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Why Single People Need Estate Planning
Patricia Bloom-McDonald • Feb 24, 2015

If you think that just because you are single that you do not need a will or an estate plan in place, think again. The assets and ownership interests you have in a home and other real property, stocks, retirement account, business or other property can be reduced by federal and state taxes and by having to go through probate if you pass away without a will or other testamentary measures in place. Your property will also be distributed according to the state’s law on intestate succession if you die without a will, which can be contrary to your wishes.

What is an Estate Plan?

An estate plan is a series of legal documents that serve a number of purposes if you become incapacitated and when you pass away. If drawn up properly, you can name a trusted friend or financial professional to deal with your financial affairs and a guardian to provide for your medical care should you become incapacitated. It also provides for the orderly administration of your estate including the distribution of your assets once you pass away. An estate plan can consist of a will, trusts, durable power of attorney, health care proxy and directive, deeds, and other instruments your estate planning lawyer can advise you on.

What Can an Estate Plan Do?

With the proper legal documents and establishment of trusts and/or other instruments, the state and federal taxes on a decedent’s estate can be greatly minimized or even eliminated. Also, you have a say in the disposition of your assets upon your death by naming the beneficiaries of your will, trust, life insurance policy, annuity, retirement, and POD accounts. If you suffer a stroke or a catastrophic accident that temporarily or permanently incapacitates you, naming a guardian or giving a trusted friend, family member, or entity the authority to make financial and health care decisions for you is essential.  If you have no will or other testamentary instrument in place in accordance with the statutory authority.

Further, without a will, the court will appoint an administrator who may not be concerned with the tax consequences or any other considerations affecting your estate. The administrator is usually there to just inventory the assets, pay off the estate’s creditors, and see that the applicable taxes are paid and that the property goes to someone. If you become incapacitated, the court will also name a guardian whom you might not know to make the essential decisions about your health and finances. Any single person should consider meeting with an elder law attorney about what documents you should have prepared in accordance with your personal wishes, to protect your assets and to preserve your estate once you pass away.

What Should Be in an Estate Plan?

Some of the documents you might consider having as part of your estate plan include:

  • – Will
  • – Revocable or irrevocable trusts
  • – Health care proxy with advance directive
  • – Living will
  • – Durable power of attorney
  • – Life estate deed
  • – Declaration of homestead

A will is the simplest document a single person can have as part of their estate plan. It allows you to name the beneficiaries of your property, designate an executor or administrator, and even set up a testamentary trust. Although a will has to go to probate, your estate may be eligible for a short probate process if it is small enough.

A trust is more complicated though it need not be filed with the court or made public. Your property is placed in a trust and managed by a trustee, which can be an individual or entity such as a trusted family member, friend or a bank. It is similar to a will except it does not go to probate and anyone can be disinherited.  It is rarely subject to challenges of mental incompetency, undue influence, or duress when it was established. You should discuss the advantages and disadvantages of a trust and how it is set up with an estate planning lawyer.

Health care proxies are another advance planning tool where you designate someone to make important medical decisions for you once your doctor determines you are no longer capable of doing so. You can limit the powers your agent may have in your proxy. The advance directive can also limit these decision such as not agreeing to life-sustaining measures or other medical care if you become brain dead or under other particular circumstances. You can name a Guardian to spare your family the requirement of court involvement to appoint someone, should the need arise that you are not able to manage3 your own health care needs on a permanent basis.  You need to sign the form before two witnesses and give copies to your doctor, named agent, hospital and family members.

A living will is not legally recognized in Massachusetts though it can be considered by the court if it needs to intervene about life-saving measures. It also gives directions to your health care providers about your wishes regarding measures to prolong life or not under certain circumstances. Your health care proxy can also have these directions as well.

A durable power of attorney is in extremely important document to have prepared along with your Health Care Proxy document. Your attorney-in-fact can have the power to write checks, pay creditors, make investments, and sell assets. You can revoke the document at any time so long as you are competent.  You can name a Conservator to spare your family the requirement of court involvement to appoint  someone, should the need arise that you are not able to manage your financial affairs on a more permanent basis.

Call Elder Law Attorney Patricia Bloom-McDonald

Patricia Bloom-McDonald is a Massachusetts elder law attorney who has been advising single people as well as seniors and their families about elder law and estate planning issues for over 24 years. She can advise you of the advantages and disadvantages of a will, trust, or other legal document and what measures you should now consider to protect your assets, your wishes regarding your health care, mitigate taxes and smooth the transition of your property to whomever you wish.

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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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