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Estate Planning

Signs of the Times

Hyman Darling says the calls started coming in several weeks ago.

At first, there were a few, and then, as the news about the COVID-19 pandemic became steadily worse and the grim reality of the situation became ever more apparent, the volume started increasing.

On the other end of the line were people looking to update a will or estate plan, or, more likely, finish the one they’d started but never finished or finally get started with one, he said, adding that there are obvious reasons why.

“Everyone knows someone who knows someone who has the virus, and they’re worried — about their parents, their brothers, their cousins … somebody,” said Darling, a partner with the Springfield-based law firm Bacon Wilson and one of the region’s pre-eminent estate-planning specialists. “And there’s more people sitting at home with less to do; they’re paying attention to this and thinking about it. The news is very distressing, and people are responding to it.”

Meanwhile, healthcare workers, and especially those on the front lines of the crisis, don’t have to watch on TV — they can see it right in from them — and, thus, they’re responsible for many of these calls to Darling and specialists like him across the area.

This phenomenon, if it can be called that, is certainly keeping area estate planners much busier than they were, providing some much-needed peace of mind to those who are watching the news and seeing the death tolls rise, and even adding some new phrases to the lexicon, like ‘driveway signing.’

Hyman Darling

Hyman Darling

“Everyone knows someone who knows someone who has the virus, and they’re worried — about their parents, their brothers, their cousins … somebody. And there’s more people sitting at home with less to do; they’re paying attention to this and thinking about it. The news is very distressing, and people are responding to it.”

That’s the phrase Liz Sillin, an estate-planning specialist with Springfield-based Bulkley Richardson, summoned as she talked about one of the more challenging aspects of this development: documents need to be signed and notarized, and at this moment (things may well change), Massachusetts does not allow electronic signatures for such documents as wills and healthcare proxies.

That’s why there really are signings in the driveway — and with all the proper precautions taken for preventing or at least minimizing the spread of the virus.

“We take as many steps as possible to keep us all away from one another and not cross-contaminate the paper,” said Sillin, who has now been part of a few of these elaborate exercises, which involve the lawyers and four participants — the party creating the document, two witnesses, and a notary. “Everyone brings their own pen, and everyone steps back while one person signs, preferably without touching the paper with his or her hand. We use lots of hand sanitizer; we use a clipboard, and we sanitize the clipboard. It’s kind of a bizarre process, but there are people for whom getting these documents done is paramount, and if remote signing isn’t legal, this is the only way we can do it.”

Liz Sillin

Liz Sillin

“Everyone brings their own pen, and everyone steps back while one person signs, preferably without touching the paper with his or her hand. We use lots of hand sanitizer; we use a clipboard, and we sanitize the clipboard. It’s kind of a bizarre process, but there are people for whom getting these documents done is paramount, and if remote signing isn’t legal, this is the only way we can do it.”

Mike Simolo, an estate-planning specialist with Springfield-based Robinson Donovan, who, like most all of his counterparts, has taken part in a few driveway signings himself, agreed. And, like others we spoke with, he said that, while it’s unfortunate that it took a pandemic to get people to do what they should have some time ago, he’s glad that many have been motivated to get this important work done.

“People who had been putting this off for one reason or another are suddenly deciding not to put it off anymore,” he said. “They’re calling up, hoping to get a plan a plan in place sooner, rather than later.”

With the accent on sooner.

And while their phones are ringing more often, those we spoke with noted that they are apprehensive that some, in an effort to get something done, and in a hurry, will take shortcuts, perhaps visit one of the legal websites out there, or, worse still, take the DIY route.

“This is LegalZoom’s dream situation,” said Simolo, referring to the popular website that provides legal assistance. “People are waking up, watching the news, and realizing, ‘I don’t have anything.’”

He said that, while people can certainly take that route, he projects that many who do will leave out something or make a mistake that could have serious implications later, when loved ones are left to settle an estate (more on that later).

Mike Simolo

Mike Simolo

“People who had been putting this off for one reason or another are suddenly deciding not to put it off anymore. They’re calling up, hoping to get a plan in place sooner, rather than later. ”

For this issue and its focus on estate planning, BusinessWest looks at how the COVID-19 pandemic is prompting many to get important estate-planning work done, and how the legal community is responding.

Where There’s a Will…

As she talked about her greater workload and when and why it came about, Gina Barry, another partner and estate-planning specialist with Bacon Wilson, used the story of a pharmacist at one of the local hospitals — an individual with a number of the health risks that make him especially vulnerable to the virus — to touch on a number of the relevant points in this intriguing development.

