Read more about the article Why You Need to File an Estate Tax Return – Annapolis and Towson Estate Planning
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Why You Need to File an Estate Tax Return – Annapolis and Towson Estate Planning

Even if your spouse has died and left all their assets to you and no estate tax is due, you still need to file an estate tax return. Doing so may save your family significant sums in estate taxes after your death, according to a recent article from Forbes, “5 Reasons You Must File An Estate Tax Return (Even When No Tax Is Due).”

The estate tax is a one-time tax due nine months after the date of death. The federal threshold in 2023 is $12,920,000 for an individual. Many states have their own estate taxes, with thresholds ranging from $1 million in Oregon and Massachusetts to $12,920,000 in Connecticut. Your estate planning attorney can advise which assets are included in calculating this amount. For example, many people are surprised to learn that proceeds from their life insurance policies are taxable on their death, unless the policy is owned in an irrevocable trust.

No estate tax is due if your assets are left to your surviving spouse because of the unlimited marital deduction. You get an unlimited deduction for the assets left to your spouse. Spouses can leave any amount to their surviving spouse tax-free, whether $2 or $2 million. However, there are reasons to file an estate tax return. The law requires it, even if the value of your estate assets is below the filing threshold.

If you’ve done estate planning, your spouse most likely has a trust that will break into various sub-trusts upon her death. As the surviving spouse, you’ll need to fund those trusts and apportion assets to them, which is done through the estate tax return. The estate tax return establishes the value of what those trusts are funded with.

Critical tax elections. When you file an estate tax return for your spouse, you’ll make certain elections to determine what assets are included in your estate when you die.

Tax savings for heirs. If your spouse has not used up all their $12,920,000 exemption, you can lock in their unused portion and port it to your estate tax return when you die. The portability of the deceased spouse’s unused exemption could potentially save your children millions of dollars in estate taxes in the future.

The combined exemption for two spouses is currently $25,840,000. The federal estate tax rate can be as high as 40%. By locking in the unused exemption, you could save more than $5 million in estate taxes that would otherwise be due on your death. Even if your assets are not in the $12 million to $25 million range, this is still smart because your assets could increase in value, and the estate tax thresholds are scheduled to drop to $5 million in 2026 (adjusted for inflation).

More tax savings for grandchildren. If your spouse has yet to use all of their general-skipping transfer tax (GST Tax) exemption, you can lock in their remaining GST Tax exemption. The GST Tax is a 40% tax on assets, if you “skip” your children and leave them directly to your grandchildren or in a trust that will eventually be distributed to them. The amount of GST Tax exemption is the same as the estate tax exemption, $12,920,000 per person in 2023. Therefore, the amount is the same, but they are different taxes.

Questions? Contact us to schedule a call with one of our experienced estate planning attorneys.

Reference: Forbes (May 10, 2023) “5 Reasons You Must File An Estate Tax Return (Even When No Tax Is Due)”

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

Read more about the article How Do I Talk to My Parents About Estate Planning? – Annapolis and Towson Estate Planning

How Do I Talk to My Parents About Estate Planning? – Annapolis and Towson Estate Planning

The best time to have this conversation is today. If you’re unsure how to broach the subject, you might ask a trusted family friend to help you navigate the conversation with compassion.

JP Morgan’s recent article, “How to talk to loved ones about estate planning,” says that if your loved ones have already started this process, ask which documents they have and see if any need to be updated. You may need to consult an experienced estate planning attorney to see what’s required.

Discussing estate planning with aging parents can be challenging, since both sides may hesitate to broach tricky topics involving end-of-life care and related decisions. However, the probate process becomes much more difficult if your parent dies without an estate plan.

Delaying this conversation won’t make it any easier. It’s important to stay calm and address the topics gently and openly. You may have to initiate a conversation several times before your mom or dad is willing to open up—another reason to broach the topic sooner.

If you’re having difficulty getting through to them, you could bring in another family member or a trusted family friend who can help you approach this conversation with the needed compassion. You may also consult an estate planning attorney to help plan and frame the conversation itself.

If your parents haven’t started planning their estate yet, think about some of the critical matters you want to discuss, like health issues, medical insurance, help with making decisions in case of incapacity, help to pay bills and keeping finances in order.

You should also ask about a plan if they need help managing daily tasks like walking, dressing, preparing meals and bathing.

