How Can I Minimize My Probate Estate? – Annapolis and Towson Estate Planning

Having a properly prepared estate plan is especially important if you have minor children who would need a guardian, are part of a blended family, are unmarried in a committed relationship or have complicated family dynamics—especially those with drama. There are things you can do to protect yourself and your loved ones, as described in the article “Try these steps to minimize your probate estate” from the Indianapolis Business Journal.

Probate is the process through which debts are paid and assets are divided after a person passes away. There will be probate of an estate whether or not a will and estate plan was done, but with no careful planning, there will be added emotional strain, costs and challenges left to your family.

Dying with no will, known as “intestacy,” means the state’s laws will determine who inherits your possessions subject to probate. Depending on where you live, your spouse could inherit everything, or half of everything, with the rest equally divided among your children. If you have no children and no spouse, your parents may inherit everything. If you have no children, spouse or living parents, the next of kin might be your heir. An estate planning attorney can make sure your will directs the distribution of your property.

Probate is the process of giving someone you designate in your will—the executor—the authority to inventory your assets, pay debts and taxes and eventually transfer assets to heirs. In an estate, there are two types of assets—probate and non-probate. Only assets subject to the probate process need go through probate. All other assets pass directly to new owners, without involvement of the court or becoming part of the public record.

Many people embark on estate planning to avoid having their assets pass through probate. This may be because they don’t want anyone to know what they own, they don’t want creditors or estranged family members to know what they own, or they simply want to enhance their privacy. An estate plan is used to take assets out of the estate and place them under ownership to retain privacy.

Some of the ways to remove assets from the probate process are:

Living trusts. Assets are moved into the trust, which means the title of ownership must change. There are pros and cons to using a living trust, which your estate planning attorney can review with you.

Beneficiary designations. Retirement accounts, investment accounts and insurance policies are among the assets with a named beneficiary. These assets can go directly to beneficiaries upon your death. Make sure your named beneficiaries are current.

Payable on Death (POD) or Transferable on Death (TOD) accounts. It sounds like a simple solution to own many accounts and assets jointly. However, it has its own challenges. If you wished any of the assets in a POD or TOD account to go to anyone else but the co-owner, there’s no way to enforce your wishes.

Contact us to speak with one of our experienced estate planning attorneys.  An experienced, local estate planning attorney will be the best resource to prepare your estate for probate. If there is no estate plan, an administrator may be appointed by the court and the entire distribution of your assets will be done under court supervision. This takes longer and will include higher court costs.

Reference: Indianapolis Business Journal (Aug. 26,2022) “Try these steps to minimize your probate estate”

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Planning for Long Term Care Is Important – Annapolis and Towson Estate Planning

Elder law attorneys have far too many stories of people who fail to plan, plan incorrectly or incompletely, or plan to fail by doing nothing at all, as described in the article “Elder Care: People in a pickle” from The Sentinel. Here’s a sad story.

A woman calls the elder law office because her husband fell at home—a common occurrence among the elderly. He was hospitalized and is now receiving rehabilitation in a nursing home. The treating physician recommends that the husband remain in the nursing home because he has significant limitations and his wife, who has her own medical issues, isn’t physically able to care for him.

The wife agrees. However, she has a host of challenges to overcome that were never addressed. The husband took care of all of the finances, for decades telling his wife not to worry. Now, she has no idea what their resources are. Can they afford to pay for his nursing home care? She doesn’t know. Nor does she have the authority to access their accounts, because there are accounts in her husband’s name only and she does not have access to them.

Her husband’s insistence of being the only one in control of their finances has put her in a terrible predicament. Without the estate planning documents to give her access to everything, including his own accounts, she can’t act. Can he now sign a Power of Attorney? Maybe—but maybe not, if it can be shown he lacks capacity.

