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A great transfer of wealth is taking place across the nation as Baby Boomers begin inheriting the $12 trillion that will be left to them by Depression-era parents. These Boomers have also started to distribute their own assets, and over the next few decades more than $30 trillion will pass from one generation to the next. But making the decisions required to create an estate plan is difficult for members of the ‘me’ generation who want to enjoy life to the fullest and retain control over their money, and still leave their children with a considerable inheritance.

Gina Barry says the demand for estate plans is on the rise, and, as just one form of evidence, she noted that Bacon Wilson, P.C., the Springfield-based firm where she’s a partner, has had to add two paralegals and two new attorneys to its Elder Law and Estate Planning department in the last five years due to the influx of business.

Gina Barry

By Gina M. Barry, Esq.

“It’s not a crush, but demand has been gaining in intensity, and we are booked a month out,” said Barry, who concentrates her practice in elder law, estate planning, and residential real estate. “But we do make room for emergency cases, when someone is facing a nursing-home admission or receives a terminal diagnosis and wants to protect their assets from the cost of long-term care. It can be catastrophic, because a nursing home can cost $14,000 a month.”

Michael Simolo, a partner in estate planning and probate at Robinson Donovan, P.C. in Springfield, says his firm is also extremely busy. “We’ve added one associate and are thinking about adding more; our calendars are filled,” he told BusinessWest, noting that estate planning can be as simple as leaving everything to a spouse or involve creating a variety of trusts if there are complex issues such as a child with special needs or federal tax issues.

Elizabeth Sillen, a partner at Springfield-based Bulkley Richardson, LLP, agreed.

“There are many reasons why people come to us; some people are dealing with a parent’s estate and want to replicate what they did right or avoid what they did wrong, while others want to know when they should retire or collect Social Security,” said Sillen, who concentrates in estate planning, explaining that the estate-planning attorney’s role is to protect assets and does not involve financial planning.

Questions pertaining to the latter are typically answered by financial advisors, but timing is important because today’s retirees want to be active, travel, and take advantage of all the world has to offer. “We are the glue,” said certified financial planner Patricia Grenier, who co-founded BRP/Grenier Financial Services in Springfield. “Someone has to coordinate everything, and there are often big pieces missing when people go to estate planners.”

Attorney Michael Simolo

Attorney Michael Simolo says estate plans should be flexible and amended to reflect changes in one’s life.

The necessary information, which financial planners help clients determine, includes when a person will retire, the sum total of their assets, the way a pension will be handled, and when people will start collecting Social Security.

“There more than 8,000 strategies for couples to use when they collect Social Security, and many people don’t even know what their pension options are; these are bases that need to be covered before someone visits an attorney,” Grenier said. “When I meet with a client, we discuss their lifestyle, their income, where and how their money is invested, and their other assets. Health costs are a big issue, and so are family dynamics.

“I ask people how they plan to care for themselves, because there comes a point at which everyone needs help. A lot of decisions need to be made, and it’s a very emotional process, but our job is to make the meeting with the estate planner efficient and effective and coordinate what needs to happen,” she went on, noting that she has accompanied clients to an attorney’s office to do estate planning.

Simolo agrees that the decisions are difficult. “Estate planning is something people tend to put off. It’s not pleasant to think about, but you are not planning for yourself; you are planning for those you are leaving behind — and it’s not as painful of a process as people think,” he said. “Plus, putting off decisions doesn’t make it any less difficult, and planning gives you the option of extending a hand beyond the grave. If you have an estate plan, you can control your money to some extent after you die.”

One of the primary goals of a plan is to avoid probate. “However, probate is a lot easier than it used to be, and sometimes it’s easier to go through it than to retitle everything and put it in a trust,” said Simolo. “It depends on family dynamics, how much you own, and what you want to do.”

Limiting estate taxes is also critical: in Massachusetts, payment is due once an estate hits the $1 million mark, while the amount in Connecticut is $2 million. Federal taxes start at 40% if an estate totals $5.43 million or more, and although that seems like a lot, the number includes everything a person owns, including real estate, investments, bank accounts, and life insurance.