“He’s working long hours in the hospital,” she said, “and he was terrified — and he probably still is — that, because of his high-risk concerns, he would be one of those who would contract the virus and not survive it.

“We started his plan a few years back,” she went on. “Recently, he e-mailed me and said, ‘I have no right to ask this, given that I delayed a bit, but can you rush?’ And I said, ‘absolutely, I can rush.’ I dropped everything and got it done.”

Continuing that story, Barry said this individual managed to get the notary from the hospital and two of his co-workers together to sign these documents, and she Zoomed in for the gathering to make sure everyone was signing in the right place.

As noted, this anecdote touches on a number of the many elements of this story, from the fear exhibited by healthcare workers to the need to move fast; from the logistics involved with getting a signing done to the technology used by lawyers to get the documents signed, sealed, and delivered.

And it’s a story that is now playing itself out countless times across the region.

Indeed, while not everyone calling to write or update a will or a related document is in healthcare — and the lawyers we spoke with said these individuals have been given first priority — most everyone is terrified. And they’re also in a hurry.

And, for the most part, estate-planning specialists are able to accommodate them.

Simolo said a process that might normally take several weeks can be expedited and handled in perhaps a week to 10 days, with a fairly simple will being done in just a few days.

Meanwhile, many of these wills and other documents — living wills and healthcare proxies are also being sought — are being created in what would be considered non-traditional ways. Indeed, since face-to-face meetings are all but out given new social-distancing guidelines, estate-planning specialists are using the phone, Zoom, and other vehicles for communicating with clients and getting documents reviewed.

“People don’t care about coming in now,” said Darling. “They’re happy to do the telephone messaging, e-mails, Zoom … as long as it gets done, they don’t care if they meet us in person.”

Interest in getting documents written and notarized is especially acute among those in healthcare, and often it’s those individuals’ loved ones who are getting the ball rolling.

“I’ve been contacted by the husbands and wives of doctors,” Simolo said. “They’re saying, ‘let’s get this done as soon as humanly possible.”

Sillin agreed, and noted that there is interest among those old and young to have their affairs in order.

“Just today, I got a call from someone who is a doctor — he’s very young and has a young family,” she explained. “He’s in a facility that has cases around him, and he’s like, ‘yikes, I have to do something.”

But interest is across the board, said those we spoke with, adding that some of those calling are finally getting around to having these documents written, while others are realizing that the ones they have are dated and need to be made current.

“People are at home reading about nothing but COVID-19,” said Sillin. “They begin to contemplate this aspect of life, and we’ve been getting a lot of calls from people of all ages who want to get going on some estate planning.”

Simolo agreed.

“It’s mostly been people who don’t have a plan in place or had a plan in place 25 years ago, when the kids were 3,” said Simolo. “Now, the grandkids are 3 — that kind of thing.”

But while those we spoke with are certainly pleased that their phones are ringing more — for themselves, but especially for their clients — they are concerned that many may try to do this work online or even draft something themselves.

“It’s been my experience that, nine times out of 10, something’s missing from those documents,” said Darling, adding that, in many other cases, documents are not signed properly. “You get what you pay for, and mistakes made now can be very costly later — not for the deceased, but for their loved ones; litigation is very expensive in a will contest, not to mention the emotional stress that it brings on family members.”

Barry agreed and summoned an analogy she’s used many times during her career — too many to count by her estimate — when talking about do-it-yourself wills and related documents.

“You can pull your own tooth, too,” she said. “But would you rather visit a dentist or tie a string to a doorknob and try it that way?”

Peace of Mind

Finishing her story about the pharmacist in one of the local hospitals, Barry said that, at the conclusion of the signing — which, again, she witnessed via Zoom — she asked her client if he now had some peace of mind.

“He signed, and his shoulders must have dropped like four inches visibly,” she told BusinessWest. “They were up around his ears, and he just relaxed and dropped his shoulders. And I said to myself, ‘this is why we’re doing this.’”

And doing a lot of this.

There aren’t very many bright spots to be found in the midst of this pandemic, but this is clearly one of them. People across the region are becoming proactive and getting needed documents in place.

And that’s allowing many more people to sigh, relax, and drop their shoulders.

George O’Brien can be reached at [email protected]

Estate Planning

A Pandemic Estate Plan

By Gina M. Barry

COVID-19, also known as the novel coronavirus, has arrived in our communities. While statistics show that many people will survive being infected, they may experience incapacity due to significant symptoms, such as breathing difficulties and fever, and, for some, the infection will be fatal.