If the couple cannot pay the nursing home bill, they have given their children a problem, since they live in Pennsylvania, where the state’s filial support law allows the nursing home to sue one or more of the children for the cost of their parent’s care. (This law varies by state, so check with a local elder lawyer to see if it could impact your family). Even if the wife knew about the family’s finances and could apply for public benefits, in this case his eligibility would be denied, as they had purchased a home for one of their children within five years of his being moved to the nursing home. Medicaid has a five-year look back period, and any large transfers or purchases would make the husband ineligible for five years.

If this sounds like a financial, legal and emotional mess, it’s a fair assessment.

Unexpected events happen, and putting off planning for them, or one spouse insisting “I’ve got this” when truly they don’t, takes a big impact on the future for spouses and family members. All of the decisions we make, or fail to make, can have major impacts on the future for our loved ones.

Other situations familiar to elder lawyers: a parent naming two children as co-agents for power of attorney. When she began showing symptoms of dementia, the two children disagreed on her care and ended up in court.

A father has guardianship for a disabled adult son. He promised the son he’d always be able to live in the family home. The father becomes ill and must move into a nursing home. Neither one is able to manage their own personal finances, and no financial or practical arrangements were made to fulfill the promise to the son.

No one expects to have these problems, but even the most loving families find themselves snarled in legal battles because of poor planning. Careful planning may not reduce the messy events of life, but it can reduce the stress and expenses. By choosing to exert some control over who can help you with decisions and what plans are in place for the future, you can leave a legacy of caring.  Contact us and schedule a time to begin your planning with one of our experienced estate planning attorneys.

Reference: The Sentinel (Aug. 19, 2022) “Elder Care: People in a pickle”

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What Should I Know about Guardianships? – Annapolis and Towson Estate Planning

Guardianships – also known as conservatorships – are drastic and invasive. They strip away control adults otherwise exercise over their own lives and establish someone else as the decision-maker.  They require a rigorous showing of legal incapacity and approval by a judge. In many jurisdictions, parties must establish a specific need for guardianship and demonstrate that other alternatives considered would not adequately protect the individual.

Kiplinger’s recent article entitled “Guardianships Should Be a Last Resort – Consider These Less Draconian Options First” says that guardianships should never be undertaken lightly. Once established, they can be extremely difficult to undo. Therefore, other options should always be considered first.

Guardianships ensure that those who are unable to handle their own affairs are not exploited or injured. There are circumstances when a guardianship may be the best – or only – choice. For example, an elderly gentleman with dementia may have lacked the planning to make adequate provisions in his will or trust for management of his affairs. Without a plan for oversight of his assets, he could end up jeopardizing the estate he intended to pass on to his family. In that case, the heirs may look to have a court-appointed guardian appointed who will ensure that their father or grandfather does not sign away his estate or compromise his physical well-being.

Transparency is important. Before it becomes necessary for a guardian to be appointed to handle your physical or financial decisions, consider whom you would trust to act in that capacity and put it in writing.

It also informs others that, if a guardian is needed, this person is the one you would like to see serve in that capacity.

A one-page directive will make your wishes clear and keep this important decision from a judge who will know nothing about you or your priorities or your specific circumstances.

In addition, you should delegate a second person now to support you in the future. It is preferable that this is someone younger whom you trust. This individual will bring a fresh perspective to the situation. They should also possess a sound understanding of money management.

If you do not consider these things now, the state will make the decision for you after you no longer can make such decisions for yourself.

Talk with an experienced elder law attorney and create the documents now that will save your loved ones from having to seek guardianship for you in the future.

Reference: Kiplinger (July 7, 2022) “Guardianships Should Be a Last Resort – Consider These Less Draconian Options First”

 

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What Is the Best Asset Protection? – Annapolis and Towson Estate Planning

Everyone should have an estate plan incorporating asset protection and tax planning. Most people do not realize they live with a certain level of risk, and it can be addressed in their estate plan, says an article from Forbes titled “You Need An Asset Protection Plan Not Just A Will.”

