Estate Planning Is Best When Personalized – Annapolis and Towson Estate Planning

Just as a custom-tailored suit fits better than one off the rack, a custom-tailored estate plan works better for families. Making sure assets pass to the right person is more likely to occur when documents are created just for you, advises the article “Tailoring estate to specific needs leads to better plans” from the Cleveland Jewish News.

The most obvious example is a family with a special needs member. Generic estate planning documents typically will not suit that family’s estate planning.

Every state has its own laws about distributing property and money owned by a person at their death, in cases where people don’t have a will. Relying on state law instead of a will is a risky move that can lead to people you may not even know inheriting your entire estate.

In the absence of an estate plan, the probate court makes decisions about who will administer the estate and the distribution of property. Without a named executor, the court will appoint a local attorney to take on this responsibility. An appointed attorney who has never met the decedent and does not know the family will not have the insights to follow the decedent’s wishes.

The same risks can occur with online will templates. Their use often results in families needing to retain an estate planning attorney to fix the mistakes caused by their use. Online wills may not be valid in your state or may lead to unintended consequences. Saving a few dollars now could end up costing your family thousands to clean up the mess.

Estate plans are different for each person because every person and every family are different. Estate plan templates may not account for any of your wishes.

Generic plans are very limited. An estate plan custom created for you takes into consideration your family dynamics, how your individual beneficiaries will be treated and expresses your wishes for your family after you have passed.

Generic estate plans also do not reflect the complicated families of today. Some people have family members they do not want to inherit anything. Disinheriting someone successfully is not as easy as leaving them out of the will or leaving them a small token amount.

Ensuring that your wishes are followed and that your will is not easily challenged takes the special skills of an experienced estate planning attorney.

Reference: Cleveland Jewish News (Dec. 9, 2020) “Tailoring estate to specific needs leads to better plans”

 

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Do You Know Your Job as Executor, Agent or Trustee? – Annapolis and Towson Estate Planning

It is not uncommon for a named executor or trustee to have some anxiety when they discover that they were named in a family member’s estate planning documents.

With the testator or grantor dead or incapacitated, the named individual is often desperate to learn what their responsibilities are.

It may seem like they are asked to put together pieces in a puzzle without a picture, especially when there is limited information to start with, says The Sentinel-Record’s recent article entitled “You’re an executor or trustee … Now what?”

Here is a quick run-down of the responsibilities of each of these types of agents:

An executor of an estate. This is a court-appointed person (or corporate executor) who administers the estate of a deceased person, after having been nominated for the role in the decedent’s last will and testament.

A trustee. This is an individual (or corporate trustee) who maintains and administers property or assets for the benefit of a beneficiary under a trust.

An agent named under a power of attorney. This person (or corporate agent) has the legal authority to act for the benefit of another person during that person’s disability or incapacity.

Each of these roles has different duties and responsibilities. For example, an executor, in most cases, is responsible for filing the original last will and testament of the testator with the probate court and then to be formally appointed by the court as the executor.

A trustee and executor both must provide notice to the beneficiaries of their role and a copy of the documents.

An agent named under a power of attorney may have authority to act immediately or only when the creator of the documents becomes disabled or incapacitated. This is often referred to as a “springing” power of attorney.

Each of these individuals is responsible for managing and preserving assets for the benefit of the beneficiary.

They also must pay bills out of the assets of the estate or trust, such as burial and funeral expenses.

Finally, they settle the estate or trust and make distributions.

Reference: The Sentinel-Record (Nov. 24, 2020) “You’re an executor or trustee … Now what?”

 

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How Much Power Does an Executor Have? – Annapolis and Towson Estate Planning

The Pauls Valley Daily Democrat’s recent article entitled “It doesn’t end with the will” explains that there is constant confusion about wills. This misunderstanding involves the scope of power of those named in the will as the personal representative (or executor) of the decedent’s estate. Let us try to straighten out some of these myths or pieces of bad information about wills and probate.

The Executor Does Not Need Court Permission. False. An estate executor or personal representative cannot distribute a decedent’s assets to themselves or to any heirs, until okayed by the court. Many people think that a will provides immediate authorization to distribute the assets of an estate.

If He Had A Will, We Do Not Need Probate. Another incorrect belief is that if a person dies with a will, probate is not needed or required. If a person has a will, the will and the distributions named in it can only be made valid by the probate court. There are ways to avoid the probate process. However, the fact that a person had a will does not do it.

