Special Nantucket Considerations

Some aspects come up more frequently with Nantucket Clients

At Landry Law, clients’ goals come first. Your wishes are the guide in designing the plan and administration. That said, there are some considerations that arise more often with Nantucket clients. As all work is designed individually for the client, the result of each can differ. However, it is important that these are taken into account when designing the work to be done and in implementation of that work.

Nantucket Real Estate

Given the high demand and value of Nantucket real estate, any property owned on island requires special attention. Typically, those who own this property will need to consider Massachusetts estate taxes as well as planning for overall tax efficiency. Part of this is considering whether or not the property should be included in the estate for estate tax purposes, which can be beneficial in reducing the capital gains paid by beneficiaries or the trust/estate upon the sale of property. Depending on client goals and the expectation of what will happen with the property, though, it could be more beneficial to transfer the property out of the estate.

For clients who are not always on island or who might want to reduce their involvement in the management of some or all of their Nantucket real estate, there are some planning options that might be preferable. In determining this, we would review the goals and situation as well as how the property falls into the overall plan.

When businesses own Nantucket property, there are additional items to consider depending on the current structure and the work being done. Some are held in complex structures that should be continued, while others might be better moved in preparation of a sale or gift, for example.

Business Owners

Businesses on Nantucket have different typical busy seasons than many in other locations. We like working with businesses when most convenient for the client - usually late autumn is a good time to start.

New businesses want to be sure that they are setting up their businesses correctly, taking into account the legal, tax, and practical implications. We work with you to determine what makes the most sense for you, including ongoing planning work when appropriate.

Something many business owners do not consider is who will handle their business should something happen to the owner. This comes up more often on island, when an unplanned event can bring someone off island or keep them there. Using both emergency and long-term succession planning is important to ensure that the business is maintained even in times when the owner is off island, sick, or otherwise unavailable as well as following the owner’s death.

Nantucket businesses often are family businesses, which have their own needs. Some owners want to transfer interest to their loved ones, but the best way to do so depends on the overall estate, tax, and business plan. We can review all of this together to assist in developing the right plan.

Some businesses have been in existence for many years, and their structure shows it. The owners of these businesses can benefit from a review of their current structure and planning to see how the laws, including tax laws, now are applied. In some cases, it is beneficial to the owners to change the structure or long-term plan.

International aspects

International work is particularly complex and typically requires the use of what we call our team of advisors approach. This approach allows for the advisors for their respective jurisdictions and professional areas to coordinate and develop one cohesive, holistic plan for the client. Attorney Lisa Ann Landry coordinates these teams for multijurisdictional work when appropriate, including using advisors the client already has or finds or Landry Law, PLLC finding advisors to assist.

At Landry Law, PLLC, we work in a variety of international planning situations. Proactive planning, especially in international matters, typically allows for more options that will meet the client’s goals, whereas waiting can lead to limited options that might not result in the same outcome.

On Nantucket, the most common international aspects that arise are: Nantucket residents who own assets in other countries; Nantucket residents or homeowners where one owner is a US citizen and the other is not; and non-US citizens who own property, have bank accounts or other assets, or live on Nantucket. These each present special considerations and require different approaches.

When a Nantucket resident who is a US person also owns property abroad, we work to ensure that the worldwide plan is designed, established, and implemented in a manner that meets the client’s goals. While these can be complex, by using professionals familiar with this work, clients are better able to achieve their goals.

For Nantucket residents or homeowners where one person is a US citizen and another is not, then the relationship between the parties and the other jurisdictions involved will determine what the best options are. For a married couple, planning using a special type of trust called a QDOT (Qualified Domestic Trust) might be appropriate. If one or both parties are considered domiciled in the UK, then a specific type of trusts, or series of them, might be best. When a beneficiary is also not a US citizen, additional options are evaluated.

With non-US citizens who have assets on island, there are a number of factors that will affect what planning options suit them best. As with the last option, the appropriate design for the plan will depend on the relationship with beneficiaries and the other jurisdictions involved are important to determine what makes sense to meet the client’s goals.

Other situations arise with international aspects, and we are happy to discuss these with the people involved. The specifics of what is needed and what design will be recommended vary by situation, so there is not one set plan that everyone is given.

In any matter that has international aspects, tax implications are especially important to consider. While there are many income tax treaties between the US and other countries, there are relatively few transfer (estate, gift, and generation-skipping transfer) tax treaties. Most of the treaties are intended to broadly minimize any duplicate taxation, meaning that a taxpayer typically should end up paying the amount of tax that the country with a higher transfer tax would levy. However, this is not always the outcome in practice, and both the specific treaty and otherwise applicable US tax laws and regulations will need to be assessed and applied to the specific situation.

