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”

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

Can Unequal Inheritances Be Fair? – Annapolis and Towson Estate Planning

Estate planning attorneys aren’t often asked to create estate plans treating heirs unfairly. However, when they do it usually is because a parent is estranged from one child and wishes to leave him or her nothing. When it comes to estate planning, equal isn’t the same as fair, explains the article “Are Unequal Inheritances Fair?” from Advisor Perspectives.

An example of this can be seen in the case of a widow with four adult children who asked an estate planning attorney how to approach distributing her assets. Three of her children were high-income earners, already building substantial net worth. A fourth child had mental health issues, limited education, had been in and out of jail and was unable to hold a job.

She understood that her fourth child needed the financial stability the others did not. She wanted to provide some support for him, but knew any money left directly to him would be gone quickly. She was considering leaving money for him in a trust to provide a monthly income stream, but also wanted to be fair to the other three children.

The trust would be the best option. However, there were problems to consider. If the estate were to be divided in four equal parts, the fourth child’s share of the estate would be small, so trustee fees would take a significant amount of the trust. If she left her entire estate for him, it would be more likely he’d have funding for most, if not all, of his adult life.

The worst thing the mother could do was to leave all the funds for the fourth child in a trust without discussing it with the other three siblings. Unequal inheritances can lead to battles between siblings, sometimes bad enough to lead them into a court battle. This is often the case where one child is believed by others to have unduly influenced a parent, when they have inherited all or the lion’s share of the estate.

Sibling fights can occur even when the children know about and understand the need for the unequal distribution. The children may suppress their emotions while the parent is living. However, after the parent dies and the reality sets in, emotions may fire at full throttle. Logically, in this case the three successful siblings may well understand why their troubled sibling needs the funds. However, grief is a powerful emotion and can lead to illogical responses.

In this case, the woman made the decision to leave her estate in equal shares to each child and giving the three successful siblings the options to share part of their inheritance with their brother. She did this by having her estate planning attorney add language in the will stating if any child wanted to disclaim or refuse any of their inheritance, it would pass to a trust set up for the troubled sibling. This gave each child the opportunity to help or not.

Was it a perfect solution? Perhaps not, but it was the best possible solution given the specific circumstances for this family.

Contact us to speak with one of our experienced estate planning attorneys about creating the best possible solution for you and your family.

Reference: Advisor Perspectives (Aug. 22, 2022) “Are Unequal Inheritances Fair?”

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

Estate Planning for Blended Families – Annapolis and Towson Estate Planning

Today, a blended family is more common than ever, with stepfamily members, half-siblings, former spouses, new spouses and every combination of parents, children and partners imaginable. Traditional estate planning, including wills and non-probate tools like transfer on death (TOD) documents, as valuable as they are, may not be enough for the blended family, advises a recent article titled “Legal-Ease: Hers, his and ours—blended family estate planning” from limaohio.com.

Not too long ago, when most people didn’t take advantage of the power of trusts, couples often went for estate plans with “mirror” wills, even those with children from prior marriages. Their wills basically said each spouse would leave the other spouse everything. This will would be accompanied by a contract stating neither would change their will for the rest of their lives. If there was a subsequent marriage after one spouse passed, this led to problems for the new couple, since the surviving spouse was legally bound not to change their will.

As an illustration, Bob has three children from his first marriage and Sue has two kids from her first marriage. They marry and have two children of their own. Their wills stipulate they’ll leave each other everything when the first one dies. There may have been some specific language about what would happen to the children from the first marriages, but just as likely this would not have been addressed.

It sounds practical enough, but in this situation, the children from the first spouse to die were at risk of being disinherited, unless plans were made for them to inherit from their biological parent.

Todays’ blended family benefits from the use of trusts, which are designed to protect each spouse, their children and any child or children they have together. There are a number of different kinds of trusts for use by spouses only to protect children and surviving spouses.

Trust law requires the trustee—the person who is in charge of administering the trust—to give a copy of the trust to each beneficiary. The trustee is also required to provide updates to beneficiaries about the assets in the trust.

A surviving spouse will most likely serve as the trustee when the first spouse passes and will have a legal responsibility to honor the shared wishes of the first spouse to pass.

If you would like to learn more about the many different types of spousal trusts, and which is best for your situation, contact us and schedule a time to speak with one of our experienced estate planning attorneys.

Reference: limaohio.com (Aug. 20, 2022) “Legal-Ease: Hers, his and ours—blended family estate planning”

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

What Should Not Be Kept in a Safe Deposit Box? – Annapolis and Towson Estate Planning

A safe deposit box can be used to store important documents and items. It’s essential if you own gold or other valuables, and can be helpful in reducing the worry of owning different kinds of assets, according to a recent article titled “10 Items You Should Never Keep In a Safe Deposit Box” from yahoo! finance.

