In This Issue
Message from the Partners
Five Important Issues to Consider Before Parents and Adult Children Move in Together
Will Your Business Survive Your Generation?
Federal Estate Tax Update
Important Information for all Massachusetts Parents of Minor Children
Special Offer for Children of our Clients
Congratulations to Suzanne!
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Samuel Sayward & Baler 
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Dedham, MA 02026
Phone: (781) 461-1020
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News from
Samuel, Sayward & Baler LLC

November 2010

group attorney photo
Attorneys Suzanne Sayward, Maria Baler, and Steven Joshua Samuel 
Message from the Partners

Dear Clients and Friends, 

We hope you have been enjoying the fall foliage and beautiful weather! 


In this issue we are featuring "Five Important Issues to Consider Before Parents and Adult Children Move in Together," which was written by Attorney Suzanne Sayward and published in the Dedham Times in April.  This article highlights the recent trend of parents and children buying homes together or modifying a home owned by one of them so they can live together. Attorney Sayward details the important legal steps parents and children should take before making the important decision to purchase real estate together or add on to a home. While such a situation can work well for many families, it is important to formalize and address living arrangements ahead of time in order to maintain healthy and enduring relationships.


Attorney Steven Joshua Samuel has written a financial column on ways to successfully pass down the family business from one generation to another.  


Attorney Maria Baler has provided an update on the still-unresolved federal estate tax situation, which is generating more uncertainty and controversy as we move into the November elections and look to the new year. We will continue to follow this issue closely and keep you updated on a regular basis.


Attorney Sayward has also contributed an article on a section of the new Massachusetts Uniform Probate Code that allows parents of minor children to appoint a temporary agent. We encourage you to learn more about this important piece of legislation.


Finally in this issue, we offer a 10% discount to the children of current clients who meet with us regarding their estate plan before the end of the calendar year. We hope you will take advantage of this incentive to encourage your family members to put a plan in place to protect their families!


 As always, we welcome your comments and feedback about specific topics you would like us to address in future newsletters. We also welcome new subscribers so please feel free to send us email addresses or forward this newsletter to a friend.


Best wishes for a healthy and happy autumn, 


Steven Joshua Samuel

Suzanne Sayward

Maria Baler


Five Important Issues to Consider Before Parents and Adult Children Move in Together 


Earlier this year  The Boston Globe ran an article titled, "For Love or Money, More Families Living Together," which focused on the number of adult children and their parents living in the same household.  The article stated the number of multigenerational U.S. households had risen by 30 percent between 2000 and 2009, citing the poor economy as a pivotal reason for the increase.   Another reason families move in together is so children can support their parents as they age.   Sometimes parents and children will purchase a home together or build an addition to an existing home for this purpose.  While this can work well for many families, it's always advisable to formalize an agreement that addresses conditions and issues well ahead of time.


Here are five important issues to consider before parents and children purchase a home together or add an in-law apartment.


1. How to take title.    Title refers to the name or names on the deed to the property.  If the parties are "joint tenants with rights of survivorship," this means the property will belong automatically to the survivors when an owner dies.  This may be preferable for long-term care planning purposes, but may not be consistent with the owners' wishes regarding distribution of their assets at death.  Alternatively, parents and children could own the property as "tenants in common."   This means the share of a deceased owner will pass in accordance with his Will (or under the intestate laws if there is no Will).   Other common ways to take title include granting parents a life interest or holding property in trust.


2. Inheritance Issues.  Adult children are more frequently adding on to their homes to provide living quarters to parents.  The money for the addition often comes from the parents who sell their home to fund the construction.  Depending upon the cost of the addition and the size of mom and dad's estate, the proceeds from the sale of the home used to build the addition could represent a significant chunk of the parents' assets.  So what happens if there are other children in the family?  From the point of view of the child whose home has been improved to accommodate mom and dad, she does not want to have to sell her home when the parents die in order to pay her siblings their share of the funds that mom and dad invested in her home.  From the parents' point of view, they want all of their children to share equally in their estate at their deaths.  Since every family's situation is unique, the different ways to resolve this issue must be carefully considered in order to find a solution that works well for everyone involved.


3. Tax Consequences.  There are almost as many potential tax issues to consider in these situations as there are types of taxes.  The parties need to review the consequences of the various ways to structure the transaction in light of estate taxes, gift taxes, income taxes and capital gain tax.  While you don't want to let the tax tail wag the dog, you don't want to be surprised by an unexpected, and perhaps expensive, consequence because you were unaware of the tax ramifications of your actions.


4. Long Term Care Consequences.  Since providing care for aging parents is often one of the reasons parents and adult children decide to live together, it is vital to understand how the transaction will be viewed in the event a parent needs to apply for Medicaid benefits for nursing home care.  The Medicaid program imposes an ineligibility period of up to five years on individuals who give away assets.  As such, it may be important to clearly establish that the parents are purchasing an asset for fair market value, rather than making a gift to their child when they are paying for the addition to the home.


5. Liability issues.   There are potential liability issues for both parents and children to be concerned about when deciding to live together.  From the child's perspective, there is concern that if a parent needs to access Medicaid benefits either for care in the community long term nursing home care, the home could be subject to a Medicaid lien for benefits paid on behalf of the parent.  On the other hand, a parent's right to live in the home needs to be protected against the possibility that the child and his spouse will divorce and the house will be ordered sold, or awarded to the spouse, or that the child could lose the house to a financial mishap such as foreclosure, bankruptcy, creditors, or a lawsuit.


The bottom line is that while there are many benefits to parents, children, and grandchildren sharing a household, it is very important to give this situation careful consideration and explore all of the options before entering into such an arrangement.

Will Your Business Survive Your Generation?


