New Estate Tax Laws Enacted

Just under the wire, Congress has enacted new tax laws with respect to federal estate, gift and generation skipping taxes.  Under this law, beginning in 2011 the estate and gift taxes are reunified and the exclusion/exemption amount is set at $5 million per person.  The maximum rate is reduced to 35 percent.  The generation-skipping transfer tax exemption is also raised to $5 million, with a maximum tax rate of 35 percent.  The act includes a "repeal of the repeal" of the prior estate tax laws, so for decedents dying in 2010, rather than there being no Federal estate tax, the fiduciaries may elect whether to subject the the estate to the previously existing laws or the new ones about to take effect.  These provisions sunset at the end of 2012.

For an interesting analysis of the new estate tax provisions, see this article in today's New York Times: http://www.nytimes.com/2010/12/18/your-money/taxes/18wealth.html?emc=tnt&tntemail1=y.

Duties Of An Executor

When a loved one dies, often a family member will have been named in the Last Will and Testament as the Executor of the deceased’s estate. What are the responsibilities of the Executor?

The Executor will have three main responsibilities. The first is to collect and manage all probate assets of the decedent. The second is to pay all liabilities of the decedent. The third is to distribute all probate estate assets to the named beneficiaries.


As soon as practical following the death of the principal, the Executor should contact the attorney who assisted the decedent with preparation of the estate plan to obtain the original Will and begin the probate process. In order for an Executor to have the power to undertake the various duties, he or she must first be appointed by the Probate Court. A Petition for Allowance of Will, together will accompanying documents, must be filed with Probate Court in the county where the decedent resided. Notice to heirs must be given and a copy of the Petition must be published in a local newspaper. Following satisfaction of procedural requirements, the Court will issue a Citation allowing the Will and appointing the petitioner as Executor.

Once appointed, the duties of the Executor will include:


• Locating the decedent’s important papers and gathering information about all assets owned by the decedent.
• Contacting each institution holding such assets and effectuating the transfer out of the decedent’s name and into an estate account or accounts.
• Filing claims to obtain certain payments to which the estate may be entitled, such as life insurance proceeds, Social Security benefits, Veteran’s benefits or employer pension and insurance benefits.
• Gathering paperwork regarding all liabilities and claims by creditors of the decedent, and arranging for payment of those liabilities.
• Selling assets of the estate as directed in the Will, or for cash requirements.
• Investing estate assets to generate income during the period of administration.
• Filing estate tax returns, if necessary, within nine months of death, and income tax returns.
• Dividing and distributing the net estate assets to the beneficiaries in accordance with the terms of the Will.
• Filing an Inventory, and ultimately a Final Accounting, with Probate Court.


If a decedent owned assets in trust, or jointly with another person, or in a form that allowed the decedent to designate a death beneficiary, those assets will pass outside of the probate process in accordance with the procedure applicable to such assets. While not strictly within the probate estate, oversight of those assets by the Executor may be necessary in order ensure the orderly administration of the decedent’s overall estate.

Of course, an article such as this cannot cover all of the possible scenarios in attending to the estate of a decedent. Consultation with a qualified probate attorney (such as myself!) will be important to proper administration.

"Avoid Contractor Rip-offs"

This http://www.boston.com/lifestyle/house/articles/2010/12/05/avoid_contractor_rip_offs/is a terrific piece in today's Boston Globe Magazine on how to protect yourself when hiring a contractor.  A good follow up to my blog post from this past September and worth reading!

My Facebook Page

Just want to remind everyone that I also have a Facebook page for "Law Offices of Judith R. Pike", where I post links to news stories of interest to my readers.  Here's the link:  http://www.facebook.com/#!/pages/Wellesley-MA/Law-Offices-of-Judith-R-Pike/118159531528358.  Please click "like" to become a follower of this page and receive regular updates of new postings.

 

Borrowing From Your Parents

Interesting article in today's New York Times about borrowing money from family members as an alternative to an institutional mortgage.  http://www.nytimes.com/2010/11/05/business/businessspecial5/05MORTGAGE.html?emc=tnt&tntemail1=y

What Is A Will, and Why Do I Need One?

