Why should you have an estate plan?

Estate Planning…It’s one of those things that most people have heard of and maybe they’ve even thought about doing it, but just haven’t gotten around to it. Some people think it’s only for the wealthy, but it’s not. Almost every time I meet with a new client I hear “I’ve been meaning to do this for years, I just haven’t gotten around to it.” Estate Planning is an important way for you to determine what happens in your life and what happens after your death- to your family and your possessions.

Who is best able to determine what happens to your property or your children, you or the government? I would argue that 99.9% of the time it’s YOU. Each state has its own intestacy statute that governs who your assets go to upon your death. Who gets your property when you die is determined by those statutes if you don’t have a will. Presently, if your primary residence is in Massachusetts and you are married and you have no descendants (i.e. children, grandchildren, etc.) who are not also descendants of your spouse and no surviving parents, then your spouse receives your entire probate estate, after expenses; but remember, laws are always subject to change. The statute (Mass. Gen. Laws ch. 190B §2-102) becomes more complicated when we start examining people who have other children who are not descendants of both the spouse and decedent (the person who died), the decedent’s parents are living, or if there is no spouse or other descendants.

Or maybe you live in New Hampshire. There, R.S.A. 561:1 governs who gets your property upon death if you die without a valid will, similarly, your surviving spouse only gets your entire probate estate if there are no surviving issue (i.e. children, grandchildren, etc.) AND your parents have also predeceased you.

It is important to remember, however that no everything becomes part of your “probate estate”, for instance, your life insurance policy, 401K or other accounts that have beneficiary designations do not generally become part of your probate estate, unless you have not named beneficiaries. Property that is held as joint tenants or tenants by the entirety in MA, is also not considered part of your “probate estate”. In a day and age where families are blended and it is easy to move from one place to another (especially if you live near a state border), it’s more important than ever to have the appropriate documents in place so who gets what is your choice, not the one size fits all approach that the statute in your home state provides.

Take Joe for example…

Joe lives in Tyngsboro, Massachusetts. He is married to Cindy. Joe and Cindy have three boys together- ages 8, 10, and 13. Joe’s parents are both living and he has one daughter, Mary, from a prior marriage. Mary has graduated from college, a few years ago and now has a good job. Joe and Cindy own their home in Tyngsboro jointly. Joe has a 401k from his employer, 2 life insurance policies and an IRA account, all of these have beneficiary designations. Joe and Cindy have a couple of joint bank accounts; however, Joe has some individually owned stocks and a savings account that he’s had since before they got married. He also owns a vacation home on Newfound Lake in NH, in his name only, which he and Cindy are planning on moving to full time…someday. One of Joe’s life insurance policies has Mary, named as the sole beneficiary. Though that policy was set up as part of the divorce settlement, in case something happened to him before Mary finished college, Joe has left the policy in place even though she’s now an adult with a good job, to provide something for her when he dies. Joe loves Mary, but gave up a lot in the divorce and feels strongly that the life insurance proceeds will be a good inheritance for her. It will leave her money for a down payment on a house or to pay for her wedding. Joe’s parents are self-supporting and he feels that any of his assets should go to support Cindy and their minor children. But what happens if Joe dies survived by Cindy, his parents, his four children and has no will? OR what happens to his children if Cindy dies before Joe?

