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Ins and outs of multi-state estate planning and probate

July 2011
Author: Attorney David M. Beliveau
Published by: Massachusetts Lawyers Weekly

It is becoming more common for estate planning attorneys to have clients who own real estate in multiple states. Whether it is a cottage on a lake in New Hampshire or a snowbird getaway in Florida, understanding the similarities and differences of estate planning and probate law in the states most commonly encountered by Massachusetts attorneys is essential to competently managing such matters.

All three states have common estate-planning documents, including revocable trusts, last wills and testaments, financial durable powers of attorney and health care directives.

Revocable trusts

Many clients establish revocable trusts for probate avoidance purposes. Upon the death of the donor, the trustee is free to administer the trust property pursuant to the terms of the trust without supervision by the Probate Court.

Last wills and testaments

In all three states, last wills and testaments require the signatures of two disinterested witnesses in order to be valid. It is important to note that, in Florida, all estate-planning documents (including real estate deeds) require two witnesses to be valid.

Living wills

A living will is a directive given by an individual to a doctor in case the individual should end up in a vegetative state and be put on life support. Massachusetts does not have a living will statute and honors the health care agent’s end-of-life decisions instead. Typically, living wills are executed in Massachusetts not for the legal benefits, but for the peace of mind such documents provide the health care agents when they must make difficult decisions. New Hampshire law and Florida law both provide for living wills.

Uniform Probate Code

Upon the death of an individual, all property the decedent owned under his own name must go through the lengthy and expensive probate process in order to transfer property to the heirs. The Uniform Probate Code was established to help provide uniformity in probate practice among the states.

Massachusetts recently enacted the UPC, but with a delayed effective date (January 2012) of the law as it relates to probate (the guardianship provisions are already in effect).New Hampshire has not yet enacted the UPC;Florida has enacted it. Should a decedent own property in multiple states, a probate must be opened in the domiciliary state and ancillary probates opened in the remaining states.

Real estate

Attorneys need to be aware of the different requirements in the Registry of Deeds should they help their clients transfer their real estate to their trusts.

In Massachusetts, a trustee certificate is required for real estate transfers to trusts; no state forms are required. In New Hampshire, no trustee certificate is required for real estate transfers to trusts; however, state real estate transfer forms need to be prepared and filed. In Florida, as long as the real estate deed contains specific language, no trustee certificate is required for real estate transfers to trusts; no state forms are required.

Typically, transferring out-of-state real estate to a trust is fairly straightforward, but transferring homestead real estate to a trust is more complicated. For property outside of a trust, all three states provide homestead protection. The homestead laws protect a certain amount of equity in the residence from being attached and executed upon by creditors.

In Massachusetts, it has been the law that a homestead declaration has to be prepared and recorded. However, the commonwealth recently enacted a new homestead law that went into effect in March, which provides that a minimum amount of homestead protection will arise automatically.

In New Hampshire, homestead protection arises automatically, and in Florida, homestead protection arises automatically to those who register and provide proof of residence.

When transferring homestead property into a revocable trust, you should be aware that, in Massachusetts, it has primarily been the law that transfers of residences to revocable trusts of registered land have not been afforded homestead protection, and such transfers of recorded land have been unknown as to the status of homestead protection.

However, the new homestead law provides homestead protection to past, present and future transfers of residences to revocable trusts of both registered and recorded land.

In New Hampshire, to preserve the homestead protection, the trust title must include the word “revocable,” or the transfer deed to the trust must indicate the trust is revocable.

In Florida, homestead has multiple implications, including title, tax and asset protection. Surviving spouses and minor children have title homestead rights. In the absence of either a nuptial agreement or a spousal waiver, a surviving spouse must receive title to the residence. In the case of a minor child, the child must receive title to the residence through his guardian. Any contrary purported transfer of the residence is void.

For a married couple in Florida with no minor children, a transfer of a residence to a joint revocable trust that can be revoked by either spouse does not present a title problem. However, in a case in which there are minor children, there would be a title problem upon the surviving spouse’s death.

Also, in the absence of either a nuptial agreement or a spousal waiver, there would be a title problem in the case of a transfer of part or all of a residence to a spouse’s own revocable trust containing estate tax provisions, upon the spouse’s death.

In Florida, in the case of a transfer of a residence to a revocable trust, paperwork needs to be prepared and filed with the state to preserve the tax homestead protection. Such tax homestead protection prevents the state from increasing real estate taxes on a residence more than a certain percentage annually. It is unclear whether asset protection homestead is forfeited with a transfer of a residence to a revocable trust.

Estate taxes

Married couples may establish separate revocable trusts for each spouse if state and — if applicable — federal estate taxes are applicable. The federal estate tax exemption amount until Dec. 31, 2012, is $5 million. Unless the federal government acts before that date, exemption amount subsequently will be reduced to $1 million.

Massachusetts has its own estate tax; the exemption amount is $1 million. For purposes of determining whether the Massachusetts estate tax is applicable, all assets, both within and outside of Massachusetts, of all individuals, both residents and non-residents, are considered.

For a single individual Massachusetts decedent, if the date of death values of all his assets exceed the $1 million exemption amount, Massachusetts estate tax will be due based on the date of death values of all the assets (not just the assets that exceed the $1 million exemption amount).

For a single individual non-Massachusetts decedent who owned Massachusetts real estate, if the date of death values of all his assets exceed the $1 million exemption amount, Massachusetts estate tax will be due based on the date of death value of the Massachusetts real estate — even if the date of death value of the real estate is less than the $1 million exemption amount.

A strategy currently available for non-Massachusetts residents to try to avoid such a result is transferring the Massachusetts real estate to a limited liability company, thereby converting the real estate that may be subject to Massachusetts estate tax to an intangible LLC interest that currently is not subject to Massachusetts estate tax. However, the Department of Revenue ultimately may close that loophole.

New Hampshire does not yet have its own estate tax, although legislation has been proposed to establish one. If enacted, the New Hampshire estate tax exemption amount will be $2 million.

The Florida Constitution prevents its Legislature from enacting an estate tax on its own.

Getting out-of-state help

To help ensure that estate planning and probate work is completed correctly and to avoid legal malpractice, it is best for local counsel to engage out-of-state counsel to prepare and process any out-of-state estate planning and probate documents (for example, real estate deeds for real estate transfers to trusts).

Florida has made it a felony to practice law if counsel is not licensed there.Florida may consider the preparation of a deed by a non-licensed Florida attorney as the practice of law.

David M. Beliveau, a CPA, is the managing attorney at the Beliveau Law Group, which has offices in Massachusetts, New Hampshire and Florida. He is admitted to practice law in all three states.

The Beliveau Law Group: Massachusetts | Florida | New Hampshire

The attorneys at The Beliveau Law Group provides legal services for estate planning (wills and trusts), Medicaid (planning and applications), probate (estate and trust administration), business law (formation and operation), real estate (residential and commercial), taxation (federal and state), and civil litigation (in connection with these practice areas). The law firm has offices and attorneys in Naples, Florida; Boca Raton, Florida; Danvers, Massachusetts; Waltham, Massachusetts; Quincy, Massachusetts; Manchester, New Hampshire and Salem, New Hampshire.

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