Annapolis, Maryland Wills, Trusts & Estate Planning

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

Millennials Need an Estate Plan Too - Annapolis Estate Planning

Live long enough, and you learn that life can change in a heartbeat. Young adults don’t always know this, but they need to have an estate plan as much as older people.

Whether you are a Baby Boomer or a millennial, you need to have an estate plan. With the help of a good estate planning attorney, someone in their 20s and 30s can get their estate plan done easily enough. Even if they think they’re immortal, says Wealth Advisor in, “Estate Planning Isn’t Only for the Old and Wealthy,” young adults need estate plans.

First, people can draft a will to provide directions regarding what happens to their assets, such as who will inherit both financial and personal items. Virtual assets like social media accounts should also be included. You should make a list of usernames and passwords for all your accounts and be sure that a trusted relative or friend has access.

Another important part of estate planning is to designate the beneficiaries for all company-sponsored life insurance and 401(k) plans to avoid probate issues. You can also set up a payable-on-death account from your bank.

As part of estate planning, you should also name a healthcare proxy and a general durable power of attorney. These two documents allow your trusted agent to make medical and financial decisions in the event you become incapacitated. If you want to give your proxy specific instructions, create an advance directive, known as a living will. 

As you work through these actions with your estate planning attorney, you’ll see that estate planning is not just for the old and wealthy. 

It can bring you peace of mind and provide clarity to your loved ones and family if you should pass away unexpectedly.

Make 2019 the year that you have an estate plan created. Think of it as a gift for yourself and for your loved ones.

Reference: Wealth Advisor (December 20, 2018) “Estate Planning Isn’t Only for the Old and Wealthy”

Holden & Campbell, LLC – Annapolis Estate Planning

Can Beneficiary Designations Help Simplify the Estate Planning Process? – Annapolis Estate Planning

Often overlooked, the beneficiary designation can help move assets directly to heirs without going through the probate process.

Many accounts and financial products allow the owner or investor to designate a beneficiary, who will receive the asset directly when the owner passes away. This is something that most of us encounter when we open a bank account, purchase an insurance policy or start a retirement savings plan, according to the article, “A simple way to simplify estate planning,” appearing in the Tupelo (MS) Daily Journal.

The type of assets that permit beneficiary designations also include annuities, transfer-on-death investment accounts, pay-on-death bank accounts, stock options and executive deferred compensation plans.

Remembering who the beneficiary is on these accounts can be difficult. However, when you consider the consequences of having the incorrect person named on the asset, it’s well worth the effort. Due to the importance of the beneficiary designation, note these reminders:

• Designate beneficiaries. Without this, assets can be tied up in probate court, resulting in delays, costs and unfavorable tax treatment.
• List a primary and contingent beneficiary. It is common to have a spouse as primary beneficiary, and a child as contingent, which lets the asset pass to the child, if the spouse has also passed away. You can also name a charity you support to be the contingent.
• Keep things up-to-date. Any time there’s a birth, adoption, death, marriage or divorce, you should review your accounts and polices.
• Go through the instructions on the form before signing it. Beneficiary forms can vary, so review each one.
• Coordinate your beneficiary designations with your will or trust documents. If they don’t, it could cause the probate process to be delayed.
• Work with an estate planning attorney before naming a trust as a beneficiary. Tax consequences may be different for a trust than for an individual, so some situations make a trust a wise option.
• Know the tax consequences of naming a beneficiary of a particular asset. That’s because every asset does not have the same tax treatment.

Far too many people learn the hard way, that whatever is on the beneficiary designation determines who receives the asset, no matter what is in your will. Make a list of all of assets that have this designation and review it when you review your estate plan. If you don’t have a contingency beneficiary, add that as well. Your estate planning attorney will be able to help you, if you run into any questions and to ensure that your beneficiary designations align with your overall estate planning goals.

Reference: Tupelo Daily Journal (November 2, 2018) “A simple way to simplify estate planning”

Holden & Campbell, LLC – Annapolis Estate Planning

One Dozen Must-Have Documents – Annapolis Estate Planning

To make sure that your wishes are carried out, you’ll have to do your homework. Make sure that you cover these most important documents.