But experts agree that most people don’t reach that mark because the majority of Boomers have failed to save enough to retire in comfort.

“The biggest risk is that they will outlive their money, so it requires careful planning and strategizing,” Grenier said.

Individual Choices

Generations tend to differ in how they want to allocate their assets, said those we spoke with.

“Folks from the Depression era are not as inclined to gift as Boomers because they fear they won’t have enough to last throughout their lifetimes; they are much more frugal and want a sense of security and know that there is enough to take care of them until they die,” Barry said, explaining that strategies used in tax planning can require a loss of control of assets, which is frequently not palatable to Boomers.

“The majority want to leave money to their kids, but some would rather have their heirs pay taxes than lose control,” she went on, adding that the state tax on $2 million is about $89,200, which could be avoided entirely.

Siller agrees. “Some Boomers don’t care if their heirs will have to pay estate taxes because they have no appetite for complex plans. But there is definitely a generational difference. People from the Depression era tended to be thrifty, live moderately, and save money. Boomers may live moderately, they are a lot more consumer-oriented,” she explained, noting that there is a lot more to buy today, including devices such as cell phones and computers that are necessary to keep pace with technology.

Attorney Elizabeth Siller

Attorney Elizabeth Siller says children from a first marriage may feel resentful if a second spouse inherits everything, so it’s important to find ways to divide things in a way that doesn’t cause family problems.

The people Boomers delegate to be their healthcare proxy or to have power of attorney over their finances if they become incapacitated is another choice that demands careful consideration. “I have had clients say they want a daughter to take over their healthcare if they become incapacitated, but when I ask if she will be able to handle the decision to stop life support if it’s necessary, they realize they need to appoint someone else,” Barry noted. “And although people often think they will name their oldest child as power of attorney, they need to consider how honest and trustworthy they are and be sure they will never use their assets for their own benefit.”

Grenier agreed. “The person in that role has to be qualified to handle it. You want someone who has the time and ability to carry out your wishes.”

Long-term care also has to be considered. Although it’s prudent in some cases for the person to take out insurance, it doesn’t always make sense. And although estate plans can be altered if circumstances change, many people never update their plans. “They are lulled into a sense of security once a plan is created, but it’s imperative that they return to their attorney if they inherit a tremendous amount of wealth,” Barry said.

Siller concurred, and said estate planning involves many factors. “Estate planners provide people with options that are very concrete after they learn everything they need to know about their situation. But the process is complex and requires specificity,” she said, adding that considerations such as putting assets in a child’s name include whether he or she may get divorced, go bankrupt, or is in a high-risk profession and could be sued. Meanwhile, Boomers with grandchildren may want to set up college plans for them.

“If Boomers do some advance planning, they may be able to give their children all of the benefit of the income they inherit without imposing a tax burden on them,” Siller said. “But everyone’s situation is different, so we build a plan for each client that suits their needs. It’s a satisfying process.”

Complex Matters

The demand for business-transition planning is another area that is undergoing rapid growth.

“A lot of small-business owners want to retire, but it can be challenging. The business is often like their child, and it’s important to them that it continues to thrive,” said Siller. “And if one child is really interested in taking over, they need to navigate continuity along with fairness to other children, which can be tricky.

“It’s a whole world unto itself,” she went on, adding that, in some cases, life insurance is used as a way to equalize the value of the business, while in others where the building sits on land that is owned, the parcel is transferred to non-participating children, and the child who takes the helm of the business pays rent on the land to their siblings.

Barry says many factors enter into the equation, and it’s critical to know how much the business is worth on the open market.

“I can’t tell you how many business owners have never had their firm properly evaluated by an accountant,” she explained. “They think they know its value or what they could sell it for, but they have no idea of its actual value.”

That figure can be pivotal, said Simolo, who noted that a business may constitute the majority of the value of an estate.

