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  /  News   /  : My father died and I am looking for a tax-smart place for my inheritance

: My father died and I am looking for a tax-smart place for my inheritance

Dear Harry,

My father, I’m grieved to write, just passed away, leaving his two trusts to be divided between my three sisters and me. Mainly to minimize taxes, I plan to create a trust with my share. Since he lived and died in Massachusetts and I plan to move back there within a year or so, should I find a trust attorney who practices in Massachusetts rather than here in Indiana? One concern is that I’m in a wheelchair with degenerative ataxia, and I’ll probably want to apply for state services at some point.

Dear reader,

I’m sorry to hear about your dad. I would advise working with a Massachusetts attorney. While every state must honor the estate planning documents created in other states (the Due Faith and Credit clause of the Constitution), the laws regarding wills, powers of attorney, healthcare directives, taxes, and public benefits are sufficiently different from state to state that it’s wisest to work with an attorney where you’ll end up. As they say (or was it Donald Rumsfeld who said?), you don’t know what you don’t know. An Indiana attorney can’t know what she doesn’t know about Massachusetts law (and vice versa for that matter).

I’d add that your plan probably will have little or no effect on taxes, but it could be very relevant to qualifying for services, especially under the Medicaid program (called MassHealth in Massachusetts). In that regard, it might have been helpful if your father had left your share of his estate in the trust for your benefit rather than having it distributed, as sounds like the case. The Medicaid rules are much more liberal for trusts created by third parties (your father) than for trusts created by the beneficiary (you) for their own benefit. I would have an attorney take a careful look at your father’s trusts to see whether they might continue for your benefit. Sometimes trusts include savings clauses that permit the trustee to hold back funds for a beneficiary with a disability rather than distribute them outright.

But that may be water under the bridge, and you can still take steps now to protect your assets and qualify for benefits if needed.

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