Most have diligently stocked up on food and household supplies, particularly disinfectants. Some have also prepared a kit of ‘illness supplies,’ containing items that would be needed in the event of illness, such as a thermometer, acetaminophen, and herbal teas. Surely, this preparedness helps to alleviate some of the anxiety that has become rampant as this virus takes its toll on our communities.

However, if you were to become so ill that you could not communicate, do you know who would handle your affairs? Have you given that person the legal authority that they would need to do so without added cost, time, and administrative difficulties? Additional peace of mind can be found in ensuring that you have a plan in place should you become ill or pass away.

Gina M. Barry

Gina M. Barry

“Estate planners are using modern technology, such as videoconferencing, to help you plan with the least amount of risk to all involved.”

Fortunately, legal services have been deemed to be ‘essential’ during this pandemic, and estate planners are using modern technology, such as videoconferencing, to help you plan with the least amount of risk to all involved.

Further, unless remote notarizations become legally acceptable, strict office protocols are in place to minimize the risk of illness transmission when documents are being signed.

A pandemic estate plan should, at minimum, contain the following documents:

Last Will and Testament

Your will directs how your probate assets will be distributed after you pass away. Your probate assets are those assets held in your name alone that do not have a designated beneficiary. A will is also necessary for you to name a personal representative (formerly known as executor), who will carry out your estate. Your personal representative will gather your probate assets, pay valid debts, and distribute the balance as set forth in your will. Further, a guardian can be named in your will to take custody of minor or disabled children. Likewise, a trust may be established in your will to provide ongoing financial protection for these children and other beneficiaries who should not receive their inheritance outright, usually due to spendthrift or addiction concerns.

Healthcare Proxy — and Possibly a MOLST

A healthcare proxy is a document that designates a person to make healthcare decisions for you if you are unable to make them for yourself. Your healthcare agent should make your decisions as you would make them if you were able.

Should you lose capacity and not have a proxy in place, your loved ones will need to petition the Probate Court to become your guardian, which is a lengthy, expensive, and public process. Further, access to the courts is more restricted during the pandemic, with a number of courts being accessible only for emergencies due to court staff having received positive COVID-19 diagnoses.

‘Living-will’ language should be included within the proxy to address your end-of-life decisions. This language generally sets forth that you do not want extraordinary medical procedures used to keep you alive when there is no likelihood of recovery. Due to the need for ventilators for COVID-19 treatment, many have asked whether they would be placed on a ventilator if needed.

Fortunately, recovery is quite possible with ventilator support; therefore, the triggering event of ‘no likelihood of recovery’ would not be present in most cases, and ventilator support for COVID-19 would be instituted. Here, it is especially important to review the language in an existing document and to discuss these concerns with your named proxy.

Those of advanced age, the terminally ill, and those with painful, chronic conditions may also consider establishing medical orders for life-sustaining treatment (MOLST) in addition to a healthcare proxy. A MOLST is a form, usually printed on bright pink paper, that contains actionable medical orders that are effective immediately based upon your current medical condition. A MOLST would eliminate the need for living-will language, but the best practice would be to reference the MOLST in your proxy.

“It is important to note that a living will and a MOLST are very different. A MOLST form needs to be signed by both you and your physician and is used by physicians to understand your wishes at a glance.”

It is important to note that a living will and a MOLST are very different. A MOLST form needs to be signed by both you and your physician and is used by physicians to understand your wishes at a glance.

A healthcare proxy, on the ther hand, only takes effect if you are incapacitated. Also, a living will asks the health care agent to take into account all facts and circumstances to decide whether recovery is likely before carrying out instructions to withhold or terminate life support, whereas a MOLST sets forth decisions you have already made about what you do and do not want as far as medical care.

The MOLST takes the place of do-not-resuscitate (DNR) and do-not-intubate (DNI) forms, as the MOLST is more comprehensive, but existing DNR and DNI forms remain valid. The MOLST not only addresses these situations, but also sets forth wishes regarding hospitalization, dialysis, and artificial means of receiving nutrition and hydration.

Durable Power of Attorney

A durable power of attorney is a document that designates someone to make financial decisions for you. The durable power of attorney is a very powerful document with authority that is as broad as the powers granted within it.

It gives power to the person you name to handle all your financial decisions, not just pay your bills. Should you lose capacity and not have a durable power of attorney in place, your loved ones will have to petition the Probate Court to become your conservator, which involves the same obstacles described above as to the appointment of a guardian.