“Succession planning for businesses poses a unique set of circumstances which are different for every family and every business. It’s a matter of fulfilling the intentions of the owner to the greatest extent possible, while protecting its future,” he told BusinessWest.

Another weighty consideration involves planning for children with special needs, and estate-planning attorneys say more clients are coming to the table with this challenge.

“Some children are receiving benefits or are incapable of managing their own funds,” Barry said. “There is a great increase in the number of people addressing these needs.”

Siller concurred, and said special consideration needs also to be made if children have addiction problems or are in relationships the parent is unhappy about.

Meanwhile, second marriages can be another tricky area to navigate.

“Kids from a first marriage often feel resentful if a second spouse inherits the bulk of the estate, so it’s important to find ways to keep the peace,” said Siller. “We try to have conversations and get the person to think about what they want to do before we come up with a plan.”

But leaving everything to a spouse, even in a first marriage, can be challenging if the deceased had always handled the finances.

“Sometimes we create a trust to ensure the remaining spouse will have plenty of money,” Siller said, adding that issues also arise if the spouse is not a citizen. “And if there is a second home, people worry about how their kids will share it. Sometimes a trust is put in place with a management structure that gives children the ability to buy out their siblings or sell the property, as there is often one primary user. Some parents endow a vacation home to preserve memories, but there are a lot of variables.”

Single people have their own dilemmas to contend with. “Their estate plans can be more complicated than a married couple’s,” Siller explained. “They need to think carefully about things because there are fewer tools available to them to reduce taxes.”

But even after all of these variables are accounted for, the work is not done.

“The drafting of documents is only half of the estate plan,” Simolo said. “The other half is making sure assets are properly structured so the plan works. Sometimes assets are made joint or taken out of joint ownership, and beneficiary designations must be properly named.”

Grenier concurred, noting that it’s not uncommon for people to fail to take the necessary steps to make the plan viable.

“Many never follow through with financial planners or investment advisors after their plans are set up; if a trust is created to protect assets, it has to be funded,” she said. “The accounts and real estate that will go into it have to be retitled, and beneficiaries have to be titled appropriately to match the plan. You can have the best attorney in the world, but if there is no follow-through, the plan won’t work.”

Attention to Detail

The bottom line is that estate planning and elder law is a complex manner, and although some people use the Internet to create what Barry calls “a will in a box,” such a strategy can lead to problems down the line.

“In most cases, there is an error because the person doesn’t understand the language or know what’s missing,” she said, adding that a simple estate plan, which typically costs less than $1,000, takes every facet of the individual’s situation into account and puts language in place to ensure their intentions will be carried out.

“Some people don’t think they have enough to warrant putting together a plan, but it’s never true,” she went on. “And it’s far better to plan your estate when you are not under pressure. Doing the work is much more enjoyable if you are not faced with a catastrophic event.”

Grenier concurs. “It is a daunting task that involves a lot of decisions,” she told BusinessWest. “But people need to make sure they have everything lined up, then finish the circle by following through and having things moved into trusts and taking care of other details.”

Whether they do or not, the transfer of wealth will continue, and future generations will bear the brunt — or reap the rewards — of what the people who go before them have left behind.

“If you don’t have a will,” Simolo said, “the state will create one for you — and it may not match your intentions.”

Estate Planning Sections

Informed Decisions Are Critical When Claiming Benefits


Hyman G. Darling

Hyman G. Darling

Years ago, it was standard practice to claim Social Security benefits at age 65. Most people retired about that age, and Social Security was available to help with retirement, based on the amounts paid in over the course of an individual’s working life.

Now, it is a major financial decision as to when to claim your benefits, when to collect your benefits, and how to maximize income for both the claimant and the claimant’s spouse.

Initially, it should be noted that Social Security is essentially a pension to be received based on the amount of money and years worked by an individual. A person receives a monthly benefit for life and, usually, a survivor benefit for a spouse and sometimes for children who are either disabled or under the age of 18. Naturally, the longer a person lives, the longer payments will continue.