The last thing you want to do, is leave a bureaucratic mess for your loved ones when you die. Not only will it cause the family stress during a difficult time, it could change how your family thinks of you. That should be more than enough reason to get this done in advance!

US News & World Report’s recent article, “12 Documents to Prepare Now for Your Heirs,” says that when people don't have their paperwork ready, it can be a huge headache for the family. A family can be left with all kinds of paperwork to sort out while dealing with grief. Even worse, heirs may forfeit life insurance proceeds and tax deductions or overlook accounts they don't know exist. That's why it's critical to have important documents ready for loved ones. Here are the documents you should start preparing right away:

A will. This is a legal document in which you name an executor to carry out your wishes, heirs to receive your assets and a guardian if you have minor children.

A letter of explanation. Your will stipulates how assets are to be divided. However, a letter of explanation can provide the reasons for these decisions. This can be helpful, if the estate is to be divided unevenly between children.

List of financial accounts and beneficiaries. Keep a list of all your finances, such as bank and retirement accounts and brokerage funds. Each may have a designated beneficiary or transfer on death provision, known as a TOD. A person who’s named as a beneficiary or TOD designee automatically will receive ownership of the asset after you die. Make sure you keep these beneficiary designations up-to-date.

Personal inventory. Most wills distribute personal property in vague terms, like designating jewelry to one person and household goods to another. To be certain that nothing significant is overlooked, create an inventory of personal items. This inventory can also list items that may be stored in another location, unbeknownst to your family.

Power of attorney. This form is an important document for your family, if you become incapacitated because of an illness or accident. A power of attorney allows a designated person to make decisions on your behalf. One form is for financial decisions, and another is for health care.

Life insurance policies. Your family can miss significant life insurance benefits, if they don't know you have a policy, or it’s been lost or misplaced. Keep records of your life insurance plans and place it with your financial records.

Real estate records. Add deeds, assessments, mortgage statements and property tax information to the documents you've prepared for your heirs. Collecting the records for them in advance will make their lives easier.

Tax returns. List the name of your CPA or tax preparer, if you have your taxes professionally done. He or she can help your family with filing final tax returns for your estate. If you file your own returns, print a copy for your files and record any login information for online tax preparation services.

Logins for accounts. Create a list of your usernames and passwords for financial accounts, email, and social media and keep it where heirs can access the information.

A digital estate plan. Some states recognize digital estate plans as legally binding. However, even if it isn’t, it can be a great resource for your family. A digital estate plan states what will happen to your digital assets, like your social media accounts, websites, digital photos, intellectual property and other files and documents. Within your plan, you can name a digital executor and list those you've named as legacy contacts on specific platforms, such as Facebook and Twitter.

An ethical will. This letter describes what you'd like remembered as your legacy, such as passing down values. An ethical will can be used to share memories or to impart wisdom.

Your final wishes. If you've made prearrangements for your funeral or cremation, place that information with your will and other end-of-life documents. Your final wishes should also include information about organ donation, pet care and who should be notified of your passing.

Distilling a lifetime into a dozen documents is not an easy task, but it is necessary. Your loved ones will appreciate your doing the heavy lifting, and it will give them the room they need to grieve their loss.

Reference: US News & World Report (October 4, 2018) “12 Documents to Prepare Now for Your Heirs”

Holden & Campbell, LLC – Annapolis Estate Planning

Choose Executor, Agent and Trustees Carefully - Annapolis Estate Planning

Selecting the individuals who will make important decisions on your behalf, when you are incapacitated or have passed away, is not to be done lightly.

Is there a bomb ticking quietly in your estate plan?  The chances are good that there is, says Forbes in “Defusing The Time Bombs In Your Estate Plan.” The only question is, how big will that explosion be? The “bombs” are the people, or the individual, who you name to act on your behalf.

Whether they act during your lifetime or after you pass away, these individuals frequently can make or break your estate plan. They can determine the fates of family relationships and financial security. However, most people don’t realize the potential consequences of their surrogates’ actions. As a result, they don’t give sufficient thought to whom they appoint to these important roles.

