The Most Important Part of Estate Plan Is Planning for Living – Annapolis and Towson Estate Planning

Most people think of estate planning as planning for death. However, a well-titled article “Planning for death probably isn’t the most important part of your estate plan” from Coeur d’Alene/Post Falls Press presents another reason for estate planning in clear terms. Estate planning is planning for the unexpected eventualities of life.

Estate planning documents address how things will work while you are still living but if you have become incapable of making your own decisions. In many cases, this is more important than distributing your worldly possessions.

Yes, you should have a Will (Last Will and Testament). But you should also have Power of Attorney documents—one for health care purposes and another for financial purposes.

The Power of Attorney (“POA”) document states who will be your substitute decision maker, or agent, if you are incapacitated or unable to make your own decisions while still living. This should be a personalized document prepared by an estate planning attorney to include the scope of tasks and the limits, if any, you want to set for your agent. The financial POA is an important one, as it gives your chosen agent the legal authority to make financial decisions on your behalf.

The health care POA gives your agent the authority to make health care decisions on your behalf.

With both of these documents properly prepared and available, someone you name will be empowered to serve as your decision maker if necessary.

The Will is used to state what happens to your possessions and assets when you die. It is also the legal document used to name your executor—the person who will be in charge of carrying out your instructions. The Will tells the probate court how you want your estate to be administered after death.

Why do you need these and other documents? Your Will only becomes effective after death. Your POA documents are effective if you become incapacitated. They are both part of your estate plan, which is a collection of legal documents and has nothing to do with whether you reside in a palatial estate.

Here’s how it might work. If you become seriously ill and cannot speak on your own behalf, but you have a Power of Attorney naming your daughter Carol to serve as your POA for healthcare and financial decisions, Carol will be able to pay bills, including paying the mortgage, keeping your car lease up to date, and taking care of all of the financial aspects of your life. If she is also named as your Health Care POA, she will be able to speak with your medical team, be involved in decisions about your course of care and follow the wishes you’ve expressed in your POA.

If you die, and Carol has also been named your executor, she will be able to transition into this new role by representing you through the probate process. She will be able to work with your estate planning attorney to have your will filed with the court and follow your directions for distribution of your assets.

Having only a Last Will and Testament would not protect you while you are living. Having only a Power of Attorney would not protect your wishes after you have died. All of these documents—and there are others not mentioned here—work together to protect you during life and after you’ve passed.

Contact us to design your estate plan with one of our experienced estate planning attorneys.

Reference: Coeur d’Alene/Post Falls Press (Aug. 29, 2022) “Planning for death probably isn’t the most important part of your estate plan”

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

Can I Get My Co-Executor Sister to Abide by Father’s Will? – Annapolis and Towson Estate Planning

When both children are beneficiaries and both are executors, it should be a simple result. Sell the house and split the proceeds as the father instructed. However, if one child feels this to be unfair, it can cause issues, especially when no one lives in the house, no one wants to and it just costs the heirs money each month.

Nj.com’s recent article entitled “I’m fighting with my sibling about an inheritance. What can I do?” says that this is an example of the estate planning issue of treating heirs equally rather than equitably.

An executor cannot act in his or her own personal interest. Instead, the executor must act in the best interest of the estate. They have what’s called a “fiduciary duty.” Thus, as joint executors, the two children in this example owe a fiduciary duty to implement the terms laid out in their father’s will, unless the will is successfully contested.

When real estate is left to named heirs, the executor can either sell the property and divide the proceeds as specified in the will, or distribute the house “in kind,” which means that the beneficiaries would become co-owners. If the beneficiaries don’t want to be co-owners, the best solution is to sell the property.

While neither child wants to keep the home, it’s also possible for one of them to buy out the other’s share based on a fair market value of the house. If they can’t resolve the dispute amicably, the courts will need to be involved.

The dissatisfied child could file a lawsuit contesting the will. If the deadline to do this has passed, the will should stand. Even if the child does contest the will within the required time period, it will be hard for her to succeed. The two most common grounds to contest a will are to show that the testator wasn’t competent to sign it, or to show that somebody exerted undue influence over the testator.

If the dissatisfied child doesn’t contest the will — or if she does contest it but fails — she’s legally obligated to put aside her personal desires and comply with her fiduciary duty to implement the will.

