies without a will and:

1.  She has three children, A, B, and C, all living.  Each child takes a 1/3 share in her estate. 

2.  In a second scenario, A predeceased, or died before parent, leaving grandchild 1 and 2.  Grandchild 1 and 2 would divide Child’s 1/3 share or 1/6 each.   

3.  In a final example, A and B predecease Parent.  A had two children, grandchild 1 and grandchild 2.  B had three children, grandchild 3, 4, and 5.  Grandchild 1 and 2 split A’s s 1/3 share (1/6 each), and 3-5 split B’s 1/3 share (or 1/9 each), leaving them with a lesser share each than their cousins. 

Present Massachusetts Law:  Massachusetts currently uses a statute referred to as “modified per stirpes.”  This modified the bootstrapping idea of above of bringing each grandchild into his or her parent’s share when all heirs are of the same generation.  Thus, if (and only if) Parent, from our example above, died with only grandchildren, each grandchild would receive an equal share.  This is referred to in legalese as “per capita.”   

Future Massachusetts Law:  Upon adoption of the MPC (Massachusetts Probate Code), distributions will be made “per capita” at each generation.  Thus, in example 3 above, C, still living, would receive his 1/3 share.  The five grandchildren would share the remaining 2/3 equally, rather than splitting the shares of their respective parents.  “Equally near is equally dear,” as stated by one of my favorite professors. 

While the information above is confusing, the purpose of this article is to show that laws are changing.  Impressions you may have had about how property would pass without a will may not be what will actually take place.

The Solution:  Make sure you plan your estate!  Having a properly executed will can ensure your property passes as you wish and can save complications for your loved ones in an already difficult time.  If you have a will, revisit it every so often to make sure it reads as you wish. 

Ready to plan your estate?  Contact me! 

Questions or Comments?  Leave a post!

Duties of a Guardian or Conservator

Kristen R. Testaverde, Esq. 

krtestaverde@gmail.com

When an individual appears to be unable to handle his/her affairs, loved ones may consider a guardianship or conservatorship when the individual has not previously executed a Power of Attorney  and/or Health Care Proxy. 

A guardianship is a legal relationship, established by the probate court, between an incapacitated person and the petitioning party.  For example, a daughter may pursue a guardianship over her elderly mother when it appears she can no longer care for herself and make necessary medical decisions.  In some situations, a Guardianship with Rogers Authority is necessary to include the administration of antipsychotic medications. 

The process involves receiving court appointment, filing reports (one after 60 days outlining the guardian’s plan for care and subsequently annual reports outlining the care of the incapacitated person), and caring for the incapacitated person.  Care involves making health care decisions and living arrangements.  The desires of the incapacitated person should be considered to the extent possible, and the court can limit or expand a guardian’s powers. 

A conservator is a guardian of the property.  A conservatorship may be pursued when an individual can no longer handle his/her finances, or is incapacitated and unable to make financial decisions.  For example, an elderly man becomes incapacitated with a bank account in his name individually.  His daughter seeks to use his funds for his care, but she is unable to access the account.  Without a power of attorney, she will need court approval to access those funds.   

Conservators must also petition the court, file annual accounts, pay the bills of the incapacitated person, and act on behalf of the incapacitated person’s financial interest.    

The process of receiving court appointment and filing reports is an intricate court process.  It can also be emotionally difficult and draining.  If you feel you are in need of a guardianship or conservatorship for a loved one, please contact me.  I am here to help!

If you are not currently facing a situation involving incapacity, consider executing a Power of Attorney and Health Care Proxy to prevent against the future need for a Guardianship or Conservatorship proceedings.  Contact me to set up an appointment.

5 Estate Planning Resolutions

Kristen R. Testaverde, Esq.  krtestaverde@gmail.com

The New Year is a great time to evaluate your estate plan.  Take a look at these 5 Estate Planning Resolutions as goals for the upcoming year. 

1. Consider your estate.  Everyone needs an estate plan.  Take some time to consider what you would want from your estate plan.  Make a list of your assets and liabilities.  Married?  Discuss with your spouse what would happen if something happened to one of you.  Have minor children?  Consider who would be their guardian in the event you were unable to care for them. 

