Annapolis, Maryland Wills, Trusts & Estate Planning

What to Do Now That We’ve Inherited Mom’s House? - Annapolis Estate Planning

The executor is in charge of managing the estate and assets. If the children have inherited the house, they have to figure out what they want to do with the house.

When kids inherit the family home, there are always a lot of questions, unless the family had conversations ahead of time about the family home and what will happen to it when the owner dies. If this hasn’t happened, which is usually the case, it’s time for the executor (also known as the Personal Representative in Maryland) to get started. Ideally, the executor and the heirs all work well together.

nj.com’s article on this subject asks, “Mom died and left us her home. What do we have to do next?” According to the article, the executor is tasked with gathering the assets, paying the debts and taxes (if any), and then distributing the assets, in accordance with the parent’s will.

If the home was in the parent’s name alone, it makes the property a probate asset that’s passed according to the will. In addition, if the will provides that under the residuary clause everything that’s left is to be distributed equally among the children, it will give the executor discretion to liquidate and then make the distributions.

There also may be a specific provision in the will covering the home.

There’s no specific timeline as to when the property has to be transferred. However, the executor is required to act prudently and in a reasonably timely manner.

In this situation, the home will most likely be sold. It is also the executor’s responsibility to pay the bills associated with the home until a buyer is found.

If one child wants to live there, and it’s agreeable to everyone, make sure that she doesn’t refuse to leave when it comes time to sell.

Note that landlord-tenant laws protect a tenant and may create an issue in this situation. The executor may want to talk with an attorney to determine what steps are necessary to protect against the tenant refusing to leave.

If a family member is staying in the house, they need to be mindful that the house is an asset of the estate. It is the responsibility of the executor to ensure that the home is maintained properly. If the home is to be put on the market, the family member needs to take care of the home. Sometimes this can spark controversy with siblings. A family meeting with the executor, possibly with the estate planning attorney present, might be useful to clarify the responsibilities and set a timeline.

Reference: nj.com (April 1, 2019) “Mom died and left us her home. What do we have to do next?”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Why is it Difficult to Pick an Executor? – Annapolis Estate Planning

It’s hard because you want to be sure your chosen person understands your wishes, your financial situation and can make good decisions on your behalf. Not everyone can do that.

There is considerable responsibility that comes with being named an executor of an estate, explains MoneySense in the article “Should the sole recipient of an estate be the executor too?” There have been new rules passed in the last year that make the tax reporting even more important. What happens if you realize that the person you originally named may not be up to the task? This is another reason why it’s good to review estate plans every few years. There are several factors to consider when you think about whom you might name.

Consider the person’s age. It’s smart to choose a person who’s younger than you. Although that doesn’t guarantee that they will outlive you, it certainly ups the odds. Ideally, you should try to find a person who is comfortable with the areas of money and tax and doesn’t easily get overwhelmed by paperwork. Since the role of estate executor can be an intense issue that takes a great amount of time, the person you choose ideally will be retired or have the bandwidth to dedicate the substantial time commitment required to do the job properly.

Based on the complexity of the assets in the estate—and the amount of planning the deceased has done to make the job a little bit easier—the winding up of an estate can take more than a year. If the assets must be probated, you’ll want the person you appoint to understand the process and liability that she’s accepting. There are multiple tax returns and filings that must be completed and filed at specific times.

There are banks that offer trust services, but these can be expensive and will take a chunk out of the estate in fees, until the last tax filing is completed. An attorney is also a good choice, but not many lawyers will take on the liability and have the time to act as an executor.

Many people ask a family member who’s either performed these duties in the past or is willing and knowledgeable enough to do things in a conscientious manner and follow through. Remember, the more estate planning that’s done in advance, the easier it makes it for an executor.

Another option is to have two or more adult children act as an executor. However, this can add some complexity to the process because first they must both agree on every issue; second, they must both be available to make decisions and sign documents at the same time. These days you can have siblings living from Maine to Oregon, and people can travel all over the world at any time.

Talk with the person you are considering naming an executor. Don’t just put their name down and hope for the best. They will need to understand the both the tasks and your wishes. Don’t hesitate to ask your estate planning executor their opinion about your choices; they’ve seen many situations and share useful insights.

Reference: MoneySense (March 27, 2019) “Should the sole recipient of an estate be the executor too?”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Making Sure Your Aging Parent Has the Correct Plan in Place - Annapolis Estate Planning

As parents age, there are certain legal and financial matters that their adult children must attend to. They include a Power of Attorney and an Advance Health Care Directive.

It’s a delicate discussion, but when parents are aging, their children should find out if their parents have several basic estate planning documents in place and talk about their final wishes. If they have not done any planning, now is the time—before a crisis occurs.