Homestead Declaration

If you own your primary residence in Massachusetts, you should also record a homestead declaration in order to protect the equity in your primary residence up to $500,000 from attachment, seizure, execution on judgment, levy, or sale for the payment of debts. In some cases, such as advanced age or disability, the equity protection can be up to $1 million.

If a homestead declaration is not recorded, there is an automatic $125,000 of equity protection, which may be adequate for some. Homestead protection will likely be particularly important as the financial consequences of this pandemic take hold.

Conclusion

The COVID-19 pandemic has brought the possibility of disability or death to the fore, and prior dismissals of ‘it won’t happen to me’ ring hollow.

We are at a time when you should presume that it will, in fact, happen to you.

That being the case, would you prefer to have a plan in place to ensure your loved ones can manage your affairs with the least amount of delay, cost, and stress? If the answer is yes, please call an estate-planning attorney today, establish or update your plan, and give yourself and your family that much more peace of mind during this pandemic.

Gina M. Barry is a partner with the law firm Bacon Wilson, P.C. She is a member of the National Assoc. of Elder Law Attorneys, the Estate Planning Council, and the Western Massachusetts Elder Care Professionals Assoc. She concentrates her practice in the areas of estate and asset-protection planning, probate administration and litigation, guardianships, conservatorships, and residential real estate; (413) 781-0560; [email protected]

Estate Planning

Preparing for the Next Stage

By Barbara Trombley, MBA, CPA, CDFA

Life — and business — can shift in unexpected ways, and an ownership transition can sneak up on even someone who expected to be at the reins for a long time. That’s why it’s good to start preparing for that possibility well in advance.

A succession plan is a vital part of a small business.

Most small businesses were built from the ground up, with a dedicated founder and owner, and it may be very hard for the owner to consider a succession plan. But retirement — or worse, sudden illness or death — can creep up on an owner and create havoc. Without a solid plan, a family may suddenly lose their income or the inheritance that was counted on, or the business may cease to exist.

“Many succession plans are not carefully planned out or are devised as a result of health event. A good succession plan is made when the owner can think rationally and formally devise a sort of buy-sell agreement.”

My personal experience with a succession plan is based on our financial- planning business. My father-in-law did what quite a few financial planners do. He brought my husband (his son) and myself into his business a few years before he retired. My mother-in-law had a bad health scare, and he could see that his years in the business were numbered.

In our case, my husband and I were good candidates to take over the family financial-planning business. We were both graduates of Duke University; I was a CPA, and my husband had recently retired from a first career in major-league baseball. We had the backgrounds and were ready to assume the responsibility of maintaining and growing the business that he started.

The transition wasn’t easy; my father-in-law’s mind knew that it was the best course of actions for his clients, but his heart wasn’t ready to leave. In hindsight, it was a great decision, because his health deteriorated quickly after we took over, and he passed away three years ago.

Many succession plans are not carefully planned out or are devised as a result of a health event. A good succession plan is made when the owner can think rationally and formally devise a sort of buy-sell agreement.

The buy-sell agreement is a legally binding contract that says what will happen if the owner passes away, falls ill, or wants to retire. It will formalize information like the company sales price, the value of each share in the business, and how the sale of the company could be funded.

 

Barbara Trombley

Barbara Trombley

“Many buy-sell agreements are funded with life insurance; the company or the individual co-owners buy policies on the other co-owners that allow them to buy shares in the company using the proceeds from the insurance after the owner or shareholder’s death.”

 

Perhaps the simplest example of a buy-sell agreement is if there is more than one owner. The agreement will state that the co-owners can purchase each other’s shares in the event the buy-sell agreement is triggered.

Many buy-sell agreements are funded with life insurance; the company or the individual co-owners buy policies on the other co-owners that allow them to buy shares in the company using the proceeds from the insurance after the owner or shareholder’s death. A term policy is often more inexpensive, but a permanent policy may be more suitable for a longer period of time.

What if you are the only owner? What makes a good succession plan?

A good succession plan will consider the human-resources side of the transition as well as the financial aspects. Do you want to keep the business in the family? Are your family members qualified and knowledgeable about your business? Do they desire and have the heart to keep your business going? Will you choose certain family members over others?

Most businesses do better with a single overall successor as opposed to splitting ownership of the business. It may be possible to appoint different heirs to manage separate departments. Many small-business owners assume their children want to take over. We have heard many stories about family in-fighting or entitled heirs assuming roles that they are not prepared for. Many a business has suffered or failed after a leadership change; a good succession plan will look with an objective view at different family relationships.

