Your Will and Estate Planning Checklist – Annapolis and Towson Estate Planning

Dying without a Last Will and Testament creates additional costs and eliminates any chance your wishes for loved ones will be followed after your death. Typically, people think about Wills when they marry or have children, and then do not think about Wills or estate plans until they retire. While a Will is important, there are other estate planning documents that are just as important, says the recent article “10 Steps to Writing a Will” from U.S. News & World Report.

Most assets, including retirement accounts and insurance policy proceeds, can be transferred to heirs outside of a Will, if they have designated beneficiaries. However, the outcome of an estate may be more impacted by Power of Attorney for financial matters and Medical Power of Attorney documents.

Here are ten specific tasks that need to be completed for your Will to be effective. Remember, if the Will does not comply with your state’s estate law, it can be declared invalid.

  1. Find an estate planning attorney who is experienced with the laws of your state.
  2. Select beneficiaries for your Will.
  3. Check beneficiaries on non-probate assets to make sure they are current.
  4. Decide who will be the executor of your Will.
  5. Name a guardian for minor children, if yours are still young.
  6. Make a letter describing possessions and who you want to receive them. Be very specific.

There are also tasks for your own care while you are living, in case of incapacity:

  1. Name a person for the Power of Attorney role. They will be your representative for legal and financial matters, but only while you are living.
  2. Name a person for the Medical Power of Attorney to make decisions on your behalf, if you cannot.
  3. Create an Advance Directive, also known as a Living Will, to explain your wishes for medical care, particularly concerning end-of-life care.
  4. Discuss these roles and their responsibilities with the people you have chosen, and make sure they are willing to serve.

Be realistic about the people you are naming to receive your property. If you have a child who is not good with managing money, a trust can be set up to distribute assets according to your wishes: by age or accomplishments, like finishing college, going to rehab, or maintaining a steady work history.

Do not forget to tell family members where they can find your Will and other estate documents. You should also talk with them about your digital assets. If accounts are protected by passwords or facial recognition, find out if the digital platform has a process for your executor to legally obtain access to your digital assets.

Finally, do not neglect updating your Will every three to four years or anytime you have a major life event. An estate plan is like a house: it needs regular maintenance. Old Wills can disinherit family members or lead to the wrong person being in charge of your estate. An experienced estate planning attorney will make the process easier and straightforward for you and your loved ones.

Reference: U.S. News & World Report (May 13, 2021) “10 Steps to Writing a Will”

 

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What Do I Need to Know about Estate Planning? – Annapolis and Towson Estate Planning

Your idea of planning for the future may include vacations and visits to family and friends—estate planning, not so much. However, it should, advises Real Simple in the article “Everything You Need to Know About Estate Planning—and Why You Should Start Now.” Estate planning concerns decisions about distributing your property when you die, and while that is not as much fun as planning a trip to an adventure park, it has become increasingly important for adults of all ages.

A survey by caring.com found that the number of young adults with a last will (ages 18-34) increased by 63 percent since 2020. Many tough lessons were learned through the pandemic, and the importance of having an estate plan was one of them.

An estate plan is more than documents for when you die. There are also documents for what should happen if you become disabled. The last will is one piece of the larger estate plan. An estate plan is also an opportunity to plan for wealth accumulation and building generational wealth, at any level.

Estate planning is for everyone, regardless of their net worth. People with lower incomes actually need estate planning more than the wealthy. There is less room for error. Estate planning is everything from where you want your money to go, to who will be in charge of it and who will be in charge of your minor children, if you have a young family.

It may be rare for both parents to die at the same time, but it does happen. Your last will is also used to name a guardian to raise your minor children. With no last will, the court will decide who raises them.

If you have filled out 401(k) and life insurance paperwork at work, you have started estate planning already. Any document that asks you to name a beneficiary in case of your death is part of your estate plan. Be certain to update these documents. Young adults often name their parents and then neglect to change the beneficiaries when they get married or have children.

