5 Estate Planning Tips for Homeowners in Boston

NextHome Titletown Real Estate Boston MA

It’s a common misconception that only wealthy people need to worry about estate planning. Not true! Estate Planning should be a concern for most people, especially homeowners.

With no estate plan in place, there is no way for your estate to pass on to your heirs and beneficiaries without the delay caused by the long and complex intestacy provisions and process. So, to help you make sure your estate is handled according to your wishes, here are 5 estate planning tips for homeowners in Boston.

1. Understand the Basics of Estate Planning

As with any complex legal matter, the first of our estate planning tips for Boston homeowners is to gain a basic understanding of estate planning. You need to know what it is, its purpose, and the steps involved.

Basically, estate planning is the process of designating who will receive your assets and handle your responsibilities after your death or incapacitation.

One goal of estate planning is to ensure that beneficiaries receive assets in a way that minimizes estate tax, gift tax, income tax, and other taxes. Estate planning can help establish a platform you can fine-tune as your personal and financial situations change.

You need to determine how you want your assets distributed in the case of death or incapacitation. Then, you should inventory all your estate’s assets, which may turn out to be much more than you previously thought.

Tangible and intangible assets typically include:

  • Real estate
  • Vehicles
  • Checking and savings accounts
  • Collectibles
  • Various personal possessions
  • Business ownership
  • Stocks and bonds
  • Life insurance
  • Retirement accounts
  • Business ownership

After a thorough inventory, the valuation of these assets is next. When it comes to your home, your Boston real estate agent at NextHome Titletown Real Estate can help you arrive at an accurate valuation. To find out more, just call (617) 657-9811.

2. Assess Your Family’s Needs

Important among our estate planning tips for Boston homeowners is how to assess your family’s needs carefully in order to determine the best way to protect them and pass on your assets.

Top considerations here include:

  • Life insurance coverage – Will your current life insurance allow your surviving spouse to keep making monthly mortgage payments?
  • Designated guardians – For example, do you need to designate a guardian for minor children?
  • Documented continuing care – Do you have minor children or disabled family members who will require continuing care?

3. Determine the Best Way to Bequeath Your Home

When it comes to leaving your home to designated beneficiaries and heirs, you have several options. So you need to determine the best way to do it.

This one of our estate planning tips can be fairly complex, so you’ll likely need professional guidance to make the final decision in choosing from among the following:

BEQUEST

You can leave your home so a specified person in a will as a bequest. The advantage here is that the beneficiary gets a stepped-up cost basis, which means that if they sell the house, only the apprecaition since you pass away – not way back when you bought it – is taxed.

In addition, if there are any liens on your home, such as a mortgage, beneficiaries aren’t obligated to prove the ability to pay to assume the mortgage.

GIFT

You can bypass the time and headache of probate, keeping it private and simple, if you pass the interest in the home on as a gift. But, in this case, you need to keep the following tax regulations in mind:

  • The grantor pays state and federal gift tax – unless the interest is worth under $15,000 or being passed along to a spouse. If the value is close to the line, be safe and file Form 709.
  • If the home has risen in value, your beneficiary will owe full capital gains taxes when ultimately selling the home. There is no stepped-up cost basis to offset capital gains.

REVOCABLE LIVING TRUST

With such a trust, you retain control and use of your home, but the trust actually owns it. And the conditions of the trust spell out exactly how, when, and to whom the home and other assets pass to others, bypassing the probate process. You can also change or revoke the trust because it is a revocable living trust.

4. Establish and Legalize Your Directives

Figuring out and then legalizing your wishes (your directives) is a critical for estate planning, with a number of important considerations:

  • Trust – Allows you to designate assets to go toward specific things and to stated people while you are still alive
  • Medical care directive / living will – Clearly states your wishes concerning medical care in the event you are unable to make such decisions yourself
  • Durable financial power of attorney – allows the designated person to manage your finances if you are rendered unable to do so
  • Limited power of attorney – Allows a stated person to make decisions for you and act on your behalf, but in a limited capacity

5. Check into Your State’s Estate Tax Laws

This is another of our important estate planning tips for Boston homeowners because it is often neglected in the planning process. But your state’s estate tax laws can heavily impact your plan.

When it comes to estate planning tips and estate tax laws, keep in mind:

  • At the federal level, only very large estates are subject to estate taxes. For 2020, up to $11.58 million of an estate is exempt from federal taxation.
  • Some states have estate taxes. They may levy an estate tax on estates valued below the federal government’s exemption amount. For Massachusetts, that amount is $1M in assets. New Hampshire, conversely, has no estate tax.
  • Some states have inheritance taxes. This means that the people who inherit your money may need to pay taxes on individual bequests received from an estate. 

Bonus Estate Planning Tip: Go to the Professionals

We’d be remiss if we didn’t include this among our estate planning tips for Boston homeowners: seek out professional help. Estate planning can be legally complex and littered with pitfalls, so be sure to call on the expertise of your attorney and your Boston real estate agent. Our Managing Broker, Rory Gill, is a licensed attorney in Massachusetts and New Hampshire, and he can point you in the right direction toward an estate planning specialist (and can answer some specific questions himself prior to the referral). To discover more, contact us at (617) 657-9811.


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