It is estimated that, if a person lives 10 years after initiating receipt of their Social Security benefits, they will get their money back. Those who live 20 years receive their money back plus interest. After 20 years, a person not only receives their payments into the system plus interest, but also receives money derived from others who have paid into the system.

Age 62 is the earliest the benefit may be started. For those born before 1954, full retirement age is 66. In order to determine the full retirement age for those born after 1954, add two months to age 66 for each year through 1959. For those born in 1960 or after, the full retirement age is 67.

For single people making this decision, some factors to contemplate include health, tax situation, and intentions for continuing work or to retire. In view of these factors, one may estimate what a monthly payment might be, and can make a more informed decision as to whether to take the benefit early or at full retirement age.

For the vast majority of Americans, once income begins, the amount is locked in and will not change, with the exception of cost-of-living increases. It is also important to consider that, if benefits are claimed earlier versus later, then the base amount is lower, and subsequent cost-of-living increases are based on that lower figure. Over the course of many years, this could make a significant difference. In 2014, the cost-of-living increase was 1.7%, and this year the increase is 1.5%.

To calculate early benefits, subtract approximately 8% (from what the full retirement-age benefit would have been) per year for each year prior to full retirement age. While it will take many years to make up the difference, it is important to consider what the overall benefit will be over the course of 10 to 20 years, and whether a person needs to rely upon Social Security as a main source of retirement income.

Naturally, health and financial status make a significant difference. For those in poor health, it may be better to claim the income early, so that benefits will be received for the longest possible period, albeit at a lower amount than if the income was delayed. Similarly, if a person really needs the money sooner, they should possibly claim it sooner, although they will take a discount on the amount. This penalty does last forever. In most cases, there are no benefits prior to age 62.

If a person is fortunate enough to have other sources of income, such as IRA benefits, a pension, or possibly other unearned income, the Social Security benefit may not be needed immediately. If in good health, delaying the income claim can ensure a significantly higher monthly benefit.

For those still working who also claim Social Security benefits prior to full retirement age, income is subject to the ‘earnings test.’ This formula reduces a person’s Social Security benefits by $1 for every $2 of earnings in excess of $15,720 (the amount for 2015). Once full retirement age is attained, then the benefit is recalculated to omit the months in which benefits were withheld.

The decision about when to start income becomes even more complex for married people. When a person claims income on their own record, this has an effect on the spouse. The spouse must be at least 62 in order to claim benefits. In most cases, if the older spouse decides to claim benefits at a later age, such as 70, then upon the death of the older spouse, the most the younger spouse can receive is 50% of this amount.

Of course, the younger spouse is also subject to his or her earnings test and the same penalties as the older spouse who is claiming the primary benefit. The numbers must be reviewed to determine what an older spouse’s earnings record is, with a decision as to when to claim his or her benefits, whether early or at full retirement age. The younger spouse, however, is not permitted to claim the spousal benefit and delay his or her own benefits.

One of the popular options is known as the ‘file-and-suspend’ method. In this situation, when the higher-earning spouse requests benefits at full retirement age, they can then request that the benefits be suspended. This means that the lower-earning spouse is able to claim benefits while the higher-earning spouse delays their benefit until age 70. This cannot be done until the higher-earning spouse reaches full retirement age.

In this situation, if the higher-earning spouse predeceases the lower-earning spouse, then the lower-earning spouse does inherit the age 70 claiming decision, thus providing a significantly larger benefit for the living spouse. Of course, age differences, health issues, and necessary income are all issues which should be reviewed before making these decisions.

Another strategy is to ‘gamble’ the decision. It would be nice to have the proverbial crystal ball and be able to know when each spouse will die because that would allow the optimum decision to be made in advance. Without knowing what will occur, however, an option would be to wait until both spouses reach 70 to claim their highest possible benefits. This will allow both to receive a larger amount, but the spouse with the lower earnings (likely the younger spouse) may take their amount earlier, thus allowing the higher-earning spouse to delay and postpone benefits until age 70. Again, this is a gamble, but it allows both spouses to maximize the amount so long as they live a longer period of time.

