Season's Greetings from the Law Office of George E. Foote, P.C.
2010
I again take this opportunity to send holiday greetings and to offer estate planning information.
A concern I often hear from people in my estate planning and real estate practice is how will their children be able to afford homes. I would like to identify several strategies to address this worry. Adventurous buyers might consider bargain hunting among bank-owned properties. In this case, be aware that homes must be habitable before a new mortgage will be granted. Necessary repairs need to be completed before the mortgage appraiser clears the property for financing. "Short sales", i.e. sales of homes by their owners under threat of foreclosure, are usually sold at a discount. The stumbling block for short sales is that the process takes months to finalize, as it requires a mutual agreement among the buyer, seller, and the seller's existing mortgage bank.
The good news is that there are new tax incentives to help make homes more affordable. In 2009, Congress created the First Time Home Buyer's Refundable Tax Credit. This law provides a government rebate to first time home buyers, whether or not they have taxable income. The tax rebate to the buyer is 10% of the cost of the home, up to a maximum of $8,000. Originally set to expire November 30, 2009, this refundable tax credit has just been extended for homes purchased before July, 2010, with a purchase & sale agreement signed by April 30, 2010. A new section of the law now gives a reduced credit of up to $6,500 to all home owners as long as they have owned their current home for at least 5 years. Income limits for qualifying buyers have been increased. Single buyers with incomes up to $125,000 and married couptes-with incurnesup to $225,000 may receive the maximum tax credit. The credit is permanent unless the new home is sold within 5 years. This last restriction was apparently designed to prevent speculators or developers from qualifying for this tax incentive provision.
It is often said that "timing is everything". In keeping with this, families may also consider maximizing assistance to their children by making outright monetary gifts to them before this refundable tax credit expires next year. As of 2009, the annual gift tax exclusion for gifts has increased to $13,000 per person. Another relevant tax code provision exempts I.R.A.s and Roth I.R.A.s from the 10% penalty on $10,000 of "early distributions" put toward the purchase of a child or grandchild's first home. The tax credit, plus a financial gift, may make a home purchase possible
My law practice continues to grow in the areas of estate administration and settlement, estate planning, taxation, and estate litigation. Please be aware that the proposed Obama tax plan freezes the estate tax threshold at $3.5 million, which may call for changes in estate plans. I also represent clients in all types of real estate transactions, mortgage financing and contract matters, as well as criminal, personal injury, and business litigation. My office at 5 Militia Drive in Lexington is a bright, attractive, first floor location with plenty of free parking. I invite you to visit my firm's updated web site at http://www.georgefootepc.conn/ You can also contact me electronically at georgefoote@rcn.com. If you know someone in need of legal services, I hope you will recommend me to them. This letter is one of the few advertisements I use, as I rely primarily upon recommendations from clients. Thank you for the referrals you have provided in 2009 and I wish you and yours good health, good times, and peace in 2010.
2009
As we look toward 2009, I am pleased to write to you to send holiday greetings and also to offer estate planning information.
In recent years, my office has, with increasing frequency, been retained to assist clients in settling the estate of a deceased loved one. Sadly, long nurtured rancor between relatives can sometimes erupt into this litigation. Like wars between hostile nations, litigation between family members wreaks similar havoc. These conflicts usually stem from deep-seated resentments. Litigation is always expensive and time-consuming, and these types of cases are especially difficult to settle without trial. In spite of the high emotional and financial costs, greed and arrogance drives some people to be aggressively dishonest in dealing with a relative’s estate. Despite the burdens of litigation, there is a high emotional cost to ignoring such wrongdoing
Cases of actual fraud and trickery are less common than what is known as the exercise of “undue influence” over a susceptible elder. The law defines “undue influence” as a “form of compulsion that coerces or pressures a person into doing something that the individual does not want to do or that destroys an individual's free will so that he or she acts contrary to his or her own wishes”. Elders suffering from dementia are clearly more susceptible to undue influence and can become targets of relatives who may feel entitled to a disproportionate share of the estate; as more elders’ mental faculties deteriorate, they can become targets for financial abuse On the other hand, there is a risk that intra-family mistrust can give rise to wild accusations against those in charge who may not be dishonest, so suspicions are not always valid. Ironically, when elders who are also family leaders lose their faculties, it presents additional difficulties. When people have become accustomed to dispensing advice and guidance find themselves in a dependent position, it can be difficult to let go of their leadership role Prudent estate planning should include a durable power of attorney appointing someone fair-minded and trustworthy before mental abilities arecompromised.