Let’s examine some of the major potential surrogates:

Agent: This is the person who acts for you under a power of attorney or advance medical directive.

Trustee: If you create a trust, be sure to create some limits in the trust agreement. The trustee has the authority to make the final decisions about managing the investments, making distributions, paying taxes, and other aspects of managing the trust.

Executor: This person manages and distributes your estate, after you pass away. Also known as a personal representative, the executor is charged with carrying out the wishes expressed in your will and other estate planning documents.

Social Security representative payee: Social Security will appoint someone to manage the benefits of someone who is unable to do so; usually it’s a family member or friend. The beneficiary can contact Social Security and ask that a particular individual be appointed, and they will consider the request.

Long-term care insurance lapse designee: Most insurers now allow the insured to choose an individual who’ll get a notice, if the LTC premiums aren’t paid. You also can name an alternate payee who’ll receive and manage benefit payments, when you can’t.

Agent for funeral decisions: States have varying regulations about who can make funeral decisions, and some have laws recognizing the appointment of an agent.

Financial account designees: When opening a financial account, some people like to select the transfer on death (TOD) option, or they open joint accounts with a relative or friend. This allows someone else to manage the account, when he or she isn’t able and who will inherit it without going through probate.

Estate planning attorneys ask clients to make sure to tell their selected surrogates about their roles well in advance. If they don’t know they have been chosen and aren’t familiar with the estate or the decedent’s wishes, it makes a difficult situation even harder. Another issue occurs when the responsibilities and tasks of different surrogates overlap. When you make your decisions about who will act on your behalf, as yourself, honestly, do they have the qualifications and strong backbone to do what you’re asking them to do?

Review your choices with your estate planning attorney to make sure you’ve made these decisions wisely. You may also want to write a letter spelling out who you want to oversee what tasks.

Reference: Forbes (July 23, 2018) “Defusing The Time Bombs In Your Estate Plan”

Holden & Campbell, LLC – Annapolis Estate Planning

Trust Declared Owner of Funds in POD Decision by Kentucky Appellate Court - Annapolis Estate Planning

Kentucky law affirmed that money remaining in a POD account after one of the owners died, belongs to the survivor. That’s the whole point of a Payable On Death account.

Known as a POD or a Totten trust, a Payable on Death account is a way to own accounts, usually in a bank, that is not subject to probate and is considered to be an arrangement between a bank and a customer. When one of the owner(s) dies, the ownership of the account and the assets automatically transfers to the beneficiary or beneficiaries. As a result, they are the new owners. This is a fairly commonly used method of transferring assets at death.

Justia reported in the recent Kentucky case, “Coe v. Schick,” that the use of a Pay on Death (“POD”) beneficiary designation was at issue.  It shows the dangers of using the POD beneficiary designation, without consulting with a qualified estate planning attorney.

The bank account and a Certificate of Deposit (CD) were purchased by William in the name of his Trust.  However, the problem was that his granddaughter Jennie was a named as the POD beneficiary. William’s pour-over will and trust left all of his assets to his two children Bill and Bonnie. The bank named as trustee at William’s death negotiated the CD and moved its proceeds along with the checking account funds into a new, single trust account after his death.

However, Jennie asserted her rights to the CD and the bank account in William’s probate proceeding. The estate disallowed her claim and ultimately made final settlement and distribution.

After more than eight years of litigation, the Court of Appeals heard the case.

The Court held that a trust can’t have a POD beneficiary designation because a trust can’t die. The Court of Appeals found that the CD was a joint account. State statute defines an "account" as "a contract of deposit of funds between a depositor and a financial institution, and includes a checking account, savings account, certificate of deposit, share account and other like arrangement."  A "joint account" is also "an account payable on request to one (1) or more of two (2) or more parties whether or not mention is made of any right of survivorship[.]"

Because the CD was issued to the Trust or Jennie alternatively, it was payable on request to either of them, the Court said. As a result, the CD satisfied the statutory definition of a joint account. The Court went on to explain that joint accounts payable in the alternative, like a CD, give the party who has possession the freedom to negotiate them, even to the detriment of the other party.

