Planning for Life

Harry S. Margolis

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3 Reasons I Disagree with Biden on the Step-Up in Basis (But Support His Other Tax Proposals)

Posted by Harry S. Margolis on March 2, 2021

By Harry S. Margolis


As a candidate, President Joe Biden proposed getting rid of the "step-up" in basis. This is a provision that erases capital gains upon the death of the owner. Here's how it works:

What's a Step-Up in Basis?

Let's say you bought some stock for $20,000 and today it's worth $50,000. If you were to sell the shares for this amount, you would have to pay tax on capital gains of $30,000. The purchase price is the stock's "basis." The gain is the difference between the proceeds and the basis.

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Topics: capital gains taxes, estate taxes, step-up in basis

Free Britney! Why Her Conservatorship is Inappropriate

Posted by Harry S. Margolis on February 23, 2021

By Harry S. Margolis


Britney Spears is 39 years old and capable of earning tens of millions of dollars a year. Yet, as exposed in the recent New York Times documentary, "Framing Britney Spears," against her wishes, her father, James Spears, has served as her conservator for the past 13 years. At a February 11th court hearing at Los Angeles Superior Court, Judge Brenda Penny continued the conservatorship but confirmed the addition of Bessemer Trust as co-conservator.

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Topics: conservatorship

Martha's Vineyard Senior Gets Home Back After Undue Influence & Fraud

Posted by Harry S. Margolis on February 16, 2021

By Harry S. Margolis


In Steere v. Steere (Mass. Sup. Ct., Dukes CA 2018-44, December 16, 2020), Superior Court judge Paul D. Wilson finds that a nephew and his wife used undue influence to defraud his 88-year-old aunt from her house in Oak Bluffs on Martha's Vineyard.

How It Went Down

Gloria Steere had lived in her house in Oak Bluffs since 1982. Despite having been in charge of accounting at Martha's Vineyard Insurance for 30 years, in 2012 and 2013, she became the victim of scammers and lost her life savings of approximately $800,000.

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Topics: undue influence

How Men Often Shortchange their Wives' Social Security Benefits

Posted by Harry S. Margolis on February 15, 2021

By Harry S. Margolis

Social-Security-retirement-benefits-elder-law-Wellesley-MA-02481According to a study by the Center for Retirement Research at Boston College, most men begin drawing on their Social Security retirement benefits at age 62 or 63, rather than waiting until their full retirement age or even age 70. The early receipt of benefits means that both the husbands and their wives will receive less each month than they would if they waited.

According to the study written by Steven A. Sass, Wei Sun, and Anthony Webb, this early election has no effect on average on the men. Though they will receive a smaller benefit check each month, this will be offset by receiving more of those smaller checks, the ones they get between the ages of 62 and normal retirement age. Of course, this is the average. Men who are in ill health would do better to take early retirement and men who expect to live a long time should postpone their receipt of benefits for as long as possible.

This is also basically true of single women, meaning on average they do about as well in terms of lifetime Social Security benefits no matter whether they start earlier and get more smaller checks or start later and receive fewer larger checks.

Wives' Benefit Levels Still Dependent on Mens'

But for today’s seniors, most wives’ benefits are based on their husband’s work record. (This is likely to change to some extent over time, but even before the pandemic, women were more likely to take time off from work to raise families than were men. The need to homeschool children during the pandemic has fallen most heavily on women, which will have long-term effects on their earnings and Social Security work records.) As a result, if husbands choose to take benefits before their full retirement age, their wives are penalized twice — first while their husbands are alive when their benefit is smaller, usually half of the husband’s benefit, and second when the husband dies (which often happens first due to women’s greater life expectancy) when they receive their husband’s smaller benefit rather than their own.

The Math

Some numbers can demonstrate how this works. Making them up, let's assume that a man's full Social Security benefit will be $1,000 a month at full retirement age, and $750 if he takes them at age 62, and $1,250 at age 70. At age 62, the average American man has a life expectancy of 20 years and the average woman of 23 years. Here's what our fictional man would receive in total from Social Security should he retire at various times and live to age 82:

Retirement Age Social Security Income
62 $180,000
66 $192,000
70 $180,000

Assuming the wife's Social Security benefit is half the husband's, she'll receive about half these amounts while they're both alive, so the husband's early retirement has little effect. The effect comes during the three years she's likely to outlive him. Here's what she'll get based on his retirement age:

Husband's Retirement Age Wife's Survivorship Benefits
62 $27,000
66 $36,000
70 $45,000

These numbers arguably understate the potential effect of the husband's early retirement for a number of reasons: First, these are low Social Security benefits. Second, they don't take into account the effect of annual CPI increases in benefits that will be bigger for the larger postponed retirement benefit. Third, many wives are younger than their husbands, so they survive them by more than the three-year average difference in life expectancies. Fourth, Social Security is an annuity that pays for your entire life, in effect insuring you from the risk that you'll live too long and outlive your other resources. The effect of a higher or lower Social Security benefit will be most felt by those who live longer than the average life expectancy.