For single people, estate planning is more important. If you have no estate plan and no children, everything you own will go to your parents. What if you have a partner or best friend and want them to receive your assets? Without an estate plan, they have no legal rights. An estate planning attorney will know how to plan, so your wishes are followed.

Estate planning includes planning for disability, also known as “incapacity.” If you become too sick to manage your affairs, bills still need to be paid. Who can do that for you? Without an estate plan, a family member will need to go to court to be assigned that role—or someone you do not even know may be assigned that role. Your last will names an executor to manage your affairs after you die.

Work with an experienced estate planning attorney to have your last will, power of attorney, medical power of attorney and other parts of your estate plan created. The court system and processes are complex, and the laws are different in every state. Trying to do it yourself or using a template that you download, could leave you with an invalid last will, which will cause more problems than it solves.

Reference: Real Simple (May 12, 2021) “Everything You Need to Know About Estate Planning—and Why You Should Start Now”

 

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Do You Have to Do Probate when Someone Dies? – Annapolis and Towson Estate Planning

Probate is a Latin term meaning “to prove.” Legally, a deceased person may not own property, so the moment a person dies, the property they owned while living is in a legal state of limbo. The rightful owners must prove their ownership in court, explains the article “Wills and Probate” from Southlake Style. Probate refers to the legal process that recognizes a person’s death, proves whether or not a valid last will exists and who is entitled to assets the decedent owned while they were living.

The probate court oversees the payment of the decedent’s debts, as well as the distribution of their assets. The court’s role is to facilitate this process and protect the interests of all creditors and beneficiaries of the estate. The process is known as “probate administration.”

Having a last will does not automatically transfer property. The last will must be properly probated first. If there is a last will, the estate is described as “testate.” The last will must contain certain language and have been properly executed by the testator (the decedent) and the witnesses. Every state has its own estate laws. Therefore, to be valid, the last will must follow the rules of the person’s state. A last will that is valid in one state may be invalid in another.

The court must give its approval that the last will is valid and confirm the executor is suited to perform their duties. Texas is one of a few states that allow for independent administration, where the court appoints an administrator who submits an inventory of assets and liabilities. The administration goes on with no need for probate judge’s approval, as long as the last will contains the specific language to qualify.

If there was no last will, the estate is considered to be “intestate” and the laws of the state determine who inherits what assets. The laws rely on the relationship between the decedent and the genetic or bloodline family members. An estranged relative could end up with everything. The estate distribution is more likely to be challenged if there is no last will, causing additional family grief, stress and expenses.

The last will should name an executor or administrator to carry out the terms of the last will. The executor can be a family member or a trusted friend, as long as they are known to be honest and able to manage financial and legal transactions. Administering an estate takes time, depending upon the complexity of the estate and how the person managed the business side of their lives. The executor pays bills, may need to sell a home and also deals with any creditors.

The smart estate plan includes assets that are not transferrable by the last will. These are known as “non-probate” assets and go directly to the heirs, if the beneficiary designation is properly done. They can include life insurance proceeds, pensions, 401(k)s, bank accounts and any asset with a beneficiary designation. If all of the assets in an estate are non-probate assets, assets of the estate are easily and usually quickly distributed. Many people accomplish this through the use of a Living Trust.

Every person’s life is different, and so is their estate plan. Family dynamics, the amount of assets owned and how they are owned will impact how the estate is distributed. Start by meeting with an experienced estate planning attorney to prepare for the future.

Reference: Southlake Style (May 17, 2021) “Wills and Probate”

 

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What is not Covered by a Will? – Annapolis and Towson Estate Planning

A Last Will and Testament is one part of a holistic estate plan used to direct the distribution of property after a person has died.  A recent article titled “What you can’t do with a will” from Ponte Vedra Recorder explains how Wills work, and the types of property not distributed through a Will.

Wills are used to inform the probate court regarding your choice of Guardians for any minor children and the Executor of your estate. Without a Will, both of those decisions will be made by the court.  It is better to make those decisions yourself and to make them legally binding with a will.

