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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Do Single People Need Estate Planning? – Annapolis and Towson Estate Planning

In evaluating your needs for estate planning, look at what might happen if you die intestate – that is, without a last will and testament. Your assets will likely have to go through the probate process, which means they will be distributed by the court according to the state intestate succession laws, says Hood County News’ recent article entitled “Even ‘singles’ need estate plans.”

Even if you do not have children, you may have a few nephews or nieces—or children of cousins or friends— to whom you would like to leave some of your assets. This can include automobiles, collectibles and family memorabilia. However, if everything you own goes through probate, there is no guarantee that these individuals will end up with what you wanted them to have.

If you want to leave something to family members or close friends, you will need to say this in your will. However, you also may want to provide support to one or more charitable organizations. You can just name these charities in your will. However, there may be options that could provide you with more benefits.

One option is a charitable remainder trust. With this option, you would transfer appreciated assets – such as stocks, mutual funds or other securities – into an irrevocable trust. The trustee, whom you have named (note that you could serve as trustee yourself) can then sell the assets at full market value, avoiding the capital gains taxes you would have to pay if you sold them yourself, outside a trust. If you itemize, you may be able to claim a charitable deduction on your taxes. The trust can purchase income-producing assets with the proceeds and provide you with an income stream for the rest of your life. At your death, the remaining trust assets will pass to the charities you have named.

There is also a third entity that is part of your estate plans: you. Everyone should make arrangements to protect their interests. However, without an immediate family, you need to be especially mindful of your financial and health care decisions. That is why, as part of your estate planning, you may want to include these two documents: durable power of attorney and a health care proxy.

A durable power of attorney allows you to name a person to manage your finances, if you become incapacitated. This is especially important for anyone who does not have a spouse. If you become incapacitated, your health care proxy (health care surrogate or medical power of attorney) lets you name another person to legally make health care decisions for you, if you cannot do so yourself.

Reference: Hood County News (Dec. 17, 2021) “Even ‘singles’ need estate plans”

 

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What’s the Best Way to Mess Up Estate Plan? – Annapolis and Towson Estate Planning

Forbes’ recent article entitled “5 Ways People Mess Up Their Estate Plan” describes the most common mistakes people make that wreak havoc with their estate plans.

Giving money to an individual during life, but not changing their will. Cash gifts in a will are common. However, the will often is not changed. When the will gets probated, the individual named still gets the gift (or an additional gift). No one—including the probate court knows the gift was satisfied during life. As a result, a person may get double.

Not enough assets to fund their trust. If you created a trust years ago, and your overall assets have decreased in value, you should be certain there are sufficient assets going into your trust to pay all the gifts. Some people create elaborate estate plans to give cash gifts to friends and family and create trusts for others. However, if you do not have enough money in your trust to pay for all of these gifts, some people will get short changed, or get nothing at all.

Assuming all assets pass under the will. Some people think they have enough money to satisfy all the gifts in their will because they total up all their assets and arrive at a large enough amount. However, not all the assets will come into the will. Probate assets pass from the deceased person’s name to their estate and get distributed according to the will. However, non-probate assets pass outside the will to someone else, often by beneficiary designation or joint ownership. Understand the difference so you know how much money will actually be in the estate to be distributed in accordance with the will.  Do not forget to deduct debts, expenses and taxes.

Adding a joint owner. If you want someone to have an asset when you die, like real estate, you can add them as a joint owner. However, if your will is dependent on that asset coming into your estate to pay other people (or to pay debts, expenses or taxes), there could be an issue after you die. Adding joint owners often leads to will contests and prolonged court battles. Talk to an experienced estate planning attorney.

Changing beneficiary designations. Changing your beneficiary on a life insurance policy could present another issue. The policy may have been payable to your trust to pay bequests, shelter monies from estate taxes, or pay estate taxes. If it is paid to someone else, your planning could be down the drain. Likewise, if you have a retirement account that was supposed to be payable to an individual and you change the beneficiary to your trust, there could be adverse income tax consequences.

Talk to your estate planning attorney and review your estate plan, your assets and your beneficiary designations. Do not make these common mistakes!

Reference: Forbes (Oct. 26, 2021) “5 Ways People Mess Up Their Estate Plan”

 

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Do I Need a Living Trust? – Annapolis and Towson Estate Planning

Yahoo Finance’s recent article entitled “What Is a Living Trust in Real Estate?” says that a living trust is a legal document that makes it easier for you to pass assets to your loved ones after you die. It allows property to be transferred directly to your designated beneficiaries without needing to go through probate. A living trust will be managed by a trustee, while you are still living (that can be you).  You will name a successor trustee who will manage the trust, if you become incapacitated and distribute its assets after you pass away.

