Some Estate Planning Actions for 2020 – Annapolis and Towson Estate Planning

Many of us set New Year’s resolutions to improve our quality of life. While it’s often a goal to exercise more or eat more healthily, you can also resolve to improve your financial well-being. It is a great time to review your estate plan to make sure your legacy is protected.

The Tennessean’s recent article entitled “Five estate-planning steps to take in the new year” gives us some common updates for your estate planning.

Schedule a meeting with your estate planning attorney to discuss your situation and to help the attorney create your estate plan.

You should also regularly review and update all your estate planning documents.

Goals and priorities change, so review your estate documents annually to make certain that your plan continues to reflect your present circumstances and intent. You may have changes to family or friendship dynamics or a change in assets that may impact your estate plan. It could be a divorce or remarriage; a family member or a loved one with a disability diagnosis, mental illness, or addiction; a move to a new state; or a change in a family business. If there’s a change in your circumstances, get in touch with your estate planning attorney to update your documents as soon as possible.

Federal and state tax and estate laws change, so ask your attorney to look at your estate planning documents every few years in light of any new legislation.

Review retirement, investment, and trust accounts to make certain that they achieve your long-term financial goals.

A frequent estate planning error is forgetting to update the beneficiary designations on your retirement and investment accounts. Thoroughly review your accounts every year to ensure everything is up to snuff in your estate plan.

Communicate your intent to your heirs, who may include family, friends, and charities. It is important to engage in a frank discussion with your heirs about your legacy and estate plan. Because this can be an emotional conversation, begin with the basics.

Having this type of conversation now, can prevent conflict and hard feelings later.

Reference: Tennessean (Jan. 3, 2020) “Five estate-planning steps to take in the new year”

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What Does a Successor Trustee Do? – Annapolis and Towson Estate Planning

This is a common concern of people when they learn they have been named as a successor trustee, says nwi.com in the article “Estate Planning: The role of a successor trustee.” The first thing to do? Verify that you are a successor trustee and what authority and powers you have. If the settler is disabled, rather than deceased, you’ll need to be sure that you have complied with any requirements to take the position.

The trust that names you as a successor trustee is likely where you will find details of what you must obtain to assume the authority. For example, you may need to have a letter from a physician stating that the settler is incapacitated and can no longer manage his own affairs.

If the settlor is deceased, establishing your authority as successor trustee is easier. Usually, all you’ll need is a death certificate.

Once this has been established, you will need to be able to prove that you have this role. Usually this is done through the use of an Affidavit of Trust and Acceptance and Oath. An estate planning attorney will be able to help you with these documents. Some affidavits affirm until the “pain and penalty of perjury that the affiant is the successor trustee” and that you are accepting the designation and agree to serve under the terms of the trust and the laws of your state.

Different estate planning attorneys may approach this differently. Some may use a “certificate of trust,” while others will simply rely on the trust agreement. The important thing is that the successor trustee’s authority is demonstrable.

Once the successor trustee has established that he is appointed properly, he can start administering the trust.

What about selling the family home? Real estate transfers are handled through the local government. To sell a home, you will need to transfer the deed, so you will need the deed to the home.

When a successor trustee transfers real estate, a copy of the affidavit of his appointment as the successor trustee and relevant documents could be recorded with the transfer documents. The transfer needs to be approved by a title examiner, and the examiner will want proof that the person in charge of the transaction has the legal authority to do so.

Other assets are transferred in a similar fashion. The asset holder is contacted, a copy of the affidavit and proof of designation as a successor trustee will be needed.

Some estate planning attorneys will add a letter of instruction to the successor trustee providing them with helpful information and tips about estate administration.

Reference: nwi.com (Jan. 12, 2020) “Estate Planning: The role of a successor trustee”

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Estate Planning Documents for a Natural Ending – Annapolis and Towson Estate Planning

If you want to control your demise, there are a handful of documents that are typically created during the process of developing an estate plan that can be used to achieve this goal, says the article “Choosing a natural end” from The Dallas Morning News.

The four documents are the Medical Power of Attorney, the Directive to Physicians, the Out-of-Hospital Do-Not-Resuscitate, and the In-Hospital Do-Not-Resuscitate. Note that every state has slightly different estate planning laws. Therefore, you will want to speak with an experienced estate planning attorney in your state. If you spend a lot of time in another state, you may need to have a duplicate set of documents created. Your estate planning attorney will be able to help.

