Plain English in Estate Documents
In my work (and life), I want to be clear, thoughtful, and straightforward.
I want you — and your family members or others — to more fully understand your documents.
Preparing legal documents is a technical subject. It should be as precise as reasonable, given the time constraints.
Because Massachusetts has an estate tax some documents need tax provisions. These tax-related terms are dense and esoteric.
Other than these tax-related provisions, I want to cut needless words. That make reading legal documents difficult. Even impossible to comprehend. I don't always succeed. But I have this attitude.
Likely, my documents are plainER, not plain.
Plain English seeks to
PLAIN ENGLISH IN LAW: BACKGROUND
Lawyers' are notorious for writing in a complicated way. And full of needless words and phrases.
For many years (centuries), the public has hated it.
In recent decades, legal scholars and attorneys have also seen this problem.
I've been reading about the plain English subject for 15+ years. And working daily to improve my writing and communication skills.
Because like most people, I don't enjoy reading legal documents. Almost all need strong edit to be more readable.
Modern Plain English approach: Garner and Adams
Bryan A. Garner is the leading advocate for a change to a more direct legal writing style. He's an attorney and author of over 20 books.
His latest book is 'Garner's Guidelines for Drafting & Editing Contracts.' (2019). I loved reading it.
While wills and trusts are not contracts, they come pretty close.
An illustration of his approach:
Lawyers who use the words 'said' or 'shall' in just about every sentence are misguided. Because shall only means 'has a duty to'. Nothing else. Doesn't mean 'in the future WILL.'
This example is the tip of the iceberg.
Another book I enjoyed was Kenneth Adams' 'Adams on Contract Drafting.' He is also an attorney.
Adams posits we use seven types of language in contracts. And each type has a different, particular function to achieve.
One type is language of 'authorization.'
Another is language of 'obligation'. And so on.
He tells us lawyers should know our aim when we use words. I work in the Cambridge - Acton area of Massachusetts. Clients are well educated and may want to (almost) understand the documents. And want clear explanations.
Here's an article in The Economist on plain English. Another from the New York Times. Both applaud the approach.
In summary, if you and others don't read a document because it is too dense and poorly written, then understanding it is impossible. This can lead to problems.
Finally, just because lawyers in the past used both the French and English versions of the same word we don't need to and should not.
About the MA estate tax
We Massachusetts residents face a MA estate tax. Our state is one of 15 that continues to have this type of taxation.
This tax is different and more complicated than the income tax. It is a tax on the value of property we own or control at death.
Federal estate tax has been in place since 1916. Before that, it came into use from time to time to raise funds for war.
The tax is calculated on the assets we control at death.
To illustrate: You're on your deathbed. You legally can direct where assets or accounts will go. It's deemed a pleasure. One worthy of taxation. Some people call it the 'death tax.'
Only some people pay this tax. Many die with assets below the MA exemption from this tax of $1 million. The Federal exemption is $11.58 million.
Important non-taxable distributions
Your estate does not pay estate tax on distributions that go to a spouse or charity.
What goes to your spouse will end up in their estate. Unless they spend it first. When added to your spouse's assets, the amount will face estate tax later.
This delay for a married person does not apply if you die married to a non-US citizen.
Instead, you should put a special provision into your estate planning documents. To cut estate tax on your death. It's called a QDOT provision.
What about a Living Trust?
To find out more about whether a Living Trust is right for you, read more here.
An alternative estate planning approach is to have a LT in place.
A Living Trust is a revocable, amendable document that can act like a will. But differently. The other type of trust used in estate planning is the irrevocable trust.
By the way, business uses trusts in different ways. Say, for example, mutual funds are often in trust form.
A Living Trust may be useful to achieve some estate planning goals.
A Living Trust can avoid probate. This is because at death the Living Trust owns the trust assets and not the individual.
A Living Trust can lower estate taxes for some people. It depends on how you use it. And your family and asset situation.
A typical situation: A Massachusetts married couple owns more than $1 million. Lawyers suggest using Living Trusts. Similar suggestion for unmarried living together with joint children.
For single people, you can use it in a different way. Apart from estate taxes, the goals of married unmarried and single are similar.
No one's perfect. (Our mothers told us this).
Unfortunately, sometimes a loved one develops an issue. A problem. With drugs, alcohol, or other behavior. Way more common that most of us think.
The National Council on Alcoholism and Drug Dependence estimates that:
While some of it is harmless, serious substance abuse is not. From the Journal of the American Medical Association:
Up to 60% of patients who receive substance abuse treatment will relapse within one year.
YOUR estate planning
Will leaving them part of your money not help things?
Make the problem worse?
A trust provision requires the trustee to give or use the money in the trust for the benefit of someone else. In the beneficiary's best interest.
This provision is a 'trust' arrangement.
Discussing this when you create or update a will or trust is part of estate planning. If you have this situation, you can deal with it.
You have an adult child with a serious drug addiction problem. The child has a son or daughter the MA court has given you custody over. You're not sure where your own child is living.