While the trust holds these assets, you are still considered in possession of them while you are alive (assuming you named yourself the trustee). Therefore, you can move assets in and out of the trust as you see fit. If you have a revocable trust, you can even cancel or change it at any time.

Creating a living trust can simplify the inheritance process for your family when you die. That is because any property you own is subject to the probate process when you die. Probate can be a very lengthy process.

While waiting, your family may be unable to manage, use, or sell the property you left behind. Until probate is complete, your executor will be responsible for maintaining the property, including paying taxes, making repairs and paying the bills (like insurance).

A living trust is a beneficial financial product for many reasons. First, it bypasses the probate courts. There are some types of assets that will pass on to your beneficiaries directly, and others will need to clear the probate courts before they can be disbursed to your beneficiaries. This probate process can take months or even years and can be both costly and complicated.

Another benefit of a trust is that you keep control of your estate, even after you pass away. A living trust lets you set rules, timelines and stipulations for your estate. This may be something like keeping your children from getting a substantial sum of money in their early 20s. With a living trust, you can state instructions for your trustee as to when your kids receive that inheritance. For example, you may provide that they receive their inheritance in stages, like a third at 30, 35 and 40.

Finally, a trust is private. Unlike a will, your trust can be kept as private as you want. Once you pass away, and your will is filed with the probate court, it becomes public record. However, if you would rather have your estate and your wishes kept out of the public eye, a trust can help you do so.  Because a trust skips the probate process, it is also much harder for someone to challenge your directives.

Reference: Yahoo Finance (Oct. 7, 2021) “What Is a Living Trust in Real Estate?”

 

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How Long Is Probate? – Annapolis and Towson Estate Planning

Yahoo Finance’s article entitled “How Long Does Probate Take?” gives us an overview of the main things you need to understand about the probate process, so you can prepare.

During probate, a judge determines the way in which to distribute assets to heirs. The court will also authenticate the will (if there is one) and appoint an executor of the estate to supervise the probate process. Probate procedures depend to a large part on the state the decedent lived in and the type of estate he or she had.

After authenticating the decedent’s will and appointing an executor, the executor locates and assesses all the property owned by the deceased. If there are any debts, the executor uses estate assets to pay these. The remaining estate is then distributed to the heirs.

The probate process takes time to make certain that everything is done according to the law. As a result, it can take from a few months up to over a year. There is a long list of variables that can contribute to the duration. A few of the common factors are discussed below.

Estate Size. An estate’s size contributes significantly to the time in probate. Most states use the total value of the estate to determine its size. This depends on state laws and the type of assets included in the estate. Many states now have a small estate probate process, and some waive it altogether for low-value properties. The state may have a small estate limit of a certain dollar amount. The executor or beneficiaries can complete a Small Estate Claim Form or an Affidavit for Transfer of Personal Property to avoid probate for estates below that value.

Multiple beneficiaries. If an estate has a number of heirs, it may gum up the works. Multiple beneficiaries can slow down the probate proceedings because disputes can drag out an otherwise smooth legal process. Disagreements among family members or other heirs can result in delays or even a total halt.

No Will. If a person dies without a will, it means that there is no guidance from the decedent. As a result, the court and executor have to work through the estate and distribution from scratch.

Debts. Taxes and debts are major factors in the time needed to close an estate. Creditors must be paid before the beneficiaries can receive anything. When a person dies, his or her creditors must receive formal notice. They have a deadline to make a claim for money the estate owed. The longer the claims period, the longer the delay in the probate process.

Taxes. Taxes on an estate also can take a while to process. The estate must receive a closing letter from the IRS and the state taxing authority to close out the probate process. This can take up to six months.

Reference: Yahoo Finance (Sep. 27, 2021) “How Long Does Probate Take?”

 

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What is the Difference between a Trust and a Will? – Annapolis and Towson Estate Planning

Trusts and wills are two different ways to distribute and control your assets after your death. They have some key differences. Family trusts and wills are both worthwhile estate planning tools that can make sure your assets are protected and will pass to heirs the way you intended, says MSN’s recent article entitled “Family Trusts vs. Wills: What Are the Differences Between These Estate-Planning Options?”

This article tells you what you need to know about the differences between family trusts and wills to help you avoid estate planning mistakes.