If she refuses to do so, the other child can ask the court for help resolving the matter. This would involve filing a complaint seeking to remove the dissatisfied child as co-executor and name the other as the sole executor.

He would ask the court to enter an order, called an “order to show cause.” This order states deadlines for the dissatisfied child to defend her conduct and oppose the relief requested.

While you’re not required to have an attorney for this process, it will be difficult to navigate the process without one. Contact us to work with one of our experienced estate planning attorneys.

Reference: nj.com (Aug. 9, 2022) “I’m fighting with my sibling about an inheritance. What can I do?”

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

How Do I Contest a Will? – Annapolis and Towson Estate Planning

As a beneficiary of a will, if you do not agree with how the assets are being distributed, you may have grounds for contesting the will. MSN’s recent article entitled “Contesting a Will? You Might Not Need a Lawyer” says to do this you must have a legitimate legal reason to challenge the will, such as one of the most common arguments:

  • Lack of mental capacity. If the person making the will (the “testator”) was not “of sound mind,” he or she may not understand their decisions. The testator must be able to understand what they own, who their natural heirs are and what they are giving and to whom.
  • Fraud, undue influence, or forgery. Some people are tricked into signing a will, are forced to create a will under duress, or have their signature forged.
  • Multiple wills. In this situation, the one that was made most recently is often the one that the courts will decide is valid. However, wills created immediately before death may be contested due to undue influence, lack of mental capacity, or other reasons.
  • The state requirements are not met. Every state has specific requirements as to what must be in a will, the way in which it is signed, and the number of witnesses required. If these elements are not met, then the will may not be valid.
  • Location. Some states may not recognize wills created in another state.

To contest the will, you must have legal standing, which means you must meet one of these requirements:

  • A prior will designates you as a beneficiary;
  • The current will designates you as a beneficiary;
  • You are the beneficiary of a more recent will made after the one in question; or
  • You would be an heir if there was no will, and the state’s laws of intestacy were applied.

Your attorney will next file a petition in the state probate court where the estate is under probate. This tells the probate court and the estate that you are contesting the will. If your case is not settled, it goes to court where you will make your argument as to why the will should be changed. The court will decide the outcome of your case.

A way to keep family members from fighting over an estate is add a no-contest clause into the will. This disinherits anyone who challenges a will, if their challenge fails. In order words, if you do not win your challenge, you get nothing from the estate.

Reference: MSN (May 30, 2022) “Contesting a Will? You Might Not Need a Lawyer”

 

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When Should I Hire an Estate Planning Attorney? – Annapolis and Towson Estate Planning

Kiplinger’s recent article entitled “Should I Hire an Estate Planning Attorney Now That I Am a Widow?” describes some situations where an experienced estate planning attorney is really required:

Estates with many types of complicated assets. Hiring an experienced estate planning attorney is a must for more complicated estates. These are estates with multiple investments, numerous assets, cryptocurrency, hedge funds, private equity, or a business. Some estates also include significant real estate, including vacation homes, commercial properties and timeshares. Managing, appraising and selling a business, real estate and complex investments are all jobs that require some expertise and experience. In addition, valuing private equity investments and certain hedge funds is also not straightforward and can require the services of an expert.

The estate might owe federal or state estate tax. In some estates, there are time-sensitive decisions that require somewhat immediate attention. Even if all assets were held jointly and court involvement is unnecessary, hiring a knowledgeable trust and estate lawyer may have real tax benefits. There are many planning strategies from which testators and their heirs can benefit. For example, the will or an estate tax return may need to be filed to transfer the deceased spouse’s unused Federal Estate Unified Tax Credit to the surviving spouse. The decision whether to transfer to an unused unified tax credit to the surviving spouse is not obvious and requires guidance from an experienced estate planning attorney.

Many states also impose their own estate taxes, and many of these states impose taxes on an estate valued at $1 million or more. Therefore, when you add the value of a home, investments and life insurance proceeds, many Americans will find themselves on the wrong side of the state exemption and owe estate taxes.