For the Medical Power of Attorney, you are appointing an agent to make health care decisions, if you cannot. This may include turning off any life-support systems and refusing life-sustaining treatment. Talk with the person you want to take on this role and make sure they understand your wishes and are willing and able to carry them out.

You have the right to change your agent at any time.

The Directive to Physicians is a way for you to let physicians know what you want for comfort care and any life-sustaining treatment in the event you receive a diagnosis of a terminal or irreversible health condition. You are not required to have this, but it is a good way to convey your wishes. The directive does not always have to be the one created by the facility where you are being treated, and it may be customized to your wishes, as long as they are within the bounds of law. Many people will execute a basic directive with their estate planning documents, and then have a more detailed directive created when they have a health crisis.

The Do-Not-Resuscitate (DNR) forms come in two different forms in most states. Unlike the Directive to Physicians, the DNR must be signed by your attending physician. The Out-of-Hospital DNR is a legally binding order that documents your wishes to health care professionals acting outside of a hospital setting not to initiate or continue CPR, advanced airway management, artificial ventilation, defibrillation or transcutaneous cardiac pacing. You need to sign this form, but if you are not competent to do so, a proxy or health care agent can sign it.

The In-Hospital DNR instructs a health care professional not to attempt CPR, if your breathing or heart stops. It is issued in a health care facility or hospital and does not require your signature. However, the physician does have to inform you or make a good faith effort to inform a proxy or agent of the order.

If you would prefer not to spend your final days or hours hooked up to medical machinery, speak with your estate planning attorney about how to legally prepare to protect your wishes.

Reference: The Dallas Morning News (Jan. 12, 2020) “Choosing a natural end”

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Why Is a Power of Attorney Important? – Annapolis and Towson Estate Planning

A son who is preparing to help his mother with her legal and financial affairs asks what legal documents he needs to obtain in the article “Tips for becoming a power of attorney” in Hometown Life. He is concerned about a sibling who is estranged from the family and could cause problems in the future. Can he protect his mother and himself?

The first thing he needs to do is obtain a medical power of attorney for the mother, and a durable power of attorney. These are two separate powers of attorney that will give the son the legal right to handle both her financial affairs and her medical care.

With the documents, he will be able to speak directly to her healthcare providers, including her doctors, and to make end-of-life decisions on her behalf. An unhappy family member could indeed cause problems, especially when it comes to major decisions.

The durable power of attorney is geared for legal or financial issues, including handling the mother’s day-to-day money tasks and making decisions about her investments and assets, including the family home.

Having both of these documents gives the son the ability to do what is necessary for his mother, while also protecting him from an uncooperative family member. However, there are more tasks to be done.

First, he needs to find out if she has an estate plan, including a will, a trust or even any other powers of attorney. He should find out if they are current, and if they still reflect her wishes.

If she has an estate plan, he will need to find out when it was last updated and see if it needs to be revised. If she does not, she needs to meet with an experienced estate planning attorney to create a plan to distribute assets according to her wishes and create any needed trusts.

He should also collect her medical information, so he knows who her doctors are and what medications she is taking. He also needs to understand her medical insurance coverage and see if she has the protection that she needs from health care costs.

For her financial affairs, the son needs to gather up information about her accounts, including passwords and login information. The mother should add the son as a signatory to her bank accounts and brokerage houses.

He should also get the names and contact information of any financial professionals she works with. That includes financial advisors, insurance agents and CPAs. It would be wise to get the last two years of her tax returns. This could be invaluable in helping to understand her assets.

Reference: Hometown Life (Dec. 6, 2019) “Tips for becoming a power of attorney”

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Preparing for the Inevitable: The Loss of a Spouse – Annapolis and Towson Estate Planning

Becoming a widow at a relatively young age, puts many people in a tough financial position, says the article “Preparing for the Unexpected Death of a Spouse” from Next Avenue. At this point in their lives, they are too young to draw Social Security benefits. There is no best time, but this is a hard time to lose the prime breadwinner in the household.

Women are more likely than men to lose a spouse. They are typically left in a worse financial position if their spouse dies before they are old enough to take retirement benefits.

One of the best ways to plan for this event, is for both spouses to have life insurance. This can replace income, and term life insurance, if purchased early in life, can be relatively affordable. The earlier a policy is purchased, the better. This can become a safety net to pay bills and maintain a lifestyle.

Another key component for surviving early widowhood, is being sure that both members of the couple understand the couple’s finances, including how household bills are paid. Usually what happens is that one person takes over the finances, and the other is left hoping that things are being done properly. That also includes knowing the accounts, the log in and password information, and what bills need to be paid at what dates.

