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Myths and Facts About Probate
Patricia Bloom-McDonald • Aug 06, 2019

I just need a Will and a Living Will. This will avoid “probate” and allow someone to make medical decisions for me if I cannot express myself.

Not true. A Last Will and Testament is a “road map” that expresses how someone wants their estate (financial and personal belongings that exist at the time of their death) to be distributed by the person they appoint as their Personal Representative.

If your home, car, bank account(s), retirement plans, life insurance policies and other assets that allow designation of a beneficiary upon your death do not make such designations, these assets, even if addressed in your Will, will be required to pass through probate, which can take at least nine months to resolve.

A Living Will is a good starting point to help you plan for medical decisions at the end of your life, because it tells your doctor and hospital what end of life treatments (respirator, dialysis, tube feedings, etc.) that you do or do not want. HOWEVER, IT DOES NOT appoint anyone to make health care decisions for you if you cannot express yourself, you are incapacitated or unconscious.

I don’t need Advance Directives (Living Will and Durable Powers of Attorney for Health Care) because I am married and my spouse can legally make these decisions for me.

It is a common misunderstanding that spouses automatically have the legal right to make health care decisions for one another. Many hospitals, nursing homes, health care workers and facilities will initially often seek direction from a spouse, but if the patient-spouse requires treatment in another facility or more advanced care, a guardianship will be required if no Durable Power of Attorney for Health Care is in place.

I have a Living Will that states that I don’t want any “heroic measures” taken to resuscitate me. Do I really need to talk with my family and doctor about this? No one likes to talk about these things.

Even though these discussions are often very difficult to start, they are essential to really having your end-of-life wishes be carried out. A Living Will that just states that you do not want “anything extreme” or “life-sustaining treatment” without more detail does not provide enough guidance to family members and health care professionals to enable these documents to be useful. Therefore, it is critical to have candid, detailed conversations with your health care providers and family about your wishes – not only for end of life treatment, but regarding autopsy, hospice, nursing home care, funeral matters – everything that is important to you. Even if your family does not like or agree with your wishes, if you document your values and wishes, the likelihood that they will follow them is greatly increased. You should explain that these are your wishes – not theirs.

My child(ren) and/or spouse’s names are on my bank account(s) so I don’t need a General (Financial) Durable Power of Attorney.

Having another person’s name on your bank account allows that person to pay bills for you, but also allows them to use the money in the account for anything else they want – even for their own use. By having someone else’s name on your bank account (even though your name is also on the account) makes that person a joint owner -this gives them the right to use the money in any way they choose.

A safer strategy that allows someone to be able to access your funds when needed to pay your bills, is to create a General (Financial) Durable Power of Attorney. If you can no longer handle your finances, the person named in your General Durable Power of Attorney would take the document to your bank, open a POA account that will be titled in their name as Attorney-In-Fact for you and then be able to pay your bills.

Additionally, a Durable Power of Attorney is necessary even if you have a trust, since there are certain powers that only a person appointed under a Durable Power of Attorney can typically do, such as filing a lawsuit, dealing with insurance issues and handling assets not in your trust.

My Advance Directives are only effective in the state in which I had them prepared, so they have no use if I move or go on vacation and something happens.

No. Every state recognizes these documents and encourages their creation. State requirements for signing, witnessing and notarizing may vary from state to state, but if the document is valid in the state in which it was prepared and complies with the most stringent signature requirements (at least two unrelated witnesses, signed and dated by the persons who created it, all in the presence of a Notary Public), these documents should be legally effective and honored in all 50 States.

I have just been diagnosed with dementia. Now I cannot have Advance Directives prepared, correct?

No. Individuals who are diagnosed with dementia, Alzheimer’s disease or other cognitive disorders are most often absolutely capable of understanding the purpose of Advance Directives and can express their wishes sufficiently to have the documents prepared. If there is a question regarding whether you have the mental capacity to have these documents created, a letter from your physician, prepared close in time to the preparation of your Advance Directives will minimize any challenges that may question your mental ability to have these documents created.

My spouse created a Durable Power of Attorney but now has Alzheimer’s disease. Is the document still valid?