However, many documents should never be kept in a safe deposit box, even when it seems as if it is the perfect spot.

Your will should never, ever, be placed in a safe deposit box. When a person dies, the only person who can access the safe deposit box are those who are also owners of the box according to bank records and those individuals named in the will itself.

Don’t use your safety deposit box to stash cash. Unless your cash contains collectible bills or coins, this is not the place for it. An investment fund or, at the very least, an interest-bearing savings account, is a better option. Stashing cash may have made sense during the Great Depression, but not today.

Keys to anything of importance don’t belong in your safe deposit box. You are likely to need them when you can’t get into the bank’s vault, and you may forget their location. If you die and no one knows where the keys are and can’t get into the safe deposit box, you’ll be remembered as the person who made life harder for everyone.

Unless you own the Hope Diamond or jewelry like it, your jewelry doesn’t belong locked up in an airless safe deposit box. If you do have irreplaceable jewelry and don’t want it kept at home, make sure it’s insured. Most banks don’t automatically insure items in a safe deposit box.

Trust documents are in the same category as a will. If they are in a safe deposit box and the person who owns the box dies or becomes incapacitated, the only way to gain access will be to be listed on the documents—which will be in the safe deposit box. Keep them in a safe at home or on file with the elder lawyer who created them for you.

A Medical Power of Attorney won’t do you any good, if it’s secured in a safe deposit box. If someone needs these documents in an emergency situation, they need to be where you are and easily accessible. There’s no downside to having too many copies of a medical POA. Keep at least one in the house, give one to the person who is designated on the document, one to your primary care physician and one or more to loved ones who live nearby.

Passports are more likely to be needed and not retrievable from a safe deposit box than they are to be stolen from home. They are far more likely to be stolen when you are traveling, especially overseas.

Your COVID-19 vaccination card is going to be needed from time to time, so it’s best in a desk drawer, on the refrigerator or in your wallet.

Loaded weapons, liquids, and explosives. If you can’t take it on an airplane, you should not keep it in a safe deposit box.

Directions to loved ones about anything of importance should be kept at home and people who are expected to follow your instructions should be told where they are located. If a safe deposit box is sealed, and most are at death, a funeral or memorial service may be a distant memory by the time the instructions are read.

Bottom line: important documents belong in our home in a waterproof, fire safe box. Tell loved ones where the box is located and where they can find the keys.

Reference: yahoo! finance (Aug. 2, 2022) “10 Items You Should Never Keep In a Safe Deposit Box”

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

What Do You Need to Do When a Spouse Dies? – Annapolis and Towson Estate Planning

Life events require planning, even the most heartbreaking, like the death of a spouse. Spouses ideally create a blueprint together so when the inevitable occurs, they are prepared, says the article “The important financial steps to take after a spouse dies” from The Globe and Mail. It may sound cold to take a business approach, but by doing so, the surviving spouse will know what to expect and what to do.

Some people use a spreadsheet to clearly see what their financial picture will look like before and after the loss of a spouse.

There are pieces of information that are vital to know:

  • What health insurance coverage does the spouse have?
  • Will the coverage remain in place after the death of the spouse?
  • Do any accounts need to be changed to joint ownership before death?
  • What investments do both spouses have, and will they be accessible after death of one spouse?
  • Is there a last will and testament, and where is it located?

Many people are wholly unprepared and have to tackle their entire financial situation immediately after their spouse dies. If they were not involved in family finances and retirement planning, it can lead to costly mistakes and make a difficult time even harder.

If assets are owned jointly with rights of survivorship, the transition and access to finances is easier. If the accounts are only in one name, the surviving spouse will have to wait until the estate goes through probate before they can access funds. If there are bills to pay, the surviving spouse may have to tap retirement funds, which can come with penalties, depending on the accounts and the surviving spouse’s age.

All of this can be avoided by taking the time to create an estate plan which includes planning for asset distribution and may include trusts. There are many trusts designed for use by spouses to take assets out of the probate estate, provide an income source and minimize taxes. Your estate planning attorney will be able to help prepare for this event, from a legal and practical standpoint.

What happens when there’s no will?

No will usually indicates no planning. This leaves spouses and family members in the worst possible situation. The laws of your state will be used to determine how assets are distributed. How much a surviving spouse and descendants will inherit will be based solely on the law. The results may not be optimal for anyone. It’s best to meet with an estate planning attorney and create a will.

