Is Your Business Included in Estate Plan? – Annapolis and Towson Estate Planning

Forbes’ recent article entitled “The Importance of Estate Planning When Building Your Business” says that every business that’s expected to survive must have a clear answer to this question. The plan needs to be shared with the current owners and management as well as the future owners.

The common things business owners use to put some protection in place are buy-sell agreements, key-person insurance and a succession plan. These are used to make certain that, when the time comes, there’s both certainty around what needs to happen, as well as the funding to make sure that it happens.

If your estate plan hasn’t considered your business interests or hasn’t been updated as the business has developed, it may be that this plan falls apart when it matters the most.

Buy-sell insurance policies that don’t state the current business values could result in your interests being sold far below fair value or may see the interests being bought by an external party that threatens the business itself.

If your agreements are not in place, or are challenged by the IRS, your estate may find itself with a far greater burden than anticipated.

Your estate plan should be reviewed regularly to account for changes in your situation, the value of your assets, the status of your (intended) beneficiaries and new tax laws and regulations.

There are a range of thresholds, exemptions and rules that apply. Adapting the plan to make best use of these given your current situation is well worth the effort. Contact us to talk to one of our experienced estate planning attorneys about your plan.

Including your estate planning as part of your general financial planning and management will frequently provide a valuable guidance in terms of how best to set up and manage your broader financial affairs.

Financial awareness can not only inform how you grow your wealth now but also ensure that it gets passed on effectively. The same is also true of your business.

A tough conversation about what happens in these situations can be a reminder to management that over dependence on any key person is not something to take for granted.

Reference: Forbes (Sep. July 12, 2019) “The Importance of Estate Planning When Building Your Business”

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Ask Mom if She has a Will – Annapolis and Towson Estate Planning

The family was baffled. Not only was the will out of date, but it was also unsigned, and the person named as executor had died a decade before their mother died. Grandchildren born after the will was created were not mentioned and personal possessions left to some people in the will had been given away years ago.

This scenario, as described in the article “Mom, Do You Have a Will?” from Next Avenue, is not unusual because many older adults and their children are equally reticent to discuss death. It’s a hard topic to address, but without these conversations, how can you make sure the transition after they pass is smooth?

Who needs a will? Pretty much everyone does. If your parents don’t have a will, here are some talking points to remind them of why it matters:

  • If you are part of a blended family, estate planning avoids either a full or partial disinheritance of a surviving spouse or their children.
  • If there are minor children or adult children with special needs, a will is used to appoint guardians. With no will, the court makes decisions about who raises children or cares for a special needs individual.
  • If yours is a fighting family (you know who you are), and if you want certain things to go to certain people, there needs to be an updated will.

Single people need a plan for their assets, especially if they are in a committed relationship but not married. Many state inheritance laws make no provision for a domestic partner. If a relationship is recognized before a loved one dies the remaining partner can access their right to property or benefits.

When someone dies without a will or a living trust, known as intestate succession, assets may be distributed according to rules set out in state law, which vary state to state and may not be what they would have wanted.

When asked if there is a will, some may say they are prepared. However, as in the example, this may or may not be true. Their will may be old, no longer relevant to their situation or may not have been signed.

Clarifying the status of an older adult’s will is important to a smoother transition of assets and needs to be addressed when they are of sound mind and able to make their own decision about their estate.

When preparing to have a discussion with someone who is active and healthy, the conversation is easier. Ask if they have a will and what their wishes are after they have passed. You can explain how these steps are essential to creating their legacy and protect their family from estate taxes and expensive court oversight.

When a person is seriously ill, this is admittedly a harder conversation. Acknowledge the difficulty and let them know they can stop the discussion if necessary. It may take more than a few conversations to get to everything. Discuss these issues with respect and empathy. Offer ideas and options and steer clear of any ultimatums.

Contact us to talk with one of our experienced estate planning attorneys who will explain what you need for your specific family.

Reference: Next Avenue (Sep. 14, 2022) “Mom, Do You Have a Will?”

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The Difference between Revocable and Irrevocable Trust – Annapolis and Towson Estate Planning

A living trust can be revocable or irrevocable, says Yahoo Finance’s recent article entitled “Revocable vs. Irrevocable Trusts: Which Is Better?” And not everyone needs a trust. For some, a will may be enough. However, if you have substantial assets you plan to pass on to family members or to charity, a trust can make this much easier.

