Annapolis, Maryland Wills, Trusts & Estate Planning

New Estate Tax Law Enacted in Maryland Not Tied to Federal Tax Rate - Annapolis Estate Planning

The ability of the state to set laws regarding estate taxes has been exercised by Maryland, which has put its own estate law in place, separate and apart from the IRS.

The state legislature of Maryland has passed a law following the new tax reform that will limit the state’s estate tax exclusion amount to $5 million. Recently passed legislation permits portability between spouses of the deceased spouse’s unused exclusion amounts. This lets the personal representative or executor of the deceased spouse make an election on the decedent’s estate tax return to port the deceased spouse’s unused exclusion amount to the surviving spouse.

LegiScan notes in “MD HB308” that Maryland's estate tax exclusion amount has been "de-coupled" from the federal estate tax applicable exclusion amount (known as the "estate tax exemption") since 2004. However, a law enacted in 2014 provided for the eventual re-coupling of the Maryland Estate Tax Exclusion Amount to the Federal Applicable Exclusion Amount. This was phased in from 2014 through 2019. Full re-coupling was to be effective for decedents dying on or after January 1, 2019.

In effect, the 2014 Maryland law provided that for decedents dying on or after January 1, 2019, the Maryland estate tax exclusion amount would equal the amount that could be excluded under the federal estate tax. Prior to the passage of the Tax Cuts and Jobs Act in December 2017, the indexed federal exclusion amount was scheduled to be $5.7 million in January of 2019.

 However, with the new tax reform, the federal exclusion amount was upped to $10 million per person, indexed for inflation, for decedents dying on January 1, 2018 or later, through December 31, 2025. After indexing for inflation, the per person exclusion amount will be roughly $11.18 million in 2018.

Starting on January 1, 2026, the $10 million per person federal exclusion amount will sunset and return to the prior exclusion amount of $5 million per person, indexed for inflation.

The maximum Maryland estate tax rate of 16% is not altered with the new legislation .

In addition, the state’s inheritance tax is also unchanged. That rate is based on how closely related the decedent was to the people who inherit from him or her, rather than on the size of the estate. The inheritance tax doesn’t apply to surviving spouses and the children of a decedent.

The prior 2014 law still applies to decedents who passed in 2018, so the exclusion amount remains at $4 million for them. Note that the 2014 amount is not indexed for inflation and portability between spouses is not permitted.

Every state has its own estate tax laws, so it is best to meet with an estate planning attorney in your state to map out your family’s plan.

Reference: LegiScan (April 5, 2018) “MD HB308”

Holden & Campbell, LLC – Annapolis Estate Planning

Holden & Campbell, LLC – Annapolis Estate Planning

Statewide “PROTECT Week” Launched in Maryland to Protect Seniors - Annapolis Estate Planning

With the exploitation of seniors adding up to millions in losses for families, businesses and government, the state of Maryland is taking steps to raise awareness of elder financial abuse.

One in five adults age 65 and older have become victims of elder financial abuse in Maryland, as reported in an article in The Baltimore Sun, “Stopping elder fraud in Maryland,” with losses averaging $12,000 per person. Maryland is taking action.

Financial exploitation of the elderly is a significant concern. It occurs when criminals operate in the open with the victims' alleged consent. It can happen at a care facility, in the community, or even in the home. These predators on the elderly can be complete strangers, caregivers, telemarketers, friends or family members.

The impact of financial fraud on the elderly is staggering: about $2.9 billion each year is attributed to these crimes.

The state of Maryland recently launched its first-ever “PROTECT Week” to raise awareness about elder financial abuse and prevention. The week-long campaign is made possible by a collaboration of public and private partners. Local, regional, and state organizations have joined together to raise awareness about elder financial abuse. Education and awareness are critical to preventing older adults from becoming victims, officials say.

In 2013, Maryland law started mandating that banks and credit unions report suspected financial exploitation of citizens over age 65. AARP started its Fraud Watch Network two years ago, which is aimed at thwarting the growing fraud problem among the elderly. Maryland Attorney General Brian Frosh appointed a dedicated Senior Asset Recovery Unit in 2017 that investigated and sued on behalf of victims of elder financial abuse in Maryland.

Like anywhere else in the United States, officials say that it’s hard to ascertain the extent of the problem in Maryland. This is because most cases go unreported. Many seniors believe that it will never happen to them. However, even if you don’t necessarily match the stereotype, it doesn’t mean you’re protected from harm. These criminals don’t discriminate based on income level, gender or age.

The larger message: if you suspect that an elderly person, friend, loved one or neighbor is being exploited, contact a long-term care ombudsman or law enforcement agency, so that the situation can be investigated. You can also contact the local Department of Aging or the Attorney General’s office.

Reference: Baltimore Sun (January 7, 2018) “Stopping elder fraud in Maryland”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

New Procedure for Designating a Beneficiary of a Vehicle Title - Annapolis Estate Planning

The Maryland Motor Vehicle Administration has recently changed the procedure for adding a beneficiary to a vehicle title.