The family is fighting. Family disputes often emerge after the death of a parent. It is stressful, and emotions run high. No one is really operating at their best. If unhappy family members want to contest the will or are threatening a lawsuit, you will also need guidance from an experienced estate planning attorney. These fights can result in time-intensive and costly lawsuits. The sooner you get legal advice from a probate attorney, the better chance you have of avoiding this.

Complicated beneficiary plans. Some wills have tricky beneficiary designations that leave assets to one child but nothing to another. Others could include charitable bequests or leave assets to many beneficiaries.

Talk to an experienced attorney, whose primary focus is estate and trust law.

Reference: Kiplinger (July 5, 2022) “Should I Hire an Estate Planning Attorney Now That I Am a Widow?”

 

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

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”

 

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

Addressing Vacation Home in Another State in Estate Planning – Annapolis and Towson Estate Planning

Many families have an out-of-state cabin or vacation home that is passed down by putting the property in a will. While that is an option, this strategy might not make it as easy as you think for your family to inherit this home in the future.

Florida Today’s recent article entitled “Avoiding probate: What is the best option for my out-of-state vacation home?” explains the reason to look into a more comprehensive plan. While you could just leave an out-of-state vacation home in your will, you might consider protecting your loved ones from the often expensive, overwhelming and complicated process of dealing both an in-state probate and an out-of-state probate.

There are options to help avoid probate on an out-of-state vacation home that can save your family headaches in the future. Let’s take a look:

  • Revocable trust: This type of trust can be altered while you are still living, especially as your assets or beneficiaries change. You can place all your assets into this trust, but at the very least, put the vacation home in the trust to avoid the property going through probate. Another benefit of a revocable trust is you could set aside money in the trust specifically for the management and upkeep of the property, and you can leave instructions on how the vacation home should be managed upon your death.
  • Irrevocable trust: similar to the revocable trust, assets can be put into an irrevocable trust, including your vacation home. You can leave instructions and money for the management of the vacation home. However, once an irrevocable trust is established, you cannot amend or terminate it.
  • Limited liability company (LLC): You can also create an LLC and list your home as an asset of the company to eliminate probate and save you or your family from the risk of losing any other assets outside of the vacation home, if sued. You can protect yourself if renting out a vacation home and the renter decides to sue. The most you could then lose is that property, rather than possibly losing any other assets. Having beneficiaries rent the home will help keep out-of-pocket expenses low for future beneficiaries. With the creation of an LLC, you are also able to create a plan to help with the future management of the vacation home.
  • Transfer via a deed: When you have multiple children, issues may arise when making decisions surrounding the home. This is usually because your wishes for the management of the house are not explicitly detailed in writing.
  • Joint ownership: You can hold the title to the property with another that’s given the right of survivorship. However, like with the deed, this can lead to miscommunication as to how the house should be cared for and used.

Plan for the future to help make certain that the property continues to be a place where cherished memories can be made for years to come. Talk to a qualified estate planning attorney for expert legal advice for your specific situation.

Reference: Florida Today (July 2, 2022) “Avoiding probate: What is the best option for my out-of-state vacation home?”

 

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

How Can I Help My Family After I Pass Away? – Annapolis and Towson Estate Planning

In addition to attempting to arrange a spouse’s funeral, a grieving person must try to locate the deceased’s will, the executor, information on the family’s finances and the various family accounts’ usernames and passwords.

Starts at 60’s recent article entitled “How to take care of your family in life and in death” explains that estate planning is always a difficult subject to deal with, because no one wants to arrange things for when they die.

However, good communication and planning make the life of the surviving spouse and family easier, particularly during the inevitably stressful time of dealing with the death. Let’s look at seven key points of estate planning:

Communication. Sharing information is crucial. Both spouses should be aware of the family’s investments and advisors. The advisers should also know both clients to help make any transition as seamless as possible. Where one spouse has taken responsibility for the financial affairs, he or she should leave specific instructions concerning who to contact in the event of their death and what steps to be taken.

Bank accounts. It is important to know what bank accounts the couple has, and, importantly, what are the accounts’ usernames and passwords. They should also make the executor or adult children aware of the location of the keys to the safety deposit box or the code to the safe at home.

Financial contacts. The couple should divulge important family financial contacts, such as an accountant, estate planning attorney, their insurance broker and financial advisors.

