Success Stories

We focus on each client's unique situation and help develop a common sense plan, returning calls promptly and speaking plain English.

Table of Contents

1. Innovative Strategy Permits Man to Set Aside Funds For Disabled Son
2. Client's Estate Plan Protects Children and Grandchildren
3. Senior Acts to Protect Daughters and Grandchildren
4. Wife of Nursing Home Resident Protects Home and Vacation Home
5. Protection and Management of Medical Malpractice Settlement for Minor
6. Planning Both for Child with Special Needs and Other Children
7. Planning to Reduce Estate Taxes
8. Planning in Advance to Reduce Long-Term Care Costs
9. Planning to Protect the Big House

Case Study 1

Innovative Strategy Permits Man
to Set Aside Funds For Disabled Son

A client's daughter initially came to see us with the sole goal of protecting the funds her father had transferred into trust for her disabled brother. Although disabled, her brother still works. Shortly thereafter the father had to move to a nursing home.

Most transfers to trusts for disabled individuals are fine under the MassHealth rules. But to qualify as "disabled" the beneficiary of the trust must not be able to work. Since our client's son could work, the transfer caused a long period of ineligibility for MassHealth benefits.

Prior to the passage of the Deficit Reduction Act of 2005 (the "DRA"), this would not have been a problem because the father kept enough funds to pay for his care during the MassHealth penalty period. But under the DRA, his penalty period will not begin until he depletes all of his savings, after which he will have no funds left and will still be ineligible for MassHealth benefits.

We devised a plan to have the penalty period begin immediately, as it would have prior to passage of the DRA. It involved the client loaning his remaining funds to his healthy daughter under a MassHealth-qualified promissory note. This eliminated his remaining funds and permitted the penalty period for the transfer into the trust to begin. The client is using the funds his daughter pays him back each month to pay the nursing home during the penalty period.

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Case Study 2

Client's Estate Plan Protects Children and Grandchildren

A widowed client with four children came to see us about protecting and providing for her disabled daughter. We created a supplemental needs trust for her daughter to be funded at our client's death and assisted her in finding a professional trustee to manage the funds for her daughter's benefit.

In further discussion, the client expressed her concerns about her other three children. All were gainfully employed and married with children. Two had also all pursued more altruistic careers as teachers and social workers, of which my client was very proud. The third had a number of failed attempts at starting businesses and had a rocky marriage. For all, my client worried about their financial well-being, whether as the result of the inability to save much for retirement or to pay for education for their children, or, her biggest fear, in the event of divorce.

The solution involved creating what we call a "family protection trust" for each child. The trusts will be managed by the same trustee who is managing the special needs trust for the daughter with disabilities and will provide for the other children and grandchildren as needed. The trusts, however, will be protected from the poor financial decisions of the children, from their creditors, and in the event of divorce.

The client is resting easier knowing that she will be able to leave all of her children a cushion for their retirement or whatever they may face in life.

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Case Study 3

Senior Acts to Protect Daughters and Grandchildren

A client is 78 years old, widowed and living alone. He has three daughters and seven grandchildren, with whom he shares a close relationship. Unfortunately, one of his daughters is divorced and has precarious finances. Another has been successfully treated for breast cancer, but he is still worried about her.

Before coming to see us, our client had a simple will dividing his estate equally among his three daughters. But he was worried about what would happen if any of his daughters got divorced or passed away.

He was aware that in divorce, in most instances the assets of both spouses are pooled and split down the middle, even if some of them were inherited from one spouse's parents. And unless one of his daughters created an estate plan saying differently, if one of them passed away, her inheritance would pass to her husband rather than to her children. That might be fine, since the husband will no doubt take care of his children. But her husband may ultimately remarry with his estate passing to his new spouse and family.

Finally, there's the daughter in financial straights who our client already helps out financially. Any inheritance she receives will be available to her creditors. In fact, under his current estate plan, that's true for all of his daughters should they be sued for any reason.

Fortunately, our client learned that there is a way to protect his daughters and grandchildren from all of these risks. He revised his estate plan to provide that his estate go into trust for each of his daughters rather than outright to them. These trusts are often called "family protection trusts."

The law permits a third party " to create a protected trust for someone else " in this case, our client's daughters, while it does not permit an individual to create a protected trust for his or her own benefit.

Our client's family protection trusts for his daughters will protect their inheritance in the event of divorce or if they are sued, and will make sure that anything left upon the death of any of his daughters will pass to his grandchildren. Anyone who has experienced a divorce in the family, issues with creditors, or the death of a family member at an early age will see the incredible benefit of a family protection trust.

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Case Study 4

Wife of Nursing Home Resident
Protects Home and Vacation Home

Our client and her son came into our office, having been referred by her estate planning attorney. Our client had been paying for her husband who had been in a nursing home for several years. While they had been well off, she was getting nervous since she was depleting her life savings paying for her husband's care and was leaving no money for herself to live.

We came up with a plan that protected both our client's home and her vacation home in Florida, as well as conserving most of the remaining investment assets to support her for the remainder of her life. We were also able to obtain MassHealth benefits for her husband. The application process took time, but our client readily provided all of the necessary information and documentation. Most importantly, she had peace of mind that she had done everything she could to provide for her husband and to protect herself.

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Case Study 5

Protection and Management of Medical Malpractice
Settlement for Minor

Our clients' son was paralyzed at birth and ultimately recovered a large medical malpractice settlement due to the fine work of their personal injury law firm. But then the family had to decide how the funds would be managed, whether some of the recovery should be "structured" meaning put in a tax-free annuity, what planning should take place to qualify their son for public benefits, such as MassHealth and Supplemental Security Income, and what should happen to the funds at their son's death.