Being aware of these issues and knowing that they need to be addressed is step one. Here is an illustration: a married couple in their 50s have two teenage children. They are diligent people and made sure to have an estate plan created early in their marriage. It has been updated over the years, adding guardians when their children were born and making changes as needed. They have worked hard and also have been fortunate. They own a vacation home they rent most of the year and a small retail business and both of their teenage children drive cars. They do not see a reason to tie asset protection and risk management into their estate plan. No one they know has ever been sued.

With assets in excess of $4 million and annual income of $350,000, they are a risk target. If one of their children were in an auto accident, they might be liable for any damages, especially if they own the cars the children drive.

The vacation home, if not held in a Limited Liability Company (LLC) or another type of entity, could lead to exposure risks too. If the property is not insured as an income-producing business property and something occurs on the property, the insurance company could easily refuse the claim if the house is insured as a residence.

If their retail business is owned by an LLC or another properly prepared entity, they have personal protection. However, if they have not followed the laws of their state for a business, they might lose the protection of the business structure.

Retirement assets also need to be protected. If they have employees and a retirement plan and are not adhering strictly to all of the requirements, their retirement plan qualification could easily be placed in jeopardy. Their estate planning attorney should be asked to review the pension plan and how it is being administered to ensure that their retirement is not at risk.

There are several reasons why tax oriented trusts would make a lot of sense for this couple. While current gift estate and GST (Generation Skipping Tax) exemptions are historically high right now, they won’t be forever.

This couple would be well-advised to speak with their estate planning attorney about the use of trusts, to serve several distinct functions. Trusts can shelter assets from litigation, decrease or minimize estate taxes when the estate tax changes in 2026 and possibly protect life insurance policies.

Estate planning and risk management are not only for people with mansions and global businesses. Regular people, business owners and wage earners in all tax brackets need an estate plan to address their legacy, protect their assets and defend their estate against risks.

Reference: Forbes (June 7, 2022) “You Need An Asset Protection Plan Not Just A Will”

 

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Should You Update Your Estate Plan? – Annapolis and Towson Estate Planning

Some reasons to update your will are more obvious than others, like marriage, divorce, remarriage, births and deaths. However, those are not the only reasons your estate plan needs to be reviewed, explains a recent article appropriately titled “When it comes to a will or estate plan, don’t just set it and forget it” from CNBC.

Think of your estate plan like your home. They both need regular updates and maintenance. If your house starts to get rundown or the roof springs a leak, you know you need to get it fixed. Your estate plan is not as visible. However, it is still in need of ongoing maintenance.

Health events should be a trigger, yours or people named in your will. If the person you named as your executor becomes ill or dies, you will need to name a new person to replace them. The same goes for a guardian named to care for any minor children, especially if you named a grandparent for this role.

If you move, your estate plan must ‘move’ with you. Each state has different laws regarding how estates are administered. In one state, an executor living out of state may be okay. However, in another, it may make the executor ineligible to serve. Inheritance tax laws also vary.

Any time there is a large change to your personal wealth, whether it is good or bad, your estate planning attorney should review your will.

The same goes for a change in parental status. The birth of additional children seems like it might not require a review. However, it does. More than a few celebrities failed to update their estate plans and accidentally disinherited children. The same person who may be willing to be a guardian for one child, may find taking on two or three children to be too much of a challenge. If you want to change the guardianship, your estate plan needs to be updated.

A change in your relationship with fiduciaries also merits an update. Someone you named ten years ago to be your executor may no longer be a part of your life, or they may have died. Family members age, retire and move and siblings have changes in their own lives. Reviewing the executor regularly is important.

If a family member becomes disabled, you may need special needs planning.

A commonly overlooked trigger concerns mergers and acquisitions of financial institutions. If your bank is the executor of your estate and the bank is bought or sold, you likely have a new executor. Do you know who the person is, and do you trust their judgment?

Beneficiaries need to be checked every few years to be sure they are still correct. If your life includes a divorce and remarriage, you could be like one man whose life insurance proceeds and property went to his new spouse. His daughter was disinherited because he failed to update his will.