The Executor Can Start Giving Away Stuff ASAP. This is also false. Some people think that as soon as a person receives appointment as the personal representative or executor from the probate court, they can begin distributing assets from the decedent’s estate. Nope. If this were true, it would defeat the objectives of probate, which is court oversight and control.

The Court Does Not Monitor The Executor’s Actions. This statement is also incorrect. The entire probate process is structured to provide a court monitored coordination of a decedent’s estate to make certain that his or her wishes are followed. This also helps to prevent unauthorized distributions or “raids” on a decedent’s assets by improper persons.

Remember, the executor’s Letters Testamentary authorize that person to act for the estate—they do not permit any distributions before court approval or final probate court order.

What Does Probate Do? Probate fulfills these purposes:

  • At death, the deceased’s property is subject to control and monitoring by the court.
  • The court then starts to see what the decedent’s wishes were for distribution and who was named to administer the estate.
  • The court must also review the scope of the estate, define all assets in the estate and determine all debts of the estate.
  • Probate requires a notice to creditors, so the executor has a complete list of debts of the estate and to give each creditor the opportunity to be paid.
  • The court watches any transfers, sales of assets or payments during probate.
  • The executor is authorized to receive money and manage the assets of the estate, but he cannot withdraw or transfer assets from the estate.
  • At a final hearing and after notice to interested parties, the court determines who should get distributions.

Ask an experienced estate planning attorney about the probate process and how to devise a complete estate plan.

Reference: Pauls Valley Daily Democrat (Oct. 1, 2020) “It doesn’t end with the will”

 

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The Wrong Power of Attorney Could Lead to a Bad Outcome – Annapolis and Towson Estate Planning

There are two different types of advance directives, and they have very different purposes, as explained in the article that asks “Does your estate plan use the right type of Power of Attorney for you?” from Next Avenue. Less than a third of retirees have a financial power of attorney, according to a study done by the Transamerica Center for Retirement Studies. Most people do not even understand what these documents do, which is critically important, especially during this Covid-19 pandemic.

Two types of Durable Power of Attorney for Finance. The power of attorney for finance can be “springing” or “immediate.” The Durable POA refers to the fact that this POA will endure after you have lost mental or physical capacity, whether the condition is permanent or temporary. It lists when the powers are to be granted to the person of your choosing and the power ends upon your death.

The “immediate” Durable POA is effective the moment you sign the document. The “springing” Durable POA does not become effective, unless two physicians examine you and both determine that you cannot manage independently anymore. In the case of the “springing” POA, the person you name cannot do anything on your behalf without two doctors providing letters saying you lack legal capacity.

You might prefer the springing document because you are concerned that the person you have named to be your agent might take advantage of you. They could legally go to your bank and add their name to your accounts without your permission or even awareness. Some people decide to name their spouse as their immediate agent, and if anything happens to the spouse, the successor agents are the ones who need to get doctors’ letters. If you need doctors’ letters before the person you name can help you, ask your estate planning attorney for guidance.

The type of impairment that requires the use of a POA for finance can happen unexpectedly. It could include you and your spouse at the same time. If you were both exposed to Covid-19 and became sick, or if you were both in a serious car accident, this kind of planning would be helpful for your family.

It is also important to choose the right person to be your POA. Ask yourself this question: If you gave this person your checkbook and asked them to pay your bills on time for a few months, would you expect that they would be able to do the job without any issues? If you feel any sense of incompetence or even mistrust, you should consider another person to be your representative.

If you should recover from your incapacity, your POA is required to turn everything back to you when you ask. If you are concerned this person will not do this, you need to consider another person.

Broad powers are granted by a Durable POA. They allow your representative to buy property on your behalf and sell your property, including your home, manage your debt and Social Security benefits, file tax returns and handle any assets not named in a trust, such as your retirement accounts.

The executor of your will, your trustee, and Durable POA are often the same person. They have the responsibility to manage all of your assets, so they need to know where all of your important records can be found. They need to know that you have given them this role and you need to be sure they are prepared and willing to accept the responsibilities involved.

Your advance directive documents are only as good as the individuals you name to implement them. Family members or trusted friends who have no experience managing money or assets may not be the right choice. Your estate planning attorney will be able to guide you to make a good decision.

Reference: Market Watch (Oct. 5, 2020) “Does your estate plan use the right type of Power of Attorney for you?”