Decision-making can also become a challenge for some as they get older. Therefore, having a valid power of attorney, living will and health care proxy is critical.

As tough as this can be, you must ask these questions when helping your parents plan their estate and future.

Questions? Contact us to schedule a complimentary initial call with one of our experienced estate planning attorneys.

Reference: JP Morgan (April 26, 2023) “How to talk to loved ones about estate planning”

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

Read more about the article What Kinds of Powers of Attorney Are There? – Annapolis and Towson Estate Planning

What Kinds of Powers of Attorney Are There? – Annapolis and Towson Estate Planning

A “durable” power of attorney remains in effect once the principal is deemed incompetent. On the other hand, a “springing” power of attorney is ineffective until the principal is judged incompetent, according to Fed Week’s recent article entitled, “‘Springing’ vs. ‘Durable’ Powers of Attorney.”

Some people prefer a springing power, so no one will be authorized to act on their behalf while they’re still capable.

A springing power might go into effect after two physicians have certified your loved one’s incapacity.

Nevertheless, some experienced estate planning attorneys prefer a full power of attorney rather than a springing power of attorney because if your loved one becomes incapacitated, the situation will be stressful enough.

You also don’t want hassles and waste time and energy at the bank or their brokerage firm. It may not be easy to establish the principal’s incompetency and put a springing power into effect.

In addition, some financial institutions are highly reluctant to accept powers of attorney unless their forms are used. These banks and credit unions may be concerned about the liability they might have if they allow transactions under a form that’s not valid.

Therefore, you should make sure that your financial institutions will accept your power of attorney.

In addition, it’s probably better to have just one person authorized to exercise the power.

If two or more people are named, the financial institution may insist that they all sign off, even if one party is authorized to act alone.

You can see that using a joint power is more cumbersome.

Ask an experienced estate planning attorney to help you draft an effective power attorney for your specific circumstances.

Contact us to schedule a complimentary initial call with one of our experienced estate planning attorneys.

Reference: Fed Week (May 1, 2023) “‘Springing’ vs. ‘Durable’ Powers of Attorney”

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

Read more about the article Why Would I Put My Home in a Trust? – Annapolis and Towson Estate Planning

Why Would I Put My Home in a Trust? – Annapolis and Towson Estate Planning

Putting property in a trust can make managing and distributing your assets — including your home — easier after your death. It can also have legal and tax benefits.

Bankrate’s recent article entitled, “How, and why, to put your home in a trust,” says that a real estate trust is a legal arrangement in which the owner of a home, known as the “grantor” or “settlor,” transfers ownership of the property to another entity or individual, known as the “trustee.” The trustee manages the property for the benefit of the grantor and any named beneficiaries of the grantor’s estate.

You can place your home into a trust by signing a deed that names the trustee as the property’s new owner. The deed must be recorded with the local county recording office, and then the trust is the legal owner of the property.

The home’s original owner will usually name him- or herself as the trustee, so they can maintain control of the property. However, the original owner can name someone else as the trustee. This can be helpful in case the original owner passes away. Trustees are frequently adult children of the homeowner, who will inherit the property upon the homeowner’s death.

Trusts are often used for tax, estate planning, or asset protection purposes, as — depending on the type of trust — the property can be protected from creditors and transferred directly to the beneficiaries without going through probate. Two primary types of trusts pertain to real estate: revocable and irrevocable.

Also called a living trust, a revocable trust can be changed or dissolved at any time by the grantor (creator) of the trust. A revocable trust lets a grantor control the property and make changes to the trust during their lifetime. The grantor retains the right to modify or dissolve the trust. The grantor can act as a trustee, manage the property, or appoint someone else.

A revocable/living trust states the original homeowner’s wishes upon death. When the grantor passes away, the property in the revocable trust is distributed to the grantor’s beneficiaries according to the terms of the trust agreement.

An irrevocable trust, as the name implies, is more permanent and can’t be terminated or modified by the grantor after it’s been created, unless the beneficiaries agree to the change.

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

Reference: Bankrate (February 21, 2023) “How, and why, to put your home in a trust”

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

Read more about the article How Estate Planning Protects Unmarried Couples – Annapolis and Towson Estate Planning

How Estate Planning Protects Unmarried Couples – Annapolis and Towson Estate Planning

Many couples make the choice not to wed, even after being together for decades, for personal or financial reasons. For example, some clients don’t marry so as not to impact their children’s inheritance, while others would rather not bother with the legalities, says a recent article, “Estate Planning for Unmarried Couples” from My Prime Time News. In some cases, marriage would cause the couple to lose pension or Social Security benefits, if they remarried.