Remember that without a will, the state probate laws will determine what happens to your assets. It may or may not be what you want. In contrast, a will lets you state to whom you want to distribute your assets.

Note that a trust permits the grantor (the person making the trust) to do what he or she wants with the assets. A trust also avoids probate.

A family trust is a wise choice for those who want to provide for the management of their assets if they become incapacitated, people interested in keeping information about their assets and who inherits those assets private and those who have a significant number of assets or a large estate. Here are some other situations in which a family trust would be appropriate to use:

  • Asset protection from creditors and divorce
  • For disabled beneficiaries who need to qualify for government benefits
  • For tax-planning; and
  • For cost and time efficiency over a lengthy probate process.

Everyone should have a will. It is a way to leave bequests, nominate guardians for a minor child and an executor.

If you have a family trust, you still need a will. There may be some assets not owned by the trust, such as vehicles and other personal property. There may also be payments due you at your death. Those assets must go through probate, if not arranged to avoid probate.

Once that process is complete, the assets are distributed to the family trust and are governed by its provisions. This is what is known as a “pour-over will” because the assets “pour over” to the family trust.

Contact an experienced estate planning attorney to discuss the estate planning options available for you and your situation.

Reference: MSN (Aug. 27, 2021) “Family Trusts vs. Wills: What Are the Differences Between These Estate-Planning Options?”

 

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Where Do You Score on Estate Planning Checklist? – Annapolis and Towson Estate Planning

Make sure that you review your estate plan at least once every few years to be certain that all the information is accurate and updated. It is even more necessary if you experienced a significant change, such as marriage, divorce, children, a move, or a new child or grandchild. If laws have changed, or if your wishes have changed and you need to make substantial changes to the documents, you should visit an experienced estate planning attorney.

Kiplinger’s recent article “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?” gives us a few things to keep in mind when updating your estate plan:

Moving to Another State. Note that if you have recently moved to a new state, the estate laws vary in different states. Therefore, it is wise to review your estate plan to make sure it complies with local laws and regulations.

Changes in Probate or Tax Laws. Review your estate plan with an experienced estate planning attorney to see if it has been impacted by changes to any state or federal laws.

Powers of Attorney. A power of attorney is a document in which you authorize an agent to act on your behalf to make business, personal, legal, or financial decisions, if you become incapacitated.  It must be accurate and up to date. You should also review and update your health care power of attorney. Make your wishes clear about do-not-resuscitate (DNR) provisions and tell your health care providers about your decisions. It is also important to affirm any clearly expressed wishes as to your end-of-life treatment options.

A Will. Review the details of your will, including your executor, the allocation of your estate and the potential estate tax burden. If you have minor children, you should also designate guardians for them.

Trusts. If you have a revocable living trust, look at the trustee and successor appointments. You should also check your estate and inheritance tax burden with an estate planning attorney. If you have an irrevocable trust, confirm that the trustee properly carries out the trustee duties like administration, management and annual tax returns.

Gifting Opportunities. The laws concerning gifts can change over time, so you should review any gifts and update them accordingly. You may also want to change specific gifts or recipients.

Regularly updating your estate plan can help you to avoid simple estate planning mistakes. You can also ensure that your estate plan is entirely up to date and in compliance with any state and federal laws.

Reference: Kiplinger (July 28, 2021) “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date?”

 

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What are the Key Documents in Estate Planning? – Annapolis and Towson Estate Planning

A basic estate plan can be fairly straightforward to create with the help of an experienced estate planning attorney.

Here are the main items you need in an estate plan. However, ask your estate planning attorney about what else you may need in your specific circumstances.

Bankrate’s recent article entitled “Estate planning checklist: 3 key steps to making a successful plan” says there are three things you need in every good estate plan: Last Will and Testament, Power(s) of Attorney and an Advance Healthcare Directive – and each serves a different purpose. Let us look at these:

A Last Will and Testament. This is the cornerstone of your estate plan.  A Will instructs the way in which your assets should be distributed.

Everyone needs a Will, even if it is a very basic one. If you do nothing else in planning your estate, at least create a Will, so you do not die intestate and leave the decisions to the courts.

A Power of Attorney (POA). This document permits you to give a person the ability to take care of your affairs while you are still living. A financial POA can help, if you are incapacitated and unable to manage your finances or pay your bills. A medical POA can also help a loved one take care of healthcare decisions on your behalf.