When it comes time to administer international work, such as a trust or estate with assets, beneficiaries, or fiduciaries (people handling the trust or estate) outside of the US, there are additional aspects to consider. One example is that, while a Massachusetts probate estate can have a Personal Representative (the fiduciary in charge of the estate, the role that used to be referred to as Executor/trix) who is outside of the US, in practice it is often important to have a local Personal Representative to ensure that the appropriate accounts can be opened and transfers completed.

Where international work further complicates already complex work, finding a professional who fits the client and their needs is essential. While we strive to help people in the areas we know, at Landry Law, PLLC, we also know that there are limits on what we can do in order to continue to provide high quality services. Therefore, there are some areas of international work where Attorney Landry has knowledge and experience but chooses to refer to or bring in other professionals who do focus on that area.

Non-traditional considerations

Many people in today’s world do not fit the older mold, and this means that most people will need to have a plan designed individually for them. At Landry Law, PLLC, we enjoy working with clients who do not fit the “traditional” mold and instead have a variety of non-traditional and complex considerations. For example, an unmarried couple generally would need to take additional steps in their planning to ensure that their wishes are followed. With a childfree or childless client, the defaults set by the law might not be what the client wants - and in some cases make it so that, even if the client’s loved ones know what the client wanted, those wishes are not an option. When someone has special needs or is otherwise abled, there might be explanations and planning options that better fit them - whether that person is the client or a beneficiary. Business owners should review their business and estate plans together to ensure that they are cohesive. Complex family structures, especially with high net worth assets, require specialized analysis. There are many more examples of non-traditional considerations, from women-led households to including people who are not legally considered related, and many of these are found on island.

Estate Tax Planning

While many people think of estate tax being only federal estate tax, it is important to remember all transfer taxes that need to be considered. Transfer taxes are taxes applied to the transfer of assets other than sales. This includes the federal estate, gift, and generation-skipping transfer tax as well as Massachusetts (and potentially other state) estate tax. The Massachusetts estate tax return must be filed for all estates over $1 million - significantly lower than the federal. There are a number of differences between the two.

Further, the federal transfer tax system is expected to change significantly in the coming years. There are options for utilizing the current high exemption amount in some situations, but those must be analyzed on an individual basis.

While many Nantucket residents do not have a Massachusetts taxable estate, it is still important to consider and keep planning flexible for future changes. First, many people in Massachusetts do not think that they have a taxable estate until they learn about all of the assets included in the estate for estate tax purposes. Life insurance is one that often surprises people as being included. Second, especially with likely federal changes before the scheduled 2025 drop in exemption amount, having a plan that is flexible to be acted upon and potentially adjust based on those changes is useful. While it is not possible to account for all possible future changes, using flexible options accounting for some changes such as changing exemption amounts is important.

Nantucket homeowners who are not Massachusetts residents might be surprised to learn that the Massachusetts estate tax applies to them, though the tax is assessed on their Massachusetts property. Determining if a return needs to be filed and any applicable tax is a complex calculation. Proper planning can minimize, simplify, and in some cases eliminate this liability and administration work.

Overall Tax Efficiency

Beyond transfer taxes, the overall tax efficiency is important to consider. In some cases, due to capital gains and income taxation, the beneficiaries might be better off paying Massachusetts estate tax to reduce the federal and state taxes owed upon the sale or transfer of assets. However, this is a case by case analysis that takes into account the client’s wishes, other planning, and likely future actions with regards to the various assets owned by the client.

High Net Worth Planning

Those with high net worth have additional planning considerations, both legal and tax. Those concerned with utilizing the higher federal estate tax exemption amount or wishing to minimize their overall transfer and income taxes might wish to use advanced planning techniques. The appropriate options depend on the types of assets, overall situation, timeline, and general plan to meet the client’s goals.

Due to likely federal changes, estate, tax, and business planning are important for high net worth individuals to consider and start soon. Many options that currently exist are expected to be removed with these changes, but some actions can be taken now to maximize efficiency - even with future changes. Some options taken now have risk as to whether they will produce the same results after the legislative changes. All of this would be reviewed with a client engaging Landry Law, PLLC in planning.

The administration of high net worth plans also have special consideration. Administration must be done following certain requirements based on the plan to ensure that the plan’s intent is achieved.

Flexibility in Plans

Many islanders value flexibility in their planning. While some planning options necessarily limit control and certain options restrict flexibility, Landry Law, PLLC includes flexibility where appropriate and possibility in planning and administration work. Whether it is the flexibility of a business owner to change their succession plan or the flexibility of a trust to adapt to some changes in applicable Massachusetts and federal transfer taxes, flexibility is included and discussed with clients starting with the design of the plan.