 

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What Estate Planning Documents Do I Need for a Happy Retirement? – Annapolis and Towson Estate Planning

Estate planning documents are made to help you and your family, in the event of your untimely demise or incapacitation.

These documents will give your family specific instructions on how to proceed.

The Winston-Salem Journal’s recent article entitled “4 Must-Have Documents for a Peaceful Retirement” looks at these critical documents in constructing an effective estate plan.

  1. Power of Attorney (POA). If you become incapacitated or become unable to make your own financial decisions, a POA will permit a trusted agent to manage your affairs. Have an estate planning attorney review your POA before it is executed. You can give someone a limited POA that restricts their authority to specific transactions. You can also create a springing POA, which takes effect only at the time of your incapacitation.
  2. Will. About 40% of Americans actually have a will. Creating a valid will prevents you from leaving a mess for your heirs to address after you die. A will appoints an executor who will manage your affairs in a fiduciary manner. The will also details your plan for the distribution of your property. Make certain that your will is also in agreement with other documents you have set up, so it does not create any questions.
  3. TOD/POD Designation Forms. A Transfer-on-Death (TOD) or Payable-on-Death (POD) designation lets you to assign your investment accounts to a named beneficiary. The big benefit here is that accounts with a named TOD/POD beneficiary pass directly to that person when you die. Any accounts without a TOD/POD beneficiary will be subject to the terms of your will and will be required to go through the probate process.
  4. Healthcare POA/Advance Directives. These are significant health-related documents. A healthcare POA allows your named agent to communicate your wishes to medical professionals, if you are unable. They also include instructions as to whether you want to have life-saving measures performed, if you have a cardiac or respiratory arrest. These healthcare documents also remove the need for your family to make difficult decisions for you.

Reference: Winston-Salem Journal (Sep. 20, 2020) “4 Must-Have Documents for a Peaceful Retirement”

 

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What Does It Mean to Be an Executor? – Annapolis and Towson Estate Planning

Being named an executor can be a big deal, undertaking confidence and trust that someone is appointing you to manage their estate after they have died. An executor has a long to-do list, according to The Cleveland Jewish News’ recent article entitled “Role of executor comes with many responsibilities.”

First, the executor must find the signed will and file it at the probate court to officially be appointed.

Next, the executor must collect all of the estate’s assets, as well as track down any debts like mortgages, credit card bills, car payments and the like.

Once the bills are paid, the executor will distribute the assets to the beneficiaries.

Finally, the executor is tasked with going to the probate court and state that the bills were paid, so all of the assets can be distributed. At that point, the executor is discharged.

Any adult can be named an executor as an executor of an estate. However, in some circumstances, a bond is required. The bonding company will decide if the executor is financially sound. If a person dies without a will, an individual can apply to be an administrator of the estate.

When naming an executor, before death, the estate owners should discuss the role and responsibilities of their named executor to have a smooth transition with no surprises for those left behind.

In addition, an alternate executor should be named in the event the first person is unwilling or unable to serve.

Executors should consult an estate planning attorney throughout the process. This legal assistance is important to guide the executor through all the required steps, so he or she can fulfill the fiduciary responsibilities.

An experienced estate planning attorney can help review the will with the executor, so he or she understands what it means. The attorney can also review the steps of being appointed and what their role of the executor is as far as collecting the assets and debts, along with the details about which the average non-attorney might not consider.

Reference: Cleveland Jewish News (Sep. 23, 2020) “Role of executor comes with many responsibilities”

 

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What Is Involved with Serving as an Executor? – Annapolis and Towson Estate Planning

Serving as the executor of a relative’s estate may seem like an honor, but it can also be a lot of work, says The (Fostoria, OH) Review Times’ recent article entitled “An executor’s guide to settling a loved one’s estate.”

As an executor of a will, you are tasked with settling her affairs after she dies. This may sound rather easy, but you should be aware that the job can be time consuming and difficult, depending on the complexity of the decedent’s financial and family situation. Here are some of the required duties:

  • Filing court papers to initiate the probate process
  • Taking inventory of the decedent’s estate
  • Using the decedent’s estate funds to pay bills, taxes, and funeral costs
  • Taking care of canceling her credit cards and informing banks and government offices like Social Security and the post office of her death
  • Readying and filing her final income tax returns; and
  • Distributing assets to the beneficiaries named in the decedent’s will.

