USA – MASSACHUSETTS Law and Practice Contributed by: Patricia Annino, Rimon, P.C.
4. Family Business Planning 4.1 Asset Protection
4.2 Succession Planning There are no succession planning techniques unique to Massachusetts. Typical strategies and structures include stock recapitalisations, operating agreements for LLCs, partnership agreements and buy-sell agree - ments. 4.3 Transfer of Partial Interest Massachusetts follows federal law and allows dis - counts for lack of marketability and lack of control. The increasing complexity of modern family struc - tures means there is often a larger pool of claimants for every estate, which increases the risk that some potential beneficiaries will feel left out or slighted. Intestacy laws do not reflect modern living arrange - ments (co-habitation, single-parent households, non- traditional relationships) and divorce at an older age is more common. There have been several high-profile litigation cases on the control of family-owned enterprises. There is an increase in family claims for caregiving and quantum meruit (unjust enrichment). 5. Wealth Disputes 5.1 Trends Driving Disputes There has been an increasing number of “back door” attacks on estate plans, even those with “no contest” clauses. These attacks include challenges to account - ings. Massachusetts allows in terrorem or “no contest” clauses. The purpose is to discourage beneficiaries from challenging the estate planning documents. 5.2 Mechanism for Compensation For estate disputes a court may order removal of the personal representative (PR) and the appointment of a new (neutral) PR, compel an accounting, order a fee rollback (surcharge) and sanctions. For trust disputes, MGL c 203E, Section 1001 lists remedies a court may order, including compelling the trustee to perform their duties as a trustee; enjoining
The Massachusetts Homestead Law protects the val - ue of a home (which can be a house, manufactured or mobile home, condominium or co-op) from the claims of unsecured creditors as long as the person plans to continue living in the home and using the home as their primary residence. There is an automatic pro - tection of USD125,000 of the value of the home. If a Declaration of Homestead is filed with the Registry of Deeds up to USD1 million of the home’s value is pro - tected. Owners who are 62 or older, or are disabled, have extra protection. Each owner can file, and each can protect up to USD1 million of the equity. This extra protection applies only to liens and claims placed on the home after the Declaration of Homestead has become effective. It does not protect against secured debts, mortgages, priority debts (such as government taxes, criminal fines, child support, nursing home liens and support for a former spouse). The cost of filing a Homestead Declaration is USD36. Traditional third-party spendthrift trusts (trusts estab - lished for beneficiaries other than the settlor) that include spendthrift language continue to be effective in Massachusetts. If the beneficiary does not have the right to demand distributions or assign them to any - one else, the trusts are protected from the creditors of the beneficiary. (Of course, if funds are distributed from the trust, they are then available to the benefi - ciary and the creditors of the beneficiary). Self-settled trusts created for the benefit of the settlor are treated differently. Generally, the creditors have access to the trust to the extent that the trustee has the discretion to make distributions to the settlor or for their benefit. Those are not permitted in Massa - chusetts – with one exception – a self-settled special needs trust, by which a disabled person puts their own assets into a trust for their own benefit. Under federal law the trust is exempt from being counted as a resource for government assistance. At the death of the settlor, Massachusetts is entitled to be reimbursed for any Medicaid or MassHealth services that were provided during the settlor’s lifetime.
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