The Monterey Herald’s recent article, “Financial planning: Making sure Mom is taken care of,” says to first make sure that she has her basic estate planning documents in place. She should have a Will and an Advance Health Care Directive. Talk to an experienced estate planning attorney to make sure these documents fully reflect your mother’s desires. An Advance Health Care Directive lets her name a person to make health care decisions on her behalf, if she becomes incapacitated. This decision-making authority is called a Power of Attorney for Health Care and the person receiving the authority is known as the agent.

Based on the way in which the form is written, the agent can have broad authority, including the ability to consent to or refuse medical treatment, surgical procedures and artificial nutrition or hydration. The form also allows a person to leave instructions for health care, such as whether or not to be resuscitated, have life prolonged artificially, or to receive treatment to alleviate pain, even if it hastens death. To limit these instructions in any specific way, talk to an attorney.

Another option is to create a revocable living trust. In some states, estates worth more than a certain amount are subject to probate—a costly, lengthy and public process. Smaller value estates usually can avoid probate. When calculating the value of an estate, you can exclude several types of assets, including joint tenancy property, property that passes outright to a surviving spouse, assets that pass outside of probate to named beneficiaries (such as pensions, IRAs, and life insurance), multiple party accounts or pay on death (POD) accounts and assets owned in trust, including a revocable living trust. You should also conduct a full inventory of your parent’s accounts, including where they’re held and how they’re titled. Parents may also need to update the named beneficiaries on IRAs, retirement plans and life insurance policies.

Reference: Monterey Herald (March 20, 2019) “Financial planning: Making sure Mom is taken care of”

Holden & Campbell, LLC – Annapolis Estate Planning

Filing Taxes After a Parent Dies - Annapolis Estate Planning

There are estate taxes, inheritance taxes and final taxes that all must be addressed when a person dies. What taxes must be paid and how much must be paid depends upon the size of the estate and what state the decedent lived in.

The death of a parent results in a flurry of paperwork, including taxes. One of the tasks that must be taken care of is what is grimly referred to as the “final” individual federal and state tax return, as explained by nj.com, in the recent article, “What tax returns need to be filed after someone dies?”

All of the income, starting at the beginning of the year up to the individual’s date of death, must be reported on the tax return. All of the tax deductions and tax credits that the person was entitled to may be claimed. This final return is typically filed by the surviving spouse or by the executor of the individual’s estate.

The final return can be either electronically filed or filed on paper. The tax preparer should also be sure to write “deceased” after the taxpayer’s name and include the date of death, so that the IRS knows that this will be the last individual return filed.

However, at the death of a taxpayer, a new taxpaying entity—the taxpayer’s estate—is automatically created to make certain that no taxable income escapes review by the IRS. Income that’s earned during the tax year up to the date of the person’s death is reported on the final individual tax return, and any earnings after that date are taxable to the decedent’s estate. Earned income of the estate is any income for which the decedent was entitled to during the year that occurred after the date of death. This could include any dividends or interest from stock or bond investments held in the decedent’s name that was collected between the date of death and the end of the calendar year.

In addition, beneficiaries of assets paid directly to them outside of probate, like IRAs already in distribution mode or life insurance policies, may be subject to what is called “income in respect of a decedent,” or IRD. Two things must apply for this to occur: (i) the asset earns interest before the balance is transferred or paid to the beneficiaries; and (ii) the interest isn’t reported on the deceased taxpayer’s final tax return. If both of these occur, then beneficiaries are responsible for reporting IRD on their own tax returns.

This is a situation where an experienced estate attorney should be contacted. 

Reference: nj.com (March 21, 2018) “What tax returns need to be filed after someone dies?”

Holden & Campbell, LLC – Annapolis Estate Planning

Move to Nevada or Anywhere Else? Review Your Estate Documents Soon – Annapolis Estate Planning

Did you know that most estate laws are governed by state law, and not federal? That’s why any kind of relocation to another state, for retirement or a new job, should have you finding an estate planning attorney and making an appointment soon after you move.

If you’ve moved to a new state, an estate planning attorney will need to review your estate plan and your will to be sure that the documents follow the laws of your new home state.

The Nevada Appeal’s recent article, “Change to estate planning documents if you moved,” also notes that as long as you're working with the attorney, it would be a wise move to also have her prepare a power of attorney for medical decisions and the power of attorney for financial matters to be in compliance with Nevada law.

Making those changes can avoid a lot of time, trouble and confusion in the future for you and your family.

Another thing to consider while you're making those changes, is to be certain the documents show your current goals and desires. If you want to make a change in trustees and/or executors, now is a good time to do that.