Will. Determine where their wills are kept and if they are up to date. Note the names of the executors. You should also see if the executors are aware they have been named as executors, and if the couple has any power of attorney documents.

Life Insurance. See if the couple has life insurance and note the details of the policy, as well as the agent’s contact information.

Other family assets. Your other valuables should be recorded with the specific ownership of each noted and shared with an estate planning attorney. This includes companies, motor vehicles, boats, vacation homes and art collections.

Reference: Starts at 60 (April 2, 2022) “How to take care of your family in life and in death”

 

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

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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Is Estate Planning Affected by Property in Two States? – Annapolis and Towson Estate Planning

Cleveland Jewish News’ recent article titled “Use attorney when considering multi-state estate plan says that if a person owns real estate or other tangible property (like a boat) in another state, they should think about creating a trust that can hold all their real estate. You do not need one for each state. You can assign or deed their property to the trust, no matter where the property is located.

Some inherited assets require taxes be paid by the inheritors. Those taxes are determined by the laws of the state in which the asset is located.

A big mistake that people frequently make is not creating a trust. When a person fails to do this, their assets will go to probate. Some other common errors include improperly titling the property in their trust or failing to fund the trust. When those things occur, ancillary probate is required.  This means a probate estate needs to be opened in the other state. As a result, there may be two probate estates going on in two different states, which can mean twice the work and expense, as well as twice the stress.

Having two estates going through probate simultaneously in two different states can delay the time it takes to close the probate estate.

There are some other options besides using a trust to avoid filing an ancillary estate. Most states let an estate holder file a “transfer on death affidavit,” also known as a “transfer on death deed” or “beneficiary deed” when the asset is real estate. This permits property to go directly to a beneficiary without needing to go through probate.

A real estate owner may also avoid probate by appointing a co-owner with survivorship rights on the deed. Do not attempt this without consulting an attorney.

If you have real estate, like a second home, in another state (and) you die owning that individually, you are going to have to probate that in the state where it is located. It is usually best to avoid probate in multiple jurisdictions, and also to avoid probate altogether.

A co-owner with survivorship is an option for avoiding probate. If there is no surviving spouse, or after the first one dies, you could transfer the estate to their revocable trust.

Each state has different requirements. If you are going to move to another state or have property in another state, you should consult with a local estate planning attorney.

Reference: Cleveland Jewish News (March 21, 2022) “Use attorney when considering multi-state estate plan”

 

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

What Can a Trust Do for Me and My Family? – Annapolis and Towson Estate Planning

A trust is defined as a legal contract that lets an individual or entity (the trustee) hold assets on behalf of another person (the beneficiary). The assets in the trust can be cash, investments, physical assets like real estate, business interests and digital assets. There is no minimum amount of money needed to establish a trust.

US News’ recent article entitled “Trusts Explained” explains that trusts can be structured in a number of ways to instruct the way in which the assets are handled both during and after your lifetime. Trusts can reduce estate taxes and provide many other benefits.

Placing assets in a trust lets you know that they will be managed through your instructions, even if you are unable to manage them yourself. Trusts also bypass the probate process. This lets your heirs get the trust assets faster than if they were transferred through a will.

The two main types of trusts are revocable (known as “living trusts”) and irrevocable trusts. A revocable trust allows the grantor to change the terms of the trust or dissolve the trust at any time. Revocable trusts avoid probate, but the assets in them are generally still considered part of your estate. That is because you retain control over them during your lifetime.

To totally remove the assets from your estate, you need an irrevocable trust. An irrevocable trust cannot be altered by the grantor after it has been created. Therefore, if you are the grantor, you cannot change the terms of the trust, such as the beneficiaries, or dissolve the trust after it has been established.

You also lose control over the assets you put into an irrevocable trust.

Trusts give you more say about your assets than a will does. With a trust, you can set more particular terms as to when your beneficiaries receive those assets. Another type of trust is created under a last will and testament and is known as a testamentary trust. Although the last will must be probated to create the testamentary trust, this trust can protect an inheritance from and for your heirs as you design.

Trusts are not a do-it-yourself proposition: ask for the expertise of an experienced estate planning attorney.

Reference: US News (Feb. 7, 2022) “Trusts Explained”

 

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