WITHOUT A WILL IN MA WITHOUT A WILL IN NH (if they lived in NH when he dies) IS THIS WHAT JOE WANTED?
Cindy gets their jointly owned bank accounts, the house in Tyngsboro, anything else they jointly own, the life insurance proceeds for the policy that she’s the designated beneficiary on, and anything else on which she’s named as a designated beneficiary (i.e. 401k) AND the first $100,000 plus ½ of the balance of the estate (i.e. his stocks, individual bank account and the lake house). Cindy gets their jointly owned bank accounts, the house in Tyngsboro, anything else they jointly own, the life insurance proceeds for the policy that she’s the designated beneficiary on, and anything else on which she’s named as a designated beneficiary (i.e. 401k) AND the first $100,000 plus ½ of the balance of the estate. Cindy may also have a homestead exemption on the lakehouse that she could claim, since they were living there full time when Joe passed. No- Joe wanted Cindy to get everything. Except the one life insurance policy Mary is named on.
His 3 boys have an equal share in the ½ of the remaining estate balance (after Cindy’s share) with their half-sister. So they each get ¼ of what’s remaining after Cindy’s share. His 3 boys have an equal share in the ½ of the remaining estate balance (after Cindy’s share) with their half-sister. So they each get ¼ of what’s remaining after Cindy’s share. No- he knows Cindy will take care of their children, besides they’re kids what are they going to do with the money when they turn 18?
Mary gets the life insurance policy money PLUS ¼ the kids’ share. Mary gets the life insurance policy money PLUS ¼ the kids’ share. No- Joe wanted Mary to only get life insurance proceeds. Her mother got a lot in the divorce and her mom has no other kids, she’ll inherit a lot then. He paid for her college and she’s an adult now, he has younger kids he needs to raise and put through school.
WHAT IF CINDY DIES BEFORE JOE?
Joe’s children all share equally in his estate. There is also the issue of guardianship of the children- who will raise them? Joe’s children all share equally in his estate. There is also the issue of guardianship of the children- who will raise them? No- Joe wanted Mary to only get lift insurance proceeds. If Joe had done an estate plan, he could have his kids’ money go into a trust so they couldn’t spend it all at once. He could also have designated a guardian for them.
WHAT IF CINDY WERE STILL ALIVE BUT HE HAD NO SURVIVING DESCENDANTS?
Then Cindy would only get $200,000 of the estate plus ¾ of the balance of the estate. His parents would get the remaining ¼ of the estate. Then Cindy would only get $250,000 of the estate plus ¾ of the balance of the estate. His parents would get the remaining ¼ of the estate. No- Joe wanted Cindy to get everything.

*NOTE: For simplification, I have not used specific numbers regarding the value of Joe’s assets or talked about spousal or family allowances, creditor’s claims or possible estate tax implications.

If Joe had had an estate plan in place when he died, he could have accomplished his goal of having Cindy (or his boys if Cindy predeceases him) get everything in his estate. Even if your life is not as complicated as Joe’s you should talk to an attorney about estate planning.

A good estate plan examines all of these assets, not just what is in your “probate estate” and takes into account possible estate tax liability. It can also help you and your family avoid probate altogether. In the event you become incapacitated or are unable to make your own medical or financial decisions prior to your death, through the use of a health care proxy and/or advanced directive (depending on your state), a durable power of attorney, and maybe even a trust, your estate plan can help your family do these things for you without the time and expense of going to court for a guardianship or conservatorship.

With some planning you can save your loved ones a lot of time and expense and make sure that your wishes are known. If you already have a plan, review it every few years to make sure that that’s still what you want.

Mandatory Reporting of Child Abuse

In most states certain professions, such as: social workers, teachers and other school personnel, health care workers (i.e. doctors, nurses, mental health professionals), child care providers, medical examiners, law enforcement officers, are required to report suspected child abuse/neglect to the appropriate authorities in that state. Some states, however, require ANY PERSON to report child abuse/neglect not only certain professionals. New Hampshire and Rhode Island are the only New England states that presently have such a requirement. The New Hampshire Statute requiring any person to report is RSA 169-C:29. Other sections of the statute also lay out how to report and the information needed:

  • An oral report shall be made immediately by telephone or otherwise, and followed within 48 hours by a report in writing, if so requested, to the NH Division for Children Youth and Families
  • Such report shall, if known, contain the name and address of the child suspected of being neglected or abused and the person responsible for the child’s welfare, the specific information indicating neglect or the nature and extent of the child’s injuries (including any evidence of previous injuries), the identity of the person or persons suspected of being responsible for such neglect or abuse, and any other information that might be helpful in establishing neglect or abuse or that may be required by the department.
  • If you make a report in good faith in making a report under this chapter is immune from liability.
  • Only the Attorney- Client privilege trumps this reporting law, all other otherwise privileged communications are subject to it.
  • If you fail to report, you may be charged and found guilty of a misdemeanor. Misdemeanors are punishable in NH by up to one year’s imprisonment, a $1,000 fine or both.

