Estate Planning Bits

Bank accounts – insured or not insured? That is the question

The Federal Government has prepared a list of banks that are in financial crisis or potential trouble. Several banks have failed this year, and it is certainly prudent to investigate as to whether all of the deposits you have in a bank are in fact insured.

The Federal Deposit Insurance Corporation (FDIC) insures each depositor up to $100,000.00. Some states have special funds, such as thrift institutions or savings banks, which have additional insurance available to cover the excess of those deposits.

In any event, you should always review a bank's financial health before making a deposit if your total deposits in that bank are in excess of $100,000.00. It is also important to keep in mind that accruing interest becomes a deposit, so if the interest is not being spent, but added to the bank account or certificate of deposit (CD,) it becomes part of the total.

In reviewing the FDIC data, it is important to clarify the type of account which is opened. Since only $100,000.00 per institution is insured, if you have more than this amount, you may open separate accounts at different institutions to assure insurance coverage.

If an account is owned jointly, each individual on that joint account is insured up to the $100,000.00 coverage. For instance, if a husband and wife have a joint account at the bank, they will each have a $100,000.00 level of protection, or in the aggregate, $200,000.00.

However, if you have an account in a revocable trust, that amount is insured up to only $100,000.00 regardless of how many beneficiaries are provided for in the Trust. Some may be contingent beneficiaries, and in most cases, the revocable trust names only the creator of the trust as the beneficiary.

IRA accounts are insured up to $250,000.00 and considered separately from any other accounts that are construed to be non-retirement accounts.

If you have a certificate of deposit that has been purchased through a brokerage firm, then the insurance will run through the brokerage firm. In many cases, it includes a total of $500,000.00 of protection of assets in the brokerage account.

You might also have an account at an institution that is held in a trust. In this situation, the trust department of the bank invests the funds, but these funds are not part of the bank's assets. Therefore, they aren't insured under the policy of the FDIC or any other insurance. In the unfortunate event of a bank's failure, these assets should not be at risk though, since they are still the property of the creator or beneficiary of the trust. But, to the extent that the bank has invested these assets within itself such as CDs or other bank accounts, they will be under the umbrella of insurance and could be at risk if the total sum exceeds the insured sum.

It is common for a bank to ask you upon opening a new account, whether you want to have another co-owner on the account. The co-owner should be aware that if they have other accounts, this additional deposit could jeopardize the total amount of insurance available.

Again, it is always good to determine the financial well-being of the bank before making any deposits, especially those that may be in excess of any insurance coverage. When in doubt, you may review the statement of condition of the bank to determine the level of financial security and stability of the bank.



by: Hyman G, Darling, Esq.

Social Security Benefits - at what age should you begin receiving them?

More than 91% of current retirees receive monthly benefits from the government program referred to as Social Security. The program is very important to seniors, as nearly three out of five retirees receive at least half of their income from Social Security. It is imperative that individuals understand their options as to when they should commence receiving Social Security retirement benefits.

Individuals must wait until their full retirement age in order to draw non-reduced Social Security benefits. For baby boomers (defined as those born between 1943 and 1954), full retirement age is at age 66. However, you may elect to receive Social Security retirement benefits at age 62. But if you elect to receive retirement benefits at age 62, there will be a permanent reduction in the amount of monthly benefit you can receive. Moreover, in the event that you delay receiving Social Security benefits until after full retirement age, you get a bonus in the form of delayed retirement credits. These annual increases apply for each year that you delay retirement, up until the age of 70 years old.

There are several factors that you should weigh prior to deciding the proper age to receive Social Security benefits, including whether you have other sources of income. If you has sufficient income, then it may be wise to defer the benefits until full retirement age or later.

Another factor is whether you want to continue working. You aren't required to stop working to receive the benefits. However, if you elects to continue working and to receive benefits before full retirement age then you face a potential reduction in benefits.

Still another factor is your health. If you is in poor health, which may reduce your life expectancy, then electing an early benefit may be a wise decision.

In sum, determining the best age to receive Social Security benefits is a complicated endeavor. An estate planning attorney and other financial professionals can assist you in navigating this process.


by: Todd C. Ratner, Esq.

New Homestead Bill proposed by Massachusetts Real Estate Bar Association

Legislation that has been submitted to the Massachusetts legislature by the Real Estate Bar Association (REBA) proposes to make significant changes to what many consider to be an outdated homestead statute.