  
2. Get a Will and Other Estate Planning Documents.   Your will is where you will determine how your assets are distributed after death.  It also appoints your personal representative to carry out the tasks of your will.  The will is also the place to appoint guardians for minor children.   Already have a will?  Review it to make sure it reads the way you desire. 

In addition to your will, consider a health care proxy  and power of attorney.  These documents are extremely important in the event you become incapacitated.  Executing these documents now can ensure that the person you would want to make medical and financial decisions is there in your place.  Further, these documents can save thousands of dollars by avoiding the court process to appoint a guardian or conservator.   

3. Consider a Trust.  Consider a trust as part of your estate plan.  Trusts are not just for the very wealthy.  A trust is a method of managing property both during one’s lifetime and after death.  Trusts can also help to avoid the probate process and place assets in the hands of beneficiaries much more quickly, saving time and money.  Have a child with special needs?  Consider a supplemental needs trust to ensure his or her needs are met without jeopardizing your child’s eligibility for government benefits.

    
4. Review beneficiary designations.  Have life insurance?  A retirement plan?  Take a moment to review the beneficiary designations.  This can be easily done by visiting your human resources department.  Make sure these designations appoint the beneficiaries you would like.  A few tips:  Do not appoint yourself.  When you pass on, these items pass to your probate estate and are subject to the probate process, rather than directly to beneficiaries.  Also, do not name one person with the expectation this person will distribute the funds to others, such as one child for the others.  You could cause the named beneficiary tax consequences and/or subject the funds to that person’s creditors. 

5. Secure your documents.  Store the documents in a safe place.  This place should be secure, fireproof, but also accessible to the individuals you would like to have access to it.  For example, a fireproof safe in your home is ideal.  A safe deposit box however, if in your name alone, would require access by your personal representative, appointed in the document locked in the box. 

Ready to begin this process?  See my About & Contact page to contact me!  Questions or Comments?  Leave a post!

Marriage, Divorce, and the MUPC

Kristen R. Testaverde, Esq.  krtestaverde@gmail.com

With the adoption of the Massachusetts Uniform Probate Code (“MUPC”) looming in the new year, several rules of construction will change in regards to how marriage and divorce impact estate plans.  Awareness of these changes can help to ensure that your estate plan is executed in accordance with your wishes. 

Premarital Wills

Present Law:  Under current Massachusetts law, marriage revokes a will in its entirety unless the will was made in contemplation of marriage.

MUPC:  Marriage no longer revokes a will.  It may or may not revoke or diminish certain dispositions under a will, as a spouse is entitled to an elective share when he/she is not provided for under the will. 

Divorce

Present Law:  Divorce or annulment revokes fiduciary appointments, gifts, and powers of appointment under the will.  This also extends to relatives of the divorced spouse.

MUPC:  Divorce or annulment revokes any revocable disposition to the spouse or the spouse’s relatives.  This applies not only to wills and fiduciary appointments, but to other dispositions that are often part of an estate plan, referred to broadly under the new law as “governing instruments” that are revocable.  This can include a trust, deed, or other important document disposition under this broad definition (how this will play out remains to be seen!).  Where real estate was held as joint tenants, the joint tenancy is converted to a tenancy in common. 

Additional Definitions:

Under the MUPC, “divorced” includes not only divorce, but annulment, and certain individuals who believe they are divorced but remain technically married, such as those who obtain a divorce or annulment that is not recognized as valid in Massachusetts or a person who remarries after an invalid divorce. 

In addition, relatives are those related only by blood.  For example, nieces and nephews are only those children of one’s own siblings, not those related by blood to the spouse.

The MUPC is designed to make estate administration simpler and to more accurately adhere to the desires of most individuals.  Regardless, everyone should have a will, power of attorney, health care proxy, and accurate beneficiary designations for their financial interests, such as life insurance and retirement plans.

Questions or comments?  Ready to plan your estate?  Leave a post or contact me directly at krtestaverde@gmail.com

Limited Liability Companies

Kristen R. Testaverde, Esq.  krtestaverde@gmail.com

A large part of planning your estate includes protecting your assets from creditors, nursing homes, and long-term health care needs.  Own a business?  A Limited Liability Company (“LLC”) is a way to protect yourself from being personally liable for any debts, obligations, or lawsuits facing the business. 

