If a person owns life insurance policies, and/or wishes to purchase life insurance, an Irrevocable Life Insurance Trust can be used to transfer ownership of those policies into the trust (and/ or to apply for the policy), thereby excluding the value from the client's estate and from the estate.
Insurance is a unique asset in that it has “springing” value, i.e., its value multiplies greatly as a result of a person’s death. Although this has obvious financial benefits, the IRS and state tax authorities will take a significant share of this enhanced value unless the policy is sheltered in a life insurance trust. Under the estate tax rules, the proceeds of an insurance policy will be taxable at the owner’s death as long as the owner retained “incidents of ownership” over the policy. These incidents would include the power to change the beneficiary, to surrender or cancel the policy, to assign the policy, to pledge the policy as security for a loan, or to obtain a loan from the insurer. Given the broad scope of this definition, it is virtually impossible to own a policy on a person’s own life without it being subject to estate tax.
Proper funding of the trust is important, because it can be done in a way that does not result in a taxable gift to the trust beneficiaries. This is usually accomplished by the grant of Crummey powers in the beneficiaries of the trust. A Crummey power allows the trust beneficiary to withdraw up to $14,000 a year from any contributions that is made to the trust to fund the policy. In almost all cases, the beneficiary will decline to exercise the withdrawal power, knowing that it makes better financial sense to leave the money in the trust to fund the insurance. Additionally, the proper selection of a Trustee is very important.
A person should consider an independent trustee with no beneficial interest to act as Trustee in order to avoid any adverse estate tax consequences. Additionally an Irrevocable Life Insurance Trust is by its nature irrevocable, meaning that it cannot be changed. Therefore it is important that it is structured in a way that a client is comfortable with.
All too often we create a beautiful estate plan for clients just to find out that they did not complete things on their end by failing to fund their living trusts during their lifetimes. What results is a less than optimal estate plan.
Once a Living Trust is set up, a client needs to fund his Trust during his lifetime in order for the estate to avoid probate. Any assets not transferred to the trust during the client’s lifetime will be subject to probate. Any assets which are not transferred to the Living Trust and do not have beneficiary designations will be subject to probate. Although a Will can provide that assets pass into a Trust at death, those assets must pass through probate first. By funding a Living Trust during a person’s lifetime, the assets will be immediately available to the beneficiaries upon death. While a Trust can be funded at death, there are certain limitations as to what and how things get transferred. Therefore the best time to fund a Trust is during a person’s lifetime.
Funding a Trust is not difficult, but it does require some work. A client can choose to fund his Trust on his own or hire the Law Firm to handle it for them.
Moustakis Law LLC received great coverage from the Amherst Patch regarding our open house on May 25!
We have undergone some exciting changes in 2017. We have changed our name from “The Law Office of Peter A. Moustakis, LLC” to “Moustakis Law LLC”. All of our contact information will remain the same.
Also, for many years, we have referred our clients to colleagues and friends we have in New Hampshire. But we have decided that now is the right time for us to bring our unique law practice to New Hampshire by opening another location in Nashua, New Hampshire.
Moustakis Law LLC is committed to helping families through different legal matters as their lives unfold. Whether it is through the purchase of a new home, the preparation of a Will or dealing with the loss of a loved one, we are here to provide the legal counsel necessary.
We blend tradition and innovation to provide the best experience possible for our clients.
Some of the things that make us unique include: The Family Inheritance System; advising on how to use technology effectively with respect to an estate plan; and providing for the care of a pet or animal as well as children when preparing an estate plan.
Here is our new contact information:
Moustakis Law, LLC
30 Eastbrook Road, Suite 301
Dedham, MA 02026
Moustakis Law, LLC
20 Trafalgar Square, Suite 480
Nashua, NH 03063
We are excited to begin this new chapter of Moustakis Law LLC.
A Trustee under a Revocable Living Trust has a few obligations and duties it needs to follow and it can sometimes feel like a daunting task. Here are some things for the Trustee to be aware of:
Trustee Fiduciary Duties
One important piece of advice for a Trustee is to hire an attorney that is familiar with the Trust document and can provide specific guidance to the Trustee as to what needs to be done. Hiring the appropriate professionals ahead of time can make a Trustee’s
Massachusetts law has certain requirements and procedures regarding claims against an estate. Below is a brief and non-exhaustive discussion of the classification of claims against an estate in Massachusetts:
Additionally, the Personal Representative shall make provision for the payment of family allowance before any allowed claim (MUPC §3-807), and, if an estate is insolvent, the Personal Representative may not waive any statute of limitation defense available to the estate (MUPC §3-802).
2016 was a great year for the Law Office. We helped a number of families get their legal affairs in order. From creating an estate plan to litigating complex trust matter. In 2016 I also became an author, a speaker and a national resource on pet trusts. So the next question is, where do we go from here? Well, we have some exciting developments in the works for 2017, so please stay tuned!
~Peter A. Moustakis, Esq.
A Premarital Agreement, otherwise known as a Prenuptial Agreement, is an Agreement made by a couple prior to getting married. There is preconceived notion however that a Premarital Agreement is just for the wealthy. Yet many attorneys would not agree with this concept. A Premarital Agreement can be thought of as a contract between two parties for an amicable dissolution of a relationship should the need arise. After all, it is estimated that about 52% of marriages end in divorce.
The Agreement can be used to segregate each person’s property including future appreciation. The Agreement can provide as to whether or not alimony would be required and how assets should be divided upon divorce. It is necessary that the Agreement be fair and reasonable at the time it is executed and at the time it is to be enforced. It is also required that there is full disclosure of all assets and that each party has appropriate knowledge or representation through counsel to ensure that the parties enter into the Agreement understanding its ramifications and its terms.
Premarital Agreements can also be used to resolve custodial relationships of pets that are brought into the relationship or are acquired during the marriage. For many couples their pets are as close to them as their children, however the law treats them more like personal property. Therefore resolving who should have ownership of the pet, and if there should be any visitation arrangements, are things that should be considered prior to the marriage where the parties are in more of an amicable state.
Thus, with a Premarital Agreement, a couple can create an Agreement during an amicable time period as to what may happen if their marriage dissolves.
The Law Office has been featured in the recent edition of the Dedham Transcipt. Here is a link to the article:
Dedham Lawyer Releases Guide on Estate Planning
Amazing how time flies. We are celebrating 5 years in practice! We would like to thank our colleagues, friends and most importantly our clients who have helped us grow these past 5 years.
Thank you all!
Peter A. Moustakis is the founder of Moustakis Law LLC
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Please note that the information contained in this blog is not an exhaustive list of the matters pertaining to the discussion. Every person has a unique situation that must be tailored with the advice of an attorney after consultation. The material published on this blog is made available by the Moustakis Law LLC for informational purposes only and should not be considered legal advice. Before you make any decision that may have legal implications, you should consult with a qualified legal professional for specific legal advice tailored to your situation. Your visiting this blog does not establish an invitation to enter into, and does not create an attorney client-relationship.