This Homestead Bill has been proposed in reaction to the frustrations of bankruptcy judges who often struggle to effectively apply the older and ambiguous statute. Additionally, REBA hopes that the revisions will provide more consistent protection for debtors and creditors alike.

Automatic Homestead. Of great benefit to Massachusetts homeowners, the proposed Bill would automatically provide a safety net that protects up to $125,000 of home equity for all homeowners, regardless of whether the homeowners filed a declaration. Homeowners who record a homestead declaration would still receive protection of their equity up to $500,000.

Signature. A flaw in the current homestead statute is that only one owner may acquire a homestead in any such home. Thus, under the current statute, joint owners, including spouses, currently have to decide which individual is more likely to incur liability for a claim that is not covered by insurance. The proposed Bill would allow both spouses to file, even if only one spouse is named on the title.

Second Homestead. Under the proposed Bill, a second homestead filing would relate back to the date of the first filing. This protects against liability incurred between the two filings that could compromise the second declarant's equity.

Trust. In complete contrast to the current statute, the Bill would provide protection to beneficiaries of trusts that hold title to the residence, provided that the home is, in reality, the beneficiaries' principal residence.

Transfer of Title Between Spouses and Co-owners. Currently, spouses or co-owners who transfer title between themselves without explicitly retaining homestead rights inadvertently terminate their right to protection. Under the proposed Bill, such transfers would not terminate homestead rights unless each co-owner or spouse expressly releases their rights to protection.

Sale Proceeds. Under the current homestead statute, there is no express protection for homeowners who sell their home and do not immediately reinvest the proceeds in a new principal residence. Additionally, the current statute also affects homeowners who sustain a casualty loss and do not immediately spend the insurance proceeds. The Bill would protect the proceeds from the sale of the protected residence for up to 12 months. Additionally, homeowners subject to a casualty loss would be protected for up to two years after the date of the loss.

Mortgage. Lastly, the Bill would prohibit mortgage lenders from requiring homeowners to terminate their homestead rights in order to secure a mortgage.


By: Gina M. Barry, Esq.

529 College Saving Plans - benefits your kids and yourself

A 529 Plan is an educational savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code, which created these type of plans in 1998. The Internal Revenue Code has allowed parents, grandparents and others to set aside money in special state-sponsored savings plans for a child's "qualified higher education expenses." The major benefit is that all the interest earned can be spent tax free so long as it's on qualified expenses.

The Code defines qualified expenses as "tuition, fees, books, supplies, and equipment necessary for the enrollment or attendance" at college. Issues have arisen as to what constitutes "supplies" and what "equipment" is "required for the enrollment or attendance" at college. For example, there has been some debate as to whether or not a laptop computer qualifies or not. Or, how about paying off a student loan from the prior year or providing a down payment for a used car to travel to and from college?

The 529 College Savings Plan is a wonderful vehicle to provide tax-free college savings; however, if you wish to pay for more than room, board, tuition and books, you should seek the counsel of a financial and legal professional before enrolling in the Plan.



by: Todd C. Ratner, Esq.

Lye in peace – a “green” alternative to cremation or burial

When deciding how to lay a loved one to rest, families now have a new option: using lye to dissolve the remains. Recently, the use of lye is increasingly generating new interest and concern in the mortuary science field.

The process, called alkaline hydrolysis, uses lye, 300-degree heat and 60 pounds of pressure per square inch from big stainless-steel cylinders similar to pressure cookers. Lye is a caustic, alkaline chemical, which means that it dissolves sticky substances like fat, and has a high degree of reactivity with other materials.

Alkaline hydrolysis leaves a dry bone residue that is quite similar in appearance and volume to cremated remains. This residue can be returned to the family in an urn or buried in a cemetery.

Additionally, alkaline hydrolysis produces a sterile liquid. Usually, the liquid is easily disposed of down the drain. This is akin to a funeral industry practice, wherein, funeral homes also wash blood, other bodily fluids and embalming liquids down the drain. The Environmental Protection Agency does not specifically regulate the effluent. Indeed, it is subject only to normal sewage treatment permitting requirements.

Alkaline hydrolysis has been praised as the "green" alternative to cremation and may attract those concerned about the environment. Unlike cremations, alkaline hydrolysis does not produce toxic emissions, including carbon dioxide as well as mercury from silver dental fillings. Additionally, the sodium hydroxide solution may be less troublesome than the blood and leftover embalming fluid washed down the drain when a body is prepared for burial.