Benefits:  In addition to protecting your personal assets, LLCs allow for flexibility.  While not required in Massachusetts, it is highly recommended that owners execute an operating agreement.  There is no standard form and the structure can be based on the desires of the owner(s).  Furthermore, LLCs are separate legal entities.  If an owner dies, the business can continue.  Also, there are tax benefits, as owners of a LLC are given more options as to how the entity can be taxed.  For example a single-owner business can be taxed as a sole proprietorship without the additional personal liability that comes therewith, or as a corporation.  With partnership, pass through tax benefits can be obtained, or again corporate tax filings can be used. 

Formation:  LLCs are formed in Massachusetts by filing a Certificate of Organization with the Secretary of the Commonwealth.  The filing fee is $500.  The LLC must file an annual report with the Commonwealth for an additional $500.  Owners should negotiate an operating agreement, obtain any required local licenses or certifications, and get a tax ID number. 

Questions or Comments?  Ready to create a LLC for your business?  Contact me!     

Disclaimer:  note that this is a general overview intended to inform but not as legal advice.  Always speak with a qualified attorney before making changes to your specific estate plan or business

The Estate Account

Kristen R. Testaverde, Esq.  krtestaverde@gmail.com

The probate process in Massachusetts lasts at least one year as, under Massachusetts Law, creditors have one year to make claims against the estate.  Failure to keep funds within the estate could leave a personal representative personally liable on the debts.  Thus, when a personal representative is appointed, he or she should keep accurate track of the funds through the one year time span. 

How it works:  When a person passes on, the administration process begins.  If there is a will, the will is submitted for probate and the personal representative named in the will seeks appointment.  If a will does not exist, an administration takes place to distribute the property in accordance with the intestate statute. 

Notice will be given to the heirs at law and beneficiaries that the personal representative seeks appointment and such persons will have the opportunity to object.  Once appointed, the personal representative is charged with the duty of safeguarding the assets of the estate.  One method of doing so is to create an estate bank account in the name of the personal representative in that capacity.  In order to do so, a tax ID number is required.  A tax id number can be retrieved online via the IRS website or by submitting an SS-4 form.  Funds are placed in the account and can be used to pay bills of the estate.

Accurate bookkeeping is key.  The probate court will require an accounting of assets in and out of the estate.  Thus, the personal representative should keep track of all incoming and outgoing funds.  If a personal representative keeps accurate and precise records, the accounting is a much simpler task for the estate attorney, who will not be required to spend extra time searching for an unknown deposit or withdrawal from the estate account.  My suggestion:  keep a running list of income and expenses.  Any time a bill is paid, write down the date, the amount, and the check number.  

Saving time for the attorney is saving money for the estate.  Keeping accurate records of all transactions is an easy way, if you keep up with it, to save time and money when the estate is wrapping up. 

Questions?  Comments?  Leave a post or visit my About & Contact page!

Thanks for reading!

A “Reading of the Will”

Kristen R. Testaverde, Esq.  krtestaverde@gmail.com

I recently attended a continuing legal education course regarding the administration of estates.  At one point, the issue was addressed that heirs and beneficiaries often ask when there will be a “reading of the will.”  A few lawyers in the crowd chuckled, as dramatic scenes from movies and television shows flooded our minds (my favorites were the sitcom episodes where a rich relative left a video will). 

In any event, the media does often shape our outlook on a variety of areas, particularly those with which we are not entirely familiar, such as the legal process.  The truth is, there is no legal requirement, nor real necessity, to have a so-called “reading of the will.”  In the past, this was done to obtain the assent of the heirs to the will.  Today, this process is rather impractical as heirs can be scattered across the globe.  In addition, all requirements can typically be met by mailings.  Further, most wills contain a self-proving affidavit.  A self-proving affidavit is a statement at the end of the will which attests to the validity thereof (that the testator/testatrix and witnesses properly signed before a notary public).   