Remember that serving as trustee and/or executor isn't an easy task. It may be possible that one of your children or a close relative is no longer the best choice at this point in time. Whoever is selected to do that work, will probably work with your CPA and your estate planning attorney. Therefore, it might be a good idea for you and the person you name to meet and go over all your goals and wishes.

In addition, many people leave an additional letter of instructions for other items like funeral services and burial or cremation instructions. You can keep the letter with your trust and will. However, you also should discuss it and make sure to tell your family members where it's located.

If you have a safe deposit box, you might tell your executor or trustee where the key to the box is kept. You may want to keep that key with your important documents. Discuss giving your executor or trustee access to the safe deposit box; you’ll need to visit the bank branch to ensure that authorization to access the safe deposit box is taken care of.

If you’ve acquired special items such as antiques, valuable jewelry, or collections, you may draft a list of possible appraisers and information about those special items. Another good idea is to take some photographs of the items that need special valuation or handling.

Some people prefer to make gifts, especially of items with great sentimental value, while they are still living. This way they can be sure the right person receives their gift, and if that person doesn’t really want the gift, it can be given to someone else.

Reference: Nevada Appeal (February 22, 2019) “Change to estate planning documents if you moved”

Holden & Campbell, LLC – Annapolis Estate Planning

Did My Sibling Take Advantage of Distance and Our Aging Mother Before She Died? - Annapolis Estate Planning

This is the kind of family situation that no one should have to deal with. However, siblings don’t always treat each other with kindness, especially when a parent has died and the other sibling has not been directly involved with caregiving.

Many times, estate planning attorneys can read between the lines to discern the dynamics of a family when one sibling asks questions about another’s actions. One such example is an adult child who asks how they can be sure if a brother divided their mother’s estate evenly.

The mother had told the children about life insurance policies and a safety deposit box. However, the brother reported that life insurance policies were cashed out, the safety deposit box was emptied and closed, a car was sold, and a reverse mortgage placed on the house, before she died. If Mom did take these actions before she died and didn’t tell anyone, or if she only told one child, it may not look right to the other sibling.

Can this information be verified without things getting ugly?

It will take some investigating. The good news is that there's always a paper trail.

nj.com’s recent article asks, “My mom died. How can I know I'm getting the right inheritance?” As the article explains, if the policies were cashed out by the parent, they no longer exist.

If you know the name of the insurance company and policy number, you can try to call the life insurance company’s home office to confirm this. However, they may not give out much information if you weren’t the named beneficiary.

If Mom had a reverse mortgage, then you know she owned a home. If the home wasn’t owned jointly, then it would be a probate asset.

One way to determine this is to check with the county court where she died to see if a will was probated or any estate administration application was filed. The home would need to be sold by the executor or administrator, so there would be some paperwork. If there was, you can contact the executor/administrator for more information.

With a parent’s safety deposit box, the executor/administrator, once appointed, would have the authority to empty the contents of the box. However, if Mom previously emptied the contents, there’d be nothing for the executor/administrator to retrieve.  You should check with that individual.

It is neither easy nor pleasant to think that a sibling would not be telling the truth about an inheritance. Start by asking some direct questions, in the kindest way possible, to clarify the timeline of these alleged events. Then get a sense of the value of the estate. It may be that you need to speak with an estate planning attorney to get all of the details. Consider the value of the estate and your relationship with your siblings, before going forward.

Reference: nj.com (February 21, 2019) “My mom died. How can I know I'm getting the right inheritance?”

Holden & Campbell, LLC – Annapolis Estate Planning

Why You Need a Gun Trust if You Own Guns - Annapolis Estate Planning

Gun owners, you may own guns to protect your family or because you admire the workmanship or history of firearms. However, without a gun trust, your heirs may face a surprising consequence.

Mistakes with inherited IRS accounts can become expensive, but the penalty is financial. Inherit a gun collection without the necessary permits and you could unwittingly commit a felony. Gun collectors need to prepare their heirs if they intend to pass on their firearms and they also need a gun trust.

Kiplinger’s recent article, “Own a Gun? Careful: You Might Need a Gun Trust,” explains that a gun trust is the common name for a revocable or irrevocable management trust that’s created to take title to firearms.

Revocable trusts are used more often because they can be changed during the lifetime of the grantor.

While it’s true that any legally owned weapon can be placed into a gun trust, these trusts are specifically used for weapons that are classified under the National Firearms Act (NFA) Title II of the Gun Control Act of 1968. These include Title II weapons, such as a fully automatic machine gun, a short-barreled shotgun and a suppressor (“silencer”).