Holding an elder’s power of attorney carries responsibilities, and can sometimes invite suspicion and mistrust toward the appointee of an elder’s power of attorney, who becomes a “fiduciary.” Fiduciaries cannot legally perform any act in that role that would favor themselves at the expense of the elder. In fact, if a “fiduciary” is accused of undue influence, they face the heightened legal burden of proving the absence of wrongdoing. This principle, in the cases I have litigated, has been a formidable legal weapon against the dishonest fiduciary, making him or her a greater target of such lawsuits. The best defense against this increased liability is, of course, full disclosure of information and periodic consultation among all interested parties. It can also be helpful to document an elder’s medical condition when they authorize potentially controversial changes in their estate plan. Thoughtful estate planning can cut short potential disputes before they can fester. If hostilities are open, raging, and beyond healing by simple discussion, then it is time to seek the shelter of competent legal advice.
My law practice continues to grow in the areas of estate administration & settlement, estate planning, tax planning, and estate litigation. The Obama tax plan proposes a freeze of the estate tax threshold at $3.5 million, which may warrant changes in estate plans. I also represent clients in all types of real estate transactions, contract matters, as well as criminal, personal injury, and business litigation. I am well settled in my office location at 5 Militia Drive in Lexington, in a bright, attractive, first floor location with plenty of free parking. I have updated my firm's web site, http://www.georgefootepc.com//; I invite you to visit it, or contact me electronically at georgefoote@rcn.com. If you know someone in need of legal services, I hope you will recommend me to them. This letter is one of the few “advertisements” I use, as I rely primarily upon recommendations from clients. Thank you for the referrals you have provided in 2008 and I wish you and yours good health, good times, and peace in 2009.
2008
As we look toward 2008, I am pleased to write to you to send holiday greetings and to offer estate planning suggestions.
Frequently, clients who have lost a loved one, consult me about the required steps to settle an estate. After a brief conference, I will almost always be able to assure clients that they can devote their energies to the funeral, burial and mourning, and meet with me at a later date. If the decedent owned a business or volatile investments, more immediate legal steps may be required. In all cases, a well organized folder with a completed Estate Checklist, such as the one I am suggesting here, can minimize survivors’ anxieties.
The settlement of a decedent’s estate will primarily concern the assets and property of the deceased and assuring that survivors receive proper allocations, and that taxes and debts are resolved. Accurate information about the decedent’s property and investments is a prerequisite to completing this process.
Where to start? A significant source of information is the most recent tax return. Survivors might find that it leads to finding year-end statements of investment accounts. While life insurance policies and other insurance documents are not usually taxable investments (and thus not listed in the form 1040), I have found insurance papers are often kept by clients together with tax returns. Survivors’ anxieties, caused by searching for documents, can easily be avoided with some simple steps. At a basic level, even designating a drawer or cabinet for such documents and making family members aware can be helpful. Ideally, however, the “throwing everything into a shoe box” method will not keep financial documents, records, or other materials organized or updated. I recommend completing a check list which itemizes assets, insurance, loans, and basic vital statistics, and updating the information on an annual basis. By drawing upon models I have seen over my years in my practice, I have developed an Estate Checklist, which I can share with clients upon request.
In addition to completing the checklist form, I recommend storing it along with a copy of the most recent tax return, a copy of your Will, Trust, Living Will, Health Care Proxy and Durable Power of Attorney. Consider tax time a good opportunity to review and update this form and accompanying documents. I will close with one piece of related advice. While placing a copy of a Will in a safe deposit box is always sensible, original Wills and Trusts should be stored elsewhere. If the safe deposit box is in the decedent’s sole name, it will not be accessible immediately after death, without a court order. A good place to store an original Will would be either at your attorney’s office or in the folder containing your completed Estate Checklist.
My law practice continues to grow in the areas of estate administration settlement as well as estate and tax planning. I also represent clients in all real estate transactions, contract law, criminal, personal injury, and business litigation. I am well settled in my office location at 5 Militia Drive in Lexington. The office is located at a bright, attractive, first floor location with plenty of free parking. My firm's web site is http//www.georgefootepc.com/, and my e-mail address is georgefoote@rcn.com. If you know someone in need of legal services, I hope you will recommend me to them. This letter is one of the few “advertisements” I use, as I rely primarily upon recommendations from clients. Thank you for the referrals you have provided in 2007 and I wish you and yours good health, good times, and peace in 2008.