There are many different types of trusts you can establish, and a revocable trust is a trust that can be changed or terminated at any time during the lifetime of the grantor (i.e., the person making the trust). This means you could:

  • Add or remove beneficiaries at any time;
  • Transfer new assets into the trust or remove ones that are in it;
  • Change the terms of the trust concerning how assets should be managed or distributed to beneficiaries; and
  • Terminate or end the trust completely.

When you die, a revocable trust automatically becomes irrevocable, and no further changes can be made to its terms. An irrevocable trust is permanent. If you create an irrevocable trust during your lifetime, any assets you transfer to the trust must stay in the trust. You can’t add or remove beneficiaries or change the terms of the trust.

The big advantage of choosing a revocable trust is flexibility. A revocable trust allows you to make changes, and an irrevocable trust doesn’t. Revocable trusts can also allow your heirs to avoid probate when you die. However, a revocable trust doesn’t offer the same type of protection against creditors as an irrevocable trust. If you’re sued, creditors could still try to attach trust assets to satisfy a judgment. The assets in a revocable trust are part of your taxable estate and subject to federal estate taxes when you die.

In addition to protecting assets from creditors, irrevocable trusts can also help in managing estate tax obligations. The assets are owned by the trust (not you), so estate taxes are avoided. Holding assets in an irrevocable trust can also be useful if you’re trying to qualify for Medicaid to help pay for long-term care and want to avoid having to spend down assets.

But again, you can’t change this type of trust and you can’t act as your own trustee. Once the trust is set up and the assets are transferred, you no longer have control over them.

Contact us to speak with one of our experienced estate planning attorneys to see if a revocable or an irrevocable trust is best or whether you even need a trust at all.

Reference: Yahoo Finance (Sep. 10, 2022) “Revocable vs. Irrevocable Trusts: Which Is Better?”

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Problems Created When No Will Is Available – Annapolis and Towson Estate Planning

Ask any estate planning attorney how much material they have for a book, or a movie based on the drama they see from family squabbles when someone dies without a will. There’s plenty—but a legal requirement of confidentiality and professionalism keeps those stories from circulating as widely as they might. This may be why more people aren’t as aware as they should be of how badly things go for loved ones when there’s no will, or the will is improperly drafted.

Disputes range from one parent favoring one child or children engaged in fierce fighting over personal possessions when there’s no will specifying who should get what, or providing a system for distribution, according to a recent article titled “Estate planning: 68% of Americans lack a will” from New Orleans City Business.

People don’t consider estate planning as an urgent matter. The pace of life has become so hectic as to push estate planning appointments to the next week, and the next. They also don’t believe their estates have enough value to need to have a will, but without a will, a modest estate could evaporate far faster than if an estate plan were in place.

The number of people having a will has actually decreased in the last twenty years. A few sources report the number keeps dipping from 50% in 2005, 44% in 2016 and 32% in 2022. In 2020, more Americans searched the term “online will” than in any other time since 2011.

Younger people seem to be making changes. Before the pandemic, only 16% of Americans ages 18-34 had a will. Today caring.com reports 24% of these young adults have a will. Maybe they know something their elders don’t!

One thing to be considered when having a will drafted is the “no contest clause.” Anyone who challenges the will is immediately cut out of the will. While this may not deter the person who is bound and determined to fight, it presents a reason to think twice before engaging in litigation.

Many people don’t know they can include trust provisions in their wills to manage family inheritances. Trusts are not just for super wealthy families but are good planning tools used to protect assets. They are used to control distributions, including setting terms and conditions for when heirs receive bequests.

Today’s will must also address digital assets. The transfer and administration of digital assets includes emails, electronic access to bank accounts, retirement accounts, credit cards, cryptocurrency, reward program accounts, streaming services and more. Even if the executor has access to log-in information, they may be precluded from accessing digital accounts because of federal or state laws. Wills are evolving to address these concerns and plan for the practicalities of digital assets.

Contact us to design your estate plan with one our experienced estate planning attorneys today.

Reference: New Orleans City Business (Sep. 8, 2022) “Estate planning: 68% of Americans lack a will”

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There are Less Restrictive Alternatives than Guardianship – Annapolis and Towson Estate Planning

The benefit of restrictive alternatives to guardianships is that they don’t require court approval or judicial oversight. They are also much easier to set up and end.

The standard for establishing incapacity is also less rigorous than the standard required for a guardianship, says Kiplinger’s recent article entitled “Guardianships Should Be a Last Resort – Consider These Less Draconian Options First.”

Limited guardianships. A guardianship takes away an individual’s right to make decisions, just as full guardianships do, but they are specific to only some aspects of the person’s life. A limited guardianship can be established to manage an individual’s finances and estate or to control medical and health care decisions. These types of guardianships still require court approval and must be supported by a showing of incapacity.