However, unmarried couples must take extra care to have estate planning documents in place to make their wishes clear and to protect each other in case of incapacity, serious illness and, ultimately, death.

From any statutory priority, a significant other does not have the legal rights granted to a spouse to serve as a personal representative or executor for their loved one’s estate. In addition, there is no statutory right to inherit property, including any family allowance or exempt property allowance.

The significant other also has no rights regarding acting as guardian or conservator for their partner and no ability to make medical decisions, if they become incapacitated or disabled.

All of these issues, however, can be resolved with the help of an estate planning attorney. Both partners should execute a will, health care power of attorney, general power of attorney and a living will to protect each other.

The last will and testament designates a personal representative or executor who will be in charge of the decedent’s estate and inherit the person’s assets. With no will, a partner will inherit no assets, unless they are owned jointly or the partner is a named beneficiary.

Having a health care power of attorney and a financial power of attorney gives a partner the power to make decisions if their loved one becomes incapacitated. In addition, these power of attorney documents are necessary for adult children to have priority in making these decisions, and guardianship proceedings will be required if there are no children or family members.

Disputes between the adult children of unmarried couples are common if a comprehensive estate plan still needs to be completed. For example, imagine a partner of many decades becoming too ill to communicate their end-of-life wishes. Even after a lifetime together, the adult children will have the legal upper hand, regardless of what the couple has discussed as their wishes for this situation.

It may be challenging for unmarried couples to discuss their living arrangements and family dynamics. However, the experienced estate planning attorney has met with and helped families of all kinds and will have the knowledge to prepare an estate plan to address all family dynamics.

Once this work is done, the couple can rest easy, knowing they have protected each other in the best and worst circumstances.

Questions? Contact us to schedule a complimentary initial call with one of our experienced estate planning attorneys.

Reference: My Prime Time News (May 1, 2023) “Estate Planning for Unmarried Couples”

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

Read more about the article How is Estate Planning Used to Distribute Property? – Annapolis and Towson Estate Planning

How is Estate Planning Used to Distribute Property? – Annapolis and Towson Estate Planning

One of the tasks of estate planning is to distribute property, through a variety of ways. A recent article from The News-Enterprise, “How property passes upon death is central to estate planning,” says there are generally four ways to pass property after death.

Beneficiary accounts. Any type of account with a beneficiary designation listed on the account paperwork passes directly to the beneficiary. Most people think of life insurance proceeds as the typical beneficiary designation. However, this can also include investment accounts, some retirement accounts and payable-on-death (POD) or transferable-on-death (TOD) accounts. It’s also possible for real estate property to have a beneficiary designation.

The individual owns property with a beneficiary designation during life but upon death; the property passes directly to the beneficiary. It’s a quick process, usually requiring a death certificate and perhaps other paperwork to pass the asset to the beneficiary.

The primary problem with using a POD or TOD account in this way is what happens if the beneficiary is disabled and is receiving means-tested government benefits. Receiving assets directly could put the person’s entire benefits structure at risk.

Jointly owned property. If an account or property is held jointly and includes survivorship language, the joint owner will own the entire share of the property upon the death of the first co-owner. Without the proper survivorship language, the decedent’s share of the property will pass through probate.

Jointly owned property is commonly how a married couple own assets. There are potential risks involved. If property or assets are left to one spouse, when the surviving spouse dies, the survivor’s separate beneficiaries may inherit the assets rather than the decedent’s intended beneficiaries.

Similarly, suppose one child is added to an account so they may continue to pay bills. In that case, the named child will become the account’s new owner upon the parent’s death, and they will have no legal requirement to share the account with siblings or other beneficiaries.

Trusts. Trusts provide the most control for managing assets during life and after death. Property held in trust does not pass through probate and goes directly to the beneficiary as per the instructions in the trust. In addition, a trust created with an experienced estate planning attorney includes provisions for distributing assets owned by the trust if the beneficiary is disabled, incapacitated, or a minor child, potentially offering significant asset protection for the grantor—the person creating the trust—and beneficiaries.

