Should You Contest a Will? – Annapolis and Towson Estate Planning

The cases that generate headlines are just the high-profile ones, and they don’t include the hundreds, if not thousands, of inheritance claims being brought every year that never make it to the courtroom, says FT Advisor in the article “When and how clients can contest a will?” What we don’t read about are the family fights, the settlements and the eventual distribution of a loved one’s estate.

What’s behind this uptick in inheritance disputes?

One answer has to do with the increased complexity of families. Having a second, or even a third, family is no longer as unusual as it once was. The division of assets when there are children and stepchildren create more chances for someone to feel wronged. A second reason is that the value of individual property overall has increased. Relatively modest estates with a home that’s now worth half a million dollars, means there’s more to fight over.

Add to that a generally more litigious society, and you have an increase in estate battles.

There are two general areas of estate battles: one concerns wanting a greater portion of an estate, and the second centers on whether the will is valid. The second can bring allegations of undue influence, lack of capacity to create a will and even forgery.

Challenging the validity of a will is difficult, since the person who made the will has passed and they can’t speak for themselves. However, there are certain presumptions in favor of upholding a will that helps the courts. For one thing, the will must be in writing and there must be two people witnessing the signing.

Taking the position that the person was incapacitated and not legally able to create a will is another way that wills are challenged. The older the person is when the will was created, the more likely this is. One way to address this in advance, is to have a medical opinion documenting the person’s mental capacity.

While it is impossible to make any will completely immune to any challenges, there are a few things that can be done to make it less likely that the will is contested.

Write a letter or have a video made that speaks to the family, explaining what your wishes are for your property and for the family. This is not legally binding but could be used to show that you were thinking clearly when you had your estate plan done.

Communicate openly and with great transparency to all members of the family, so there are no surprises. If everyone knows what you have in mind and an opportunity to voice their opinions, there may be less potential for fighting.

Finally, be sure to work with an estate planning attorney who will know the laws of your state, so there are no legal errors that would lead to the will being deemed invalid by the courts.

Reference: FT Adviser (July 3, 2019) “When and how clients can contest a will?”

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

Elder Law Estate Planning for the Future – Annapolis and Towson Estate Planning

Seniors who are parents of adult children can make their children’s lives easier, by making the effort to button down major goals in elder law estate planning, advises Times Herald-Record in the article “Three ways for seniors to make things easier for their kids.” Those tasks are planning for disability, protecting assets from long-term care or nursing home costs and minimizing costs and stress in passing assets to the next generation. Here’s what you need to do, and how to do it.

Disability planning includes signing advance directives. These are legal documents that are created while you still have all of your mental faculties. Naming people who will make decisions on your behalf, if and when you become incapacitated, gives those you love the ability to take care of you without having to apply for guardianship or other legal proceedings. Advance directives include powers of attorney, health care powers or attorney or proxies and living wills.

Your power of attorney will make all and any legal and financial decisions on your behalf. In addition, if you use the elder law power of attorney, they are able to make unlimited gifting powers that may save about half of a single person’s assets from the cost of nursing home care. With a health care proxy, a person is named who can make medical decisions. In a living will, you have the ability to convey your wishes for end-of-life care, including resuscitation and artificial feeding.

When advance directives are in place, you spare your family the need to have a judge appoint a legal guardian to manage your affairs. That saves time, money and keeps the judiciary out of your life. Your children can act on your behalf when they need to, during what will already be a very difficult time.

Goal number two is protecting assets from the cost of long-term care. Losing the family home and retirement savings to unexpected nursing costs is devasting and may be avoided with the right planning. The first and best option is to purchase long-term care insurance. If you don’t have or can’t obtain a policy, the next best is the Medicaid Asset Protection Trust (MAPT) that is used to protect assets in the trust from nursing home costs, after the assets have been in the trust for five years.

The third thing that will make your adult children’s lives easier, is to have a will. This lets you leave assets to the family as you want, with the least amount of court costs, legal fees, taxes and family battles over inheritances. Work with an experienced estate planning attorney to have a will created.  If your attorney advises it, you can also consider having trusts created, so your assets can be placed into the trusts and avoid probate, which is a public process. A trust can be easier for children, because estates settle more quickly.

Think of estate planning as part of your legacy of taking care of your family, ensuring that your hard-earned assets are passed to the next generation. You can’t avoid your own death, or that of your spouse, but you can prepare so those you love are helped by thoughtful and proper planning.

Reference: Times Herald-Record (July 13, 2019) “Three ways for seniors to make things easier for their kids”

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

Is My Irrevocable Trust Revocable? – Annapolis and Towson Estate Planning

Irrevocable trusts aren’t as irrevocable as their name implies, according to Barron’s recent article, “Are Irrevocable Trusts True to Their Name?” The article says that for both new and existing trusts, there are ways to build in flexibility to make changes to a grantor’s wishes if terms are no longer appropriate or desirable for beneficiaries.