Having that conversation with a spouse is not easy, but necessary. There are costs that you may not be aware of, without a thorough knowledge of how the household works. For instance, if the husband has done all of the repairs around the house, maintaining the yard and taking care of the cars, those tasks still need to be done. Either the widow will become proficient or will have to pay others.

Couples should work with an estate planning attorney and a financial advisor, as well as an accountant, to be sure that they are prepared for the unexpected. What survivor’s benefits might the surviving spouse be eligible to receive? If there are children at home age 16 or under, there may be Social Security benefits available for the child’s support.

Discuss what debt, if any, either spouse has taken on without the other’s knowledge. Any outstanding medical bills should also be discussed. The last thing a loved one should have to cope with when a spouse passes, is a tangle of debt. However, this often happens.

If the spouse was a veteran, the surviving spouse might be eligible for benefits from the Veterans Administration. Find out what information will be needed to apply for benefits.

Talk with your estate planning attorney to make sure that all proper documents have been prepared. This includes a last will and testament, power of attorney, health care proxy and any trusts.

Reference: Next Avenue (Dec. 18, 2019) “Preparing for the Unexpected Death of a Spouse”

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What Is an Advance Care Directive? – Annapolis and Towson Estate Planning

People start out with good intentions at the start of the year, and then fail to follow through.  This makes difficult situations even worse for their family. The process begins with discussions about your care wishes, explains the Chicago Tribune’s Daily Southdown in the article “Talk to your family now about advance care directives.”

That conversation should include who you would trust as a health care agent. This person would be named in the medical power of attorney, an advance directive legal document that gives that person the power to make medical and care decisions on your behalf if you are not able to.

That person needs to know, from you, what is important to you when it comes to quality of life, or length of life.

This is a very important document, as the person has the power to make life and death decisions on your behalf.

It also covers whether you want to be an organ donor. If an unexpected accident occurred and your organs were still healthy and working, would you want to give them to someone who needs a kidney or a heart? If that would be your goal, you need to make your wishes known to your health care proxy and health care providers, as well as to your family.

A living will is also important to have in place. This is used in cases of incurable or irreversible injury, disease, or illness. It expresses your wishes for end-of life care. It gives you the ability to refuse any death-delaying treatment and allow you to die naturally.

These are family matters that should be discussed, but often are not. The topics are hard, as they are centered on our mortality, the mortality of those we love and the reality of death. However, when family members know what their loved one’s wishes are, it provides the family with a tremendous relief.

Without a medical power of attorney or living will, the family may end up fighting over what each member thinks their loved ones wanted. Without clear direction from the family and the correct legal documents, the health care provider must take steps to prolong life, even if that is not what the person wanted.

When naming a health care agent, think about someone who you trust completely. That person will have access to your medical records and be able to approve who else sees them. They may also authorize tests and treatment, decide where you will receive care, which physicians will provide care and whether to accept, withdraw or decline treatment.

Reference: Chicago Tribune’s Daily Southdown (Dec. 30, 2019) “Talk to your family now about advance care directives”

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How Do I Incorporate My Business into My Estate Planning? – Annapolis and Towson Estate Planning

When people think about estate planning, many just think about their personal property and their children’s future. If you have a successful business, you may want to think about having it continue after you retire or pass away.

Forbes’ recent article entitled “Why Business Owners Should Think About Estate Planning Sooner Than Later” says that many business owners believe that estate planning and getting their affairs in order happens when they are older. While that’s true for the most part, it is only because that is the stage of life when many people begin pondering their mortality and worrying about what will happen next or what will happen when they are gone. The day-to-day concerns and running of a business is also more than enough to worry about, let alone adding one’s mortality to the worry list at the earlier stages in your life.

Business continuity is the biggest concern for entrepreneurs. This can be a touchy subject, both personally and professionally, so it is better to have this addressed while you are in charge, rather than leaving the company’s future in the hands of others who are emotionally invested in you or in your work. One option is to create a living trust and will to put in place parameters that a trustee can carry out. With these names and decisions in place, you will avoid a lot of stress and conflict for those you leave behind.

Let them be upset with you, rather than with each other. This will give them a higher probability of working things out amicably at your death. The smart move is to create a business succession plan that names successor trustees to be in charge of operating the business, if you become incapacitated or die.