2007
I am pleased to write to you during this festive season, to send holiday greetings, to offer estate planning suggestions and to announce that my office has moved to 5 Militia Drive in Lexington. We have a first floor location with plenty of free parking.
The Durable Power of Attorney (DPOA) is a basic estate planning document I draft for clients, and clients often have questions about it. First, it is a lifetime-only document which terminates upon the death of a person granting the DPOA (the “grantor”). By signing any POA, the grantor is designating the recipient of the POA, or “attorney-in-fact” as his or her “agent” to perform the tasks listed in the document. What makes the DPOA “durable” is that it legally stays in effect, even if the grantor becomes mentally disabled.
Once someone becomes mentally disabled, a properly drafted DPOA signed before that person is deemed mentally disabled, can be used for almost every task involving the disabled person’s property. Typical tasks covered by the document include the signing of checks, all types of withdrawals from the grantor’s accounts, selling and buying of the grantor’s property, creating trusts, and making gifts of the grantor’s property. In effect, the agent recipient “stands in the shoes” of the grantor. Without a previously signed DPOA, the disabled person has no legal capacity to sign legal documents, including a trust, or a new power of attorney. At that point, the only option for managing aperson’s property is a Probate Court Guardianship.
Probate Court Guardianships can be expensive and time-consuming. Major transactions involving the “ward’s” (i.e. a disabled person under guardianship) property require court approval and a hearing, where “interested parties” (potential heirs) are invited to object. While the process of administering a deceased person’s estate in the Probate Court has been streamlined, by contrast, guardianship matters have not, and can be bogged down for many reasons. In addition, the guardian’s records of spending and investments of the ward’s assets are scrutinized, and such “accounts” are reviewed by the ward’s heirs and require approval by the Probate Court. All too often, the ward’s assets are depleted by court and attorney fees.
A non-spousal DPOA should be given to a respected and honest family member. Keeping accurate records protects everyone in case motives and actions are questioned. A recipient of a DPOA is a “fiduciary”. Fiduciary responsibilities impose a high legal standard of ethical behavior upon the recipient. Before signing a DPOA, potential conflicts and jealousies within the family should be considered. A grantor’s written guidelines and intentions can be helpful, but if they are overly specific, they may impinge on a recipient’s need for flexibility to deal with unanticipated future contingencies. However, a DPOA does have its limitations. A Will, for example, cannot be signed under authority of a DPOA. Finally, some banks are reluctant to honor a DPOA if it is not “recent”. It is good practice for the non-disabled grantor to sign a new DPOA every few years to satisfy restrictive financial institutions.
My practice continues to grow in the areas of estate settlement and estate and tax planning. I also represent clients in all real estate transactions, as well as contract law, criminal, personal injury, and business litigation. My firm's web site is http//www.georgefootepc.com/; my e-mail address is georgefoote@rcn.com. If you know someone in need of legal services, I hope you will recommend me to them. This letter is one of the few “advertisements” I use, as I rely primarily upon recommendations from clients. Thank you for the referrals you have provided in 2006 and I wish you good health, good times, and peace in 2007.
2006
I am pleased to write to you during this holiday season, to send greetings, and to offer some information about Tax and Estate Planning.
I have often been asked about the crucial role played by an executor of an estate. After all, many of us are nominated to be an executor in a Will, Yet I find that a limited number of people have an adequate grasp of what is required.
A starting point is to keep in mind that an executor is an individual who has a “caretaker” role over all of the decedent’s “probate property”, which will ultimately be distributed to the beneficiaries. Property subject to “probate” are those assets that at the point of death were owned solely by the decedent. This would include, of course, property that was at one time “jointly held”, but one of the joint owners had previously died.
Probate is usually an unfamiliar process to heirs. Parts of the probate process are institutionally arcane and move slowly. Beneficiaries can easily become suspicious and upset even when they have no cause to be since grief over the loss of a loved one can sometimes ignite anger where least expected. In order to assist the executor, my own undertaking as an estate attorney is in part devoted to reducing tensions by careful explanation about the estate process. Attention by the executor to good communications are essential to prevent small misunderstandings from escalating into major conflicts. Left unattended, such emotions sometimes find outlet in an antagonistic attitude toward the person most visibly associated with that death, which is often the executor. Anger and conflicts within a family are often greatly exacerbated by the process of dividing up a deceased family member's estate, and the executor and the seasoned estate attorney need to work as a team to minimize them to get the estate settlement job completed, and avoid becoming a casualty of intrafamily war.