However, there are strict rules that apply. These rules vary between states. One of the main reasons for an irrevocable trust is to remove assets from an estate for estate tax purposes. If the rules aren’t followed carefully, a trust can be rendered unlawful. If that happens, the assets may be returned to the grantor’s estate and estate taxes may apply.

If you want to be certain that beneficiaries have some discretion in the future if circumstances change, grantors should build flexibility into the trust when it’s established. This can be accomplished by giving a power of appointment to beneficiaries. However, if the beneficiaries are looking to change the terms or the structure of an existing trust, the trust must be modified according to state law.

Most states allow trusts to be decanted. When you decant a trust, you pour its terms into a new trust and leave out the parts that are no longer wanted. Just like decanting a bottle of wine, it’s like the sediment left in the wine bottle.

In a state that doesn’t permit decanting, a trustee can ask a judge to allow it. You should be careful with decanting because you don’t want to do anything that would adversely affect the original tax attributes of the trust.

The power of appointment in a trust or the ability to decant can’t be given to the person who set up the trust. Thus, grantors can’t have a “re-do” or rescind the terms. It’s only trustees and the beneficiaries that can do that.

If you and your attorney create a trust with a lot of flexibility for the trustee, you may want to appoint an institutional trustee from a bank, trust, or other financial services company.

They can be either the sole trustee or serve as co-trustees with a personal, non-institutional trustee, like a family member. This can help to eliminate future conflicts.

Reference: Barron’s (June 18, 2019) “Are Irrevocable Trusts True to Their Name?”

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

What Debts Must Be Paid Before and After Probate? – Annapolis and Towson Estate Planning

Everything that must be addressed in settling an estate becomes more complicated when there is no will and no estate planning has taken place before the person dies. Debts are a particular area of concern for the estate and the executor. What has to be paid and who gets paid first? These are explained in the article “Dealing with Debts and Mortgages in Probate” from The Balance.

Probate is the process of gaining court approval of the estate and paying off final bills and expenses before property can be transferred to beneficiaries. Dealing with the debts of a deceased person can be started before probate officially begins.

Start by making a list of all of the decedent’s liabilities and look for the following bills or statements:

  • Mortgages
  • Reverse mortgages
  • Home equity loans
  • Lines of credit
  • Condo fees
  • Property taxes
  • Federal and state income taxes
  • Car and boat loans
  • Personal loans
  • Loans against life insurance policies
  • Loans against retirement accounts
  • Credit card bills
  • Utility bills
  • Cell phone bills

Next, divide those items into two categories: those that will be ongoing during probate—consider them administrative expenses—and those that can be paid off after the probate estate is opened. These are considered “final bills.” Administrative bills include things like mortgages, condo fees, property taxes and utility bills. They must be kept current. Final bills include income taxes, personal loans, credit card bills, cell phone bills and loans against retirement accounts and/or life insurance policies.

The executors and heirs should not pay any bills out of their own pockets. The executor deals with all of these liabilities in the process of settling the estate.

For some of the liabilities, heirs may have a decision to make about whether to keep the assets with loans. If the beneficiary wants to keep the house or a car, they may, but they have to keep paying down the debt. Otherwise, these payments should be made only by the estate.

The executor decides what bills to pay and which assets should be liquidated to pay final bills.

A far better plan for your beneficiaries is to create a comprehensive estate plan that includes a will that details how you want your assets distributed and addresses what your wishes are. If you want to leave a house to a loved one, your estate planning attorney will be able to explain how to make that happen while minimizing taxes on your estate.

Reference: The Balance (March 21, 2019) “Dealing with Debts and Mortgages in Probate”

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

Is it Wise to Have Three Grown Children Named Co-Executors of Your Will? – Annapolis and Towson Estate Planning

Is it a good idea to have your three grown children listed as co-executors of your will? This may get somewhat confusing when probating a will if there are multiple executors.

What are the pros and cons to choosing one child to act as your executor instead of selecting all three of your children to act together?

nj.com’s recent article asks “I’m planning my will. Is it bad to have more than one executor?”

The article explains that the duty of the executor is to gather all the decedent’s assets, pay any outstanding debts and liabilities and then account for and distribute the remaining estate to the beneficiaries according to the instructions in the decedent’s will.

The executor is allowed to hire professionals and others to help with tasks, like completing a decedent’s final income tax return or preparing the home for sale.

When you have multiple executors appointed, these tasks can be assigned to each person to lessen the burden of the many duties and responsibilities that an executor has.

On the downside, if those appointed can’t work together easily and without strife, appointing multiple siblings can make the administration of an estate much more difficult due to arguments, conflicts of interest, one sibling taking the lead to the resentment of the others or one executor undermining another executor’s actions.