Why Do Those Men Do It?

So, why do men do this? Are they cads? The researchers conclude that they are not, that instead they simply don’t understand the implications of claiming benefits early. More education may change their behavior, although the researchers note that “financial education has not been especially effective in changing behavior.” As an alternative, they suggest a number of potential policy changes, such as requiring spouses to sign off on the decision to claim Social Security before the beneficiary’s full retirement age.

Interestingly, while the Social Security Administration’s website has a number of excellent calculators to assist beneficiaries in deciding when to retire, none appear to calculate spousal benefits.  Based on the Boston College report, adding such calculators would be a good first step.

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You've Been Appointed Trustee, Watch Out! - Massachusetts

Posted by Harry S. Margolis on February 14, 2021

By Harry S. Margolis
Being chosen to act as a trustee is a vote of confidence in your ability, but it is also a big responsibility. Trustees must locate and protect trust assets, invest assets prudently, distribute assets to beneficiaries, keep track of income and expenditures, and file taxes. If you don’t perform your duties properly, you can be held personally liable for any losses or extra costs. Read More

Topics: trustee

SJC Rules House in Nominee Trust Not a Countable Asset for MassHealth

Posted by Harry S. Margolis on February 9, 2021

By Harry S. Margolis


In the latest of a long line of cases debunking MassHealth legal theories, in Guilfoil vs. Sec. of the Exec. Office of Health and Human Services (SJC-12922, February 9, 2021), the Massachusetts Supreme Judicial Court (SJC) finds that an applicant's life interest in a home held by a nominee trust is not a countable asset for purposes of her eligibility for MassHealth coverage of her nursing home care. We also note that this is the latest in a long line of MassHealth trust cases litigated by Lisa N. Neeley of Mirick O'Connell in Worcester.

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Topics: MassHealth, nominee realty trust

Oldest Baby Boomers Turning 75: A Time to Plan

Posted by Harry S. Margolis on February 4, 2021

By Harry S. Margolis


With the Baby Boom commonly defined as beginning in 1946, the leading edge of the Baby Boomers are turning 75 this year. (Interestingly, three United States presidents, Bill Clinton, George H. Bush, and Donald Trump, were all born in that first Baby Boom year.)

But what does it mean that Baby Boomers are just beginning to cross this threshold? For them? For society? This blog post will discuss the former—planning for 75-year-olds—and a subsequent post will discuss the latter—the impact on our society of aging Baby Boomers.

A Time to Plan

Borrowing both from Ecclesiastes and from my friend and colleague Rajiv Nagaich of Life Point Law in Washington State, age 75 is a good time to plan for the second half of retirement.

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Topics: baby boomers, health-care decision making, Estate Planning

Will You Leave Your Children a Negative Inheritance?

Posted by Harry S. Margolis on February 2, 2021

By Harry S. Margolis

negative-inheritance-estate-planning-attorney-Wellesley-MA-02481Will you leave your children a “negative inheritance?” The term (which was likely first used in the study of economics by Boston University Professor Laurence Kotlikoff) describes the situation in which the costs to children of caring for aging relatives outstrip any gifts or bequests they might receive in return.

Those costs may be financial, physical, and emotional, as children and other relatives give up jobs and homes to care for family members. The following posting to the is not unusual:

My parents are in their mid-eighties and continue to live at home. We sold our large home 2 years ago and moved in temporarily with my parents while awaiting the purchase of our new home. Alas I discovered how much they needed more care than just each other during our stay. My husband and I now stay at my parents home and we do not even visit our own home. I quit my job last summer to increase the level of care necessary for them. We pay all their bills except for food as well as our own bills. I am taking CNA classes so that I may continue to take care of them at home as opposed to the option of nursing home care. We are now dipping into our personal retirement savings to continue to care for them.