The actual tasks for which the executor is responsible would include the filing of the decedent’s final income tax return, the filing of the estate’s form 706, or “estate tax”return, the filing of the decedent’s last Will, the necessary due diligence to discover the extent of the decedents assets, as will as debts, paying lawful debts and taxes, and ultimately distribution to heirs and beneficiaries.
It is important to note that while the Federal estate tax exemption will increase to $2 millinon in 2006, the Massachusetts estate tax exemption will top out at $1 million. While the decedent’s last Will has jurisdiction over only “probate property”, the executor must have complete information about the joint property, life insurance and other “non-probate” property in order to file the estate tax return. Distribution to heirs or even creditors without completely paying all of the estate’s tax obligations, subjects the executor for personal liability for such non-payment. In summary, the ability and willingness to keep accurate records, financial acumen, good management skills, as well as, impartiality and communication and mediation skills, are important qualities for a good executor.
My practice continues to grow in the areas of estate settlement and estate planning. I also represent clients in all real estate transactions, as well as contract law, criminal, personal injury, and business litigation. My firm's new web site is http//www.georgefootepc.com/; my e-mail address is georgefoote@rcn.com. If you know someone in need of legal services, I hope you will recommend me to them. This letter is one of the few “advertisements” I use, as I rely primarily upon recommendations from clients. Thank you for the referrals you have provided in 2005 and I wish you good health, good times, and peace for all of us in 2006.
2005
Although the following information might not be of interest to my broader client base, it does deal with the specific areas of both tax and real estate law, and I thought it might be helpful to a few clients who in the unique position of owning homes which either in a historic district or could be certified (or are already certified) as “historic structures”, regardless of the district in which they are located. Here is the “tax tip” which may be helpful:
The Federal Historic Preservation Tax Incentive allows an owner of a historic residence to take a charitable deduction for up to 11% of a building’s value for the “donation” of its “façade (e.g. the exterior)” to a charitable trust. Trusts for historic preservation have made the program more available to ordinary taxpayers.
By “donation” I do not mean that you have to share ownership of your residence with some civic organization; you only donate what is, in effect, an “easement” to the historic trust. Such an easement would restrict an owner’s ability to make significant changes to the façade. In towns like Lexington, local Historic Boards already impose obstacles to changing the façade of an historic building. Donation of the façade to a qualified Trust will not, practically speaking, diminish an owner’s property rights, and the owner will gain a huge tax deduction. In most situations, the donation will neither interfere with refinancing nor cause a reduction in a property’s value when the owner decides to sell. Because every property is unique, however, a real estate Broker should be consulted for an opinion whether the donation of a particular property’s façade would have a psychological or other impact upon future potential Buyers of the property.
Most of my tax clients are clients of long standing for other legal matters. Occasionally, I find that a few tax clients get the mistaken impression that I deal almost exclusively with income tax returns. While assisting clients with all types of tax matters is a significant area of my practice, I devote the majority of my law practice time dealing with estate settlement, estate planning, real estate transactions, as well as criminal, injury, and business litigation. My firm's web site is http//www.georgefootepc.com; my e-mail address is georgefoote@rcn.com. If you know someone in need of legal services, I hope you will recommend me to them. Thank you.
2004
As always, I am pleased to write to you during this holiday season, to send greetings, and to offer some information about Tax and Estate Planning.
As I reported to you in last years letter, the Massachusetts estate tax rates effectively increased on January 1, 2003. Estates in Massachusetts as of 2003 have a $700,000 exemption compared to a $1 million exemption under Federal tax rules. Next year, the Massachusetts exemption increases to $850,000 and the Federal exemption rises to $1.5 million. Those who have amended their marital trusts (also called credit shelter trusts) during 2003 should be adequately covered if their potential estates are valued above $850,000 and under $1.5 million. I am recommending that any estate plan drafted before the fall of 2002-2003 be reviewed and amended to account for recent changes in the law. Amendments of this nature can usually be drafted at a very reasonable cost to clients.