Nobody wants to think about the fact that we will all die someday, but responsible planning includes setting your affairs in order so that your family and loved ones are taken care of if something should happen to you. A Will is simply a document that sets out your instructions for how you want your assets to be distributed after your death. It ensures that your assets are passed on the people you want and provides for orderly distribution of those assets. It may also serve to avoid or eliminate disputes among your beneficiaries. If you should die without a Will, your assets will be distributed according to a statutory scheme, which may not be the same as what you would otherwise choose. Any person of any age, 18 or older, who owns assets, real or personal, should consider establishing a Will.


To be valid, a Will must be in writing and must be witnessed and notarized. The witnesses and notary must verify that the creator of the Will was of sound mind and executed it freely and voluntarily, without any undue influence. A handwritten Will without proper execution will not be validated in most cases. A Will once executed remains valid unless and until revoked by the creator (or, as to a spouse, until a divorce). It may be changed at any time that you wish.

If you have minor children, a Will is also the place where you would designate guardians to take legal custody of your minor children in the event both parents are deceased. (See my blog post dated December 9, 2008 for more on the topic of guardians.)

Not all property passes according to a Will. Only property which you own in your individual name with no beneficiary designation will pass under the Will. Certain assets, such as life insurance and retirement accounts, will pass instead directly to the beneficiaries of those assets. Jointly held property also passes not through the Will but instead to the surviving joint owner. In determining distribution of your assets, therefore, you must consider beneficiary designations and the way you hold title to property as well as the terms of your Will.

Wills may be simple or more complex depending on your particular circumstances. It may be just one of several components in a proper estate plan. Establishing a Will is an important first step in putting all of your financial affairs in order. The assistance of an experienced estate planning attorney is crucial to the successful completion of this task.

CONSIDERATIONS WHEN BUYING NEW CONSTRUCTION

If you are buying a property currently under construction, there are several additional factors to take into account beyond those of the customary purchase of an existing property. Following are some considerations which should be addressed in any contract for the purchase of new construction:


1. TIMING: the builder will project a completion and closing date which will be incorporated into the purchase and sale agreement. Notwithstanding, home builders generally provide the right to extend a completion and closing date for periods of up to 120 days from the originally projected date to protect against construction delays. If you are buying new construction, be sure you have a contingency plan for storage of your possessions and somewhere to live in the likely case your closing is delayed.


2. INSPECTIONS: a purchase and sale agreement should always give the buyer the right to do a comprehensive inspection of the property at the completion of construction but prior to closing to ascertain that the property has been constructed in accordance with all plans and specs. Once you close, you lose the right to object to property condition except as may be covered by a builder’s warranty.


3. “SUBSTANTIAL COMPLETION” AND UNFINISHED WORK: It should be a condition of any purchase and sale agreement that the builder deliver a final and unconditional Certificate of Occupancy from the building department before closing occurs. Without this, the property is not certified as complete or legally habitable. Yet even if a C.O. has been issued, it is possible, even probable, that there may be a “punch list” of smaller items not yet finished which will be completed after the closing. In your final inspection, you and the builder should develop a “punch list” of unfinished work so all parties have a common understanding of what remains. Ideally, for maximum protection, a buyer should seek a holdback from the builder’s sale proceeds in an amount at least equal to the value of the unfinished work (one and one-half times the value is better), with such funds being held in escrow by buyer’s attorney until the punch list is completed. Many builders, however, will not agree to holdbacks in any circumstances. In that case, the buyer is limited to a contractual obligation on the builder’s part to complete the punch list within a stated period of time following closing.


4. COMMUNICATION: it is imperative to keep in regular communication with the builder and conduct periodic inspections to ensure that the property is being completed as agreed. It is much easier to fix a problem as it occurs than to have to go back much later and try to remedy non-compliance.

5. WARRANTY: always seek a written one-year warranty from the builder covering structural and systemic matters and warranting against any defects in materials or workmanship.


If you are buying new construction, keep these matters in mind, and seek the assistance of a qualified attorney to negotiate your purchase and sale agreement so these items are incorporated into the contract.