Reviewing beneficiary designations for life insurance policies and retirement accounts should be done every few years. If the beneficiary is no longer part of the account owner’s life, the designation needs to be updated. If the beneficiary had died, most accounts would go into the probate estate, where they otherwise would pass directly to the beneficiary.

If you would like to make sure everything is in order for you and your spouse, please contact us to schedule a call with one of our experienced estate planning attorneys.

Reference: The Globe and Mail (July 13, 2022) “The important financial steps to take after a spouse dies”

 

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Actress Helen McCrory Leaves Money in Trust – Annapolis and Towson Estate Planning

Late British actress Helen McCrory left her entire $1 million estate in the name of her husband and actor Damian Lewis and their two children. The will states that the Harry Potter star had put her money into a trust.

Her will appointed Damian as one of the trustees of the 125-year-long fund – along with HM the Queen’s bankers Coutts – with the power to make payments out of the trust to himself and the other beneficiaries.

SK Pop’s recent article entitled “What was Helen McCrory’s net worth at the time of her death?” reports that her children, Manon (15), and Gulliver (14), along with any future grandchildren, have been named beneficiaries.

McCrory, who last starred in Netflix’s Peaky Blinders, died in April 2021 after secretly battling breast cancer for years. She was 52 and had been married to Lewis since 2007.

Her net worth was combined with her husband’s and was around $25 million at the time of her death.

In 2017, Helen was awarded an OBE for her services in drama. McCrory  was most remembered for playing Aunt Polly, the Shelby family matriarch in Netflix’s crime drama series Peaky Blinders. She died during the filming of the show’s final season.

She also starred as Narcissa Malfoy in the Harry Potter film series and played roles in Skyfall and the 2006 film The Queen.

McCrory received many accolades during her lifetime, including a BAFTA award for Streetlife (1995), a Broadcasting Press Guild Award for North Square and a Golden FIPA at the Biarritz International Festival of Audiovisual Programming.

The National Theatre’s artistic director Rufus Norris said she was “unquestionably one of the great actors of her generation.”

McCrory and Lewis made contributions during the pandemic and helped raise $1.8 million for Feed NHS.

Her actor husband was the Emmy Award-winning star of Band of Brothers, Homeland and Wolf Hall.

Reference: SK Pop (July 23, 2022) “What was Helen McCrory’s net worth at the time of her death?”

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

Who Is the Best Person for Executor? – Annapolis and Towson Estate Planning

Several critical estate planning documents give another person—known as an agent or personal representative—the legal right to act on another person’s behalf. They include wills, trusts, powers of attorney and advance health care directives, as described in a recent article titled “The nomination of trustees, executors and agents” from Lake County Record-Bee.

Your will is only activated after you die. The will and executor then have to be approved by the court. Many people think being named as an executor confers instant authority, but this is not true. Only when the will has been deemed valid by the court, does the executor have the power to act on behalf of the decedent.

After death, the court is petitioned for a court order appointing the executor and then letters testamentary are signed by the appointed executor. An executor then becomes active as an officer of the court with a fiduciary duty to act as personal representative of the decedent’s estate.

If the named person declines to serve, the will should have a secondary person named as executor, who can then request the appointment be validated by the court. Others can petition the court to be appointed. However, it is best to name two people of your choice in your will.

A trust is a separate legal entity with a trustee who is in charge of the trust and its assets. If a revocable will is created, the trustee is usually the same person who has the trust created, also known as the grantor. For an irrevocable trust, the trustee is someone other than the grantor. The appointment does not become official until the appointment is accepted, usually through signing a document or by the successor trustee taking action on behalf of the trust.

Just as an executor might not accept their role, a trustee can decide not to accept the nomination. However, once they do, they have a fiduciary duty to put the well-being of the trust first and manage it properly. You can’t accept the role and then walk away without serious consequences.

Powers of attorney are used while a person is living. The power of attorney’s effective date depends upon what kind of POA it is. A durable power of attorney is effective the moment it is signed. A springing POA sets forth terms upon which the POA becomes active, usually incapacity. The challenge with a Springing POA is that approval by the court may be required, usually with proof from a treating physician concerning the person’s condition.

Similarly, the health care power of attorney appoints a person who acts on behalf of another as their agent for health issues. They can decline the position. However, once they agree to take on the position, they are responsible for their actions.

If the POAs decline to serve and there is no secondary person named, or if all named POAs decline to serve, the family will need to apply for a conservatorship (also known as guardianship). This is a lengthy and expensive process requiring a thorough investigation of the situation and the person who needs representation. It can be contested if the person does not want to give up their independence, or by family members who feel it is not needed.

