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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Can I Plan My Estate to Avoid Leaving Residual Assets? – Annapolis and Towson Estate Planning

When looking into your estate plan, you see the term “residuary estate.” This is any part of your estate that has not been distributed to your heirs through a will. It is also called estate residue or residual estate. However, it simply means assets that are left over once your will has been read, the assets have been distributed to your heirs and any final expenses have been paid.

Proper estate planning can help you avoid leaving residual assets behind, says Yahoo Finance’s recent article entitled “Residuary Estate Definition and Example.” An experienced estate planning attorney can help you select a structure for your estate that accomplishes your objectives.

A will lets you state how you want your assets to be divided among your heirs when you pass away. However, it is possible that not all of your assets will make it into your will for some reason. Any assets that are not included in your will or distributed through a trust automatically becomes part of your residuary estate when you pass away.

Residual estates can be created without advance planning. For example, your heirs may be left to deal with a residuary estate if:

  • You neglected to include certain assets in your will;
  • You acquired new assets after drafting your will and failed to amend the document for the distribution of these assets; or
  • Someone you named in your will dies before you or is unable to receive their inheritance for some other reason.

Assets that are designed to have a named beneficiary but do not have one, can also be included in the residuary estate.

When a residuary estate exists, it can complicate the probate process for your family. Any unclaimed or otherwise overlooked assets would be distributed according to the state’s inheritance laws, after any estate taxes, outstanding debts or final expenses have been paid.

You should also know that it is possible to have a residuary beneficiary of a living trust. This person would receive any property or assets transferred to the trust that were not designated for specific beneficiaries. If you create a trust properly, there should be a provision for each beneficiary you want to be included and which assets they should receive. However, you could still run into issues if a named beneficiary dies, and you haven’t named anyone as a residuary beneficiary.

A residuary estate is something you may need to plan for when creating a will or trust. Fortunately, it is pretty easy to do so by including the proper wording in your will and trust documents. Ask an estate planning attorney to eliminate confusion and to plan your estate properly.

Reference: Yahoo Finance (Dec. 30, 2021) “Residuary Estate Definition and Example”

 

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Taking Care of Dying Parent’s Financial Affairs Can Be Challenging – Annapolis and Towson Estate Planning

It is not uncommon for adult children to have to face a parent’s decline and a stay in hospice at the end of their life. The children are tasked with trying to prepare for his passing. This includes how to handle his financial matters.

Seniors Matter’s recent article entitled “How do I handle my father’s financial matters now that he’s in hospice?” says that caring for a sick family member is a challenging and emotional time. Because of this major task, it is easy to put financial considerations on the back burner. Nonetheless, it is important to address a few key issues.

If a family member is terminally ill or admitted to hospice – and you are able to do so – it may be a good idea to start by helping to take inventory of your family member’s assets and liabilities. A clear idea of where their assets are and what they have is a great starting point to help you prepare and be in a better position to manage the estate.

An inventory may include any and all of the following:

  • Real estate
  • Bank accounts
  • Cars, boats and other vehicles
  • Stocks and bonds
  • Life insurance
  • Retirement plans (such as a 401(k), a traditional IRA, a Roth IRA and a SEP IRA);
  • Wages and other income
  • Business interests
  • Intellectual property; and
  • Any debts, liabilities and judgments.

Next, find out what, if any, estate planning documents may be in place. This includes a will, powers of attorney, trusts, a healthcare directive and a living will. You will need to find copies.

This is hard to do while a loved on is dying, but it can make the aftermath easier and less stressful.

Reference: Seniors Matter (Feb. 22, 2022) “How do I handle my father’s financial matters now that he’s in hospice?”

 

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Why Do I Need a Will? – Annapolis and Towson Estate Planning

Some people mistakenly think that not having a will allows their probate assets to bypass the time and expense of probate. No, that is not true.

Probate assets are those assets with no surviving joint owner, designated beneficiary, or are not titled in a revocable living trust.

If you die without a will, your probate property still must go through probate, says Fed Week’s recent article entitled “Expressing Your Will with a Will.”

Therefore, you should have a will. If probate avoidance is a concern, you can ask an experienced estate planning attorney about utilizing various non-probate transfer methods, to include creating a trust. If you have a revocable living trust, you can keep control over the trust assets while you are alive.

The assets placed in revocable living trust during your lifetime can be distributed at your death, under the terms of the trust, without the requirement of probate.

When you draft a will, you cannot simply forget about it. Special life events, such as births, adoptions, deaths, marriages, and divorces, all may require you to revisit your will. After each change, make certain that your current will is both safe and accessible. You can leave a copy of your will with your executor.

If you decide to keep your will somewhere else, your executor and other loved ones should know that location. The estate planning attorney who prepared your will should have a copy, as well as a memo revealing the location of the original.

Regardless of where you put your will, you should create a separate document for your funeral and burial instructions. That is because wills typically are not read until days or weeks after death.

It will not help your survivors make prompt decisions about a funeral or a memorial service.