Another option to a family succession plan would be to have a key employee buy the business.

The buy-sell agreement could be executed over time, giving the other employees and customers time to get used to the idea, or it can be triggered by an event such as an illness or death of the owner. Of course, not many employees have the funds to purchase a company.

One idea would be to provide seller financing. A loan from the owner to the buyer could provide a stream of income to the owner as he enters retirement. Another option would be outside financing. This would be the best course if the owner desires his funds up front.

In our financial-planning business, we are constantly urged to set up a succession plan. This is mainly to ensure that a properly licensed advisor can quickly service our clients in the event of the death or disability of myself and my husband. Our plan is to set up a buy-sell agreement with another financial advisor that would be triggered in an emergency but fully changeable in case one of our qualified children would like to take over the business for a third generation.

Taking the time to consider the human-resource angle as well as the financial angle can ensure an agreement that is beneficial to all parties involved and ensure the business you have built will last for a long time.

Barbara Trombley, MBA, CPA, CDFA is an LPL financial planner with Trombley Associates Investment and Retirement Planning in Wilbraham; securities offered through LPL Financial; member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Trombley Associates and LPL Financial do not provide legal advice or services. Consult your legal advisor regarding your specific situation.

Estate Planning

Retirement-income Planning

By Greg Sheehan

Most working Americans have only one source of steady income before they retire: Their jobs. But when you retire, your income will likely come from a number of sources, such as retirement accounts, Social Security benefits, pensions, and part-time work.

When deciding how to manage your various assets to ensure a steady retirement-income stream, there are two main strategies to consider: the total-return approach and the investment pool — or bucket — approach.

The Total-return Approach

With the total-return approach, you invest your assets in a diversified portfolio of investments with varying potential for growth, stability, and liquidity. The percentage you allot to each type of investment depends on your asset allocation plan, time horizon, risk tolerance, need for income, and other goals you may have.

The objective of your investment portfolio generally changes over time, depending on how close you are to retirement.

• Accumulation phase: During this phase, your portfolio’s objective is to increase in value as much as possible, focusing on investments with growth potential.

• Approaching retirement-age phase: As you near retirement, your portfolio becomes more conservative, moving toward more stable and liquid assets in order to help preserve your earnings.

• Retirement phase: Once you retire, the idea is to withdraw from your portfolio at an even rate that allows you to enjoy a sustainable lifestyle.

A widely quoted withdrawal rate for the first year of retirement has usually been 4%. Ideally, that 4% should be equal to the amount left over after you subtract your yearly retirement income (e.g., pensions, Social Security) from your total cost of living, including investment-management fees. Each year, you will most likely increase your withdrawal percentage to keep up with inflation. Keep in mind, however, that the appropriate withdrawal rate for you will depend on your personal situation as well as the current economic environment.

The Bucket Approach

The bucket approach also begins with a diversified portfolio, following the total-return approach throughout most of the accumulation period. Then, as retirement approaches, you divide your assets into several smaller portfolios (or buckets), each with different time horizons, to target specific needs.

There is no ‘right’ number of buckets, but three is fairly common.

• The first bucket would cover the three years leading up to retirement and the two years following retirement, providing income for near-term spending. It would likely include investments that historically have been relatively stable, such as short-term bonds, CDs, money-market funds, and cash.

• The second bucket would be used in years three through nine of retirement. Designed to preserve some capital while generating retirement income, it would include more assets with growth potential, such as certain mutual funds and dividend-paying stocks.

• The third bucket, designated to provide income in year 10 and beyond, would contain investments that have the most potential for growth, such as equities, commodities, real estate, and alternatives. Although the risk profile of this bucket is typically higher than the other two, its longer time horizon can help provide a buffer for short-term volatility.

As you enter the distribution phase, you draw from these buckets sequentially, using a withdrawal rate based on your specific lifestyle goals in a particular year.

The Big Picture

Many people are familiar with the total-return approach, but the bucket approach has been gaining popularity, thanks in large part to its simplicity. It also accounts for different time periods during retirement, potentially allowing you to allocate money more effectively based on your personal situation.

Perhaps the greatest benefit of the bucket approach is that it can help provide a buffer during times of market volatility. If the value of the investments in buckets two and three fluctuates due to market conditions, your immediate cash income is coming from bucket one, which is likely to be less volatile. This may also alleviate the need to sell investments that have lost money in order to generate retirement income.