The MVA is no longer using Form VR 471 to designate a beneficiary of a vehicle. There is now the option of adding a beneficiary to your title via the MVA's website, which can be accessed using the following link:  Vehicle Beneficiary Designation (see the last option under Vehicle Services on the left hand side).

You can complete the online process and receive a new title that designating your beneficiary.  This transaction will void any previously issued titles. The fee for adding, deleting, or changing a beneficiary is Twenty Dollar ($20.00). You will need to provide the title number, Maryland driver's license or ID number and date of birth. The form must be completed in full prior to the death of the vehicle owner. 

Further requirements and instructions to add beneficiary are as follows:

• The vehicle must be solely owned and currently titled in Maryland

• Only one beneficiary can be named; which can either be an individual or business entity

• Beneficiary must be designated prior to the death of the vehicle owner. A corrected title will be mailed to the vehicle owner displaying “Beneficiary on File.”

• A beneficiary may be added if a vehicle is subject to a lien. When the vehicle is being transferred, all liens must be satisfied, or have a letter of permission to change ownership to the beneficiary.

• The designation of a beneficiary does not affect the ownership of the vehicle until the death of the owner of the vehicle.

• The owner of the vehicle may cancel or change designation of a beneficiary at any time without the consent of the beneficiary.

• Once a beneficiary is designated, the corrected title will be delivered to the vehicle owner. All previously issued titles will be void.

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Maryland ABLE is open for enrollment - Annapolis Estate Planning

More independence, greater financial security and a better quality of life – that’s the future Maryland ABLE wants to help build. Maryland ABLE accounts are a new way to help individuals with disabilities save money and pay for qualified disability-related expenses without jeopardizing state or federal means-tested benefits such as SSI or Medicaid. Learn more and enroll at www.marylandable.org. 

When Power of Attorney Forms are Refused - Annapolis Estate Planning

This is one of those problems that you think you've solved, only to discover that the problem still exists. The best workaround we can think of: overdoing due diligence, well in advance.

When you took the necessary and advisable step to have a parent or other relative sign a durable power of attorney, you might have felt relieved, secure in the knowledge that you were now prepared and protected to handle their finances if they become incapacitated.

However, The New York Times explains in “Finding Out Your Power of Attorney Is Powerless” that when you take the witnessed and notarized document to a financial institution, the officials there may not accept the documents. They may not honor your power of attorney and may insist that the account owners sign the institution’s own power of attorney form.  (In Maryland, if the power of attorney presented to the financial institution is a Statutory Form power of attorney, the bank cannot require any other additional power of attorney, if they still do not honor the Statutory Form power of attorney and the Agent is forced to sue to have it enforced, the bank may be liable for the Agent's attorney's fees)

Sometimes when a person is helping an older relative consolidate his or her accounts, the individual will run into this roadblock. The local bank will not accept the out-of-state power of attorney that the relative had signed three years earlier, when this individual sold his or her house. The bank has its own more detailed state form. In the meantime, the relative has developed dementia.

This is not a rare occurrence. Elder law attorneys often encounter financial institutions unwilling to honor valid powers of attorney. Even when state statutes require banks to accept a durable power of attorney, or waive their liability when they do accept it, elder law attorneys have seen some banks resist.

Financial industry executives have not given any estimates of how many banks and brokerages insist on their own power of attorney forms, but it is uncommon, they say. Nevertheless, banks argue that they hold important assets and need to be careful when someone is asking for access to a customer’s account. This is a valid concern. Government agencies and advocacy groups warn us about the financial exploitation of seniors, particularly those with cognitive impairment.

Banks also have other motivations. When they are insisting on their own forms, they are concerned about liability.

What can you do? An estate planning attorney can help with banks and brokerages honoring valid powers of attorney by going above local managers to higher-ups. You can also be proactive by asking a brokerage or bank if it requires its own durable power of attorney document and, if it does, having your relatives sign it when they are still able to do so.

It may seem like double work, but by going above and beyond now and working with an elder law or estate planning attorney to review all of these forms in advance, you will be better prepared if and when you need to represent a loved one using the power of attorney.

Reference: New York Times (May 6, 2016) "Finding Out Your Power of Attorney Is Powerless"

Holden & Campbell – Annapolis, Maryland Estate Planning Attorneys

Financial Pointers: Providing Care for Aging Parents - Annapolis Estate Planning

Dealing with aging parents is not only tough emotionally, but financially.

As one's parents age, financial and health care discussions are essential for families to have in order to plan ahead for any care they may require.

A recent Newsday article, titled"Money Fix: The cost of caregiving," tackled this tough issue and offered some financial and non-financial advice to help with providing care for aging parents.

Here are the pointers Newsday recommends implementing:

Communicate. Speak with your parents. You may need to ask some hard questions: Do they have a strategy in place to pay for long-term care expenses? The answer could be as easy as purchasing long-term care insurance or devising a Medicaid plan.