A power of attorney document will nominate a fiduciary agent to act on your behalf, if you become incapacitated, but you should also ask your estate planning attorney about creating a trust to provide for the seamless transition of your business at your death to your successor trustees. The transfer of the company to your trust will avoid the hassle of probate and will ensure that your business assets are passed on to your chosen beneficiaries. Timely planning will also preserve your business assets, as advanced tax planning strategies might be implemented to establish specific trusts to minimize the estate tax.

Estate planning may not be on tomorrow’s to do list for young entrepreneurs and business owners. Nonetheless, it is vital to plan for all that life may bring.

Reference: Forbes (Dec. 30, 2019) “Why Business Owners Should Think About Estate Planning Sooner Than Later”

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Creating an Estate Plan Should Be a New Year’s Resolution – Annapolis and Towson Estate Planning

Many people think of estate planning as a way to save on taxes as their hard-earned assets are passed from one generation to the next. That is certainly a part of estate planning, but there are many other aspects of estate planning that focus on protecting the person and their family. They are detailed in the article “An estate planning checklist should be a top New Year’s resolution” from the Houston Business Journal.

Now is a good time to start the new year off right to put an estate plan in place. For those who have an estate plan, it is a good time to revisit living documents that need to be updated to reflect changes in a person’s life, family dynamics, changes in exemption limits and the recently passed SECURE Act.

Here are the top four items to make sure that your estate plan is ready for 2020.

Take a look at your financial situation. No matter how modest or massive your assets, just about everyone has an estate that is worth protecting. Most people have something they want to pass along to their children or grandchildren. An estate plan simply formalizes these wishes and minimizes the chances that the family will fight over how assets are distributed.

Many people meet with their team at least once a year to get a clear picture of their financial status. This allows the estate planning attorney to review any changes that may impact how the estate is structured, including tailoring gifting strategies to reduce the tax burden.

Put your wishes on paper, and your affairs in order. Without a will, there is no way for anyone to know what your wishes are and how you would want your assets passed to others. A will spells out who gets what and avoids having the estate administered by state laws. A living will is also needed to establish medical power of attorney and state wishes about life support and what medical care you may or may not want to receive. That can include everything from blood transfusions, palliative care, diagnostic tests or the use of a respirator. A financial POA is needed to give someone the legal authority to make decisions on your behalf, if you become incapacitated.

With these estate planning documents, you relieve family members of the burden of guessing what you might have wanted, especially during emergency situations when emotions are running high.

Asset estate and gift tax exemptions for 2020. The exemption for 2020 has increased to $1.58 million. This eliminates federal estate taxes on amounts under that limit that are gifted to family members during a person’s lifetime or left to them upon a person’s death. This is a significant increase from prior years. In 1997, the exemption was $600,000. It rose to $5.49 million in 2018, and as a result of the Tax Cuts and Jobs Act, was $11.4 million in 2019.

Understand the “claw back.” The exemption amount will increase every year until 2025. There was some uncertainty about what would happen if someone uses their $11.58 million exemption in 2020 and then dies in 2026, when the number could revert back to the $5 million range. Would the IRS say that the person used more of their exemption than they were entitled to? The agency recently issued final regulations that will protect individuals who take advantage of these exemption limits through 2025. Gifts will be sheltered by the increasing exemption limits when the gifts are actually made.

Continuing changes in the tax laws are examples of why an annual review of an estate plan is necessary. The one thing we can all be certain of is change, and keeping estate plans up to date makes sure that the family benefits from all available changes to the law.

Reference: Houston Business Journal (Jan. 1, 2020) “An estate planning checklist should be a top New Year’s resolution”

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Failure to Act on a Will Can Lead to a Loss of an Estate – Annapolis and Towson Estate Planning

Here’s a cautionary tale for family members who don’t know what to do when a parent or uncle dies. A man and his sister have an uncle, let’s call him George, who has no children. Uncle George had two siblings—the father of the man and his sister (who died before Uncle George made out his will)—and a brother. Let’s call the brother Jim. Uncle Jim lived in Uncle George’s house. Uncle George died, and the siblings didn’t do anything.

Five years went by, and the siblings decided they wanted to sell the house to pay off some loans. When they told Uncle George their plans, he announced that he would not leave the house. As explained in the article “Wills are not self-enacting” from mySanAntonio.com, the nephew and niece have overlooked more than a few salient details.

The most important fact: wills are not self-enacting. Next, there is a legal time limit upon which an executor or an heir must take legal action and finally, state law for each state has a default inheritance plan, when there is no will in the public record after someone has died.