It does not take long to review an estate plan or beneficiaries. However, the impact of not doing so could be long-lasting and cast a negative light on your legacy.

Reference: CNBC (March 1, 2022) “When it comes to a will or estate plan, don’t just set it and forget it”

 

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Does an Elder Orphan Need an Estate Plan? – Annapolis and Towson Estate Planning

Estate planning for the future is even more important for elder orphans than for those with a spouse or family members, according to this recent article “Savvy Senior: How to get help as an elder orphan” from The Virginia Gazette. There is no one single solution, but there are steps to take to protect your estate, health and provide for long-term care.

Start with the essential estate planning documents. These documents will protect you and ensure that your wishes are followed, if you become seriously ill or when you die. These documents include:

A durable Power of Attorney to designate someone to handle financial matters in the event of incapacity.

An Advanced Health Care Directive, including a Living Will, to tell your health care provider what kind of care you want if you become incapacitated.

A Health Care Power of Attorney, naming a person of your choice to make medical decisions on your behalf, if you are unable to do so.

A Will to direct how you want your property and assets to be distributed upon your death and to name an Executor who will be in charge of your estate.

Your best option to prepare these documents is an experienced estate planning attorney. Trying to do it yourself is risky. Each state has its own laws for these documents to be valid. If the documents are not accepted, the court could declare your will invalid and your directions will not be followed.

People with families typically name a responsible adult child as their power of attorney for finances, as executor or for health care decisions. If you do not have adult children, you may ask a trusted friend or colleague. Name a person who is younger than you, organized and responsible and who will likely be available and willing to service.

If the person you name as executor lives in another state, you will need to check with your estate planning attorney to see if there are any special requirements.

If you do not have a friend or even a distant relative you feel comfortable assigning this role to, your estate planning attorney may be able to suggest alternatives, such as an aging life care manager. These professionals are trained in geriatric care and often have backgrounds in social work or nursing.

If you are reluctant to complete the legal documents mentioned above or start having them prepared and then fail to complete them, you may face some unpleasant consequences. A judge may appoint a guardian to make decisions on your behalf. This guardian is likely to be a complete stranger to you. They will be legally empowered to make all decisions for you regarding your health care, end-of-life care and even your burial and funeral services.

Unless you are comfortable with a court-appointed person making health care and other decisions for you, call an estate planning attorney and start making plans for the future.

Reference: The Virginia Gazette (April 1, 2022) “Savvy Senior: How to get help as an elder orphan”

 

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What Legal Terms in Estate Planning do Non-Lawyers Need to Know? – Annapolis and Towson Estate Planning

Having a working knowledge of the terms used in estate planning is the first step in working successfully with an estate planning attorney, says a recent article, “Learn lingo of estate planning to help ensure best outcome” from The News-Enterprise. Two of those key words:

Principal—the individual on whose behalf documents are prepared.

Fiduciary—the person who signs some of these documents and who is responsible for making decisions in the best interest of the principal and the estate.

In estate planning and in business, the fiduciary is the person or business who must act responsibly and in good faith towards the person and their property. You will see this term in almost every estate planning or financial document.

Within a last will and testament, there are more: beneficiary, conservator, executor, grantor, guardian, testator, and trustee are some of the more commonly used terms for the roles people take.

The testator is the principal, the person who signs the will and on whose behalf the will was drafted.

Beneficiaries are individuals who receive property from the estate after death. Contingent beneficiaries are “back-up” beneficiaries, in case the beneficiaries are unable to receive the inheritance. In most wills, the beneficiaries are listed “or to descendants, per stirpes.” This means if the beneficiary dies before the testator, the beneficiary’s children receive the original beneficiary’s share.

In most cases, specific distributions are made first, where a specific asset or amount of money goes to a specific person. This includes charitable donations. After all specific distributions are made, the rest of the estate, referred to as the “residuary estate,” is distributed. This includes everything else in the probate estate.