In this situation, the bank, as successor trustee, negotiated the CD and placed the funds in a separate account for the benefit of the Trust and its beneficiaries. The Court of Appeals found it proper for the trustee to dispose of the CD in this manner, even without Jennie's authorization or knowledge. The funds from the negotiation of the CD were the sole property of the trust and were to be distributed by the trust's terms.

This case is an example of what happens when assets in an estate are not properly aligned with the estate plan. The family could have been spared the $75,000 in legal fees, not to mention the acrimony within the family, by working with an experienced estate planning attorney to resolve all of these matters well in advance.

Reference: Justia (June 29, 2018) “Coe v. Schick”

Holden & Campbell, LLC – Annapolis Estate Planning

Estate Plan Basics You and Your Heirs Cannot Do Without – Annapolis Estate Planning

To really serve its purpose, an estate plan must have the legal documents that will protect you and your heirs, if you should become incapacitated. It’s not a pleasant thought, but it does happen.

It’s true that an estate plan starts with a properly prepared will, and often includes a trust, but that is just the starting point for a complete estate plan. Even transferring assets upon your death, is only one part of an estate plan. Surprised? Many people are, but better to be surprised now than to have your heirs surprised later!

Investopedia’s recent article, “6 Estate Planning Must-Haves,” provides a list of items that every estate plan should have. This includes a will (and perhaps a trust), a durable power of attorney, up-to-date beneficiary designations, a letter of intent, a healthcare power of attorney, and guardianship designations.

Let's take a look at each item on the list to see if you’ve left any decisions to chance.

Wills and Trusts. This should be one of the main elements of every estate plan—even if you don't have substantial assets. Wills are documents that make certain property is distributed according to your wishes (if drafted pursuant to state laws). Some trusts also help limit estate taxes or legal issues. But this isn’t enough. The wording of these documents is extremely critical: a will or trust should be written in a way that’s consistent with the way you've bequeathed the assets that pass outside of the will.

Durable Power Of Attorney. A durable POA authorizes an agent of your own choosing to act on your behalf when you’re unable to do so for yourself. Without a power of attorney, a judge may have to decide what happens to your assets, if you’re found to be mentally incompetent. That ruling may not be what you wanted. A POA can give your agent the power to transact real estate, enter into financial transactions and make other legal decisions in your stead (as if he or she were you). This POA is revocable by the principal at a time of his or her choosing, typically at a time when the principal is deemed to be physically able, mentally competent or upon death.

Beneficiary Designations. Some assets can pass directly to your heirs without being dictated in the will (like a 401(k) plan). Therefore, it’s important to have an up-to-date beneficiary, as well as a contingent beneficiary, on these types of accounts. If you fail to designate a beneficiary, or if the beneficiary has passed away or is unable to serve, a judge may decide what to do with your funds. This again may not be what you wanted.

Letter of Intent. This is a document left to your executor or a beneficiary, that defines what you want done with a particular asset, after your death or incapacitation. It can also provide funeral details or other special requests. It’s not a legal document, but it helps inform a probate judge of your intentions and may help in the distribution of your assets, if the will is deemed invalid.

Healthcare Power of Attorney. This appoints another individual (usually a spouse or family member) to make important healthcare decisions on your behalf, in the event of incapacity. If you’re thinking about creating such a document, you should select someone you trust, who shares your views, and who would likely recommend a course of action with which you’d agree. A backup agent should also be named, if your initial pick is unavailable or unable to act at the time needed.

Guardianship Designations. If you have minor children or are considering having kids, choosing a guardian is very important and many times is overlooked. Be sure the individual or couple you choose shares your views, is financially sound and is willing to rear your children. You should also add a contingent guardian as well. Without these designations, a judge could rule that your kids should live with a family member you wouldn't have wanted, and in some cases, the court could require that your children become wards of the state.

It takes all of these documents to make up an estate plan, that protects you and your loved ones in the event of many different situations.

Reference: Investopedia (April 18, 2018) “6 Estate Planning Must-Haves”

Holden & Campbell, LLC – Annapolis Estate Planning

What are the Most Common Estate Planning Mistakes? - Annapolis Estate Planning

After years of practicing estate planning law, attorneys are all too familiar with some of these mistakes, and can help you avoid them, if you are smart enough to get help from a professional.