Currently, the process is now used on human cadavers in only two places: the Mayo Clinic in Minnesota and at the University of Florida in Gainesville. There are presently no funeral homes in the world that offer alkaline hydrolysis. Indeed, the use of alkaline hydrolysis as an alternative to cremation is now only legal in Minnesota. It may be very difficult for the public to accept a process that radically strays from the traditional burial or cremation. Nonetheless, as environmental concerns continue to increase, it is likely that alkaline hydrolysis will gain additional acceptance and ultimately be offered on a more widespread basis.


by: Gina M. Barry, Esq.

Planning for the continued care of your disabled child after you’re gone

One of the most pressing issues for parents with a disabled child is probably the concern about what will happen to their child when they become incapacitated or die. This issue often is so difficult that the parents have a difficult time in making decisions, and therefore procrastinate to the extent that nothing gets done until very late in life.

It is estimated that there are over 700,000 adults with disabilities who have parents over the age of sixty in the United States. This statistic reflects the need for people to plan in advance. Once a plan is prepared, it is relatively easy to amend or change it as times change.

For instance, the selection of a guardian for your child when he is a minor may be about who is best able to suit his needs at that age; and this may be his grandparents or possibly an aunt or uncle. As time goes on, it may be better to appoint someone who is younger, such as one of the siblings of your disabled child, when they are mature, responsible and ready to take on the future needs of their disabled sibling.

In preparing the plan for your disabled child, the usual documents should be completed, including a Health Proxy, Will and Power of Attorney. However, a "so-called" simple Will may not be sufficient to attend to your child's needs. You might need a Special Needs Trust in addition. This will protect your child against losing governmental benefits available to him.

The Trust becomes the primary document that provides for your child's needs to the extent that medical care, food, shelter, etc. are not otherwise provided. The funds may also provide for luxuries, which may include massage therapy, vacations, companions, television, etc. These items may also provide medical, educational and social benefits and will hopefully enrich the life of your child.

While attending to these important decisions, you must also consider the potential for public benefits and assure that they are not lost. This may include supplemental security income, food stamps, housing, fuel assistance and possibly a monthly benefit from other sources. However, in the event that governmental benefits are ever diminished, then the funds in the Trust may be available to or for the benefit of your disabled child.

A properly established and funded Trust will also provide the additional benefit of avoiding probate. In addition, estate taxes may minimized or eliminated, which will allow for preservation of additional funds for your disabled child and other beneficiaries.

Another important document to consider is a care plan, which would allow a guardian and trustee to be aware of the special needs of your child. This will list all of the educational, social, financial, and any other necessary information about your child's needs that must be attended to on a daily basis.

The care plan will list of any basic and special information regarding the plan for the child and provide detailed information that will help the trustee and guardian to determine the best housing and social situation for your child. It will also provide detail your wishes for the future as your child transitions from minority to majority and then beyond. Every year, this care plan should be updated, and a copy kept with the Trust Agreement.

It is important to contact professionals who are knowledgeable in this area, as the rules change quite frequently. It is also important to know what services and programs are available to support individuals with disabilities in your community. The trustee and guardian must be provided with information about how services such as therapy, medications, and transportation will be paid for.

The details of the administration and taxation of a Special Needs Trust are quite involved and require professional assistance. One of the best sources to locate this type of attorney is through the Special Needs Alliance, which is made up of approximately one hundred lawyers from across the United States, who must be invited to join the organization. These attorneys are recognized by their peers for their competence, caring and their expertise in preparing plans for disabled families. They may be located at www.specialneedsalliance.com.


By: Hyman G. Darling, Esq.

New bill amends old insurance practice: gender neutral annuities

The Massachusetts House and Senate recently approved and forwarded to Governor Patrick a bill that prohibits insurance companies from using gender as a factor in the sale and payout of an annuity policy. Previously, it was a common insurance practice in Massachusetts to provide women with a lower monthly payout than men, even though both genders purchased the annuity at the same price. As such, a woman had to pay a higher premium than a man to guarantee the same monthly payment. 

The bill provides that, after January 1, 2009, all annuities contracts shall be based on a gender-neutral or gender-blended basis in accordance with regulations promulgated by the Massachusetts Division of Insurance Commissioner. The bill further maintains that any insurance company that makes a gender distinction when calculating annuity benefits will be engaged in an unfair method of competition or an unfair or deceptive act or practice in violation of chapter 176D. 


by: Gina M. Barry, Esq.