While the bucket approach has its advantages, some investors feel more comfortable using the total-return approach. The best strategy for your retirement is unique to you and your personal preferences and needs. However you choose to pursue your retirement dreams, it’s important to work with a financial professional who can help you create the most appropriate strategy based on your goals and situation.

Note that diversification does not assure against market loss, and there is no guarantee that a diversified portfolio will outperform a non-diversified portfolio. 

Greg Sheehan is an accredited investment fiduciary and partner at the Wealth Transition Collective, a Northampton-based financial-advisory and planning firm. The firm offer securities and advisory services as a registered representative and investment adviser representative of Commonwealth Financial Network, Member FINRA/SIPC, a registered investment adviser; (413) 584-1805; [email protected]

Estate Planning

Now Is the Time to Plan

By Gina Barry

In recent times, many committed couples are choosing not to get married, especially if they have been previously divorced or widowed.

Gina Barry

By Gina M. Barry, Esq.

Although these couples are not married, many present themselves as a married couple. They live together, while sharing their assets and debts. While this arrangement may allow the happy couple to live in bliss while each partner is alive and well, trouble begins when one of the partners loses their competency or passes away.

Your partner does not have the same legal rights as would your spouse. In fact, their legal rights are usually no more than a stranger would have. Fortunately, with proper planning, an unmarried partner can be provided with some legal rights.

The first potential issue to be addressed is incapacity. If you lose your capacity, your partner will have no power to handle your financial affairs unless you have executed a valid durable power of attorney. This is a document in which you designate someone to make financial decisions for you. At a minimum, naming your partner in this document will allow your partner to pay bills, manage real property and other assets, and deal with government agencies, such as MassHealth.

Similarly, if you lose your capacity, your partner will have no power to make medical decisions for you unless you have executed a valid healthcare proxy, a document in which you designate someone to make healthcare decisions for you in the event that you are incapacitated and unable to make your own healthcare decisions. Language addressing your end-of-life decisions, which is known as a living will, is normally included within the healthcare proxy.

This language usually states that you do not want extraordinary medical procedures used to keep you alive when there is no likelihood that you will recover. Having a living will in place lets loved ones know your wishes and should reduce conflict should such a situation arise.

“Although these couples are not married, many present themselves as a married couple. They live together, while sharing their assets and debts. While this arrangement may allow the happy couple to live in bliss while each partner is alive and well, trouble begins when one of the partners loses their competency or passes away.”

Further, if you have not properly planned your estate and you pass away, you may unintentionally disinherit your partner. Your probate estate consists of any assets held in your name alone at the time of your passing that do not have a designated beneficiary. When you die without a will, the heirs at law of your probate estate are your spouse and your blood relatives. As your partner is neither your spouse nor a blood relative, your partner would not receive any assets from your probate estate if you die without a will.

While your partner may receive assets held jointly with you or the assets on which you have named your partner as beneficiary, your partner will not receive anything from your probate estate unless you have a last will and testament naming your partner as your beneficiary. Another reason to establish a will is so that you may name your partner as the personal representative of your estate, which will give your partner the authority to handle your estate for you.

If you have a taxable estate, which at the present time in Massachusetts means an estate greater than $1 million, you will not be able to take advantage of estate-tax laws that favor married couples. The unlimited marital deduction allows a deceased spouse to leave assets of any amount to the surviving spouse without having to pay any estate tax. Since this deduction may be taken only with respect to assets left to a surviving spouse, it is not available to your estate if you leave assets to a partner.

As such, it may be necessary for you to address your tax issues in other ways, such as by gifting, using the annual gift-tax exclusion of $15,000 per person in 2019, or by establishing an irrevocable trust that owns life insurance meant to replace the wealth that will be lost on estate tax.

Even though you may have committed to your partner, if you have not taken the legal steps necessary to protect your partner’s interests should you lose your capacity or pass away, you have overlooked a very important aspect of your relationship.

Once you have lost your capacity or passed away, it is too late to protect your partner. For the love of your partner, plan now, and ensure their legal rights.

Gina M. Barry is a partner with the law firm Bacon Wilson, P.C.. She is a member of the National Assoc. of Elder Law Attorneys, the Estate Planning Council, and the Western Mass. Elder Care Professionals Assoc. She concentrates her practice in the areas of estate and asset-protection planning, probate administration and litigation, guardianships, conservatorships and residential real estate; (413) 781-0560; [email protected]

Cover Story Estate Planning Sections

Death and Taxes

Estate art

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

By HYMAN G. DARLING, Esq.

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]