Property not falling into any of these categories is distributed via a will and through probate. If the decedent had a will, the executor must file it with the court. If there is no will, then a probate case must still be established. However, the distribution of assets will be according to the laws of the state of residence, regardless of the decedent’s wishes.

An estate planning attorney reviews their client’s property and unique situation and prepares an estate plan to distribute property in the most ideal manner based on the client’s goals.

Contact us to schedule your complimentary initial call with one of our experienced estate planning attorneys.

Reference: The News-Enterprise (May 6, 2023) “How property passes upon death is central to estate planning”

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

Read more about the article Will In-Laws Inherit If I Don’t Have a Will? – Annapolis and Towson Estate Planning

Will In-Laws Inherit If I Don’t Have a Will? – Annapolis and Towson Estate Planning

State inheritance laws prioritize spouses, children and other blood relatives ahead of in-laws. However, how those individuals handle their share of an inherited estate can determine whether an in-law receives any assets.

Yahoo’s recent article, “Can I Leave Inheritance Money to In-Laws?” explains that state inheritance laws say who can be an estate heir. These individuals are typically directly related to the decedent by marriage, blood, or adoption. In order of priority, people who can inherit from someone under state law include spouses, children, siblings, parents, grandchildren, aunts and uncles and cousins.

However, an in-law may get some of an estate if they marry a direct heir.

You can leave assets to your in-laws if you want them to inherit from your estate. The easiest way to do this is to leave instructions in your will as to what assets they should inherit. You could also ask an experienced estate planning attorney about creating a trust to give assets to in-laws.

Some people may want to leave something to a son or daughter-in-law. However, others may seek to exclude them from inheriting altogether. To protect an inheritance from in-laws, you can create a trust that allows you to leave assets to family members. In addition, the trust can state that anyone not a blood relative can be excluded from receiving assets.

A prenuptial agreement for your child is another option. This might have terms that state how assets you pass on to your child should be handled during your lifetime and beyond. You could also raise the prospect of a postnuptial agreement after they’re married. The document would dictate what happens to their assets (and anything they’ve inherited from you) if they are divorced.

Every family situation is unique, and you might have questions about where in-laws fit into your estate plan. Ask an experienced estate planning attorney to discuss this with you.

Questions? Contact us to schedule a complimentary initial call with one of our experienced estate planning attorneys.

Reference: Yahoo (Jan. 8, 2023) “Can I Leave Inheritance Money to In-Laws?”

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

Read more about the article What are the Consequences of Dying Without a Will? – Annapolis and Towson Estate Planning
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What are the Consequences of Dying Without a Will? – Annapolis and Towson Estate Planning

Someone who dies (the “decedent”) with a legal will is known to have a testate inheritance. As such, their assets are distributed according to their will. A person who dies without a legitimate will has an intestate estate. Their assets are distributed according to the laws of inheritance.

Yahoo’s recent article, “What Happens If I Die Without a Valid Will?” says that estate planning is a local area of the law, so specific rules governing estate planning vary greatly from state to state.

When you die, all of your property is called your estate. If you die with a valid and enforceable will, then your estate is distributed in the following way:

  1. First, all attorney’s fees related to managing your estate are set aside for payment;
  2. The person managing your estate (the executor) then pays any debts that you had with the assets in your estate;
  3. Finally, after paying off all debts, your estate is distributed according to the instructions in your will.

Liabilities don’t transfer through an estate, so while you can inherit someone’s property, you can’t inherit their debts. However, debts can affect an inheritance in several ways. The first case is when liabilities transfer with the property. Therefore, if the decedent owed unpaid property taxes or a mortgage on their house and then left you that property if you wanted the house, you’d also have to take responsibility for paying those debts. If you don’t, the executor will sell the house, settle the debts and transfer any remaining money to you.

Second, liabilities can reduce a potential inheritance. Here, if someone leaves you $100,000 in their will but also has $40,000 in unpaid debts, you’d only get $60,000 because that’s what would be left. If the debts exceed the estate’s value, the individual dies insolvent, and their heirs would get nothing.

Other than managing liabilities like debt and taxes, a person can use their will to distribute their assets in almost any way they want. It’s important to understand this because many think family members automatically have a right to inherit money or property. This isn’t so.

Contact us to schedule a complimentary initial call with one of our experienced estate planning attorneys.