Every state has specific laws and deadlines for an executor’s responsibilities. To help you, work with an experienced estate planning attorney and take note of these reminders:

Get organized. Make certain that the decedent has an updated will and locate all her important documents and financial information. Quickly having access to her deeds, brokerage statements and insurance policies after she dies, will save you a lot of time and effort. With a complex estate, you may want to hire an experienced estate planning attorney to help you through the process. The estate will pay that expense.

Avoid conflicts. Investigate to see if there are any conflicts between the beneficiaries of the decedent’s estate. If there are some potential issues, you can make your job as executor much easier, if everyone knows in advance who is getting what, and the decedent’s rationale for making those decisions. Ask your aunt to tell her beneficiaries what they can expect, even with her personal items because last wills often leave it up to the executor to distribute heirlooms. If there is no distribution plan for personal property, she should write one.

Executor fees. You are entitled to an executor’s fees paid by the estate. In most states, executors are allowed to take a percentage of the estate’s value, which can be from 1-5%, depending on the size of the estate. However, if you are a beneficiary, it may make sense for you to forgo the fee because fees are taxable, and it could cause rancor among the other beneficiaries.

Reference: The (Fostoria, OH) Review Times (Aug. 19, 2020) “An executor’s guide to settling a loved one’s estate”

 

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How Do I Handle Inheritance? – Annapolis and Towson Estate Planning

The loss of a close loved one can make it very hard to think clearly and function effectively. Add to that the fact that you may have to make important decisions about an inheritance, and it can be an overwhelming time.

Motley Fool’s recent article entitled “5 Considerations for Managing an Inheritance” discusses some ways to be a responsible steward of the money you have received and how to best integrate new funds into your larger financial plan.

  1. Stop and organize your thoughts. After the funeral or memorial service, take time to grieve and reflect on the loss of your loved one. You should also not make any sudden, large changes to your life, if you have inherited a considerable amount of money or a valuable asset. After some time has passed, you should speak with the estate’s executor or court-appointed administrator about next steps.
  2. Create a plan and act on it. While the executor is tasked with winding up the deceased’s affairs, you might ask if you can help with an inventory of his or her assets in the estate. This should include both probate (assets without a named beneficiary) and non-probate (assets with a named beneficiary). It is helpful to make sure that you verify and then cancel your loved one’s subscription services and recurring household expenses (i.e., cable and electric). The executor will make that decision, but you may be able to help with some phone calls or emails to these companies. After the estate’s final expenses are paid, you should create an action plan and assign responsibilities. You’ll then be ready when the executor distributes the estate assets to heirs.
  3. Integrate to avoid mental accounting. After time has passed and you have received your inheritance, any new funds should be integrated into your own financial plan, as if it were earned income. If you do not yet have a written financial plan, talk to a fee-only financial planner who charges by the hour or on a fixed-rate.
  4. Make certain that your financial priorities are met. Your inheritance creates a critical chance to possibly change the trajectory of your net worth. You might use it to pay off or reduce long-standing debts, like student loans. Build your emergency fund — at least six months’ worth of living expenses — that will cushion you from unforeseen circumstances (like this pandemic!). You should also make sure that Roth contributions are made for the year.
  5. Get creative! If you have inherited non-financial assets, like a car, artwork or antiques, you should make sure you know their value and decide whether you will keep or sell them. You might also swap an item with another heir, or if you are not ready to absolutely part with an inherited item, you might offer them to other family or friends. It can be nice to know that an unused item is being put to good use by people you know. Another option is to repurpose the item or donate it.

Losing a close loved one is difficult enough, but the need to wisely manage your inheritance will be a big task. Follow these steps to help with that process.

Reference: Motley Fool (Aug. 8, 20020) “5 Considerations for Managing an Inheritance”

 

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys

What Happens When a Will Is Challenged? – Annapolis and Towson Estate Planning

What happens when estate planning does not go according to plan? A last will and testament is a legally binding contract that determines who will get a person’s assets. However, according to the article “Can you prevent someone from challenging your will?” in the Augusta Free Press, it is possible for someone to bring a legal challenge.

Most will contests are centered around five key reasons:

  • The deceased had a more recent will.
  • The will was not signed voluntarily.
  • The deceased was incapacitated, when she signed the will.
  • The will was not signed in front of the right number of witnesses.
  • The will was signed under some kind of duress or mental impairment.

