Woburn, MA Estate Planning and Elder Law

Hire the Right Attorney for Your Estate Plan

Most attorneys are specialists in their particular practice areas. For your estate planning, you should hire  an attorney who is a specialist in estate planning.

Human beings can only become truly knowledgeable in a limited number of areas. We cannot all be experts on everything. This is true even within disciplines.

For example, if you wanted to learn something about the history of 16th century Britain, you would be unlikely to learn very much by asking a historian who specializes in the Roman Empire. You would want to ask a historian who specializes in English history. Even better would be asking someone who   only studies 16th century Britain.

A similar need for specialization is even more obvious, when you think about your health.

If you need heart surgery, you would not seek the services of an ear, nose and throat specialist. You would not even want a neurosurgeon. You would want a cardiac surgeon.

The same thing is true with legal matters and estate planning, as the Norman Transcript points out in "The right attorney is needed for wills and estate planning."

Estate planning is a complicated and specialized legal field.

Only attorneys who have dedicated their lives to studying the field can be guaranteed to give you the services that you need. You might know someone who is excellent in criminal law or who excels at writing contracts. While he or she might even be willing to help you with your estate planning, you would be better off going to an estate planning expert.

Many avoidable mistakes are made when people do not seek out the services of attorneys who specialize in estate planning. Do not let those mistakes happen with your estate plan.

Reference: Norman Transcript (March 5, 2017) "The right attorney is needed for wills and estate planning."

If you  would like to discuss setting up your Estate Plan with an experienced attorney at Simmons & Schiavo, LLP, call (781) 397-1700 or visit our contact us webpage.

IRS Audits Target the Wealthy

In 2017 it is expected that the IRS will focus its auditing efforts on the wealthy, in order to get the most that they can out of their limited enforcement budget.

It used to be that the IRS was actually more likely to target middle class taxpayers for an audit than wealthy people. It is more difficult to audit the wealthy because they can afford to hire expert lawyers and accountants to fight the auditors.

However, years of cuts to the IRS budget have led to a change in tactics.

The IRS now prefers to target the wealthy for audits, so the agency gets the most bang for its buck. There is simply more money that the IRS can get by auditing the wealthy than by making sure middle class Americans have filed all of their taxes correctly.

This trend is expected to continue in 2017, according to Private Wealth in "This Year's Audits Are Bad News For The Rich."

The IRS is expected to go after common ways the wealthy often lower their tax bills and challenge them to prove that they have done everything correctly.

For example, a charitable deduction over a certain limit might trigger the IRS to send a letter demanding proof of the donation. Reporting that money was put into a 529 education savings plan over a certain amount, could also trigger an automatic letter as could a whole lot of other common practices.

It is important that wealthy people get together with their estate planning attorneys and accountants to make sure they have done everything correctly to lower their tax bills, if they want to avoid problems with the IRS.

Reference: Private Wealth (Feb. 28, 2017) "This Year's Audits Are Bad News For The Rich."

Simmons & Schiavo, LLP • (781)397-1700 • [email protected] • www.simmonsandschiavo.com

How to pass on your home tax-free

Giving your house to your child or children can have tax consequences, but there are ways to accomplish this tax-free. The best method to use will depend on your individual circumstances and needs.

Leave the house in your will

The simplest way to give your house to your children is to leave it to them in your will. In 2017, as long as the total amount of your estate is under $5.49 million it will not pay estate taxes. In addition, when your children inherit property it reduces the amount of capital gains taxes they will have to pay if they sell the property. Capital gains taxes are paid on the difference between the “basis” in property and its selling price. If children inherit property, the property’s tax basis is “stepped up,” which means the basis would be the value of the property at the time of death, not the original cost of the property.

There are some downsides to this approach. Some states have smaller estate tax exemptions than the federal exemption, meaning that leaving the property in your estate may cause it to owe state taxes. Also, if you were to need Medicaid at any time before you died, a lien might be put on the property and it might need to be sold after your death to repay Medicaid.