What does it mean for a will to not be “self-enacting”? While Uncle George may have had a will with instructions to leave his house to the siblings, they did not do anything to probate the will. The only people who knew about the will were the uncle, the attorney who prepared the will and maybe a few other family members. When a home is bought and sold, the transaction must be recorded in the county’s public records to inform the public of the change of ownership.

Not taking action on a will is a disservice to the decedent and their heirs. The will needs to go through probate, for the will to be deemed valid by the court and to allow the named executor to distribute assets, according to the terms of the will.

There are legal limits to when the will must be presented to the courts. A local estate planning attorney will know what those limits are, as they are different in each state. In Texas, where this took place, the will must be filed for probate within four years of the date that the will’s maker passed. After four years, the court is not allowed to appoint the named executor. The court may not recognize the will either, unless those who are late in presenting the will can explain the delay, the heirs agree that the will can be recognized and the will is limited to passing title to the named devisees.

Every state has a plan for how assets are distributed in the absence of a will. When the owner of something dies, the ownership passes to someone else. When there is no will, heirs-at-law receive the property. Each state has a statute that determines who the heirs are.

In this case, the will was not timely probated, so the law defaults to giving ownership to the heirs-at-law. In Texas, when there is no surviving spouse and no descendants, the siblings of the deceased person are the heirs-at-law. That would be Uncle George, since the nephew and niece failed to file the will for probate in a timely manner.

When a family member passes, someone in the family must take steps to ensure that the will is probated, and the estate is properly settled. Failing to do so cost this brother and sister the inheritance that their uncle wanted them to have. Had they contacted a qualified estate planning attorney, the entire process would have been handled correctly, and they would have had ownership of their uncle’s home.

Reference: mySanAntonio.com (Dec. 23, 2019) “Wills are not self-enacting”

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Why a Will Is the Foundation of an Estate Plan – Annapolis and Towson Estate Planning

An estate planning lawyer has many different tools to achieve clients’ estate planning goals. However, at the heart of any plan is the will, also known as the “last will and testament.” Even people who are young or who have modest levels of assets should have a will—one that is legally valid and up to date. For parents of young children, this is especially important, says the article “Wills: The Cornerstone of Your Estate Plan” from the Sparta Independent. Why? Because in most states, a will is the only way that parents can name guardians for their children.

Having a will means that your estate will avoid being “intestate,” that is, having your assets distributed according to the laws of your state. With a will, you get to determine who is to receive your property. That includes your home, car, bank and investment accounts and any other assets, including those with sentimental value.

Without a will, your property will be distributed to your closest blood relatives, depending upon how closely related they are to you. Few individuals want to have the state making these decisions for their property. Most people would rather make these decisions for themselves.

Property can be left to anyone you choose—including a spouse, children, charities, a trust, other relatives, a college or university, or anyone you want. There are some limits imposed by law that you should know about: a spouse has certain rights to your property, and they cannot be reversed based on your will.

For parents of young children, the will is used to name a legal guardian for children. A personal guardian, who takes personal custody of the children, can be named, as well as a property guardian, who is in charge of the children’s assets. This can be the same person, but is often two different people. You may also want to ask your estate planning attorney about using trusts to fund children’s college educations.

The will is also a means of naming an executor. This is the person who acts as your legal representative after your death. This person will be in charge of carrying out all of your estate settlement tasks, so they need to be someone you trust, who is skilled with managing property and the many tasks that go into settling an estate. The executor must be approved by the probate court, before they can start taking action for you.

There are also taxes and expenses that need to be managed. Unless the will provides directions, these are determined by state law. To be sure that gifts you wanted to give to family and loved ones are not consumed by taxes, the will needs to indicate that taxes and expenses are to be paid from the residuary estate.

A will can be used to create a “testamentary trust,” which comes into existence when your will is probated. It has a trustee, beneficiaries and directions on how distributions should be made. The use of trusts is especially important, if you have young children who are not able to manage assets or property.

Note that any assets distributed through a will are subject to probate, the court-supervised process of administering and proving a will. Probate can be costly and time-consuming, and the records are available to the public, which means anyone can see them. Many people chose to distribute their assets through trusts to avoid having large assets pass through probate.

Talk with an experienced estate planning attorney about creating a will and the many different functions that the will plays in settling your estate. You’ll also want to explore planning for incapacity, which includes having a Power of Attorney, Health Care Proxy, and Medical Directives. Estate planning attorneys also work on tax issues to minimize the taxes paid by the estate.

Reference: Sparta Independent (Dec. 19, 2019) “Wills: The Cornerstone of Your Estate Plan”

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