Lacking a Will, an estate will be distributed according to the laws of the state, which creates extra expenses and sometimes, leads to life-long fights between family members.

Property distributed through a Will necessarily must be processed through a probate, a formal process involving a court.  However, some assets do not pass through probate.  Here is how non-probate assets are distributed:

Jointly Held Property. When one of the “joint tenants” dies, their interest in the property ends and the other joint tenant owns the entire property.

Property in Trust. Assets owned by a trust pass to the beneficiaries under the terms of the trust, with the guidance of the Trustee.

Life Insurance. Proceeds from life insurance policies are distributed directly to the named beneficiaries.  Whatever a Will says about life insurance proceeds does not matter—the beneficiary designation is what controls this distribution, unless there is no beneficiary designated.

Retirement Accounts. IRAs, 401(k) and similar assets pass to named beneficiaries.  In most cases, under federal law, the surviving spouse is the automatic beneficiary of a 401(k), although there are always exceptions.  The owner of an IRA may name a preferred beneficiary.

Transfer on Death (TOD) Accounts. Some investment accounts have the ability to name a designated beneficiary who receives the assets upon the death of the original owner.  They transfer outside of probate.

Here are some things that should NOT be included in your Will:

Funeral instructions might not be read until days or even weeks after death. Create a separate letter of instructions and make sure family members know where it is.

Provisions for a special needs family member need to be made separately from a Will.  A special needs trust is used to ensure that the family member can inherit assets but does not become ineligible for government benefits.  Talk to an elder law estate planning attorney about how this is best handled.

Conditions on gifts should not be addressed in a will. Certain conditions are not permitted by law.  If you want to control how and when assets are distributed, you want to create a trust. The trust can set conditions, like reaching a certain age or being fully employed, etc., for a Trustee to release funds.

Reference: Ponte Vedra Recorder (April 15, 2021) “What you can’t do with a will”

 

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I am Concerned That My Son-in-Law will get My Estate – Annapolis and Towson Estate Planning

A frequent question people have when updating their wills with an experienced estate planning attorney, is whether they still need a trust for an adult child.  The child has graduated college, is on her second well-paying job, is married and has children of her own.  The child is a responsible young adult.  However, an issue may arise with the adult child’s spouse and the potential for divorce.

Kiplinger’s recent article entitled “Worried about Your Child’s Inheritance If They Divorce? A Trust Can Be Your Answer” says that people do not want money they have worked hard for to be directed to their son’s or daughter’s ex-spouse, if a divorce occurs.

The current federal estate tax exemption in 2021 is $11.7 million per person or $23.4 million for married couples, so creating a trust to save taxes upon death is not as big a factor as it used to be.  The larger question is how well we think our children will handle receiving a large sum of money.  Some parents want a trust because they worry about their adult child losing thousands of dollars of their inheritance as a result of a failed marriage.  By creating a trust as part of their estate plan, these parents can help protect their child’s assets in a divorce settlement.

In many situations, if a child receives an inheritance and combines it with assets they own jointly with their spouse, like a bank account, car or house, depending on where they live, the inheritance may become subject to marital property division, if the adult child and spouse later divorce.  However, if the child’s inheritance is in a trust account, or they use trust funds to pay for assets only in their name, the inherited wealth can further be protected from a divorce.

Trusts can be complicated and require more administrative work and costs, which may cost more than just leaving assets outright to your children.  This is worth it for those who want to protect their child’s wealth.  If your child is under 18, you are not thinking about divorce, but because of their youth, leaving assets in trust for them is often a good idea.  A trustee will oversee the child’s assets and will be able to guide them to make sound decisions with any inherited funds.  If your child is newly married, rather than creating a trust right after your child’s marriage, see how the marriage goes over the next five to 10 years.  Then ask yourself how comfortable you are with your child’s relationship and how you feel about your son-in-law or daughter-in-law.