The administrator or executor is the fiduciary charged with gathering assets, paying bills and making the distribution to beneficiaries. The executor is the term used when there is a will. If there is no will, the person in the role is referred to as the administrator and may be appointed by the court.

If a beneficiary is unable to take the inheritance because they are a minor or incapacitated, the court will appoint a conservator to act as fiduciary on behalf of the beneficiary.

A guardian is the person who takes care of the beneficiary, or minor children, and is named in the will. If there is no guardian named in the will, or if there is no will, a court will appoint a person to be the guardian. Judges do not always select family members to serve as guardians, so there should always be a secondary guardian, in case the first cannot serve. If the first guardian does not wish to serve or is unable to, naming a secondary guardian is better than a child being sent to foster care.

Finally, the trustee is the person in charge of a trust. The person who creates the trust is the grantor or settlor. It is important to note the executor has no control or input over the trust. Only the trustee or successor trustee may make distributions and they are the trust’s fiduciary.

Getting comfortable with the terms of estate planning will make the process easier and help you understand the different roles and responsibilities involved.

Reference: The News-Enterprise (Jan. 18, 2022) “Learn lingo of estate planning to help ensure best outcome”

 

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How Do I Plan with a Special Needs Child? – Annapolis and Towson Estate Planning

The three main structures a family should put in place to provide future protection for their child relate to money management, self-care and housing, says CNBC’s recent article entitled “If you have a child with special needs, here’s how to plan for their life after you pass.”

Money Management: If the child gets government benefits, such as Supplemental Security Income or Medicaid, parents will usually establish a special needs trust to shield assets to allow the child continued access to those benefits. A trustee oversees the funds and other trust provisions not under the child’s control.

Life Insurance. This is the cheapest way to fund a trust. That is because you need to know what is left over from your estate to care for the child, and this creates that certain bucket of money.

Self-Care: Parents must arrange the services their child will need to live independently or semi-independently, which may be overseen by a court-appointed conservator (or guardian). This person makes all decisions regarding an individual’s financial and/or personal affairs. In the alterative, decisions may be made by a person with power of attorney, as well as the individual.

Parents may want to write a “letter of intent,” which is a guide for those who will care for the child in the future. This letter can cover family history, medical care, benefits, daily routines, diet, behavior management, residential arrangements, education, social life, career, religion and end-of-life decisions, according to the Autism Society.

Housing: With respect to future housing for the child, location is more important than the house itself. Parents should consider options beyond keeping their loved one in the family home. It is more important to look at the individual and the interests and supports they might require. Parents may think of retiring to a community that supports the interests of the child. There is a trend toward more community-based living. State-administered Medicaid HCBS waiver programs allow people with disabilities to live in a house or apartment. The state, in turn, provides staffing for a group of similar residents. Sometimes, a group of families will purchase a collection of houses or condominiums. Also, people are rehabbing houses for roommate living, resulting in neighborhoods of people with special needs.

It is critical to work with specialists in this type of planning, such as an experienced estate planning or elder law attorney.

Reference: CNBC (Dec. 6, 2021) “If you have a child with special needs, here’s how to plan for their life after you pass”

 

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Can I Change My Estate Plan During Divorce? – Annapolis and Towson Estate Planning

Divorce is never easy. Adding the complexities of estate planning can make it harder. However, it still needs to be included during the divorce process, says a recent article entitled “How to Change Your Estate Plan During Divorce from the Waco Tribune-Herald.

Some of the key things to bear in mind during a divorce include:

Is your Last Will and Testament aligned with your pending divorce? The unexpected occurs, whether planning a relaxing vacation or a contentious divorce. If you were to die in the process, which usually takes a few years, who would inherit your worldly goods? Your ex? A trust created to take care of your children, with a trusted sibling as a trustee?

Are your beneficiary designations up to date? For the same reason, make sure that life insurance policies, retirement accounts and any financial accounts allowing you to name a beneficiary are current to reflect your pending or new marital status.