With a financial POA, you can give as much or as little power over your financial affairs as you want. Note that when establishing this document, you should have a conversation with your POA Agent, so if called upon, he or she will have a good understanding of what they can and cannot do financially for you. A healthcare POA also allows a person to make healthcare decisions, if you are unable to do so.

An Advance Healthcare Directive. This document instructs medical staff how you want them to handle your health-related decisions, if you are unable to choose or communicate. It includes resuscitation, sustaining your quality of life, pain management and end-of-life care.

Reference: Bankrate (July 23, 2021) “Estate planning checklist: 3 key steps to making a successful plan”

 

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What are Biggest Mistakes in Estate Planning? – Annapolis and Towson Estate Planning

Bankrate’s recent article entitled “Estate planning checklist: 3 key steps to making a successful plan” talks about five things to watch out for with an estate plan. Therefore, as you are making your estate plan, carefully consider everything, and that means it may take some time to complete your plan.  Let us look at five things to watch out for in that process:

  1. Plan your estate now. Of course, it is not just the old and infirm who need an estate plan. Everyone needs a last will so that their last wishes are respected, knowing that the unexpected can happen at any time.
  2. Say who will take care of your minor children. While last wills may typically focus on what happens to your financial assets, you will also want to specify what happens to any minor children on your passing, namely who takes care of them. If you have underage children, you must state who would be a guardian for that child and where that child will live. Without a last will, a judge will decide who will take care of your children. That could be a family member or a state-appointed guardian.
  3. 3. Ask executors if they are willing and able to take on the task. An executor carries out the instructions in your last will. This may be a complicated and time-consuming task. It involves distributing money in accordance with the stipulations of the document and ensuring that the estate is moved properly through the legal system. Make sure you designate an executor who is up to the task. That means you will need to speak with them and make certain that he or she is willing and able to act.
  4. Consider if you want to leave it all to your children. Many young families simply give all their assets to their children when they die. However, if the parents pass away when the children are young, and they do not establish a trust, they have access to all of the money when they reach the age of majority. This could be a great sum of money for a young adult to inherit with no rules on how to use it.
  5. Keep your estate plan up to date. You should review your estate plan regularly, at least every five years to be sure that everything is still how you intend it and that tax laws have not changed in the interim. Your plan could be vastly out of date, depending on changes since you first drafted it.

Estate planning can be a process where you demonstrate to your friends and family how much you care about them and how you have remembered them with certain assets or property.

It is a way to ensure that your loved ones do not have months of work trying to handle your estate.

Reference: Bankrate (July 23, 2021) “Estate planning checklist: 3 key steps to making a successful plan”

 

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

Cryptocurrency is a digital currency that can be used to buy online goods and services, explains Forbes’ recent article entitled “Cryptocurrency And Estate Planning: What Digital Investors Should Know.” Part of cryptocurrency’s appeal is the technology that backs it. Blockchain is a decentralized system that records and manages transactions across many computers and is very secure.

As of June 24, the total value of all cryptocurrencies was $1.35 trillion, according to CoinMarketCap. There are many available cryptocurrencies. However, the most popular ones include Bitcoin, Ethereum, Binance Coin and Dogecoin. Many believe cryptocurrency will be a main currency in the future, and they are opting to buy it now. They also like the fact that central banks are not involved in the process, so they cannot interfere with its value.

In addition, NFTs or non-fungible tokens, are also gaining in popularity. Each token is one of a kind and they are also supported by blockchain technology. They can be anything digital, such as artwork or music files. NFTs are currently being used primarily as a way to buy and sell digital art. An artist could sell their original digital artwork to a buyer. The buyer is the owner of the exclusive original, but the artist might retain proprietary rights to feature the artwork or make copies of it. The popularity of NFTs is centered around the social value of fine art collecting in the digital space.

Here are three reasons to have an estate plan, if you buy bitcoin:

  1. No probate. Even if your loved ones knew you had cryptocurrency, and even if they knew where you stored your password, that would not be enough for them to get access to it. Without a proper estate plan, your digital assets may be put through a lengthy and expensive probate process.
  2. Blockchain technology. You must have a private key to access each of your assets. It is usually a long passcode. A comprehensive estate plan that includes this can help you have peace of mind knowing that your investments can be passed on to loved ones’ if anything were to happen to you unexpectedly.
  3. Again, central banks do not play any part in the process, and it is secure because its processing and recording are spread across many different computers. However, there is no governing body overseeing the affairs of cryptocurrency.

Reference: Forbes (July 21, 2021) “Cryptocurrency And Estate Planning: What Digital Investors Should Know”

 

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