Yes. The document is absolutely valid. This is the purpose of Durable Powers of Attorney – they are meant to be and specifically state that they are to be valid: 1) depending on the wording of the document, upon the occurrence of a certain event identified in the document (i.e.; effective immediately upon signing) or 2) in the event the person who created it becomes incapacitated. If the document specifies that it becomes effective when one or two physicians certifying that the Principal is incapacitated, a letter from however many doctors required by the document will need to be obtained before it can be used.

A Living Will means “Do Not Treat Me”

No, your Living Will can and should state whatever your wishes are regarding your end of life treatment. You can state that you want all, some or no life-sustaining treatment at the end of your life. “Life-sustaining treatment” is considered to be CPR, artificial ventilators, dialysis, surgery, antibiotics, artificial nutrition (tube feedings) and hydration (I.Vs) at a time when you are determined to be in terminal condition, coma, persistent vegetative state, with no reasonable chance of recovery and something changes in your condition, requiring that artificial means be used to maintain your life. Therefore, if you wish to have everything done to maintain your life (all life-sustaining measures), you should have your document clearly state these wishes. Individuals who have strongly held religious or moral beliefs should state any treatment preferences based on those beliefs in their documents and be SURE to discuss these wishes with their health care providers and family.

If I create Advance Directives, I give up complete control and I don’t want to do that.

You can always change your mind and either revoke, destroy your documents or create new documents, even if you are incapacitated. However, if you are incapacitated and revoke your documents, someone will need to go to Court and be appointed to make health and financial decisions for you.

I can’t have these documents created because I have no family in town to help me.

Although it is preferable to have someone local to be able to make urgent/emergency medical decisions for you, the person you believe will best advocate for you and honor your wishes should be appointed. Cell phones, email and faxes makes it possible for out-of-town appointees to be accessible when needed.

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Using a Credit Card When You Have a Special Needs Trust

25 May, 2023
A special needs trust (SNT) allows you to meet your needs while receiving government benefits, such as Medicaid/MassHealth and Supplemental Security Income (SSI). When you have a special needs trust, you can use it to pay for goods and services government benefits do not cover, such as therapy, education,and housing. Since receiving income directly from your trust would jeopardize your eligibility for benefits, your trustee cannot give you cash from your SNT. When you use a credit card for permitted transactions, and your trustee pays off the balance with funds from your trust, these payments to a credit card company are not considered income. An SSI or Medicaid/MassHealth recipient who is capable of managing their own affairs can therefore use a credit card to make small purchases, and the trustee of the special needs trust need not micromanage every transaction. In the past, beneficiaries of SNTs sent their bills to their trustees for payment. Today, an individual with an SNT who qualifies for a personal credit card may find that using a credit card is more convenient. Credit cards have several benefits. Using a credit card to manage payments from your special needs trust allows you to maintain independence, gain access to some of the advantages of a credit card, and easily keep records while preserving your eligibility for Medicaid/MassHealth and SSI. Although credit cards can help people manage their special needs trusts, there are also several important restrictions and considerations to keep in mind. Consult with a special needs planner to ensure all transactions are acceptable under the trust's rules and comply with government regulations. The Benefits of Using Credit Cards When You Have a Special Needs Trust If you have a special needs trust, using a credit card has many benefits, including: Independence : Allowing you to maintain your independence. You can use your card to make qualifying purchases yourself. Your trustee does not have to make the transactions for you. Access to the Typical Advantages of a Credit Card : Using it responsibly can help you establish or build credit history, which may be important for your future financial needs. Record-Keeping : Credit cards provide easy record-keeping and a convenient way to monitor transactions from your special needs trust, which can also help special needs trustees fulfill their duty to maintain records. When you use your card, your trustee can observe your purchases and ensure that all expenses are allowable under the trust’s rules. Your statements can help your trustee keep track of funds leaving the trust. Benefits Eligibility : While adhering to Medicaid/MassHealth and SSI’s income and asset limits, you can access funds from your SNT. Credit cards can help prevent your trustee from accidentally providing you with cash payments that could affect your eligibility for government benefits. Considerations When Using a Credit Card for Your Special Needs Trust While you can use a credit card to access funds from your special needs trust for certain transactions , restrictions apply. If your trustee sees a charge on your card that could affect your benefits eligibility , they can flag it for review. You cannot use your credit card to pay for food and shelter, which SSI would cover. When administering your funds, your trustee must ensure that any expenditures are for your sole benefit if you have a first-party special needs trust. While using a credit card is appropriate, you should not use a debit card. Debit cards are considered cash income. Best Practices When using a credit card for a special needs trust fund, remember several best practices. Choose a card with low fees and interest rates. Set a clear budget and monitor transactions regularly. Keep thorough records and receipts of expenses. Consult with your special needs planning attorney. A special needs planning attorney can help you navigate the rules that apply to your trust and understand how to use a credit card to preserve your Medicaid/MassHealth and SSI eligibility. 