A separate letter should be used to specify your final wishes and your executor should know where these instructions are located.

These arrangements include seeing if there is a pre-arranged funeral plan, meeting with a funeral director to make arrangements for the funeral services, confirming cemetery arrangements and choosing the necessary casket or urn, grave marker and funeral stationery.

Reference: Fed Week (Feb. 22, 2022) “Expressing Your Will with a Will”

 

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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”

 

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What Assets Should Be Considered when Planning Estate? – Annapolis and Towson Estate Planning

The numbers of Americans who have a formal estate plan is still less than 50%. This number has not changed much over the decade. However, the assets owned have become a lot more complicated, according to a recent article from CNBC titled “What happens to your digital assets and cryptocurrency when you die? Even with a will, they may be overlooked.”

Airline miles and credit card points, social media accounts and cryptocurrencies are different types of assets to be passed on to heirs. For those who do have an estate plan, the focus is probably on traditional assets, like their home, 401(k)s, IRAs and bank accounts. However, we own so much more today.

Start with an inventory. For digital assets, include photos, videos, hardware, software, devices, and websites, to name a few. Make sure someone you trust has the unlock code for your phone, laptop and desktop. Use a secure password manager or a notebook, whatever you are more comfortable with, and share the information with a trusted person.

You will also need to include what you want to happen to the digital asset. Some platforms will let owners name a legacy contact to handle the account when they die and what the owner wants to happen to the data, photos, videos, etc. Some platforms have not yet addressed this issue at all.

If an online business generates income, what do you want to happen to the business? If you want the business to continue, who will own the business, who will run the business and receive the income? All of this has to be made clear and documented properly.

Failing to create a digital asset plan puts those assets at risk. For cryptocurrency and nonfungible tokens (NFTs), this has become a routine problem. Unlike traditional financial accounts, there are no paper statements, and your executor cannot simply contact the institution with a death certificate and a Power of Attorney and move funds.

Another often overlooked part of an estate are pets. Assets cannot be left directly to pets. However, most states allow pet trusts, where owners can fund a trust and designate a trustee and a caretaker. Make sure to fund the account once it has been created, so your beloved companion will be cared for as you want. An informal agreement is not enforceable, and your pet may end up in a shelter or abandoned.

Sentimental possessions also need to be planned for. Your great-grandmother’s soup tureen may be available for $20 on eBay, but it is not the same as the one she actually used and taught her daughter and her granddaughter how to use. The same goes for more valuable items, like jewelry or artwork. Identifying who gets what while you are living, can help prevent family quarrels when you are gone. In some families, there will be quarrels unless the items are in the will. Another option: distribute these items while you are living.

If you can, it is also a good idea and a gift to your loved ones to write down what you want in the way of a funeral or memorial service. Do they want to be buried, or cremated? Do they want a religious service in a house of worship, or a simple graveside service?

If you are among those who have a will, you probably need it to be reviewed. If you do not have a will or a comprehensive estate plan, you should meet with an experienced estate planning attorney to address distribution of assets, planning for incapacity and preparing for the often overlooked aspects of your life. You will have the comfort of expressing your wishes and your loved ones will be grateful.

Reference: CNBC (Jan. 18, 2022) “What happens to your digital assets and cryptocurrency when you die? Even with a will, they may be overlooked”

 

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Write a Letter of Instruction for Loved Ones – Annapolis and Towson Estate Planning

A letter of intent is frequently recommended for parents of disabled children to share information for when the parent dies. However, letters of intent or a letter of instruction can also be a helpful resource for executors, says the article “Planning Head: For detailed instructions consider a letter of instruction” from The Mercury. This is especially valuable, if the executor does not know the decedent or their family members very well.

For disabled children, legal documents address specific issues and are not necessarily the right place to include personal information about the child or the parent’s desires for the child’s future. Estate plans need more information, especially for a minor child.

The goal is to create a document to make clear what the parents want for the child after they pass, whether that occurs early or late in the child’s life.

For a disabled child, the first questions to be addressed in the estate plan concern who will care for the child if the parent dies or becomes incapacitated, where will the child live and what funds will be available for their care. Once those matters are resolved, however, there are more questions about the child’s wants and needs.

The letter of intent can answer questions about the special information only a parent knows and is helpful in future decisions about their care and living situation.

The letter of intent concerning an estate should also include information about wishes for a funeral or burial and contain everything from directions for the music list for a ceremony to the writing on the headstone.

Once the letter of intent is created, the next question is, where should you put it so it is secure and can be accessed when it is needed?

Do not put it in a bank safe deposit box. This is a common error for estate planning documents as well. The executor may only access the contents of the safe deposit box after letters of administration have been issued. This happens after the funeral, and sometimes long after the funeral. By then, it will be too late for any instructions.

Keeping estate planning documents in a safe deposit box presents other problems. If the bank seals the safe deposit box on notification of the owner’s death, the executor will not be able to proceed. This can sometimes be prevented by having additional owners on the safe deposit box, if permitted by the bank . Any additional owners will also need to know where the key is located and be able get access to it.