The attorney for the estate will still be required to provide notice to the beneficiaries and heirs.  Typically, this is done by mailing a notice of probate of the will to all necessary parties (this includes not only those listed in the will, but any heirs at law and next of kin).  In addition, a copy of the will is provided to the beneficiaries and personal representative.  Once the will is submitted to probate, it becomes public record and can be viewed by anyone. 

Upon notice, heirs and beneficiaries are given the ability to object to the will if they wish to do so.  

In short, a “reading of the will” very rarely, if ever occurs, as almost all requirements of notice can be met by mail.

Questions?  Comments?  What was your favorite “reading of the will” scene?  Leave a post here or visit my About & Contact page!

Caregiving for Minor Children – Another Alternative

Kristen R. Testaverde, Esq.  krtestaverde@gmail.com

As I wrote earlier this week, under Massachusetts General Laws Chapter 201F, a parent (or legal guardian) may authorize a non-parent with whom a minor child is living to make medical and educational decisions for that child, rather than a formal guardianship.  The parent may do so by executing a Massachusetts Caregiver Authorization Affidavit.  The form gives authority through a specified date, up to two years.   

An additional alternative to the formal guardianship is a Delegation of Temporary Agent.  Limited to 60 days, a parent or guardian may delegate any power regarding the care, custody or property of the minor child, excluding the power to consent to marriage or adoption, to a temporary agent.  The delegation cannot be made if another party has custody of the child.  In addition, a temporary agent be cannot appointed if the child has another parent whose whereabouts are known and who is both willing and able to provide care and custody for the minor child.  Said nonappointing parent however, may consent to the appointment of the temporary agent in writing. 

Much like the Caregiver Authorization Affidavit, the authority can be revoked or amended.  Interested parties should receive copies.  While no formal sample exists, the authorization must be made before two witnesses and accepted by the temporary agent.   A Delegation of Temporary Agent may also be made for an adult incapacitated person. 

As with the Massachusetts Caregiver Authorization Affidavit, all parties should understand the agreement into which they are entering.   

Questions or Comments?  Leave a post or contact me directly via the About & Contact page.

Massachusetts Caregiver Authorization Affidavit

Kristen R. Testaverde, Esq.    krtestaverde@gmail.com

Under prior Massachusetts law, when a minor child resided with a non-parent, a formal guardianship would be required to give the non-parent the authority to make medical and educational decisions for the child.  In order to become a guardian of a minor child, a court order is required.  This process can be expensive and time-consuming.  In the meantime, actions required to benefit the minor child may have been stalled, or emergency proceedings may have been required to take place in the probate court.  A court order is also required to terminate the guardianship.  In addition, a formal guardianship replaces the rights of the parents and places rights in the hands of the guardian. 

Presently, under Massachusetts General Laws Chapter 201F, a Massachusetts Caregiver Authorization Affidavit may be completed.  This form allows for a parent (or legal guardian) to give a non-parent with whom the child is living the permission to make educational and medical decisions on behalf of the child.  The form is valid for up to two years and the authority may be terminated by a letter to the caregiver, signed and dated, revoking the permission to make decisions. 

The form does not give custody to the non-parent, but rather provides for an easier way for those caregivers to interact with health care professionals, such as doctors and dentists, and with schools.  The form provides a section where the parent may specifically list actions, if any, which the caregiver is not permitted to perform.  The parent also maintains the rights to make medical and educational decisions for the child.  Should a disagreement between the parent and non-parent occur, the parent’s decision is considered final.   

Copies of the form should be given to the child’s health care providers and to his/her school.  The original should be kept in a safe place.  It is also advisable to keep a list of whom has received copies, so that any changes in information can be provided to those parties. 

The form itself, available here:  http://www.mass.gov/courts/courtsandjudges/courts/probateandfamilycourt/documents/caregiverauthorizationaffidavitform.pdf, is to be filed out on the front page by the parent, signed before two witnesses (not including the caregiver) and a notary public.  The caregiver fills out the “Caregiver Acknowledgment” section. 

This form is a practical way to allow a caregiver to make decisions for the child without extensive court proceedings.  No court action is required to use this form.  The form should be read carefully and all parties should understand its contents and use. 

Questions or Comments?  Leave a post or contact me via the About & Contact page!