Some people like to think they know everything, and that often applies to estate planning. The problem is, they don’t learn about the mistake—their heirs do! By working with an estate planning attorney, you can avoid making these mistakes and spare your family the stress and expense.

The Hockessin (DE) Community News reports in a recent article, “The dumbest estate planning moves,” that the misuse of joint ownership is extremely frequent.

You probably know that settling an estate without a will, can be very time consuming and expensive. One way that people try to avoid probate, is with property owned jointly with rights of survivorship.

That’s because the joint owner becomes the exclusive owner of that property, when the other owner passes away. This is the case for a bank account or a family home.

Many seniors say their joint owner, usually a son or a daughter, will gladly share the account with their siblings after the parent passes. But will the joint owner then tell their siblings that’s how Mom wanted it?

More often than we’d like to believe, the result is that the other siblings may get a lot less than Mom wanted—or nothing at all. If the surviving owner does follow through with Mom’s instructions and does truly square up with his brothers and sister, there may be other tax consequences.

That’s because the process of squaring up may be considered a gift for tax purposes.

In real estate, there’s a chance the remaining owner will be burdened with a low-cost basis. As a result, she will be hit with capital gains taxes, when later selling the asset. Mom’s effort to simplify things may have actually caused a lifetime of family conflict.

Instead, avoid these troubles with a transfer on death account or the use of a revocable living trust.

A real estate attorney can handle the title change.  However, before you start dealing with the deed, sit down with an estate planning attorney. He or she will be able to explain how this may impact your tax liability and the conflict it may spark within the family.

A better option is to create an estate plan, properly prepared with the help of an experienced estate planning attorney. This will guide the distribution of assets and prevent or at least mitigate the possibility of siblings battling over the estate.

Reference: Hockessin (DE) Community News (April 24, 2018) “The dumbest estate planning moves”

Holden & Campbell, LLC – Annapolis Estate Planning Attorneys

Proper Planning for the Distribution of an IRA – Annapolis Estate Planning

The rules for IRA distributions can be complicated. Unforeseen circumstances can make things even more complex. Understand the rules, so the money goes where you want it to.

What happens if you designate each of your two adult children as 50/50 beneficiaries of your IRA, and then one of them dies? Will the funds go to your grandchildren?

MarketWatch answered that question in its article, “Who gets your IRA when you die? It’s not so simple.” The answer to what happens to the IRA money is dependent upon what the beneficiary designations say and when one of the children passes away. The beneficiary designations state how it will be distributed. However, that may not be what is written in your will.

If the children are alive when the IRA owner dies, and she simply named them 50/50 outright beneficiaries, they will each get half the funds. Each child could do whatever they wanted, including placing the funds in an inherited IRA account and naming their choice of beneficiaries.

However, if either child dies before the parent with the IRA passes away, and she doesn’t update the beneficiary designation before she dies, there are two common default arrangements built into account forms for IRAs, retirement accounts, life insurance policies, annuity contracts, and “transfer on death” arrangements available in some states. One is per capita: if one child is dead at the time of the parent’s death and is still listed as a 50% beneficiary, then 100% of this share will go to the surviving child.

The other common arrangement is per stirpes—Latin for “by the root.” Here, rather than the predeceasing child’s share going to their surviving sibling, the share goes to the deceased beneficiary’s children.

Be sure to obtain a copy of what you filed for your beneficiary designations. You should carefully review the language to be certain that it meshes with your wishes. If you want your assets to flow differently, speak with an estate planning attorney about drafting a custom beneficiary designation. Some people don’t want one of their beneficiaries to inherit outright and have free reign with the funds. An attorney can help protect that person and the money.

If you want to have people who are not “linear” decedents be beneficiaries, such as family friends or spouses of children, you’ll need to sit down with an estate planning attorney to make sure that the legal documents are correctly drafted. You may decide to use a custom beneficiary designation or trusts to achieve this.

Reference: MarketWatch (March 17, 2018) “Who gets your IRA when you die? It’s not so simple”

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