Powers of attorney. Powers of attorney can be established for medical or for financial decisions. A second set of eyes ensures that financial decisions are well-considered and not harmful to the individual or his or her estate. A medical power of attorney can allow an agent to get an injunction to protect the health and well-being of the subject, including by seeking a determination of mental incapacity. A durable power of attorney for health care matters gives the agent the right to make medical decisions on behalf of the subject if or when they are unable to do so for themselves. Unlike a guardianship, powers of attorney can be canceled when they are no longer needed.

Assisted decision-making. This agreement establishes a surrogate decision-maker who has visibility to financial transactions. The bank is informed of the arrangement and alerts the surrogate when it identifies an unusual or suspicious transaction. While this arrangement doesn’t completely replace the primary account holder’s authority, it creates a safety mechanism to prevent exploitation or fraud. The bank is on notice that a second approval is required before an uncommon transaction can be completed.

Wills and trusts. These estate planning documents let people map out what will happen in the event they become incapacitated or otherwise incapable of managing their affairs. Trusts can avoid guardianship by appointing a friend or relative to manage money and other assets. A contingent trust will let the executor manage assets if necessary. For seniors, it may be wise to name a co-trustee who can oversee matters and step in should the trustor lose the capacity to make good decisions.

Reference: Kiplinger (July 7, 2022) “Guardianships Should Be a Last Resort – Consider These Less Draconian Options First”

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

The Most Important Part of Estate Plan Is Planning for Living – Annapolis and Towson Estate Planning

Most people think of estate planning as planning for death. However, a well-titled article “Planning for death probably isn’t the most important part of your estate plan” from Coeur d’Alene/Post Falls Press presents another reason for estate planning in clear terms. Estate planning is planning for the unexpected eventualities of life.

Estate planning documents address how things will work while you are still living but if you have become incapable of making your own decisions. In many cases, this is more important than distributing your worldly possessions.

Yes, you should have a Will (Last Will and Testament). But you should also have Power of Attorney documents—one for health care purposes and another for financial purposes.

The Power of Attorney (“POA”) document states who will be your substitute decision maker, or agent, if you are incapacitated or unable to make your own decisions while still living. This should be a personalized document prepared by an estate planning attorney to include the scope of tasks and the limits, if any, you want to set for your agent. The financial POA is an important one, as it gives your chosen agent the legal authority to make financial decisions on your behalf.

The health care POA gives your agent the authority to make health care decisions on your behalf.

With both of these documents properly prepared and available, someone you name will be empowered to serve as your decision maker if necessary.

The Will is used to state what happens to your possessions and assets when you die. It is also the legal document used to name your executor—the person who will be in charge of carrying out your instructions. The Will tells the probate court how you want your estate to be administered after death.

Why do you need these and other documents? Your Will only becomes effective after death. Your POA documents are effective if you become incapacitated. They are both part of your estate plan, which is a collection of legal documents and has nothing to do with whether you reside in a palatial estate.

Here’s how it might work. If you become seriously ill and cannot speak on your own behalf, but you have a Power of Attorney naming your daughter Carol to serve as your POA for healthcare and financial decisions, Carol will be able to pay bills, including paying the mortgage, keeping your car lease up to date, and taking care of all of the financial aspects of your life. If she is also named as your Health Care POA, she will be able to speak with your medical team, be involved in decisions about your course of care and follow the wishes you’ve expressed in your POA.

If you die, and Carol has also been named your executor, she will be able to transition into this new role by representing you through the probate process. She will be able to work with your estate planning attorney to have your will filed with the court and follow your directions for distribution of your assets.

Having only a Last Will and Testament would not protect you while you are living. Having only a Power of Attorney would not protect your wishes after you have died. All of these documents—and there are others not mentioned here—work together to protect you during life and after you’ve passed.

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

Reference: Coeur d’Alene/Post Falls Press (Aug. 29, 2022) “Planning for death probably isn’t the most important part of your estate plan”

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Read more about the article Estate Planning for Blended Families – Annapolis and Towson Estate Planning

Estate Planning for Blended Families – Annapolis and Towson Estate Planning

Today, a blended family is more common than ever, with stepfamily members, half-siblings, former spouses, new spouses and every combination of parents, children and partners imaginable. Traditional estate planning, including wills and non-probate tools like transfer on death (TOD) documents, as valuable as they are, may not be enough for the blended family, advises a recent article titled “Legal-Ease: Hers, his and ours—blended family estate planning” from limaohio.com.