The better solution is to keep all important documents including wills, financial power of attorney, health care powers, living wills, or health care directives, insurance forms, cemetery deeds, information for the family’s estate planning attorney, financial advisor, and CPA, etc., in one location known to the trusted person who will need access to the documents. That person will need a set of keys to the house. If they are kept in a fire and waterproof safe in the house; they will also need the keys to the safe.

If the parents move or move the documents, they will need to remember to tell the trusted person where these documents have moved. Otherwise, a lot of work will have been for naught.

Reference: The Mercury (Jan. 19, 2022) “Planning Head: For detailed instructions consider a letter of instruction”

 

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

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

Principal—the individual on whose behalf documents are prepared.

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

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

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

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

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

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

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

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

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

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

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

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

 

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What’s the Difference between Probate Assets and Non-Probate Assets? – Annapolis and Towson Estate Planning

Updating estate plans and reviewing beneficiary designations are both important estate planning tasks, more important than most people think. They are easy to fix while you are alive, but the problems created by ignoring these tasks occur after you have passed, when they cannot be easily fixed or, cannot be fixed at all. The article “Who gets the brokerage account?” from Glen Rose Reporter shares one family’s story.

The father of three children had an estate plan done when the children were in their twenties. His Last Will and Testament directed all assets in a substantial brokerage account to be equally divided between the three children.

His Last Will and Testament was never updated.

Thirty years later, his two sons are successful, affluent physicians with high incomes. His daughter is a retired educator who had raised two children as a single mom and struggled financially for many years.

When her father met with his investment advisor, he signed a beneficiary designation leaving the substantial brokerage account, including the substantial growth occurring over the years, to his daughter.

When he dies, the two brothers claim his Last Will and Testament, dividing all assets equally, must be the final word. They insist the brokerage account is to be divided equally among the three children.

Any assets held in an account with a beneficiary designation are considered non-probate assets. They do not pass through the probate process. Their disposition is not controlled by the Last Will and Testament. The contract between the institution and the individual is paramount.

Insurance policies, retirement accounts, bank and brokerage accounts usually have these designations. They often include a pay-on-death provision, and the person who is to receive the assets upon death of the owner is clearly named.

If the owner of the account fails to sign a right of survivorship, pay-on-death or to name a beneficiary designation before they die, then the assets are paid by the financial institution to the probate estate. This is to be avoided, however, since it complicates what could be a simple transaction.

The two sons were correctly advised by an estate planning attorney of their sister’s full and protected right to receive the investment account, despite their wishes. When the provisions in the Last Will and Testament conflict with a contract made between an owner and a financial institution, the contract prevails.

In this case, a less financially secure daughter and her family benefited from the wishes and foresight of her father.

Last Wills and Testament and beneficiary designations need to be reviewed and revised to ensure that they reflect the wishes of the parent as time goes by.

Reference: Glen Rose Reporter (Jan. 13, 2022) “Who gets the brokerage account?”

 

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What Is Elder Law? – Annapolis and Towson Estate Planning

WAGM’s recent article entitled “A Closer Look at Elder Law“ takes a look at what goes into estate planning and elder law.

Wills and estate planning may not be the most exciting things to talk about. However, in this day and age, they can be one of the most vital tools to ensure your wishes are carried out after you are gone.

People often do not know what they should do, or what direction they should take.

The earlier you get going and consider your senior years, the better off you are going to be. For many, it seems to be around 55 when it comes to starting to think about long term care issues.

However, you can start your homework long before that.

Elder law attorneys focus their practice on issues that concern older people. However, it is not exclusively for older people, since these lawyers counsel other family members of the elderly about their concerns.

A big concern for many families is how do I get started and how much planning do I have to do ahead of time?

If you are talking about an estate plan, what’s stored just in your head is usually enough preparation to get the ball rolling and speak with an experienced estate planning or elder law attorney.

They can create an estate plan that may consists of a basic will, a financial power of attorney, a medical power of attorney and a living will.

For long term care planning, people will frequently wait too long to start their preparations, and they are faced with a crisis. That can entail finding care for a loved one immediately, either at home or in a facility, such as an assisted living home or nursing home. Waiting until a crisis also makes it harder to find specific information about financial holdings.

Some people also have concerns about the estate or death taxes with which their families may be saddled with after they pass away. For the most part, that is not an issue because the federal estate tax only applies if your estate is worth more than $12.06 million in 2022. However, you should know that a number of states have their own estate tax. This includes Connecticut, Hawaii, Illinois, Maine, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont and Washington, plus Washington, D.C.

Iowa, Kentucky, Nebraska, New Jersey, and Pennsylvania have only an inheritance tax, which is a tax on what you receive as the beneficiary of an estate. Maryland has both.

Therefore, the first thing to do is to recognize that we have two stages. The first is where we may need care during life, and the second is to distribute our assets after death. Make certain that you have both in place.

Reference: WAGM (Dec. 8, 2021) “A Closer Look at Elder Law“

 

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