Another choice is to claim some income now, and claim more later. This is what is known as a ‘restricted claim,’ which means that a person who is claiming the spouse’s benefits postpones their own benefits until age 70. In order to take advantage of this option, one spouse must have filed for benefits, or filed and suspended.

In this situation, for instance, if a husband’s benefit at full retirement age is greater than his wife’s, and he is at least one month older than his wife, at age 66 the wife could file for benefits. Because she files and the husband has already attained full retirement age, he can also claim a portion of his wife’s benefit until he turns 70. At age 70, his check is increased to what his benefit would have been, plus an increase for waiting. It also provides him with a larger base for cost-of-living adjustments (the annual increase as determined by the Social Security Administration).

Some significant appeal in this case lies in the fact that, if the husband dies first, the wife inherits his age-70 claiming decision. In this situation, both spouses must have reached full retirement age to utilize this option, and it may be they cannot afford, or don’t want to, wait until both have reached the age of 66.

Divorce is another issue that can complicate Social Security calculations. If the marriage was longer than 10 years, the divorce occurred more than two years prior, and the spouses remain unmarried, then the lower-earning person is entitled to claim the benefits of the ex-spouse. If a person had multiple marriages in the past 10 years, then both ex-spouses may claim benefits without adversely affecting the benefits of the other.

When claiming in this situation, it is important that Social Security numbers for all individuals, including all former spouses, are utilized, so that the Social Security Administration can determine which person to claim as the highest wage earner. One should also bring a marriage certificate and divorce decree to the Social Security office when claiming for benefits of an ex-spouse.

An ironic provision in the law also provides that, if both ex-spouses never remarried, they can each claim spousal benefits while delaying their own benefits until age 70. Married spouses cannot do this, but unmarried former spouses have this opportunity. For instance, if a divorced couple determine that the husband’s benefit at age 62 would have been a lower amount, then his ex-spouse would receive only 82.5% of his benefit, whereas if he had waited until 70, his ex-spouse’s benefit would be approximately 132% of his original benefit. With multiple marriages, the decisions become more difficult, but provide additional opportunities to receive greater benefits.

Of course, when one spouse dies, a surviving spouse should check with Social Security to determine whether there are any benefits available for the survivor. It is sometimes possible to claim benefits sooner rather than later, as well as provide for minor or disabled children.

There are many planning opportunities for a person to claim the maximum benefits over life. All strategies and decisions should be considered prior to retirement, and if a person is considering electing to start benefits, they should check with the Social Security Administration several months before retirement age to determine options, so that they will have sufficient time to make intelligent decisions.

Each situation must be reviewed independently, and while the Social Security Administration does have a website that provides information and calculations (www.ssa.gov), it may be helpful in some cases to meet with a Social Security representative to ensure understanding of all options. There are private companies that provide independent evaluations (for a fee, of course), but the cost of such an advisor may be recouped in a short period of time if the advisor secures a greater financial benefit.

Between Medicare costs, prescription drugs, and housing expenses, a person’s Social Security may be their largest source of income. As stated earlier, life is a gamble. Even so, it is important to make intelligent decisions rather than merely accepting the amount that initially seems to be higher. Many benefit plans are irrevocable, so informed choices are critical when claiming Social Security benefits.

Attorney Hyman G. Darling is chair of the Estate Planning and Elder Law departments at Bacon Wilson, P.C. His areas of expertise include all areas of estate planning, probate, and elder law. He is a frequent lecturer on various estate-planning and elder-law topics; (413) 781-0560; [email protected]

Estate Planning Sections

Put Time and Thought into Answering This Critical Question

Dawn Badorini

Dawn Badorini

Dealing with end-of-life issues can be overwhelming. One of the most important decisions you will make is deciding who should be your executor.