While a supermajority — 91% — of boomers report being “generally pleased to be helping their parents,” according to a survey by Putnam Investments, it doesn’t relive the negative effects it may have on a caregiver's own life. There are many steps parents can take to reduce, if not eliminate, the burden they may become on their children as they age. These include:

  • Doing proper estate planning so that children can step in to manage finances and make health care decisions when necessary.
  • Moving to housing that you can navigate if you're no longer able to go up and down stairs.
  • And that is close to your children so they can easily check in on you or pick you up for appointments.
  • Purchasing long-term care insurance to pay for care costs, if you can afford it.
  • Doing Medicaid planning if you cannot.
  • Having a family meeting to discuss your wishes should you become incapacitated and discussing the roles in your care to be carried out by different family members.

Taking these steps can help reduce the out-of-pocket costs of your care as well as the stress family members will experience when they have to step in. They can also help preserve and enhance family bonds, thus avoiding perhaps the worst potential "negative inheritance."


Related Articles:

Ultimate Juggling Act: Working, Raising Children, & Caring for Parents

AskHarry Podcast Episode 1: Planning Steps Seniors Can Take for their Protection

Got Questions? We've Got Answers

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Topics: long-term care planning, baby boomers, negative inheritance

How the Pandemic will Permanently Change the Practice of Law

Posted by Harry S. Margolis on January 30, 2021

By Harry S. Margolis


We're almost a year into the pandemic. While the vaccines are finally giving us a light at the end of the tunnel, it's a long tunnel. If we vaccinate people at the rate of President Joe Biden's goal of 100 million shots in arms in 100 days, we won't reach Dr. Anthony Fauci's target of reaching herd immunity by vaccinating 70 population for another year.

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Topics: Estate Planning

Can Trust Pay for Voodoo Cure?

Posted by Harry S. Margolis on January 24, 2021

By Harry S. Margolis


Both the issues and the clients faced by trustees of special needs trusts can be significantly different from those faced by trustees of more traditional trusts created for asset management, tax, and asset protection purposes.

I am co-trustee of a trust holding funds derived from a medical malpractice award for a severely handicapped girl with cerebral palsy. She was born in the United States, but her parents came from the Dominican Republic.

Some years ago, the girl’s mother called me and asked whether the trust would pay for medications from Venezuela that had helped another girl with cerebral palsy. I was rather skeptical, but didn’t want simply to say “no.” So, I asked a number of questions about the name of the medication, its derivation, its dosage, and the amount of times the girl would have to take it. The mother said she would try to get answers to my questions.

A few minutes later, the mother called back to apologize for not being entirely straight with me. It turned out that she did not need the money for medicine, but for a voodoo cure. She was convinced that the reason her daughter had been born with her ailment was that while she was pregnant someone had put a curse on her, the mother. The voodoo doctor, for a fee, would remove the curse.

Being trained in a western tradition, I have no knowledge of these affairs. So I agreed to meet the mom halfway, to split the cost of the voodoo treatment. She paid for half out of her pocket; the trust paid for the other half. Unfortunately, the treatment didn’t work.

As this story indicates, trustees can be asked to pay for items or services that may run counter to their own values or best judgement. Should a trust pay for video games, plastic surgery, pornography, or an abortion? Guidance from the grantor of the trust can be helpful. But in the case of a special needs trust funded as the result of litigation, there really is no grantor. So, in that case, the trustee must make a judgement based on what she believes to be in the best interest of the beneficiary. That can include a consideration of the benefit the trustee believes the beneficiary will receive from the item or service. It should also consider the financial standing of the trust. Can the trust afford this payment, or would it deplete the resources available for services the beneficiary may need?

In the case of the voodoo treatment for my beneficiary, while I was almost 100% certain it would not work (always allowing for the possibility that my western view of how the world works could be wrong or limited), I felt there was value in strengthening my relationship with her mom. I do think that worked. My relationship with the family has grown as I've watched the mom continue to devote her life to caring for her largely bedridden and uncommunicative daughter. (It also helped when, years later, my co-trustee and I met the mom's sister and it turned out he and she knew people in common. Boston can be a small town in many ways.)

As a side note, if the voodoo treatment had worked, or if we truly believed that a voodoo curse was the cause of the initial injury, this would raise a serious doubt about the medical malpractice case which was the source of the trust funds. If the cause was voodoo, how can we find the doctor truly at fault?


Related Articles:

What You Need to Know about Special Needs Trusts and Taxes

SNT vs. ABLE Account: Which Makes More Sense for You

Congress Passes Special Needs Fairness Act

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Topics: Special Needs Trust, trustee

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