Gift the house

When you give anyone other than your spouse property valued at more than $14,000 ($28,000 per couple) in any one year, you must file a gift tax form. But as of 2017 you can gift a total of $5.49 million over your lifetime without incurring a gift tax. If your residence is worth less than $5.49 mil­lion and you give it to your children, you probably won’t have to pay any gift taxes, although you will still have to file a gift tax form.

The downside of gifting property is that it can have capital gains tax consequences for your children, and this tax could be steep if your chil­dren plan to sell the home. When property is gifted it does not receive a step-up in basis as it does when it is inherited. When you give away your property, the tax basis (the original cost) of the property for the giver becomes the tax basis for the recipient.

In addition, gifting a house to your children can have consequences if you apply for Medicaid within five years of the gift. Under federal law, if you transfer assets within five years before applying for Medicaid, you will be ineligible for Medicaid for a period of time (called a transfer penalty), depending on how much the assets were worth.

Sell the house

You can also sell your house to your children. If you sell the house for less than fair market value, the dif­ference in price between the full market value and the sale price will be considered a gift. As discussed above, you can use the $14,000 annual gift tax exclusion as well as the $5.49 million lifetime gift tax exemption on this gift. The same issues with gifts discussed above will apply.

Another option is to sell the house at full market value, but hold a note on the property. The note should be in writing and include interest. You can then use the annual $14,000 gift tax exclusion to gift your child $14,000 each year to help make the payments on the note. This can be tricky and you should consult with your attorney to make sure this won’t cause tax problems.

Put the house in a trust

Another method of transferring property is to put it into a trust. If you put it in an irrevocable trust that names your children as beneficiaries, it will no longer be a part of your estate when you die, so your estate will not pay any estate taxes on the transfer. The house will also not be subject to Med­icaid estate recovery.

The downside is that once the house is in the irrevocable trust, it cannot be taken out again. Al­though it can be sold, the proceeds must remain in the trust. Similar to making a gift, if you apply for Medicaid within five years of transferring the house, you may be subject to a Medicaid penalty period.

Figuring out the best way to pass property to your children will depend on your individual circumstanc­es. Talk to your attorney to decide what method will work best for your family.

If you would like to discuss setting up your Estate Plan with an experienced attorney at Simmons & Schiavo, LLP, call (781) 397-1700 or visit our contact us webpage.

You Need More Than Just a Will

Most Americans do not have wills. They should get one, but they should not stop their estate planning with just a will.

The estate planning news has recently been full of stories about a new survey that showed that 58% of American adults do not have wills. The survey found that it was even worse for parents of minor children. Some 64% of them do not have wills. They have more reasons than anyone else have a will.

This has resulted in many articles about how Americans need to get wills and why their excuses for not getting them are misguided. That is all true.

Americans do need to get wills and they do need to stop making the same excuses, as the AARP points out in "Haven't Done A Will Yet?"

However, estate planning should not stop with just a will.

A will is only one of the documents you can get by going to an experienced estate planning attorney. For example, you might learn that a trust is a better primary estate planning tool for you to use in your particular situation. Through an attorney, you can also get other important legal documents, including a health care power of attorney, a general durable power of attorney and a living will.

These and other legal documents will make sure that your financial affairs are managed properly, if you ever become unable to handle your own affairs.

Do get a will if you do not already have one. However, do not stop there. Make sure that you have a more thorough estate plan by consulting with a qualified estate planning attorney.

Reference: AARP (Feb. 24, 2017) "Haven't Done A Will Yet?"

If you would like to discuss setting up your Estate Plan with an experienced attorney at Simmons & Schiavo, LLP, call (781) 397-1700 or visit our contact us webpage.

Retirement accounts: Tips for taxpayers turning 70 ½

It’s a big year for the first set of baby boomers: They’re turning 70 1/2. And that means getting prepared for their first mandatory distributions from tax-sheltered retirement accounts.