An executor is someone named in your will who will be responsible for handling all the paperwork after your death and the distribution of your assets. This can include collecting assets of the estate, protecting and maintaining estate property, paying bills, paying taxes, making court appearances, and, if necessary, liquidating assets to have enough cash to pay creditors, taxes and/or beneficiaries. An executor is responsible for distributing assets that don’t have a stated beneficiary, are not in joint name, or titled in the name of a revocable trust. If an executor is not named in your will, the court will appoint one. 

You can choose an unpaid or paid executor. You may also choose to have co-executors. The key qualities an executor needs are honesty, organization, communication, and financial responsibility; the distribution of the estate can become a mess if handled by someone who lacks these qualities. 

The law sometimes restricts the powers of an executor, and for this reason, it’s often a good idea to specify in your will that your executor will have certain powers beyond those normally granted by state law. This may be especially important if you choose a family member or friend as your executor.

Powers that you grant in your will may include the right to hire professional help (attorneys or a CPA, for example); power to continue running your business; power to mortgage, lease, buy, and sell real estate; power to borrow money; and power to take advantage of tax savings.

The most common unpaid executors are spouses, siblings, and children. Think carefully before choosing your husband, wife, or partner as an executor; they may be too overwhelmed by grief to deal with everything. A grown child who lives nearby could serve as co-executor to help the surviving spouse.

It is also important to consider the executor’s location. Things such as court appearances and checking property can be more difficult if the executor does not live near where the majority of the assets are located. You should also take into account the person’s age, health and likelihood of being willing and able to administer your estate. 

Family dynamics are extremely important when choosing your executor. Who you choose can lead to family squabbles and contesting of the will. Whether intended or not, people sometimes read into your decisions and assume you are making judgments regarding their worthiness or based on favoritism. Instead of focusing on being fair to your children, aim to prevent family conflict. Family fights will cause more friction in the family, deplete the estate’s assets, and take a lot of time. If you have several beneficiaries who don’t get along, you may want to appoint an outside executor who is independent and has no potential conflict of interest.

For larger estates, it is often advisable to use an independent executor. A complicated estate may require an institutional executor, such as a bank trust department that can call on the advice of lawyers, tax experts, accountants, investment counselors, and business administrators. You may also consider choosing an attorney if you believe the estate will require considerable legal work.

Although heirs may not appreciate paying fees to an executor, in certain cases it is best to leave the fiduciary responsibility to an institution. This shifts stress and liability away from a family member. A corporate trustee may also be a smart choice for blended families. With a second marriage, it may be preferred to have a neutral executor.

Another option is to appoint co-executors. You could choose a personal friend or family member and someone with more expertise, such as a trusted business partner. Oftentimes, people appoint all of their children as co-executors. Assuming the children all have a good relationship, this may prevent some family dissension.

For smaller estates and where there is little possibility of a contest, the fees that lawyers and other paid executors charge make it too expensive to hire outside executors, so many people choose a friend or family member who will waive or refuse the executor’s fee. This person will be interested in making sure the process goes as quickly and smoothly as possible.

Massachusetts law provides only that the executor be reimbursed for reasonable out-of-pocket expenses and be compensated for their services as the court allows. In Massachusetts, there is no set amount or percentage of the estate’s assets for executor compensation. Ideally, the decedent’s will states exactly how much compensation the executor will receive. If it doesn’t and the beneficiaries and executor cannot agree, then the probate judge must decide what is reasonable.

It is important that you discuss being the executor with the person you wish to name in your will. Once you have made your choice, go over your will with that person and let him or her know where you keep all your important financial documents. Also, be aware that whomever you named as your executor may decline the responsibility when it is time. For this reason, it is important to name successor executors in your will, allow your executor to name a successor, or designate a corporate executor. 

It is a good idea to review your will and your choice of executor every few years and after major life changes. What seems like a good choice today may become an unwise choice tomorrow.

Dawn Badorini, CPA is a manager for the Holyoke-based public accounting firm Meyers Brothers Kalicka, P.C.; (413) 322-3477; [email protected]