Consider your estate plan as a five-year plan.  Review your will, trust and other estate planning documents every five years.  This can help you carefully evaluate relationships, finances and the emotional dynamics of your family.  An experienced estate planning attorney can also adjust or cancel the trust during your life, as your family situation changes.

Reference: Kiplinger (April 16, 2021) “Worried about Your Child’s Inheritance If They Divorce? A Trust Can Be Your Answer”

 

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Should I Discuss Estate Planning with My Children? – Annapolis and Towson Estate Planning

US News & World Report’s recent article entitled “Discuss Your Estate Plan With Your Children” says that staying up-to-date with your estate plan and sharing your plans with your children could make a big impact on your legacy and what you will pay in estate taxes. Let us look at why you should consider talking to your children about estate planning.

People frequently create an estate plan and name their child as the trustee or executor. However, they fail to discuss the role and what is involved with them. Ask your kids if they are comfortable acting as the executor, trustee, or power of attorney. Review what each of the roles involves and explain the responsibilities. The estate documents state some critical responsibilities but do not provide all the details. Having your children involved in the process and getting their buy-in will be a big benefit in the future.

Share information about valuables stored in a fireproof safe or add their name to the safety deposit box. Tell them about your accounts at financial institutions and the titling of the various accounts, so that these accounts are not forgotten, and bills get paid when you are not around.

Parents can get children involved with a meeting with their estate planning attorney to review the estate plan and pertinent duties of each child. If they have questions, an experienced estate planning attorney can answer them in the context of the overall estate plan.

If children are minors, invite the successor trustee to also be part of the meeting.

Explain what you own, what type of accounts you have and how they are treated from a tax perspective.

Discussing your estate plan with your children provides a valuable opportunity to connect with your loved ones, even after you are gone. An individual’s attitudes about money says much about his or her values.

Sharing with your children what your money means to you, and why you are speaking with them about it, will help guide them in honoring your memory.

There are many personal reasons to discuss your estate plans with your children. While it is a simple step, it is not easy to have this conversation. However, the pandemic emphasized the need to not procrastinate when it comes to estate planning. It has also provided an opportunity to discuss these estate plans with your children.

Reference: US News & World Report (Feb. 17, 2021) “Discuss Your Estate Plan With Your Children”

 

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What Is a Living Trust Estate Plan? – Annapolis and Towson Estate Planning

Living trusts are one of the most popular estate planning tools. However, a living trust accomplishes several goals, explains the article “Living trusts allow estates to avoid probate” from The Record Courier. A living trust allows for the management of a beneficiary’s inheritance and may also reduce estate taxes.  A person with many heirs or who owns real estate should consider including a living trust in their estate plan.

A trust is a fiduciary relationship, where the person who creates the trust, known as the “grantor,” “settlor,” “trustor” or “trustmaker,” gives the “trustee” the right to hold title to assets to benefit another person. This third person is usually an heir, a beneficiary, or a charity.

With a living trust, the grantor, trustee and beneficiary may be one and the same person. A living trust may be created by one person for that person’s benefit. When the grantor dies, or becomes incapacitated, another person designated by the trust becomes the successor trustee and manages the trust for the benefit of the beneficiary or heir. All of these roles are defined in the trust documents.

The living trust, which is sometimes referred to as an “inter vivos” trust, is created to benefit the grantor while they are living. A grantor can make any and all changes they wish while they are living to their trust (within the law, of course). A testamentary trust is created through a person’s will, and assets are transferred to the trust only when the grantor dies. A testamentary trust is an “irrevocable” trust, and no changes can be made to an irrevocable trust.

There are numerous other trusts used to manage the distribution of wealth and protect assets from taxes. Any trust agreement must identify the name of the trust, the initial trustee and the beneficiaries, as well as the terms of the trust and the name of a successor trustee.