Not too long ago, when most people didn’t take advantage of the power of trusts, couples often went for estate plans with “mirror” wills, even those with children from prior marriages. Their wills basically said each spouse would leave the other spouse everything. This will would be accompanied by a contract stating neither would change their will for the rest of their lives. If there was a subsequent marriage after one spouse passed, this led to problems for the new couple, since the surviving spouse was legally bound not to change their will.

As an illustration, Bob has three children from his first marriage and Sue has two kids from her first marriage. They marry and have two children of their own. Their wills stipulate they’ll leave each other everything when the first one dies. There may have been some specific language about what would happen to the children from the first marriages, but just as likely this would not have been addressed.

It sounds practical enough, but in this situation, the children from the first spouse to die were at risk of being disinherited, unless plans were made for them to inherit from their biological parent.

Todays’ blended family benefits from the use of trusts, which are designed to protect each spouse, their children and any child or children they have together. There are a number of different kinds of trusts for use by spouses only to protect children and surviving spouses.

Trust law requires the trustee—the person who is in charge of administering the trust—to give a copy of the trust to each beneficiary. The trustee is also required to provide updates to beneficiaries about the assets in the trust.

A surviving spouse will most likely serve as the trustee when the first spouse passes and will have a legal responsibility to honor the shared wishes of the first spouse to pass.

If you would like to learn more about the many different types of spousal trusts, and which is best for your situation, contact us and schedule a time to speak with one of our experienced estate planning attorneys.

Reference: limaohio.com (Aug. 20, 2022) “Legal-Ease: Hers, his and ours—blended family estate planning”

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

What Should Not Be Kept in a Safe Deposit Box? – Annapolis and Towson Estate Planning

A safe deposit box can be used to store important documents and items. It’s essential if you own gold or other valuables, and can be helpful in reducing the worry of owning different kinds of assets, according to a recent article titled “10 Items You Should Never Keep In a Safe Deposit Box” from yahoo! finance.

However, many documents should never be kept in a safe deposit box, even when it seems as if it is the perfect spot.

Your will should never, ever, be placed in a safe deposit box. When a person dies, the only person who can access the safe deposit box are those who are also owners of the box according to bank records and those individuals named in the will itself.

Don’t use your safety deposit box to stash cash. Unless your cash contains collectible bills or coins, this is not the place for it. An investment fund or, at the very least, an interest-bearing savings account, is a better option. Stashing cash may have made sense during the Great Depression, but not today.

Keys to anything of importance don’t belong in your safe deposit box. You are likely to need them when you can’t get into the bank’s vault, and you may forget their location. If you die and no one knows where the keys are and can’t get into the safe deposit box, you’ll be remembered as the person who made life harder for everyone.

Unless you own the Hope Diamond or jewelry like it, your jewelry doesn’t belong locked up in an airless safe deposit box. If you do have irreplaceable jewelry and don’t want it kept at home, make sure it’s insured. Most banks don’t automatically insure items in a safe deposit box.

Trust documents are in the same category as a will. If they are in a safe deposit box and the person who owns the box dies or becomes incapacitated, the only way to gain access will be to be listed on the documents—which will be in the safe deposit box. Keep them in a safe at home or on file with the elder lawyer who created them for you.

A Medical Power of Attorney won’t do you any good, if it’s secured in a safe deposit box. If someone needs these documents in an emergency situation, they need to be where you are and easily accessible. There’s no downside to having too many copies of a medical POA. Keep at least one in the house, give one to the person who is designated on the document, one to your primary care physician and one or more to loved ones who live nearby.

Passports are more likely to be needed and not retrievable from a safe deposit box than they are to be stolen from home. They are far more likely to be stolen when you are traveling, especially overseas.

Your COVID-19 vaccination card is going to be needed from time to time, so it’s best in a desk drawer, on the refrigerator or in your wallet.

Loaded weapons, liquids, and explosives. If you can’t take it on an airplane, you should not keep it in a safe deposit box.

Directions to loved ones about anything of importance should be kept at home and people who are expected to follow your instructions should be told where they are located. If a safe deposit box is sealed, and most are at death, a funeral or memorial service may be a distant memory by the time the instructions are read.

Bottom line: important documents belong in our home in a waterproof, fire safe box. Tell loved ones where the box is located and where they can find the keys.