Why is a gun trust an important component of an estate plan? When the grantor owns Title II weapons, the transport and transfer of ownership of such heavily regulated firearms can easily be a felony without the owner or heir even realizing he or she is breaking the law.

A gun trust provides for an orderly transfer of the weapons upon the death of the grantor to family members or other heirs. However, that transferee is required to submit to a background check and identification process before taking possession of the firearm.

An NFA Title II weapon, like a suppressor, can only be used by the person to whom it’s registered. Therefore, allowing a friend or family member to fire a few rounds with a Title II weapon at the local range is a felony. A gun trust can be used to allow for the use of the Title II weapon by multiple parties. Each party who will have access to and use of the weapon should be appointed as a co-trustee of the gun trust and must go through the same required background check and identification requirements.

An owner of a large collection of firearms may find it easier to transfer ownership of his or her weapons to a gun trust even if the person doesn’t own any Title II weapons. There are several benefits to doing this, such as protecting your privacy, allowing for the disposition of your collection and addressing the possibility of incapacity. A gun trust can also ease the process for your heirs. You don’t want to run afoul of the complex laws regarding the use and ownership of firearms, especially Title II firearms. Leaving a large collection of Title I weapons—or even a single Title II weapon—in an estate to be dealt with by an executor or trustee can be extremely troublesome. Fortunately, it’s avoidable with the use of a gun trust.

There are federal and state laws about ownership and how to transfer ownership of firearms, so you’ll need to work with an estate planning attorney who has experience with both.

Reference: Kiplinger (February 6, 2019) “Own a Gun? Careful: You Might Need a Gun Trust”

Holden & Campbell, LLC – Annapolis Estate Planning

How Does Divorce Impact My Estate Plan? - Annapolis Estate Planning

Was 2018 the year you finalized your divorce? Many people did all they could to finalize their divorces before New Year’s Eve, because there are new tax rules that will impact ex-spouses in 2019.

There’s bad news for those who did not get their divorce finalized by the end of 2018. Among the new tax laws are changes to alimony and taxes. Paying alimony is no longer deductible to the person who is making the payment. It’s also no longer taxable by the person who is receiving it. This doesn’t work well for anyone – the payor loses a deduction and it’s likely the receiver will get less in alimony because there’s less money available to the payor.

Forbes’ recent article, “9 Things You Need To Know About Estate Planning After Divorce” suggests that if you were one of those whose divorce was finalized last year, it’s time to revise your estate plan. It’s also good idea for those people who divorced in prior years and never updated their estate plans. Let’s look at some of the issues about which you should be thinking.

See your estate planning attorney. Right off the bat, send your divorce agreement to your estate planning attorney, so he or she can see what obligations you have to your ex-spouse in the event of your death.

Health care proxy. This document lets you designate someone to make health care decisions for you, if you were incapacitated and not able to communicate.

Power of attorney. If you had an old POA that named your ex-spouse, it should be revoked, and you should execute a new POA naming a friend, relative, or trusted advisor to act as your agent regarding your finances and assets.

Your will and trust. Ask your attorney to remove the provisions for your ex-spouse and remove your ex-spouse as the executor and trustee.

Guardianship. If you have minor children, you can still name your ex-spouse as the guardian in your will. Even if you don’t, your ex-spouse will probably be appointed guardian if you pass away, unless he or she is determined by a judge to be unfit. 

A trust for your minor children. If you don’t have a trust set up for your minor children, and your ex-spouse is the children’s guardian, he or she will have control of the children’s finances until they turn 18. You may ask your estate planning attorney about a revocable trust that will name someone else you select as the trustee to access and control these funds for your children, if you pass away.

Life insurance. You may have an obligation to maintain life insurance under the divorce agreement. Review this with your estate planning attorney and with your divorce attorney.

Beneficiary designations. Be certain that your 401(k) and IRA beneficiary designations are consistent with the terms of your divorce agreement. Have the beneficiary designations been updated? If you still want to name your ex-spouse as the beneficiary, execute a new beneficiary designation dated after the divorce. It’s also wise to leave a letter of intent with your attorney, so your intentions are clear.

Prenuptial agreement. Talk about this with your intended long before the wedding. If you both come to the marriage with assets, children, etc., having this document done can help you work through financial issues. Ideally, you’ll toss it in a drawer and never need it. However, if you need it, you’ll be glad you planned things out in a calm state of mind.

Make this the year you get your divorce and your estate plan all tidied up, so you can move on to a great year.