For the trust to achieve its desired outcome, assets must be transferred from the individual to the trust. This is called “funding the trust.” The trust creator typically holds title to assets, but to fund the trust, titled property, like bank and investment accounts, real property or vehicles, are transferred to the trust by changing the name on the title. Personal property that does not have a title is transferred by an assignment of all tangible property to the trustee. An estate planning attorney will be able to help with this process, which can be cumbersome but is completely necessary for the trust to work.

Some assets, like life insurance or retirement accounts, do not need to be transferred to the trust. They use a beneficiary designation, naming a person who will become the owner upon the death of the original owner. These assets do not belong in a trust, unless there are special circumstances.

Reference: The Record Courier (April 3, 2021) “Living trusts allow estates to avoid probate”

 

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What Does ‘Per Stirpes’ in a Will Mean? – Annapolis and Towson Estate Planning

Let us say you had six brothers and sisters. All of your siblings were still living at the time your father made his will. However, three of your brothers died before your father passed away.

In that case, would the children of the deceased siblings be entitled to their fathers’ shares of their grandfather’s estate?

What if that was not what the father intended when he wrote the will. Instead, the money was to be divided equally between his remaining living children. Who is right?

Nj.com’s recent article entitled “My father died. Who will get the share meant for a dead beneficiary?” says that it really depends on how the will was written by the deceased, who is also known as the testator.

A will may state, “I give, devise, and bequeath my residuary estate to those of my children who survive me, in equal shares, and the descendants of a deceased child of mine, to take their parent’s share per stirpes.”

Per stirpes in a will means that the share of a deceased child will pass to the children of that deceased child in equal shares, if any. However, if nothing is stated in the will, then every state has law that interprets a lapse of a will provision. These are known as “anti-lapse” statutes.

For example, the Kansas anti-lapse statute (K.S.A. 59-615), is operative only when:

  • The testator bequeaths or devises property to a beneficiary who is a member of the class designated by the statute;
  • The specified beneficiary predeceases the testator and leaves issue who survive the testator; and
  • The testator does not revoke or change his or her will as to the predeceased beneficiary.

If you are a resident of Arizona, that state’s anti-lapse statute applies, if a beneficiary under your will predeceases you. The anti-lapse statute would apply if the predeceasing beneficiary were your grandparent, a descendant of your grandparent, or your stepchild, who have at least one child who survives you. Therefore, if the anti-lapse statute were to apply, the child who survives you would effectively take your beneficiary’s place, and inherit the gift instead of the beneficiary.

Talk to an experienced estate planning attorney if you have questions about wills and per stirpes designations.

Reference: nj.com (March 25, 2021) “My father died. Who will get the share meant for a dead beneficiary?”

 

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Have Estate Planning Conversations with Aging Parents – Annapolis and Towson Estate Planning

Let us start with this idea: maybe your parents are going to leave you a generous bequest as part of their estate plan. Do you know this for a fact, or is it wishful thinking? The only way to know, advises a recent article from Yahoo! Finance titled “How To Talk to Your Parents About Their Estate (Without Making It Awkward),” is to have a conversation, or a series of conversations. It is not the first awkward conversation you will have with your parents, but it may be a bit stickier than you expect.

No matter how you approach it, this is a sensitive issue. How do you avoid appearing greedy or selfish? There is actually a lot more to know beyond the inheritance issue. You need to know how to ensure that your parents’ wishes are carried out, while they are living as well as after their deaths.

It will be helpful to be aware that the prospective inheritance amount may change over the course of your parents’ remaining lives. You also do not want your parents thinking that you consider yourself entitled in any way to the assets they have built over the course of their lives.

Instead, start the conversation by talking about their estate plan. Explain that you want to be able to follow their instructions. You might reference an article or blog post that you have read about the importance of estate planning. You can also talk about your own estate plan, explaining that you have created an estate plan to protect your children and family members and to be sure that your instructions are followed.

Do not be afraid to acknowledge how difficult this conversation is for you. Reassure them that you are not looking forward to their demise, but you have concerns about how things will work out when the time does come.