Clients concerned about nursing home costs and eligibility for Medicaid often consult me about depletion of estates due to potentially catastrophic health care costs. Typically, clients are left with two options; either completely transfer ownership of their home, or purchase Long Term Health Care Insurance (“LTCI”). The purchase of LTCI will exempt the client’s home from being sold to reimburse the Commonwealth for Medicaid payments paid during a client’s lifetime to a nursing home. This “Medicaid lien” would otherwise effectively prevent a sale of the home by the estate until the State is reimbursed for Medicaid. But LTCI is expensive and only those in excellent health can qualify for the insurance. Until recently, as an alternative to costly LTCI, clients could transfer their homes into a, so-called life estate , which removes a home from their Aprobate estate. Prior to July 1, 2003, the Medicaid lien attached only to the owner’s probate estate. Now, the Medicaid lien will attach to property held in a life estate.
Gifting assets to heirs may result in a three-year waiting period for Medicaid eligibility, depending on the amount gifted. The only exception to this waiting period exists where the home is transferred to a sibling or a child who lives with the senior and provides custodial care to the former owner. If the transfer of assets is made to a trust, the waiting period for Medicaid eligibility increases to five years. Massachusetts, like Connecticut, has applied for a Federal waiver to make the asset transfer rules even stricter. Connecticut’s application, however, has been pending for two years, so the transfer rules may not change soon, but stay tuned. There are still steps clients can take to protect their estates, but this means retaining less control over their assets (i.e. gifting property to heirs). In summary, clients whose potential estates would be over $850,000 have less to fear from nursing home costs, and should focus instead on optimizing estate tax planning opportunities.
I continue to consult with a growing number of clients in the areas of estate settlement and estate planning. I also represent clients in all real estate transactions, as well as contract law, criminal, personal injury, and business litigation. My firm's new web site is http//www.georgefootepc.com / ; my new e-mail address is georgefoote@rcn.com. If you know someone in need of legal services, I hope you will recommend me to them. This letter is one of the few advertisements I use, as I rely primarily upon recommendations from clients. Thank you for the referrals you have provided in 2003 and I wish you good health, good times, and peace for all of us in 2004.
2003
As always, I am pleased to write to you during this holiday season, to send greetings, and to offer some information about Tax and Estate Planning.
Despite the much publicized "repeal" of the Federal estate tax, the Massachusetts estate tax will actually increase on January 1. Through 2002, and for the past several years, an estate valued at less than the Federal exemption, would also be exempt from Massachusetts estate tax. Even Federal taxable estates would only pay the "maximum state credit" amount, which would be sent separately to the State, but would be subtracted from the Federal Estate Tax owed. The Federal exemption will remain at $1 million for one more year, then increase in future years, but as of 1/1/03, the Mass. exemption will drop to $700,000.00. While the Federal estate tax exemption is also scheduled to fall back in 2011, a Republican majority in Congress may attempt to enact permanent repeal of the Federal estate tax; this is despite growing budget deficits caused by a slow economy and additional expenses for national security. If only for the Mass. estate tax however, there is still a compelling need for estate tax planning.
Taxes are only a part of estate planning. I am often asked about the wisdom of leaving children unequal shares, thus favoring some beneficiaries over their siblings in a Will or Trust. The "price" of unequal treatment in Wills and Trusts can be resentment which can incite estate litigation filed by those less favored by the decedent, and I have witnessed this result. Estates are quickly depleted by such lawsuits. They can be avoided by careful evaluation of competing personalities among beneficiaries. Unequal treatment of beneficiaries should be attempted with extreme caution.
On the other hand, it is always more prudent to avoid procrastination and make the best choice by weighing all the facts at your disposal. Estate plans can usually be amended at a reasonable cost, if circumstances change. Even a Will which designates an executor and divides an estate equally among survivors provides financial advantage by easing the administration process. It will also give emotional closure to heirs who will know that the decedent cared enough to make even their declaration of equal treatment, rather than leaving things untended.
I continue to consult with a growing number of clients in the areas of estate settlement and estate planning. I also represent clients in all real estate transactions, as well as criminal, injury, and business litigation. My firm's new web site is http//www.footelawoffice.com ; my new e-mail address is georgefoote@rcn.com. If you know someone in need of legal services, I hope you will recommend me to them. This letter is one of the few advertisements I use, as I rely primarily upon recommendations from clients. Thank you for the referrals you have provided in 2002 and I wish you good health, good times, and peace for all of us in 2003.
George E. Foote, J.D., L.L.M. in Taxation