These are commonly used terms in estate planning. However, they are not always understood clearly. Your estate planning attorney will be able to address specific responsibilities and requirements, since every state has laws and appointments vary by state.

Contact our office to schedule a consultation with one of our experienced attorneys to discuss who the right people would be to serve as your Executor, Trustee, Power of Attorney, and/or Health Care Agent.

Reference: Lake Country Record-Bee (July 30, 2022) “The nomination of trustees, executors and agents”

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

What are Alternatives to Guardianship? – Annapolis and Towson Estate Planning

Guardianships are drastic and very invasive. They strip individuals of their legal autonomy and establish the guardian as the sole decision maker. To become a guardian requires strong evidence of legal incapacity, and approval by a judge, explains an article titled “Guardianships Should Be a Last Resort–Consider These Less Draconian Options First” from Kiplinger. They should not be undertaken unless there is a serious need to do so. Once they are in place, guardianships are difficult to undo.

If an elderly person with dementia failed to make provisions durable powers of attorney for health care and for financial matters before becoming ill, a guardianship may be the only ways to protect the person and their estate. There are also instances where an aging parent is unable to care for themselves properly but refuses any help from family members.

Another scenario is an aging grandparent who plans to leave funds for minor beneficiaries. Their parents will need to seek guardianships, so they can manage the money until their children reach the age of majority.

Laws vary from state to state, so if you might need to address this situation, you will need to speak with an estate planning attorney in the elderly parent or family member’s state of residence. For the most part, each state requires less restrictive alternatives to be attempted before guardianship proceedings are begun.

Alternatives to guardianship include limited guardianship, focused on specific aspect of the person’s life. This can be established to manage the person’s finances only, or to manage only their medical and health care decisions. Limited guardianships need to be approved by a court and require evidence of incapacity.

Powers of attorney can be established for medical or financial decisions. This is far less burdensome to achieve and equally less restrictive. A Healthcare Power of Attorney will allow a family member to be involved with medical care, while the Durable General Power of Attorney is used to manage a person’s personal financial affairs.

Some families take the step of making a family member a joint owner on a bank, home, or an investment account. This sounds like a neat and simple solution, but assets are vulnerable if the co-owner has any creditor issues or risk exposure. A joint owner also does not have the same fiduciary responsibility as a POA.

An assisted decision-making agreement creates a surrogate decision-maker who can see the incapacitated person’s financial transactions. The bank is notified of the arrangement and alerts the surrogate when it sees a potentially suspicious or unusual transaction. This does not completely replace the primary account holder’s authority. However, it does create a limited means of preventing exploitation or fraud. The bank is put on notice and required to alert a second person before completing potentially fraudulent transactions.

Trusts can also be used to protect an incapacitated person. They can be used to manage assets, with a contingent trustee. For an elderly person, a co-trustee can step in if the grantor loses the capacity to make good decisions.

Planning in advance is the best solution for incapacity. Talk with an experienced estate planning attorney to protect loved ones from having to take draconian actions to protect your best interests.

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

 

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What’s Involved with Being a Trustee? – Annapolis and Towson Estate Planning

There is an old saying that the two best days in a boat owner’s life are the day they buy their boat and the day they sell it.

Forbes’ recent article entitled “How To Be An Effective Trustee” says that a similar notion applies to being a trustee – it is an honor to be named and then a huge relief when it is over. That is because being a trustee is difficult.

Remember that a trust is a fiduciary relationship in which one party (the trustor) gives another party (the trustee) the right to hold title to property or assets for the benefit of a third party (the beneficiary). Trusts are created to provide legal protection for the trustor’s assets, to make certain those assets are distributed according to the wishes of the trustor, and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or estate taxes.

Being a trustee requires knowledge about a wide range of topics, including:

  • The trustee’s fiduciary duties, which include loyalty, impartiality, duty of care, protection of trust property, enforcement of claims and the duty to inform and account to beneficiaries, among others (violation of these duties exposes the trustee to liability).
  • Understanding the details of the trust, like the specifics of the distribution instructions.
  • Investments and the ability to engage and monitor investment managers.
  • Administrative matters, such as record keeping and principal and income accounting.
  • Estate planning, trusts and the basics of the estate, gift and generation skipping taxes.
  • Income tax, including how trusts are taxed both by the federal government and the state.

A trustee must also be able to productively communicate and work with the beneficiaries on their financial wellness and distribution needs, which is an area that can be full of conflict.

It is a daunting list. Talk with an experienced estate planning attorney to discuss your situation in detail.

Reference: Forbes (May 31, 2022) “How To Be An Effective Trustee”

 

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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”

 

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