Create a strategy. A PNC Financial Services Group survey found that 30% of pre-retirees who plan to care for a parent or another loved one will work longer to afford such care.

Build a cash reserve. The original article says that experts really do not recommend using your retirement funds to pay for this care. However, if needed, Roth IRA contributions can be withdrawn tax and penalty free.

"Unearth all possibilities." That is the descriptive phrase the original article uses for the type of creativity and imagination one should have when thinking about the budgeting and affording the added expense of a loved one's care. For example, if your father passed away and was in the military—even if it was a long time ago—your mom might have a claim to some veteran's benefits.

Another key point is that if your parent or loved one needs to be placed in a nursing home, Medicaid will "look back" five years for any gift made in an attempt to reduce assets to become Medicaid eligible. Gifts of that sort, the original article cautions, can trigger a waiting period before Medicaid would pay for nursing home care.

We are talking about a lot of money—$5K to over $10K a year to provide care for your parent or parents. Start to think about this sooner rather than later. Talk to your siblings and work with an experienced elder law attorney to make the right moves and to develop a strategy for this possibility.

Reference: Newsday (October 5, 2014) "Money Fix: The cost of caregiving"

Holden Campbell, LLC - Annapolis, Maryland Estate Planning Attorneys

Maryland to Cut Estate Tax - Annapolis Estate Planning

"The Maryland measure gradually increases the amount exempt from the state estate tax from $1 million this year, to $1.5 million in 2015, $2 million in 2016, $3 million in 2017, and $4 million in 2018. Finally, in 2019 it will match the federal exemption which is projected to be $5.9 million, up from $5.34 million today (it’s indexed for inflation)."

The Maryland Senate passed a bill Thursday, March 20, 2014 that will gradually increase the estate tax exemption.  It has not been signed by Governor O'Malley as of yet, but he is expected to sign.  This change in the law will give estate planning attorneys more flexibility when preparing clients planning, such as planning to avoid more capital gains tax upon the second spouse's death.  

It will also allow estate planners to spend less time talking about saving taxes and more time talking about the things that really matter such as: who is going to take care of the client if they are no longer able to, any and all issues concerning the client's family, the client's goals for leaving an inheritance, etc.

References:  http://www.washingtonpost.com/local/md-politics/maryland-general-assembly-passes-estate-tax-relief/2014/03/20/0b467abc-b050-11e3-9627-c65021d6d572_story.html

www.forbes.com/sites/ashleaebeling/2014/03/20/maryland-to-cut-estate-tax-as-blue-states-fall-in-line

Holden & Campbell, LLC - Annapolis Estate Planning Attorneys

State Estate Taxes Are Lurking In The Shadows - Annapolis Estate Planning

There are steps that residents of states with steep estate taxes can take–short of moving–to help minimize such bills or avoid them altogether.

Although the Federal government may cast a big shadow in terms of estate taxes, don't forget those state laws lurking in the shadows. If you are building your estate plan, be sure to find out which state estate taxes apply to you.

MarketWatch recently provided some advice in an article titled “Protecting your estate in a high-tax state.”

Ironically, the estate tax scare at the federal level is less of a concern at present. The IRS has issued the estate and gift tax exemptions for 2014 and the new unified exemption/credit will be pegged at a cool $5.34 million. Unfortunately, the states did not get the same memo.  Here in Maryland, the estate tax exemption remains at $1 million, which becomes relevant to a lot more people.

The states are still different and vary considerably. Certain states have their own forms of gift tax, estate tax, inheritance tax, and so on. There are even more subtle taxes such as those on real property.

Even if you live in one state, you might just be affected by the laws of another state if you own the wrong kind of property or conduct business there. Where you choose to retire could also upset your estate tax planning apple cart. In addition, you may be inheriting from family members who are residents in a tax-happy jurisdiction.

Consequently, it is important to follow the Boy Scout motto and always “Be Prepared.’

Reference: MarketWatch (October 28, 2013) “Protecting your estate in a high-tax state”

            Holden & Campbell, LLC - Annapolis Estate Planning Attorneys

Annapolis Estate Planing Blog: State Estate Taxes

There has been a marked uptick in state-level activity on the estate tax front. With numerous legislative proposals swirling, which ones survived? When it comes to the federal level and the estate tax, we’re all simply waiting for some word from Congress and the White House. As if that weren’t enough, you need to keep a sharp eye on the state legislatures too.

Recently, Wealth Strategies Journal took a snapshot of 16 states considering amendments, higher exemptions, and even outright repeals. As you might expect, the results were mixed. The article is titled Multi-State Estate Tax Update: Much Activity - What Are The Results?  Maryland continues to have a separate state estate tax with a $1 million exemption.  The highest rate for the Maryland Estate Tax is 16%.

Here’s the takeaway. With many state budgets bleeding red ink, all sources of potential revenue are on the table, to include inheritance and estate taxes at the state level.

        Holden-Campbell, LLC, Annapolis Estate Planning Attorneys