The problem is, in situations where the siblings don’t get along, designating one of them as executor can cause hard feelings and conflict. It’s not uncommon for those siblings who aren’t named as executor to complain about every decision made by the named executor or delay in the administration of the estate.

If there are multiple executors, the majority rules. That can avoid deadlock. Simple math in this case says that you want to avoid naming an even number of executors or name a person who can act as the tiebreaker.

Even with a “majority rules” agreement among the executors, there are some financial institutions and other entities that may require all the executors to sign documents and/or checks on behalf of the estate. This can become burdensome and inefficient, if there are multiple executors.

Speak with your estate planning attorney about your family dynamics and get their opinion about what would be best in your personal situation.

Reference: nj.com (May 22, 2019) “I’m planning my will. Is it bad to have more than one executor?”

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

What Can I Do When My Aging Parent Refuses to Give Up Control? – Annapolis and Towson Estate Planning

It’s a common problem for families when a parent in charge of finances develops cognitive impairment and needs help managing the family trust and his own spending. It can be financially dangerous with a stubborn parent.

Forbes’ recent article asks, “What Can You Do When A Stubborn Aging Parent Refuses To Give Up Control?” The article explains what it took one family to get an aging parent out of the position as trustee and to permit the successor, the adult daughter, to take over.

The family saw signs of dementia and a family member’s financial abuse.

The trust provided that the parent could be removed as trustee, if two physicians declared him to be incapacitated for handling his own finances. In that case, a judge’s decision wasn’t required. The doctors verified that the elderly parent was incapacitated to safely handle his money. However, all this takes time.

A parent’s failure to listen to reason and their stubborn refusal to resign as trustee when asked, can cost his children dearly. In that situation, a family may have to engage an attorney to resolve the problem.

Remember that even if your aging parents are fine, there’s no time like the present to ask them to review their estate planning documents with you. Look at the terms that define what happens in the event of “incapacity.” Be sure that all of you understand what would happen, if impaired parents are unwilling to give up financial control and you have to institute the proscribed process to remove control from them.

Those who are named in a trust as the “successor trustee,” must know what that means and how much responsibility is involved. The family needs to recognize that financial elder abuse is a huge problem in our country, and family members are frequently the abusers. If you see abuse, and your elderly parent can’t resist the pressure to give money to any dishonest person, an elder law attorney will be able to give you worthwhile advice on the best approach, as well as the law.

Lastly, in the event your aging parent never created an estate plan, work with an experienced estate planning attorney and ask your parent to get going for the family’s sake. You don’t want to live through the situation described above, with no legal means to stop an impaired parent from financial ruin.

Reference: Forbes (May 7, 2019) “What Can You Do When A Stubborn Aging Parent Refuses To Give Up Control?”

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

What Are Some Advantages of Making Lifetime Gifts? – Annapolis and Towson Estate Planning

There are several non-tax advantages of making lifetime gifts. One is that you’re able to see the recipient or “donee” enjoy your gift. It might give you satisfaction to help your children achieve financial independence or have fewer financial concerns.

WMUR’s recent article, Money Matters: Lifetime non-charitable giving,” explains that lifetime giving means you dictate who gets your property. Remember, if you die without a will, the intestacy laws of the state will dictate who gets what. With a will, you can decide how you want your property distributed after your death. However, it’s true that even with a will, you won’t really know how the property is distributed because a beneficiary could disclaim an inheritance. With lifetime giving, you have more control over how your assets are distributed.

At your death, your property may go through probate. Lifetime giving will help reduce probate and administration costs, since lifetime gifts are typically not included in your probate estate at death.  Unlike probate, lifetime gifts are private.

Let’s discuss some of the tax advantages. First, a properly structured gifting program can save income and estate taxes. A gift isn’t taxable income to the donee, but any income earned by the gift property or capital gain subsequent to the gift usually is taxable. The donor must pay state and/or federal transfer taxes on the gift. There may be state gift tax, state generation-skipping transfer tax, federal gift and estate taxes, as well as federal generation-skipping transfer (GST) tax.

A big reason for lifetime giving is to remove appreciating assets from your estate (i.e., one that’s expected to increase in value over time). If you give the asset away, any future appreciation in value is removed from your estate. The taxes today may be significantly less than what they would be in the future after the asset’s value has increased. Note that lifetime giving results in the carryover of your basis in the property to the donee. If the asset is left to the donee at your death, it will usually receive a step-up in value to a new basis (usually the fair market value at the date of your death). Therefore, if the donee plans to sell the asset, she may have a smaller gain by inheriting it at your death, rather than as a gift during your life.

You can also give by paying tuition to an education institution or medical expenses to a medical care provider directly on behalf of the donee. These transfers are exempt from any federal gift and estate tax.