The first thing to keep in mind is that the amount of your required annual withdrawal is based on the assets in the account as of the prior December 31. For a taxpayer with multiple 401(k) plans, he or she must take a proportional distribution from each of the accounts. If a taxpayer has multiple IRAs, the payouts can be uneven. That is, the entire amount can be taken out of one IRA, if the taxpayer chooses.

As far as timing, a taxpayer can choose to get periodic payments or take a lump sum, typically later in the year, to defer paying taxes on the withdrawal.

IRA withdrawals are usually in cash, but you can also take them as shares of stock or a piece of real estate. If an IRA owner doesn’t intend to spend the money that’s withdrawn, such in-kind withdrawal options avoid commissions on selling investments and buying them again outside of the IRA. However, this type of withdrawal takes more time and necessitates finding out whether any other fees will be charged.

Keep in mind that federal law allows IRA owners to donate up to $100,000 of IRA assets per year, counting toward the required minimum distribution. The donation must be made to a qualified charity.

Simmons & Schiavo, LLP • (781)397-1700 • [email protected] • www.simmonsandschiavo.com

Spare Your Family

There are many reasons why you should have an estate plan. One of them stands out above the others. Getting an estate plan will spare your family a lot of pain later.

One of the last things that most people would ever want to do is to cause pain for their loved ones. However, it is something that many people do inadvertently all the time.

The majority of American adults are in danger of doing it, simply because they do not have estate plans, as the Las Vegas Review-Journal explains in "Estate planning can save your family plenty of money and heartache later."

Not having an estate plan, means your family will ultimately have to deal with everything you leave behind, including what happens with your assets. They will have to sort out your belongings and decide where everything should go.

They will also have to pay for the probate process to make sure that it is all done legally.

When your family has to pay and make decisions about your estate because you did not, it can cause them considerable pain and money.

Spare your family that pain and get an estate plan.

Reference: Las Vegas Review-Journal (Feb. 27, 2017) "Estate planning can save your family plenty of money and heartache later."

If you would like to discuss setting up your Estate Plan with an experienced attorney at Simmons & Schiavo, LLP, call (781) 397-1700 or visit our contact us webpage.

Reverse Mortgages are Better Than They Used to Be

Reverse mortgages used to have a much deserved terrible reputation. Today, however, they are much better and have become a viable option for many people.

Many elderly people find themselves in need of money to meet unexpected expenses. Sometimes, they just did not anticipate how much they would need to live on in retirement.

While some are able to get a standard loan, that is not an option for many people. Why? It is because they cannot afford to make payments every month.

To solve this problem, reverse mortgages were created.

Elder law attorneys almost universally have derided reverse mortgages. They were seen as nothing more than ways to rip off the elderly.

However, the laws have changed and reverse mortgages are not as bad as they used to be, as Inforum points out in "Changes in reverse mortgages make them safer, less expensive."

A reverse mortgage allows an elderly person to use the equity they have built up in their home. The borrower can get money now as a line of credit, regular payments or even a lump sum. The money does not have to be paid back, until the borrower moves out of the house permanently, sells the house or passes away. The lender is paid back the money loaned plus interest by selling the house. If there is anything left after the lender is made whole, the remainder goes to the borrower or his heirs.

Legal protections make these loans better than they used to be, including provisions that borrowers must receive counseling by an approved provider before signing a reverse mortgage.

Nevertheless, the contracts are complex. It is, therefore, best to see an elder law attorney before signing a reverse mortgage.

Reference: Inforum (Feb. 27, 2017) "Changes in reverse mortgages make them safer, less expensive."

Simmons & Schiavo, LLP • (781)397-1700 • [email protected] • www.simmonsandschiavo.com

Be Careful With I Love You Wills

Every February married couples express their love for each other on Valentine's Day. In estate planning, however, saying "I love you" might not be the best approach to take for your spouse.

You have probably heard of the term "simple will." It normally refers to a will made by a married person that leaves his or her entire estate to the spouse. Both spouses often have these wills drawn up at the same time and have agreed that the surviving spouse will eventually leave everything to their children or some other agreed upon heirs.