Reference: yahoo! finance (Aug. 2, 2022) “10 Items You Should Never Keep In a Safe Deposit Box”

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

Actress Helen McCrory Leaves Money in Trust – Annapolis and Towson Estate Planning

Late British actress Helen McCrory left her entire $1 million estate in the name of her husband and actor Damian Lewis and their two children. The will states that the Harry Potter star had put her money into a trust.

Her will appointed Damian as one of the trustees of the 125-year-long fund – along with HM the Queen’s bankers Coutts – with the power to make payments out of the trust to himself and the other beneficiaries.

SK Pop’s recent article entitled “What was Helen McCrory’s net worth at the time of her death?” reports that her children, Manon (15), and Gulliver (14), along with any future grandchildren, have been named beneficiaries.

McCrory, who last starred in Netflix’s Peaky Blinders, died in April 2021 after secretly battling breast cancer for years. She was 52 and had been married to Lewis since 2007.

Her net worth was combined with her husband’s and was around $25 million at the time of her death.

In 2017, Helen was awarded an OBE for her services in drama. McCrory  was most remembered for playing Aunt Polly, the Shelby family matriarch in Netflix’s crime drama series Peaky Blinders. She died during the filming of the show’s final season.

She also starred as Narcissa Malfoy in the Harry Potter film series and played roles in Skyfall and the 2006 film The Queen.

McCrory received many accolades during her lifetime, including a BAFTA award for Streetlife (1995), a Broadcasting Press Guild Award for North Square and a Golden FIPA at the Biarritz International Festival of Audiovisual Programming.

The National Theatre’s artistic director Rufus Norris said she was “unquestionably one of the great actors of her generation.”

McCrory and Lewis made contributions during the pandemic and helped raise $1.8 million for Feed NHS.

Her actor husband was the Emmy Award-winning star of Band of Brothers, Homeland and Wolf Hall.

Reference: SK Pop (July 23, 2022) “What was Helen McCrory’s net worth at the time of her death?”

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

Who Is the Best Person for Executor? – Annapolis and Towson Estate Planning

Several critical estate planning documents give another person—known as an agent or personal representative—the legal right to act on another person’s behalf. They include wills, trusts, powers of attorney and advance health care directives, as described in a recent article titled “The nomination of trustees, executors and agents” from Lake County Record-Bee.

Your will is only activated after you die. The will and executor then have to be approved by the court. Many people think being named as an executor confers instant authority, but this is not true. Only when the will has been deemed valid by the court, does the executor have the power to act on behalf of the decedent.

After death, the court is petitioned for a court order appointing the executor and then letters testamentary are signed by the appointed executor. An executor then becomes active as an officer of the court with a fiduciary duty to act as personal representative of the decedent’s estate.

If the named person declines to serve, the will should have a secondary person named as executor, who can then request the appointment be validated by the court. Others can petition the court to be appointed. However, it is best to name two people of your choice in your will.

A trust is a separate legal entity with a trustee who is in charge of the trust and its assets. If a revocable will is created, the trustee is usually the same person who has the trust created, also known as the grantor. For an irrevocable trust, the trustee is someone other than the grantor. The appointment does not become official until the appointment is accepted, usually through signing a document or by the successor trustee taking action on behalf of the trust.

Just as an executor might not accept their role, a trustee can decide not to accept the nomination. However, once they do, they have a fiduciary duty to put the well-being of the trust first and manage it properly. You can’t accept the role and then walk away without serious consequences.

Powers of attorney are used while a person is living. The power of attorney’s effective date depends upon what kind of POA it is. A durable power of attorney is effective the moment it is signed. A springing POA sets forth terms upon which the POA becomes active, usually incapacity. The challenge with a Springing POA is that approval by the court may be required, usually with proof from a treating physician concerning the person’s condition.

Similarly, the health care power of attorney appoints a person who acts on behalf of another as their agent for health issues. They can decline the position. However, once they agree to take on the position, they are responsible for their actions.

If the POAs decline to serve and there is no secondary person named, or if all named POAs decline to serve, the family will need to apply for a conservatorship (also known as guardianship). This is a lengthy and expensive process requiring a thorough investigation of the situation and the person who needs representation. It can be contested if the person does not want to give up their independence, or by family members who feel it is not needed.

These are commonly used terms in estate planning. However, they are not always understood clearly. Your estate planning attorney will be able to address specific responsibilities and requirements, since every state has laws and appointments vary by state.

Contact our office to schedule a consultation with one of our experienced attorneys to discuss who the right people would be to serve as your Executor, Trustee, Power of Attorney, and/or Health Care Agent.

Reference: Lake Country Record-Bee (July 30, 2022) “The nomination of trustees, executors and agents”

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