They came to Margolis & Associates to find answers to these questions. We were able to work with the clients to craft an appropriate trust for their son, help them choose an independent trustee with whom they feel comfortable, and decide how much of the settlement to structure for optimum tax and investment results.

We developed a very close relationship with the clients and were successfully able to manage the trust funds for their son while taking his needs into consideration. We were even able to guide these clients throughout the process of building a new home which was modified to make it accessible for their son.

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Case Study 6

Planning Both for Child with Special Needs
and Other Children

Our clients came in initially wanting to create a simple estate plan that met their goals. They have three children, two sons and a daughter with special needs. They wanted their assets to go to their children equally, but did not know if their daughter should receive her inheritance directly. Doing so would disqualify her from receiving public benefits from the state and they knew that she would not be able to manage the funds well.

One alternative the parents considered was to give everything to their other two children and ask them to take good care of their sister. But they realized that this approach would present a number of difficulties. Their other children might not be able to agree on how much of what they inherited should be spent for their sister, potentially creating animosity between them. Either of them might pass away before their sister, leaving their estate to their spouse and children. And, finally, it would be an unfair burden on our clients' sons to not to be able to spend their inheritance as they see fit. This is sometimes referred to as a "morally obligated" gift.

Fortunately, there are good alternatives. We were able to provide them with the legal advice they needed, help them plan accordingly, and also create a trust to protect and manage their daughter's inheritance going forward. As part of this planning, the parents realized that their estate might not be large enough to fully protect their daughter and provide equal shares to their sons. So, taking into account their daughter's additional needs, they decided to purchase an additional life insurance payable to their daughter's trust, which would protect their daughter and still allow them to provide an equal inheritance to their sons.

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Case Study 7

Planning to Reduce Estate Taxes

A client called because her husband had taken an unexpected turn and was hospitalized two days earlier. Besides their simple wills, health care proxies and durable powers of attorney, they had been putting off establishing a proper estate plan for years.

The couple had three adult children and four grandchildren. They owned their Southboro home and a vacation cottage in Cape Cod where their family spent a month every summer. Our client's husband had recently retired and had a substantial 401(k) and IRA to show for his life's work. They also had additional stocks, savings and miscellaneous investments worth around $1 million. Our client knew that she and her husband had a large estate. Now, on top of our client's concern for her husband's declining health, she was very confused and concerned about the tax implications if something should happen to her husband, and what would be left for their children and grandchildren.

Upon her husband's passing, the couple's jointly-owned real estate and her husband's IRA and 401(k) will pass directly to our client as the designated beneficiary. The federal"marital deduction" permits such property to pass to her free of tax. However, doing so would mean substantial federal and Massachusetts estate taxes upon our client's ultimate passing.

We were able to establish an efficient and effective estate plan for the family, taking advantage of both the Massachusetts and Federal estate tax exemptions that would have been lost upon the husband's death without tax planning. Unfortunately, our client's husband did pass away within the year. We were able to save hundreds of thousands of dollars in estate taxes upon our client's death by putting the new estate plan into action quickly. This ensures that their children and grandchildren will receive as much of their hard earned savings as possible without unnecessary gifts to the IRS.

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Case Study 8

Planning in Advance to Reduce
Long-Term Care Costs

Our clients, a married couple, were both in good health until a couple of years ago, when the wife was first diagnosed with dementia. She's doing fine right now, and they are still living together in the same house that they bought right after they were married. They don't see any reason why she would have to move out of their home any time soon. Over the years the family managed to save a small nest egg, mainly IRA's and 401K's, and a few stocks here and there, and they were worried that all of their savings would have to pay for her future care when she eventually needed it. The clients wanted to make sure that they both would be taken care of, but they also wanted to protect some of their savings for their children.

When our clients called Margolis & Associates, they were nervous that they were too late to make any important changes to their estate plan. We tried to set their minds at ease. We reviewed their old wills before their appointment so we had a sense of their original estate planning goals. When we met with them they had a lot on their minds.

After reviewing all of their information, we were able to protect some of their older stocks in an irrevocable trust for their children. We also recommended that they create revocable trusts, which could hold the rest of their property and avoid probate. The clients had no idea these options were even available for people in their circumstances - they thought that they were only for the super-rich! We also looked ahead to when the wife might need nursing home care, and structured their estate plan to protect their funds from estate recovery should he pass away first. The clients walked out of our office with an entirely new estate plan, and, more importantly, peace of mind.

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Case Study 9

Planning to Protect the Big House

Our client came to see us with one of her sons with the goal of protecting her large house for herself and her family of five children. She is in her mid-70s and in good health. Her husband had passed away a few years earlier.

The house is her sole substantial asset. It's much too big for her, though one of her sons and his family also live there. She hopes to remain in her home until her grandson graduates from high school, but then she may sell and move to a smaller house or condominium. Another possibility we discussed is to divide the house into condominiums, as developers have done with many of the larger houses in her neighborhood, but that would take more capital than our client can afford.

Our client is sure, however, that she wants to protect this one asset for her family. In light of the DRA, it is more important than ever that she take action now. This is for two reasons: First, the house exceeds the new limit of $750,000 on the value of a personal residence. Second, any transfer causes five years of ineligibility for MassHealth benefits, as opposed to three years for non-trust transfers under the pre-DRA rules.

The plan we devised for our client had two elements. She transferred her home into an irrevocable trust which will protect it for herself and her family. And she purchased long-term care insurance. This will cover her for the next five years in case she requires nursing home care during that time. Her children are paying the premiums over those five years, a small price to pay to protect a $750,000 asset. At the end of five years, the family will decide together whether to keep the policy or let it lapse. Ultimately, we were able to protect both her home and her peace of mind.

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