Estate planning attorneys privately sometimes sarcastically call these "I love you wills."

The reason for the sarcasm is not cynicism about loving a spouse so much that you want to leave him or her everything. It is because a simple will might not be the best way to express your love for a spouse in an estate plan as Wealth Management explains in "A Better Way To Say 'I Love You'."

The problem is that simple wills have many potential difficulties that people have not thoroughly thought through. Because these are wills and not trusts, they will ordinarily have to go through probate. They can also have unintended tax and financial consequences for the surviving spouse. Finally, there is no way to prevent the survivor from later changing his or her mind and doing something different.

Instead of simple wills, estate planning attorneys often suggest lifetime beneficiary trusts. These trusts let the surviving spouse use any assets while alive, with any remaining assets later going to other beneficiaries.

If you have questions about wills and trusts and whether you should consider something other than a simple will, talk to an estate planning attorney.

Reference: Wealth Management (Feb. 14, 2017) "A Better Way To Say 'I Love You'."

If you would like to discuss setting up your Estate Plan with an experienced attorney at Simmons & Schiavo, LLP, call (781) 397-1700 or visit our contact us webpage.

Mistrial Declared in Age Discrimination Case

An important age discrimination case has been declared a mistrial, after the jury could not reach a decision. That leaves an important question for older job seekers unanswered.

Several years ago, an employee of the Equal Employment Opportunity Commission went out to eat at a Texas Roadhouse restaurant. The employee began asking questions of staff about the restaurants hiring practices. This led to an investigation from which the EEOC concluded that the chain restaurant company had a practice of not hiring older applicants to protect its image.

In 2011, the agency filed suit.

The case was unusual. No complaint had actually been made to the agency.

Normally, the EEOC does not bring lawsuits without receiving a complaint from a member of the public.

The case finally made its way to trial recently, but is now on hold because the jury failed to return with a verdict three times.

ProPublica reported on this case in "Federal Court May Decide If Employers Can Reject Older Job Seekers to Protect 'Image'."

This case is important for a couple of reasons.

The first is that older Americans often have a more difficult time finding employment than younger people. For this reason, the law protects them from some forms of discrimination, but it has never been decided if that includes protection from discrimination to protect a company's image. Another reason this is important, is that it is not known how President Trump’s administration will deal with age discrimination cases and whether it will be as aggressive as the Obama administration.

Elder law advocates will continue to monitor this case closely for clues about how the administration will handle age discrimination issues.

ProPublica (Jan. 31, 2017) "Federal Court May Decide If Employers Can Reject Older Job Seekers to Protect 'Image'."

Simmons & Schiavo, LLP • (781)397-1700 • [email protected] • www.simmonsandschiavo.com

 

Why Families Fight

Family battles over an estate are not uncommon. While there can be several different reasons for these fights, there are a few reasons that are the most common.

Most of the time, litigation over an estate pits family members against family members. If there is a large sum of money involved, people have many reasons to possibly fight over what they consider to be their fair share. Sometimes these family battles just happen because family members do not get along with each other.

On the other hand, there are some common reasons for these fights as Wealth Management recently listed in "Five Reasons Families Fight over Estates," including:

• When one sibling lives close to their parents and another lives a great distance away, leaving the sibling who lives closest more assets can lead to disputes.
• If a wealthy person gets remarried later in life and leaves a large portion of the estate to the new spouse, fights between that spouse and children from previous relationships are common.
• Any blended family situation can lead to family battles over estates, if proper plans have not been made.
• When wealthy people leave large sums to a trusted caregiver, then it is likely the family will fight with the caregiver over those assets.
• If the wealthy person has not adequately prepared and drawn up proper estate planning documents, then family fights over the estate are very likely.

Reference: Wealth Management (Jan. 30, 2017) "Five Reasons Families Fight over Estates."

Simmons & Schiavo, LLP • (781)397-1700 • [email protected] • www.simmonsandschiavo.com