Depending upon your family dynamics, holidays may be a good time to address estate planning. This provides an opportunity for all family members to be included and for concerns and plans to be shared among involved siblings.

This does not mean discussing inheritances at the dinner table. Focus on what your parents’ wishes are and include a conversation about what values they would like to pass on to the next generation. If there are family histories or stories to share, this is also part of your inheritance.

Regardless of when or how you approach the topic, you do want to be sure your parents have a plan in place, so there is a path for whoever will be taking care of them and their assets. Ask if they have these key legal documents:

  • A Last Will, also known as a Last Will and Testament
  • A Power of Attorney to designate someone to make financial and legal decisions, if they are not able to do so for themselves.
  • A Living Will or health care directive that will designate someone who can make healthcare decisions and address end of life care for them.

Ask where your parents keep these documents, and how you can find them when the time comes. Are they in your father’s night table, or in a lockbox in the attic? If they have a financial advisor or estate planning attorney, who is that person? You’ll need to be able to access the documents and speak with their estate planning attorney.

A few awkward moments now will help all of you as your parents, and you, move through the coming stages of life.

Reference: Yahoo! Finance (March 25, 2021) “How To Talk to Your Parents About Their Estate (Without Making It Awkward)”

 

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What are the Stages of Probate? – Annapolis and Towson Estate Planning

Probate is a court-supervised process occurring after your death. It takes place in the state where you were a resident at the time of your death and addresses your estate—all of your financial assets, real estate, personal belongings, debts and unpaid taxes. If you have an estate plan, your last will names an executor, the person who takes charge of your estate and settles your affairs, explains the article “Understanding Probate” from Pike County Courier. How exactly does the probate process work?

If your estate is subject to probate, your estate planning attorney files an application for the probate of your last will with the local court. The application, known as a petition, is brought to the probate court, along with the last will. That is also usually when the petitioner files an application for the appointment of the executor of your estate.

First, the court must rule on the validity of the last will. Does it meet all of the state’s requirements? Was it witnessed properly? If the last will meets the state’s requirements, then the court deems it valid and addresses the application for the executor. That person must also meet the legal requirements of your state. If the court agrees that the person is fit to serve, it approves the application.

The executor plays a very important role in settling your estate. The executor is usually a spouse or a close family member. However, there are situations when naming an attorney or a bank is a better option. The person needs to be completely trustworthy. Your fiduciary will have a legal responsibility to be honest, impartial and put your estate’s well-being above the fiduciary’s own. If they do not have a good grasp of financial matters, the fiduciary must have the common sense to ask for expert help when needed.

Here are some of the tasks the fiduciary must address:

  • Finding and gathering assets and liabilities
  • Inventorying and appraising assets
  • Filing the estate tax return and your last tax return
  • Paying debts, managing creditors and paying taxes
  • Distributing assets
  • Providing a detailed report of the estate settlement to the court and any other parties

What is the probate court’s role in this part of the process? It depends upon the state. The probate court is more involved in some states than in others. If the state allows for a less formal process, it is simpler and faster. If the estate is complicated with multiple properties, significant assets and multiple heirs, probate can take years.

If there is no executor named in your last will, the court will appoint an administrator. If you do not have a last will, the court will also appoint an administrator to settle your estate following the laws of the state. This is the worst possible scenario, since your assets may be distributed in ways you never wished.

Does all of your estate go through the probate process? With proper estate planning, many assets can be taken out of your probate estate, allowing them to be distributed faster and easier. How assets are titled determines whether they go through probate. Any assets with named beneficiaries pass directly to those beneficiaries and are outside of the estate. That includes life insurance policies and retirement plans with named beneficiaries. It also includes assets titled “jointly with rights of survivorship,” which is how most people own their homes.

Your estate planning attorney will discuss how the probate process works in your state and how to prepare a last will and any needed trusts to distribute your assets as efficiently as possible.

Reference: Pike County Courier (March 4, 2021) “Understanding Probate”

 

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