Less than one third of the country's 21 million family-owned businesses make it to the second generation, according to the Small Business Administration. Over 85 percent fail to make it to the third generation. The sudden death or disability of the founding owner who has no estate or succession plan in place, is the most devastating yet the most avoidable cause of failure. A succession plan, created with advice from experienced legal and financial professionals, can ensure your family isn't left in a bind and will receive value for your years of hard work.

 Each succession plan has its own set of issues that must be addressed. Fortunately there are plenty of legal and financial tools to address them. It's important to first understand some of the scenarios that can take place in a typical family-owned business situation. Here are some challenges or concerns to consider:


Inheritance by Will or Trust 

         With Federal and state estate taxes as high as 50 percent, heirs could be forced to sell the business to pay the taxes

         A surviving spouse who was dependent on income from the business will have only business profits, if any

         If some heirs are active in the business and other less so, disputes may occur regarding salaries, dividends and profits


Buy-Sell Agreement

         A buy-sell agreement addresses specific price and payment terms and whether these go into effect at the owner's death only or at some other times

         A source for money for the purchase price needs to be identified

         If sale during the owner's lifetime is intended to provide retirement income, the terms for payment must be clear and work for all concerned



         Gifts of ownership interests in a business during the owner's lifetime must comply with IRS gift tax rules

         Often, the owner's desire to maintain control must be balanced with the next generation's interests


Here are specific legal and financial tools to address these issues, including:

         Life insurance, when affordable and owned in a way to avoid or minimize taxes, can be the source of money for payment of estate taxes or funding a buy-sell agreement

         Family Limited Partnerships and other forms of business organizations can make gifting of stock in a business faster and easier as well as ensure the business stays in the family

         A thoughtfully written Buy-Sell Agreement, which addresses the interests of the owner and spouse as well as the next generation, can address issues before they become problems

Federal Estate Tax Update


Over the past several months we've been providing updates on the status of the federal estate tax. To recap, under current law there is currently no federal estate tax on estates of people who die in 2010; however on January 1, 2011, the federal estate tax will be imposed on estates over $1 million in value.  In 2009, the federal estate tax was imposed only on estates of over $3.5 million in value.  There has been speculation that Congress will act before the end of 2010 to prevent the $1 million exemption from taking effect on January 1, either by extending the 2009 law (continuing the $3.5 million exemption) or by enacting an even higher exemption amount ($5 million).  To date, Congress has not taken any action despite numerous bills introduced in the House and Senate since January 1, 2009, which attempted to address this issue. 


It now seems certain there will be no action on the federal estate tax until after the November elections.  In September, Senate Democratic leaders announced they would not vote on tax legislation - including provisions to reinstate the estate tax -- until after that time.   Without Congressional action, the federal estate tax will reappear on January 1, 2011, with a $1 million exemption, creating a large federal estate tax obligation for many estates that would have escaped the tax altogether under the higher exemption amounts that had been in effect since 2004.


A question still remains whether Congress will reinstate the federal estate tax for 2010 and apply that tax retroactively to estates of individuals who have died in 2010.  If Congress attempts to apply the estate tax retroactively, many expect this action to be challenged in the courts, which would leave the issue unresolved for years while those cases make their way through the court system.


A recently mentioned possibility is that Congress will offer a choice to estates of those who die in 2010, meaning the estate can elect to either (1) allow the federal estate tax to apply retroactively, pay any federal estate tax that may be due and receive a step-up in basis on all inherited assets, or (2) pay no federal estate tax but forgo the step-up in basis and comply with the 2010 carryover basis rules.  This possibility became more concrete on Sept. 13, 2010, when a group of leading Republican senators introduced a bill that proposes to retroactively impose an estate tax on estates of those who die in 2010, raise the estate tax exemption to $5 million, repeal the carryover basis rules, reduce the top estate and gift tax rate to 35%, and permit a surviving spouse to take advantage of her spouse's unused estate tax exemption.  Significantly, the bill also includes a provision that would allow executors of estates of those who die in 2010 to elect whether to be taxed under this new regime or under the present 2010 rules.


By the time our next newsletter is published in January, we should have much more information.  Stay tuned!

Important Information for all Massachusetts Parents of Minor Children 


In 2009, Massachusetts rewrote its guardianship law to include a procedure to allow parents of minor children to appoint a 'temporary agent' for their children.  The appointment is done by way of a written document, signed in the presence of two witnesses, and accepted by the appointed agent.  No court approval is necessary.


The purpose of the statute is to permit parents to designate the person who would make decisions for and about their minor children in the event the parents are not available to do so.  This situation could arise, for example, if the parents were traveling and could not be reached.  It could also occur in the event the parents were incapacitated or killed in a car accident.  The appointed agent could make medical and other decisions about a minor child's care, and would have the legal authority to take custody of the child.  Without such a document in place a minor child whose parents are rendered incompetent or who die unexpectedly may be placed into state custody until the court process of appointing a legal guardian is completed.


This new law provides an important safeguard for all Massachusetts parents of minor children.  Parents know they need to take steps to ensure their children are protected in their absence. These steps now include appointing a temporary agent for minor children in accordance with the new Massachusetts statute.


            If you would like to learn more about what legal measures you can take to protect your family including your minor children, please contact the attorneys at Samuel, Sayward & Baler LLC to schedule a meeting.


Planning Discount For Children of our Clients


To encourage parents to take the important step of creating an estate plan to protect their families, Samuel, Sayward & Baler LLC is offering a ten percent (10%) discount to children of the firm's clients who meet with us before the end of 2010 to create or update their estate plan.  Mention this Newsletter offer to receive the discount.  This offer is valid only through December 31, 2010.


Congratulations to our partner Suzanne R. Sayward, who was named a New England Super Lawyer!  Look for Suzanne in the November issue of Boston magazine and click here to read more!