For those of you in NH that encounter children in your daily lives (which I venture to guess is most people), please be aware of this law and if you suspect abuse of a child please report it, not only for the child’s wellbeing, but to keep yourself in compliance with NH law.

“Best Interests of the Child(ren)”- Standard for Child Custody

When people contact me regarding divorce issues, oftentimes the first sentence I hear from them is I’m getting divorced and I want to get custody of my children. I have heard this from both Moms and Dads. Assuming there has not been a history of abuse, Mass. Gen. Law c. 208 sec. 31 says: “In making an order or judgment relative to the custody of children, the rights of the parents shall, in the absence of misconduct, be held to be equal, and the happiness and welfare of the children shall determine their custody.” For those of you who don’t know, there are two types of custody, legal and physical. Legal custody is defined as “the right and responsibility to make major decisions regarding the child’s welfare including matters of education, medical care and emotional, moral and religious development.” This post will focus on physical custody. Physical custody is different in that it deals with the day to day supervision and care of the child(ren). In the past, the mother very often got custody of the children because they were the mother and primary caretaker. In recent years however, Massachusetts judges have really begun to embrace parental equality as mandated by statute and there is far less bias toward awarding physical custody to mothers. This could be due to the changing faces on the bench or it could be because more and more fathers are taking active parenting roles and fighting for custody of their children or more likely a combination of the two. Also, keep in mind a large number of cases settle prior to trials before a judge; in those cases, oftentimes, fathers agree to the mother having physical custody (or a majority of the parenting time) with the children.

When the decision is left to the court (as opposed to being agreed to by the parties), there are no mandatory factors listed in the statute, but here are factors that judges take into consideration by virtue of past case law. These factors include: age, sex and stage of development of the child; child’s present state of adjustment in home, school, and community; present and prior interactions of the child with parents, siblings, extended family members or other person who significantly affects the life of the child; the expressed preference of an older child and the wishes and real motivations of potential custodians; the mental and psychosocial health and status of the child and the parents; evidence of each parent’s home environment; a comparison of the economic, physical and emotional environments of the potential custodian including their educational backgrounds, employment circumstances and proposed child care plans; history of domestic violence, alcohol or drug abuse by a parent and its effect on the child; also the comparisons of the capacity of potential custodians to foster growth and development to promote education of the child, to give affection, love, guidance, and moral and spiritual training, and to cooperate with, provide access to and foster affection and respect in the child for other caregivers in the child’s life. In practice, the courts put a lot of weight on disrupting the child’s life as little as possible, because divorce is such a disruptive process in the first place; therefore all other things being equal, if the court needs to decide between one parent who is still living in the child’s school district and another who is not and the child is well adjusted and settled there, it is likely that the court will decide that the child will remain living with the parent lives in a place where the child will not have to switch schools, etc. and uproot their lives even more. For older children, the court also give great weight to the where the child wants to live.

Bottom line: Parents are the only ones that really know what is in the best interest of their child(ren) and YOU (the parents) have options in the process and the outcome of your divorce or custody dispute. Look at your divorce from your child’s perspective and make the best decisions you can for their lives. You want to be able to look back and know that you did your best for your children. That you didn’t let your emotions control you actions and did not use the divorce or custody of your children just to get back at your ex. If you can put your love for your child(ren) before anger at your soon to be ex, you can choose what is best for the kids together. Alternatives to a litigated divorce/custody case, such as mediation and collaborative law can help you do this.

If you would like to learn more about all your alternatives in such matters, please contact me.