Certain changes may not be made until the divorce is finalized. For instance, there are laws concerning spouses and pension distribution. You might not be able to make a change until the divorce is finalized.  If your divorce agreement includes maintaining life insurance for the support of minor children, you must keep your spouse (or whoever is the agreed-upon guardian) as the policy beneficiary.

Once the divorce decree is accepted by the court, the best path forward is to have a completely new will prepared. Making a patchwork estate plan of amendments can be more expensive and leave your estate more vulnerable after you have passed. A new will revokes the original document, including naming an executor and a guardian for minor children.

The will is far from the only document to be changed. Other documents to be created include health care directives and medical and financial powers of attorney. All of these are used to name people who will act on your behalf, in the event of incapacity.

It is a good idea to update these documents during the divorce process. If you are in the middle of an ugly, emotionally charged divorce, the last person you want making life or death decisions as your health care proxy or being in charge of your finances is your soon-to-be ex.

Talk with your estate planning attorney so your attorney knows you are going through the divorce process. They will be able to make further recommendations to protect you, your children and your estate during and after the divorce.

Reference: Waco Tribune-Herald (Oct. 18, 2021) “How to Change Your Estate Plan During Divorce”

 

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How to Approach Parents about Estate Planning – Annapolis and Towson Estate Planning

One of the lessons learned from the pandemic is not to wait for the “right time” to prepare for death or incapacity. Aging parents who do not have a plan in place leave their children with a number of obstacles, says this recent article entitled “Why (and How) To Talk To Your Parents About Estate Planning” from NASDAQ.

One is scrambling to unravel the family finances at a time when you are still grief-stricken. Another is managing costs associated with severe illness and death. Incapacity can be even more complicated. It is more so, if the family has to apply for guardianship to make medical and financial decisions for a parent who cannot speak for themselves or manage their financial affairs.

To prevent a host of problems and expenses, start talking with aging parents about estate planning.  They do not have to live in an  “estate” to have an estate. This is simply the term used to describe all assets owned by a couple or individual.

An estate plan is a tool to convey intentions about assets and health. The first step may be to create an inventory of all assets and belongings, from the family home to personal belongings and digital assets. Next, is to have some tough conversations about their wishes for end-of-life care and medical decisions.

A few questions to get started:

  • Who should be the primary caregiver and decision maker?
  • How will health care expenses be paid?
  • Who do you want to make medical decisions?
  • What do you want to happen to your property after you die?
  • Should the family sell the home, or should one of the children inherit it?
  • Do you have any estate planning documents, and where are they kept?

Estate planning is different for everyone, so be wary of downloading basic estate documents from the web and hoping they will be valid. An experienced estate planning attorney will create the necessary documents, as per the laws of your parents’ state of residence, and reflecting their wishes.

If there is no will, or if a will is deemed invalid by the court, the laws of the state will govern how assets are distributed. Making sure a will is properly prepared, along with other estate planning documents, is a more efficient and less costly way to go.

Estate planning includes tax planning, which occurs when property passes from one person to another. Estate and inheritance taxes are the most common concern. While most Americans do not need to worry about the federal estate tax, individual states have their own rules and thresholds. Some states have both state estate taxes and inheritance taxes. There are ways to minimize taxes, from gifting during your parent’s lifetimes, to establishing trusts for beneficiaries.

An estate plan includes a Will, a Power of Attorney for financial matters, a Health Care Proxy so someone can make health care decisions, a Living Will (also known as an Advance Care Directive) and usually some kind of trust. Each serves a different purpose, but all name a designated person to act in a legal manner to handle the affairs of the person, while they are living and after they have passed.

Some families are more comfortable than others about talking about death and money, so you probably already know what to expect from your parents when trying to have this conversation. Be mindful of their feelings, and those of your siblings. These are hard, but necessary conversations.

Reference: NASDAQ (Nov. 10, 2021) “Why (and How) To Talk to Your Parents About Estate Planning”

 

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