Reference: Forbes (January 8, 2019) “9 Things You Need To Know About Estate Planning After Divorce”

Holden & Campbell, LLC – Annapolis Estate Planning

A Love Story: George and Barbara Bush - Annapolis Estate Planning

Their lives were devoted to family and public service, and to each other. The passing of George H.W. Bush and his wife gave many Americans pause to consider their leadership and their devotion.

Few were surprised when George H.W. Bush passed less than eight months after Barbara’s death. Their deep connection—from his service in World War II to the Presidency and their role in public service after leaving the White House—was evident to everyone around them, says Forbes in the article, “Valuable Estate Lessons From The Passing Of George And Barbara Bush.”

The death of a longtime married couple in quick succession is often called “broken-heart syndrome” or “widowhood effect.” The thought is that the lives of two people are so entwined they can’t bear to be without each other. The time between the Bushes’ deaths also raises practical questions in estate planning. Timing is critical in an estate plan, and if the deaths of married spouses happen within a short period of time, it can make the administration of an estate more difficult.

Although the passing of long-time married spouses in close succession is not uncommon, the way in which the estate will be handled is based on the time between the two deaths and the details of their estate plan. In many instances, trusts or wills have survivorship provisions that require a spouse to survive for a specified period of time. If a spouse dies within a certain period—such as two weeks—they may be designated as having predeceased the other spouse and that may have implications under the document. Therefore, rather than having to probate the two estates successively, the estate administration is made into a simpler process.

The senior Bushes, however, wouldn’t have been aided by such a provision, because nearly eight months had passed. However, solid strong estate planning can help in a long-term marriage of older spouses to have the estate flow a certain way.

One thing President Bush might have used is a qualified disclaimer. With this, a beneficiary makes an irrevocable election to refuse to receive an interest in the property. This can be an effective tool when a surviving spouse doesn’t need those assets.

When spouses die within a short period of time of each other, there may be difficulties with beneficiary designations. Most spouses leave their retirement plans to the surviving spouse and their children as contingent beneficiaries. However, when death occurs in quick succession, the second spouse to die may not have yet rolled the first’s retirement account into their own account with beneficiaries. That can cause issues. This can mean having no beneficiary and the retirement account winds up going to the estate of the first spouse. When this occurs, there’s probate and no chance to stretch out retirement distributions.

In situations like the Bushes, where the surviving spouse doesn’t need the funds, it might be smart for the couple to rework their beneficiary planning to pass over the spouse and distribute immediately to the children in an inherited IRA.

The romantic nature of spouses, who literally cannot live without each other, is very touching. However, there are estate planning implications that must be addressed. An experienced estate planning attorney will be able to explain how the timing of one spouse’s death impacts the other, and how to prepare their estate, in case this should happen.

Reference: Forbes (December 3, 2018) “Valuable Estate Lessons From The Passing Of George And Barbara Bush”

Holden & Campbell, LLC – Annapolis Estate Planning

What Will Happen to Paul Allen’s Vast Fortune? - Annapolis Estate Planning

The co-founder of Microsoft serves as an excellent example of advance planning, maintaining privacy and creating a legacy.

Through a trust established years ago and several companies, Paul Allen began building his legacy of philanthropy long before his death. His last will and testament was a simple six-page document, according to an article from The Seattle Times, “Paul Allen’s will sheds little light on what will happen to estate.”

The will was filed with King County on October 24—the same day his sister Jody announced she was named the executor and trustee of his estate.

Allen died on October 15 at age 65, from complications of non-Hodgkin lymphoma.

He was a Microsoft co-founder, who operated a long list of business and philanthropic initiatives that helped shape the Puget Sound region. His business concerns included owning the Seattle Seahawks, donating significantly to the arts community and scientific research, and running the multifaceted Vulcan Inc., which reshaped the real-estate landscape of South Lake Union.

Allen’s will places his assets into a 25-year-old living trust, where their disposition is not expected to be made public. It is important to remember that wills are public records, but trusts are not.

Forbes estimated his wealth at roughly $20 billion.

The will also sets out a list of successors if Jody Allen declines or is unable to serve as executor.

Jody can appoint someone, or it would next fall to Nancy Peretsman, the managing director of investment firm Allen & Co., which is not connected to Allen. After him, the duty would fall to lawyers Allen Israel and Nicholas Saggese.

Jody Allen said in October that she “will do all that I can to ensure that Paul’s vision is realized, not just for years, but for generations.”

Many tributes to Allen have taken place since his passing. In early November, buildings in Seattle and throughout the state were lit up in blue, his favorite color and the color of the Seattle Seahawks, the football team he owned.

Reference: The Seattle Times (November 8, 2018) “Paul Allen’s will sheds little light on what will happen to estate”

Holden & Campbell, LLC – Annapolis Estate Planning