Should I Update My Estate Plan? – Annapolis and Towson Estate Planning

An estate plan exists to accomplish three things.

  1. Preserving your accumulated wealth
  2. To specify who will inherit your assets after your death; and
  3. To indicate who will make health care and financial decisions on your behalf if you are unable.

Real Daily’s recent article entitled “4 Good Reasons to Update Your Estate Plan” says that as you age, you should consider updating your estate plan. Why? Well, your feelings may change over time, or you may experience a significant life event that requires you to update things. These are events such as a marriage or divorce, a new child or grandchild, or a significant change in your health, wealth and outlook on life.

In addition to your will and trusts, you need to review your power of attorney, healthcare directive, living will and HIPAA waiver.

It is critical to recognize the life events that may necessitate updating your estate plan.

For example, if you are recently married or divorced, according to some state laws, existing wills are nullified when someone gets married or divorced.

It is also possible that your wealth has increased significantly, which may affect the way you view how your assets should be distributed to your beneficiaries.

Another reason to update your plan, is if you want to give more (or less) to charity or to your heirs.

Your executor or trustees may change their minds about their roles, no longer live nearby, or they themselves have died. If an individual is no longer interested in assuming those responsibilities, no longer alive, or no longer in good health or of repute, then there is a need to revise the document.

Some other reasons to update your plan include if you are in the process of retiring, moving to another state, or buying or selling real estate.

Each of these events calls for a comprehensive estate plan review.

Finally, your goals may evolve over the years as a result of changes to your lifestyle or circumstances, such as an inheritance, career change, marriage, house purchase, or a growing family.

Reference: Real Daily (June 13, 2022) “4 Good Reasons to Update Your Estate Plan”

 

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

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

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

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

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

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

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

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

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

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

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

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

 

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

Can I Make Decisions for My 18-Year-Old ‘Kid’ If She Becomes Incapacitated? – Annapolis and Towson Estate Planning

The Press-Enterprise’s recent article entitled “Legal documents for young adults” describes some of the important legal and estate planning documents your “kid” (who is now an adult) should have.

HIPAA Waiver. This form allows medical personnel to provide information to the parties you have named in the document. Without it, even mom would be prohibited from accessing her 19-year-old’s health information—even in an emergency. However, know that this form does not authorize anyone to make decisions. For that, see Health Care Directives below.

Health Care Directive. Also known as a health care power of attorney, this authorizes someone else to make health care decisions for you and details the decisions you would like made.

Durable Power of Attorney. Once your child turns 18, you are no longer able to act on their behalf, make decisions for them, or enter into any kind of an agreement binding them. This can be a big concern, if your adult child becomes incapacitated. A springing durable power of attorney is a document that becomes effective only upon the incapacity of the principal (the person signing the document). It is called a “springing” power because it springs into effect upon incapacity, rather than being effective immediately.

A durable power of attorney, whether springing or immediate, states who can make decisions for you upon your incapacity and what powers the agent has. The designated agent will typically be able to access bank accounts, pay bills, file insurance claims, engage attorneys or other professionals, and in general, act on behalf of the incapacitated person.

They will always be your babies, but once your child turns 18, he or she is legally an adult.

Be certain that you have got the legal documents in place to be there for them in case of an emergency.

Remember a spring break, when they are home for summer after their 18th birthday, or a senior road trip are all opportunities when these documents may be needed.

Reference: The Press-Enterprise (April 2, 2022) “Legal documents for young adults”

 

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

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

Nj.com’s recent article entitled “What does becoming someone’s ‘power of attorney’ mean?” explains that a power of attorney (POA) is a legal document through which a principal states that his or her trusted agent may act on his or her behalf and for their benefit.

A power of attorney is usually centered on addressing the principal’s financial matters, such as banking, paying taxes and selling or buying property.

A power of attorney can be “springing,” so that it becomes effective only when the principal becomes incapacitated. A springing POA provides that an agent cannot act, until the principal is determined to be incapacitated based on the criteria listed in the POA.

The “springing POA” frequently says the determination of incapacity will be made by the principal’s spouse and a licensed physician, or two licensed physicians.

There is also what is known as a medical power of attorney or living will. This is a legal document through which a principal authorizes an agent to make medical decisions for him or her, when they are incapable of making the decisions for themselves.

