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Pitfalls of Relying on a Last Will and Testament

Pitfalls of Relying on a Last Will and Testament

A Last Will and Testament is a legal document that coordinates the distribution of your assets after you pass away.  While many individuals believe that a Will is a sufficient way to allocate assets to their loved ones, there are numerous short comings in relying on a Will as the core document in your estate plan.  This Article covers the top 6 pitfalls of relying upon a Last Will and Testament.

The first pitfall is the ability for your Will to be challenged.  The provisions of your Will, including your direction as to the disposition of your assets, may be exposed to challenges by individuals or family members who disagree with your wishes.  The Court will allow any of your natural heirs and any individual you have named as beneficiary in your Will to challenge any provision contained in your Will.  The likelihood of a challenge increases if there is strife in the family, a disinherited family member, or unequal distributions between beneficiaries.  Once a challenged is levied, it can impose a large financial burden on the estate and can take years to resolve

The second, and unavoidable, pitfall with a Will-based estate plan is that you are exposed to the costly, time consuming, and intrusive process of the probate court.  While many individuals believe that creating a Will is an effective way to cut down on legal expenses, you will likely end up spending a large amount of money on costs associated with probate proceedings.  The probate process can cost upwards of 10% of the value of the estate.  Further, the probate process is lengthy.  It can take around eight months to have your Personal Representative (formerly referred to as Executor) appointed and the probate process itself takes at least a year to finalize.

The third pitfall presents itself during the probate process, when your beneficiary’s access to the inherited assets is often restricted.  This can be especially problematic if you have minor beneficiaries or beneficiaries with special needs or disabilities.  Under the provisions of a simple Will, an inheritance left to a minor (person under 18 years of age) will be held by the Personal Representative until the beneficiary turns 18, at which point the entire inheritance will be distributed to them outright.  Most individuals would prefer to have their minor beneficiaries inherit at a later age or have the money allocated for specific purposes such as education.  In addition, beneficiaries with special needs or those receiving government benefits will not be protected under a simple Will.  It is likely that these beneficiaries will have their existing benefits suspended or terminated.  This would also jeopardize their eligibility status for programs they otherwise would have been immediately eligible for.  A simple Will is also unable to protect the inherited assets from a beneficiary’s creditor, divorcing spouse, or any lawsuits which might be pending against the beneficiary.

The fourth pitfall is the public nature of the probate proceedings.  An inventory of all your assets is filed with the Court, which is public information, as well as the names and addresses of your family members and beneficiaries.  Due to modern day technology, these records are easily available online, free of charge, for anyone to look up without you or your family’s knowledge, and without requiring permission from you or the Court.

The fifth pitfall worth mentioning is that a Will is only effective after death.  Therefore, a Will does not aid in the management of your affairs should you become incapacitated.  Without further estate planning, your family members will be left without guidance, and you will be left without a trusted representative to make your medical and financial decisions.  Often times this can result in the need for the appointment of a Guardian or Conservator for you or your assets, a process that is expensive and time-consuming.

The sixth, and final pitfall covered in this Article is that a simple Will does not protect your estate from estate taxes.  While the 2022 federal estate tax exemption is $12.06 million, it does not mean that individuals with an estate value less than $12.06 million should disregard a concern for estate taxes.  Some states, including Massachusetts, have a state-level estate tax with a much lower exemption amount.  In Massachusetts, the estate tax applies to any estate over $1 million.  This amount is sometimes easily attained when you factor in real estate, life insurance, retirement accounts, and any investment or cash accounts.  This is especially important for married couples as a simple Will cannot effectively maximize each spouse’s $1 million Massachusetts exemption.

Ultimately, these shortcomings may place an undue burden on your family or friends both during your lifetime and after you pass away.  A simple way to avoid these pitfalls is to establish a Revocable Living Trust as the core document to your estate plan. A Revocable Living Trust is a legal instrument through which one person, called the Trustee (typically yourself), holds and manages the Trust assets for the benefit of the beneficiaries named in the Trust.  Traditionally you are the beneficiary of the Trust during your lifetime and you name one or more beneficiaries to inherit after you pass away.

The Benefits of a Revocable Living Trust 

A Revocable Living Trust does more than merely instruct distribution of your assets after you pass away.  A Revocable Living Trust also allows you to manage your affairs while you are alive with no restrictions.  In the event you become incapacitated or pass away, your Trust will appoint a successor Trustee to ensure that you and your affairs are properly managed.  This individual or institution has the discretion to decide how assets are distributed to your minor or adult beneficiaries and take into consideration any specific wishes you may have. Transferring your assets into a trust and designating your Trust as the beneficiary of your assets will allow you to avoid the costly, time consuming, and intrusive process of probate court. Unlike a Will, your trust does not become a matter a public record and can remain private.