Remember that the federal annual gift tax exclusion lets you to give $15,000 (for the 2019 year) per donee to an unlimited number of donees without any federal gift and estate tax or federal GST tax (it applies only to gifts of present interest).

Prior to making a gift, discuss your strategy with an estate planning attorney to be sure that it matches your estate plan goals.

Reference: WMUR (April 18, 2019) “Money Matters: Lifetime non-charitable giving”

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

An Estate Plan Directs Assets According to Your Wishes – Annapolis and Towson Estate Planning

Anyone who has any assets they want distributed should have an estate plan, regardless of the size of their estate.

Having a will and an estate plan created by an experienced attorney is the easiest place to start, says the Observer-Reporter in the article “Set up an estate plan so your assets go where you want.” Without a will, the state will decide what happens to your assets and it may not be what you wanted.

If your will was done more than four years ago and was never updated, it may lead to some unwanted results. If people you named as beneficiaries or executors have died or if there were divorces in your family, these are examples of changes that should be addressed in the estate plan.

Many people don’t know that insurance policies, annuities, 401(k), or IRA accounts that have a designated beneficiary are going to the designated beneficiary, regardless of what is in the will. If the will says everything in the estate should be divided equally between children, but one child was named the beneficiary on the life insurance policy, then only the named child will inherit the insurance policy.

Another part of an estate plan that is needed to ensure that your wishes are followed, is a financial power of attorney and a health care power of attorney. The financial power of attorney gives the person you name the legal ability to make financial decisions for you, if you are incapacitated. The health care power of attorney, similarly, gives the person you name the power to make health care decisions for you if you cannot do so for yourself. A living will is another part of planning for incapacity that is a part of a comprehensive estate plan. The living will lets your wishes for end of life care be known to others.

Assets that pass to heirs through beneficiary designations do not go through the probate process. However, assets distributed through your will do so. Probate administration of an estate takes some time to complete depending upon where you live. In some states, probate is more involved and time consuming than in others.

Another reason why people like to avoid probate is that documents, including your will, are filed with the court and become part of the public record. That’s why many people who lose a family member find themselves receiving direct mail and phone calls about buying insurance policy or selling their home.

There are ways to minimize the number of assets that pass through probate, which your estate planning attorney will be able to explain. Trusts are used for this purpose. There are a variety of trusts that can be used depending upon your circumstances. Some are used to protect inheritances if a person has an opiate addiction or cannot manage her own affairs. Others are used so individuals with special needs do not receive inheritances that would make them ineligible for government benefits.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances.

Reference: Observer-Reporter (April 19, 2019) “Set up an estate plan so your assets go where you want”

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

For Immediate Release

Contact: Jane Frankel Sims

410-828-7775

Contact: Frank Campbell

410-263-1667

Sims & Campbell Estates and Trusts

Frankel Sims Law and Holden & Campbell
Merge to Form Sims & Campbell

Firm will offer comprehensive Trusts & Estates services through offices in Towson and Annapolis

TOWSON, Md. (April 26,2019)  Frankel Sims Law and Holden & Campbell have jointly announced the merger of their firms to create a boutique Trusts & Estates law firm providing comprehensive services in the fields of Estate Planning, Estate Administration, Trust Administration and Charitable Giving. The combined firm will be named Sims & Campbell and have offices in Towson, Md. and Annapolis, Md.  Jane Frankel Sims and Frank Campbell will lead and hold equal ownership stakes in the firm.

Sims & Campbell will have 9 attorneys and 15 legal professionals that handle every facet of estate and wealth transfer planning, including wills, revocable living trusts, irrevocable trusts, estate and gift tax advice, and charitable giving strategies.  The firm will focus solely on Trusts & Estates but will serve a wide range of clients, from young families with modest resources to ultra-high net worth individuals.  This allows clients to remain with the firm as their level of wealth and the complexity of related estate and tax implications change over time. 

“By joining forces, we have expanded our footprint to conveniently serve clients in Maryland, D.C. and Virginia” said Jane Frankel Sims.  We are seeing some of the greatest wealth transfer in our country’s history, and we want to continue to be on the leading edge of helping our clients maintain and enhance their family’s wealth.  In addition, we aim to serve our clients for years to come, and the new firm structure will allow Sims & Campbell to thrive even after Frank and I have retired.”    

“Jane and I have always admired each other’s firms and recognized the need to provide even greater depth and breadth of focused expertise to help families amass and protect their wealth from generation to generation,” said Frank Campbell.  “Now we have even greater capabilities to make a real difference for our clients.” 

The Sims & Campbell Towson office is located at 500 York Road, on the corner of York Road and Pennsylvania Avenue in the heart of Towson.  The Annapolis office is currently located at 716 Melvin Avenue, and is moving to 181 Truman Parkway in August, 2019.  For more information, visit www.simscampbell.law.