What is the best way to lessen the chances of someone challenging your will? Take certain steps when the will is created, including:

Be sure your will is created by an estate planning attorney. Just writing your wishes on a piece of paper and signing and dating the paper is not the way to go. Certain qualifications must be met, which they vary by state. In some states, one witness is enough for a will to be properly executed. In others, there must be two and they can’t be beneficiaries.

The will must state the names of the intended beneficiaries. If you want someone specific to be excluded, you will have to state their name and that you want them to be excluded. A will should also name a guardian, if your children are minors.  It should also contain the name of an alternate executor, in case the primary executor predeceases you or cannot serve.

What about video wills? First, make a proper paper will. If you feel the need to be creative, make a video. In many states, a video will is not considered to be valid. A video can also become confusing, especially if what you say in the paper will is not exactly the same as what is in the video. Discrepancies can lead to will contests.

Do not count on those free templates. Downloading a form from a website seems like a simple solution, but some of the templates online are not up to date. They also might not reflect the laws in your state. If you own property, or your estate is complex, a downloaded form could create confusion and lead to family battles.

Tell your executor where your will is kept. If no one can find your will, people you may have wanted to exclude from your estate will have a better chance of succeeding in a will challenge. You should also tell your executor about any trusts, insurance policies and any assets that are not listed in the will.

Don’t expect that everything will go as you planned. Prepare for things to go sideways, to protect your loved ones. It is costly, time-consuming and stressful to bring an estate challenge, but the same is true on the receiving end. If you want your beneficiaries to receive the assets you intend for them, a good estate planning attorney is the right way to go.

Reference: Augusta Free Press (July 12, 2020) “Can you prevent someone from challenging your will?”

 

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What Must Be Done when a Loved One Dies? – Annapolis and Towson Estate Planning

When a member of a family dies, it falls to the people left behind to pick up the pieces. Someone has to find out if the person left a last will, get the bills paid, stop Social Security or other automatic payments and file final tax returns. This is a hard time, but these tasks are among many that need to be done, according to the article “How to manage a loved one’s finances after they die” from Business Insider.

This year, more families than usual are faced with the challenge of taking care of the business of a loved one’s life while grieving a loss. When death comes suddenly, there is not always time to prepare.

The first step is to determine who will be in charge. If there is a will, then it contains the name of the person selected to be the executor. When a married person dies, usually the surviving spouse has been named as the executor. Otherwise, the family will need to work together to pick one person, usually the one who lives closest to the person who died. That person may need to keep an eye on the house and obtain documents, so proximity is a plus. In a perfect world, the person would have an estate plan, so these decisions would have been made in advance.

Do not procrastinate. It is hard, but time is an issue. After the funeral and mourning period, it is time to get to work. Obtain death certificates, and make sure to get enough certified copies—most people get ten or twelve. They will be needed for banks, brokerage houses and utility service providers. You will also need death certificates for taking control of some digital assets, like the person’s Facebook page.

The first agency to notify is Social Security. If there are other recurring payments, like VA benefits or a pension, those organizations also need to be notified. Contact banks, insurance companie, and financial advisors.

Get the person’s credit cards into your possession and call the credit card companies immediately. Fraud on the deceased is common. Scammers look at death notices and then go onto the dark web to find the person’s Social Security number, credit card and other personal identification info. The sooner the cards are shut down, the better.

Physical assets need to be secured. Locks on a house may be changed to prevent relatives or strangers from walking into the house and taking out property. Remove any possessions that are of value, both sentimental or financial. You should also take a complete inventory of what is in the house. Take pictures of everything and be prepared to keep the house well-maintained. If there are tenants or housemates, make arrangements to get them out of the house as soon as possible.

Accounts with beneficiaries are distributed directly to those beneficiaries, like payable-on-death (POD) accounts, 401(k)s, joint bank accounts and real property held in joint tenancy. The executor’s role is to notify the institutions of the death, but not to distribute funds to beneficiaries.

The executor must also file a final tax return. The final federal tax return is due on April 15 of the year after death. Any taxes that were not filed for any prior years, also need to be completed.

This is a big job, which is made harder by grief. Your estate planning attorney may have some suggestions for who might be qualified to help you. An attorney or a fiduciary will take a fee, either based on an hourly rate for services performed or a percentage of the entire value of the estate. If no one in the family is able to manage the tasks, it may be worth the investment.

Reference: Business Insider (May 2, 2020) “How to manage a loved one’s finances after they die”

 

Sims & Campbell, LLC – Annapolis and Towson Estate Planning Attorneys