Reference: Yahoo (Jan. 27, 2023) “What Happens If I Die Without a Valid Will?”

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

Read more about the article Can I Keep Stepchildren Out of Estate Plan? – Annapolis and Towson Estate Planning

Can I Keep Stepchildren Out of Estate Plan? – Annapolis and Towson Estate Planning

Parents in second marriages may want to leave assets to their children and try to make sure that their stepchildren don’t inherit. However, if stepchildren inherit, it can create resentment leading to legal disputes that can cost the estate significantly in delay and attorney fees.

AOL’s recent article, “How to Protect Assets From Stepchildren,” says that taking specific estate planning steps will let you effectively protect your assets from stepchildren.

If a stepchild inherits some of your assets, your children may feel cheated out of their rightful inheritance. Therefore, they may contest any awards to stepchildren to protect their interests.

Your children will be recognized as heirs to your estate even without a will naming them as beneficiaries. Stepchildren don’t have the same rights.

In most cases, they won’t inherit from a deceased stepparent’s estate unless specifically listed as beneficiaries in the will. However, stepchildren still may receive assets from your estate if your spouse dies after you and leaves assets to their children. Preventing stepchildren from ever getting assets from your estate can be done. However, it requires definite action to exclude them as beneficiaries.

If your spouse from a second or later marriage dies first, you usually don’t have to do anything to prevent stepchildren from receiving assets you control.

Even after an intestate death that happens without a valid will, stepchildren typically aren’t recognized as having any right to assets in the estate. However, some states grant stepchildren some rights of inheritance. Ask an experienced estate planning attorney about this.

In addition, a will can name specific people, including stepchildren, and exclude them from receiving benefits from the estate.

Using a trust, you can ALSO prevent stepchildren from getting assets from your estate after you die.

This can help avoid conflicts and potential litigation from children upset because stepchildren received assets from the estate.

Remember that if you fail to act, stepchildren can still benefit even at the expense of your children if, for example, you die before your spouse, who then names their children as beneficiaries of the estate.

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

Reference: AOL (April 26, 2023) “How to Protect Assets From Stepchildren”

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

Read more about the article What to Do When a Spouse Dies – Annapolis and Towson Estate Planning

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

The death of a spouse is one of life’s most stressful events and is an overwhelming experience. Having to deal with life’s legal and financial aspects while grieving is a challenge, says a recent article, “What To Do After The Death Of A Spouse,” from Forbes. One thing to note: all tasks don’t have to be done at once.

What does need to be done promptly is making funeral arrangements, notifying family and friends and alerting your estate planning attorney. Other immediate steps include:

  • Obtaining multiple copies of the death certificate
  • Asking a friend or relative to watch the house during the funeral. Burglaries often occur during funerals, when burial plans are public.
  • Arrange for any pets to be cared for.

There are a number of things to avoid as well. Letting grief and fear delay important actions can lead to larger estate problems. Don’t neglect to contact Social Security to report the death and monitor tax and other deadlines. Don’t start giving away assets, whatever persistent family members may say. You’ll need to go through the estate process properly. Assets are not distributed until all other tasks have been completed.

Legal and financial documents must be gathered and reviewed, including bank statements, investment accounts, retirement accounts and beneficiary designations, life insurance policies, estate planning documents and outstanding debts or liabilities.

Bills need to be paid. This can become problematic. For example, were the bills paid from joint accounts, your or your spouse’s account? Do you have a list of all accounts? Is it okay to pay a joint bill from your bank account? Do you need to change regularly made payments formerly made from your deceased spouse’s account to your account?

Hopefully, you and your spouse had the right estate planning documents completed beforehand. Next, contact your estate planning attorney to discuss the will and any trusts. Assets owned by your spouse only will likely go through probate. Assets with beneficiary designations, like retirement accounts or life insurance policy proceeds, will go directly to the beneficiaries.

The surviving spouse needs to file taxes for themselves and the deceased spouse by April 15 of the following year. Discuss with your estate planning attorney whether or not you’ll need to file a federal or state estate tax return, which is due nine months after death. Note that these may need to be filed even if no tax is due.

Questions? Contact us to schedule a complimentary initial call with one of our experienced estate planning attorneys.

Reference: Forbes (April 20, 2023) “What To Do After The Death Of A Spouse”

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