A hard place to be.
But if you die, do you want the money to go directly to your addicted son or daughter?
This is the estate planning issue.
What's this about Probate?
Some people come to us with only one goal. 'To avoid probate."
But that should be only one goal.
Almost a minor goal. There are many bigger ones. But first, about probate.
Will or no will can lead to probate court
You go to the probate court if you die with a will. Or without one.
In either case, if you don't own any assets in your sole name, then you don't need to go there. Because a major goal of probate is to allow your survivors to get their hands on them.
It goes like this. You identify which assets were in the sole name. Someone prepares several legal documents, then delivered to the probate court. The 'someone' is the person you've named in your will to handle that job.
After a process, the probate court appoints a MA personal representative (PR.
The PR then requests the court for a document. Called a 'letter of authority'. The PR gives a Letter of Authority to each bank or other financial house that hold assets.
The institution hands over the assets. The PR pays bills. What is not needed for debts or taxes you hand over to the persons the will names. Or your heirs at law if there is no will.
Only SOLE assets need probate
Remember: Only assets in your sole name need this process.
Assets not in your sole name go others through non-probate ways. You likely signed a form for each non-probate asset. That form lists a person or two to get the asset. It sits in the file of the financial institution where the money is.
Such as an IRA or retirement account. Life insurance is similar. Differently, joint assets will belong to the surviving joint owner.
The wording on the account is important. Joint assets have words like ''with rights of survivorship.'
Another type of ownership is 'Tenants in Common'.
This is different from joint ownership with survivorship. Each tenant (each person) owns 1/2 of this asset type.
The interest of each tenant in common goes pursuant to your will. It does not pass automatically to the other tenant in common.
It will need to go through probate.
Lots of U.S citizens are married to non-U.S. citizens. Can you leave them with your assets? Yup. Write a will or trust--whether a U.S. citizen, or not.
Now, what happens if you’re married to a non-US citizen and you die? Then the normal rules for marital deduction do not apply. For this, include a qualified domestic trust (QDOT) provision in your estate plan. This allows your non-U.S. citizen spouse to avoid paying estate taxes.
A foreign trust is when the trustee lives outside U.S.
Generally, QDOT provisions are part of a revocable living trust you create while living. Say your spouse becomes a US citizen after creating this living trust. Cool. The QDOT provisions can be made to not apply. So then you don’t have to revise your estate planning.
You can name a non-US citizen to act in your behalf after you pass. This is known as a Foreign Trust. Your survivor will have to fill out more tax forms for the IRS. But that’s hardly a reason to not appoint someone you trust.
Are you going through a divorce? Or is one in your future? Yikes. If so, wondering what to do about your estate plan? Not to worry.In MA, you can always create a new or change an existing will or trust.
Now, there are some limitations during the divorce. It depends on the state laws. For instance, life insurance and retirement accounts are often off the table.
Know, your spouse is still your spouse—until divorce is final. So they may try to claim their portion if you die before you’re divorced.
State laws dictate what your spouse should get if: a) you leave them with nothing and b) the divorce is not final. This is known in Massachusetts as elective share. Different states calculate elective share differently.
Some states include more assets than others. The more modern state laws have what is known as augmented estate. This is to prevent spouses from trying to make sole assets joint before the other spouse passes—thereby, fooling the elective share system. Unfortunately, Massachusetts does not have augmented estate laws.
Massachusetts has a $1 million exemption from estate tax.
Meaning… if you are single and die in MA and own more than $1 million, then you must file a tax return and pay estate tax.
With real estate values high in eastern Massachusetts, many estates exceed that amount, resulting in high taxes.How can a Living Trust for married persons lower estate taxes?
By making large gifts before you die.
This lowers the value of your estate. Then we file your estate tax return, based on the size of your estate—excluding the large gift. So long as the gift is less than Federal gift tax limit of $11.5 million.
Make all your money out West? Here's what to do about it for your estate plan in MA.
People move here from all over. Including from Western states, where one may have earned all their current wealth. Sound familiar? Why does this matter?
Because they’re differences in how assets are owned—if you’re married. It’s called Community Property. But this doesn’t apply to Massachusetts, because we have separate property.
For instance, in California, when you earn a dollar, your spouse owns one-half of it. But here, you own that whole dollar until you part with it.
Say you moved here from California. Community property remains community property. Even if it’s put into the name of one spouse.
There’s two benefits of a community property scenario.
1) Each spouse can control who gets their half when they die.
2) You can save on income taxes. Say you guys bought Apple stock for $20K. Later, it grows to be worth $1M. The surviving spouse will pay less income taxes when they later sell the stock. Why? Because the tax law has a lower tax rate when a surviving spouse sells it.
I'm Joel Bernstein, an estate planning attorney with over 30 years of experience. I use plain English to help you understand wills, trusts, and the other documents you need to protect your loved ones and your estate.
Most middle-aged people aren’t ready for their inevitable death. We make estate planning simple, affordable, and quick. So people can live in peace, knowing their affairs are in order.