Furthermore, a Revocable Living Trust more comprehensively protects minor beneficiaries and those with government benefit concerns.  Additionally, a properly drafted Revocable Living Trust can protect the assets you leave behind for an adult beneficiary from a divorce, creditor, or lawsuit.   A Revocable Living Trust is also recommended to better protect your assets from an estate tax, whether it be Federal or Massachusetts, and ensure the value of your estate is preserved to its fullest extent.  A Revocable Living Trust allows a married couple to protect up to $2 million in assets in Massachusetts from estate tax exposure.

We often hear that individuals and families want to keep their planning simple and believe a simple Will can accomplish their estate planning goals. Wills and simple estate plans can be very deceiving.  While creating a simple Will may cost less at the time, in the long run, you pay far more in time and money than the cost of instead creating a Revocable Living Trust.

If you have questions about your Estate Planning needs, our Attorneys are ready to assist you!

Wetlands Violation Trips Up New Owner

Buyer Ordered to Restore Property
By Christopher R. Vaccaro
Special to Banker & Tradesman

Last August in Con­servation Com­mission of Norton v. Pesa, the Supreme Judicial Court put buy­ers on notice of the risk of ignoring unresolved wetlands orders of con­ditions.

In a dispute centering on a Norton property, the Supreme Judicial Court ruled that Massachusetts property owners are responsible for wetlands violations committed under previous ownership.

The Massachusetts Wetlands Protection Act generally prohibits removing, filling, dredging and altering wetlands without or­ders of conditions issued by local conserva­tion commissions. Property owners must record these orders with the registry of deeds to put future buyers and lenders on notice of wetlands issues. After the work is done, owners must obtain and record certif­icates of compliance, showing that the work was properly completed.

In 1979, John Teixeira proposed to build a store with a sanitation system and parking lot in Norton. Teixeira’s project impacted protected wetlands. The Norton Conserva­tion Commission issued an order of condi­tions allowing Teixeira’s project, but limit­ing fill near the wetlands. In 1984 and 1987, the commission sent letters to Teixeira, ex­pressing concerns that he had exceeded the fill limits under the order of conditions. Teixeira apparently disregarded those let­ters. He transferred the property to himself and his wife Ann in 1996, then died in 2006, leaving Ann as the sole owner.

13K SF of Fill
Ann agreed to sell the property to Robert and Annabella Pesa in 2014. Before the clos­ing, an attorney discovered the order of conditions, and asked the Norton Conserva­tion Commission to issue a certificate of compliance. The commission refused, claiming that Teixeira had deposited 11,000 more square feet of fill than allowed under the order of conditions. The Pesas pro­ceeded with the closing anyway in 2014. After the Pesas bought the property, the commission sent them an enforcement order asserting that 13,000 square feet of fill had been installed illegally and demanding that they restore the affected areas to their “original condition.” The Pesas did not com­ply with or contest the order.

In 2016, the Conservation Commission sued the Pesas in Superior Court for the vio­lation, seeking injunctive relief and civil penalties. The Superior Court judge ruled against the commission, citing a statute of repose in the Wetlands Protection Act, which provides: “Any person who . . . ac­quires real estate upon which work has been done in violation of the provisions of this section or in violation of any order issued under this section shall forthwith comply with any such order or restore such real es­tate to its condition prior to any such viola­tion; provided, however, that no action, civil or criminal, shall be brought against such person unless such action is commenced within three years following the recording of the deed or the date of the death by which such real estate was acquired by such person.”

The judge determined that this statute of repose barred the commission from enforce­ment actions three years after Teixeira transferred the property to himself and Ann in 1996.

The commission appealed, and the Su­preme Judicial Court took up the case. The commission argued that the statute of re­pose only bars enforcement actions against a particular buyer after the three-year pe­riod expires, but it does not bar enforce­ment against a subsequent buyer until an­other three years expire after the subsequent buyer acquired the property. In other words, they argued the Wetlands Pro­tection Act’s three-year statute of repose re­sets at zero and begins to run again and again for each subsequent buyer ad infini­tum.

Statute of Repose ‘Does Not Run With The Land’
The SJC agreed with the commission’s ar­gument, noting that the statute allows en­forcement actions against “any person” who acquires land that violates the statute within three years after “such person” acquires the land. Therefore, according to the SJC, the statute does not bar enforcement actions against subsequent buyers of the land, even if no enforcement action was brought against any prior buyer within the three-year period. The SJC ruled that the statute of re­pose does not “run with the land,” but is in­stead “personal” as to each buyer. It set aside the judgment in favor of the Pesas and remanded the case to the Superior Court for further proceedings.

Given this decision, buyers must take care when purchasing land subject to wet­lands orders of conditions, even if the or­ders were issued decades ago for work long since completed and there have been nu­merous intervening owners since. When re­corded orders of conditions are discovered during routine title searches, buyers should make sure that certificates of compliance are obtained and recorded prior to closing.

Buyers who fail to do this assume the risk, as the Pesas did, that they will be sad­dled with the responsibility and cost of fix­ing wetlands messes caused by prior own­ers.

Download the article as seen in Banker & Tradesman on October 25, 2021. Learn more about Christopher R. Vaccaro.