In either event, the agent does not become personally responsible for the financial expenses incurred by the principal, unless the agent agrees to take such responsibility in his/her individual capacity.

It is, therefore, important to execute documents as an agent and indicate you are doing so as an agent.

For example, you, Jim Smith, would sign for principal Mary Smith as follows: “Mary Smith, by Jim Smith, attorney-in-fact,” or “Jim Smith, as agent for Mary Smith, under power of attorney.”

When signing a contract with respect to nursing home care, be wary of agreeing to individually be the “responsible party.” That term may be defined to assign additional obligations, meaning being responsible for the bill.

Remember to sign everything as agent under the power of attorney.

Reference: nj.com (April 12, 2022) “What does becoming someone’s ‘power of attorney’ mean?”

 

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

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

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

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

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

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

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

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

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

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

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

 

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Do You Need a Revocable or an Irrevocable Trust? – Annapolis and Towson Estate Planning

Many seniors planning for the future may want to place their home in a trust for their children.

This is especially true if the house is paid off, and free and clear of a mortgage.

However, what would happen if the home were placed in a trust and the senior then decides to sell it?

Nj.com’s recent article entitled “Can I sell my house after I put it in a trust?” explains that there are two primary types of trusts: revocable and irrevocable. In this situation, placing the home in a revocable trust may be a wise option.

The assets in a revocable trust avoid probate but stay in the grantor’s control. That is because you can always change the terms of the trust or terminate the trust. With a revocable trust, the terms can be altered or canceled dependent on the grantor (also known as the trustmaker, settlor, or trustor) of the trust.

During the life of the trust, income earned is given to the grantor, and only after death does property transfer to the beneficiaries.

A grantor can be the trustee. In that way, the grantor is still able to live in the home and sell it and dispose of it as they want upon death.

Assets in a revocable trust are available to creditors and are subject to estate taxes upon death.

In contrast, an irrevocable trust cannot be changed or altered once it is established. In fact, the trust itself becomes a legal entity that owns the assets placed in it.

Because the grantor no longer controls those assets, there are certain tax advantages and creditor protections.

An irrevocable trust is best used for transferring high-value assets that could cause gift or estate tax issues in the future.

Trusts are very complicated, so in any situation consult with an experienced estate planning attorney about whether to use a trust and to make certain that you create the best trust for your specific situation.

Reference: nj.com (Feb. 25, 2022) “Can I sell my house after I put it in a trust?”

 

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

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”

 

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

Can I Add Children’s Names to my House Deed? – Annapolis and Towson Estate Planning

There are many ways that this simple strategy can go very wrong, very quickly. If one of the joint owners is sued, or files for bankruptcy, the home is vulnerable, reports a recent article titled “Naming a child on your deed to avoid probate? Here’s why you may want to reconsider” from St George News.

That is just the beginning.

As any estate planning attorney will tell you, things change when significant assets are involved. Your son or his new wife may decide they do not want you to rent, sell or refinance your home. They have the power as co-owners to stop you from doing anything with the house. All they have to do is refuse to sign the paperwork.

If one child is on the deed and you and your spouse both die, the one child owns the house outright. If there are other siblings, no matter what your will says, the siblings have no legal right of ownership. Your other children will need to go to court and will likely not win.

If all of your children are named as joint tenants with you and your spouse on a deed, only the surviving children will own the home after the death of the surviving spouse. If one of your children predeceases, then the share belonging to any such sibling will disappear, and their children (your grandchildren) will not receive anything.

Naming multiple children as joint owners on a deed also opens you up to more exposure. Even if your children are model citizens, things happen, including divorces, auto accidents, bankruptcies and other unexpected events. Business owners who run into problems can spell disaster for a family-owned asset of any kind. The more siblings with ownership interests in the home, the more risk.

It gets even more complicated if you and a joint tenant child die in a common accident. Determining who died first will determine who is entitled to the home. If you live longer than your child, even by a few minutes, your estate may then own the home.

As is often the case, when people decide they have found a simple solution, complex problems follow. The lawsuits resulting from the situations described above are common, expensive and can cause families to break apart. Your estate planning attorney can explain how an estate plan, with proper ownership, possibly a trust and other legal strategies, will achieve the desired goals without putting the estate and the family’s relationships at risk.

Reference: St George News (Jan. 30, 2022) “Naming a child on your deed to avoid probate? Here’s why you may want to reconsider”

 

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