How an ILIT can help offset estate taxes

12 May, 2023
With the Federal estate tax exemption possibly about to be lowered, it may be time to think about steps you can take to keep your estate from being taxed. An irrevocable life insurance trust allows you to pass on money to your heirs while avoiding both the federal estate tax, as well as any applicable state estate tax which is currently $1 million in the Commonwealth of Massachusetts. Senate Democrats have proposed lowering the current estate tax exemption from $11.7 million for individuals and $23.4 million for couples to $3.5 million for individuals and $7 million for couples. While it is unclear if this proposal will pass, it is likely that some change to the estate tax is coming. Even if Congress does not take any action, the current rate will sunset in 2026 and essentially be cut in half, to about $6 million per individual. In the Commonwealth of Massachusetts, the current estate tax exemption is $1 million for individuals and is taxed at dollar $1.00. A proposal to raise it to $3 Million and the tax to start at $3 Million (not at $1.00) has been submitted in the legislature but has not yet been voted on or enacted. One way to make up for any estate tax your estate may have to pay is by setting up an irrevocable life insurance trust [ILIT]and funding it with a policy that has a death benefit that would pay your heirs some or all of the amount your estate will be taxed. If you purchased such a life insurance policy directly, it could end up being taxed as part of your estate. But if a trust owned the policy, it could pass outside your estate. While a life insurance trust can be highly beneficial, it is also complicated to set up and maintain properly. The following are some of the requirements: Trustee . If you are setting up the trust, you cannot also serve as a trustee. If you are the trustee, you have control of the trust, which could lead to the trust being included in your estate. You will need to name another trusted person or financial institution to act as trustee. Policy ownership . The trust must own the life insurance policy. If you transfer an existing policy to the trust and die within three years, the policy will still be considered a part of your estate. To avoid this risk, the trust can purchase a policy directly rather than receive an existing policy. Premiums . You need to transfer funds to the trust to pay the policy premiums, which creates an issue with gift taxes. A transfer to a trust is usually not subject to the $15,000 yearly gift tax exclusion. For a gift to qualify for the exclusion, the recipient must have a "present interest" in the money. Because a promise to give someone money later does not count as a present interest, most gifts to trusts aren't excluded from the gift tax. To avoid this, you can use something called a “Crummey” power which gives beneficiaries the right to withdraw the funds transferred to the trust for up to 30 days. As part of the process, the trustee needs to send them a letter, known as a Crummey letter, letting them know about the trust funding and their right to withdraw the funds. After the 30 days have passed, the trustee can use the funds to pay the annual insurance premium. You run the risk of the beneficiaries withdrawing the funds, but if they know that by allowing the money to stay in the trust they will receive more money later, it shouldn’t be a problem. Beneficiaries . The beneficiary of the life insurance policy is usually the trust. Once the funds are deposited in the trust, the trustee can distribute the assets to the beneficiaries in the way specified by the trust. For example, if your beneficiaries are minors, you can wait to have the trustee distribute the assets. Keeping the assets in the trust will also protect them from your beneficiaries’ creditors. The downside of an irrevocable life insurance trust is that you do not have the ability to change it once it is set up, although the policy would effectively be canceled if you stopped paying the premiums. If you are considering this type of trust, discuss it with your attorney.
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