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ESTATE PLANNING - WILLS, TRUSTS & ESTATES


Careful estate planning enables people to protect their assets now and also plan for their future distribution to family members and other beneficiaries after death.

You are putting your personal security at risk if you lose control of your assets. Quite often even well meaning people place their assets and personal welfare in jeopardy. Avoid the worst Estate Planning mistake - Procrastination.

What is Estate Planning?

Estate Planning requires two simple elements - i) define your goals and ii) organize your property and estate documents to meet your goals.

There is no doubt that you have probably invested extraordinary time & effort to achieve security, build a business or provide for your loved ones. Now, it may be an occasion to consider making some investment of time in developing strategies for your legacy. Even people without significant assets should write a will.

You must find time out of your busy schedule to articulate your final wishes. Without planning and proper documentation, much of what you are working to accomplish may dissipate on your death in ways you never intended. Nearly half of your assets may be consumed by taxes. Your business probably will have to be liquidated.

We at this law firm will take an inventory of all the important assets that you own. We will help you define and organize your objectives, and develop appropriate planning that best suits your desires. Although taxes may not be entirely avoidable, they can be minimized by using proven techniques. Succession planning may help preserve a family business for future generations. We work with you to accomplish your goals.

How does a person transfer property at death?

Property owned at death is transferred either by Will through probate administration, trust, or operation of law such as beneficiary designation on a life insurance policy.

Will:

A Will is a written document that directs to whom assets shall be distributed and also names the administrator of the estate. A Will alone does not avoid probate administration.

Probate

Probate is the court supervised administration of your assets after your death. Your “Probate Estate” comprises all the property you owned at death which does not pass by trust or operation of law.

Why is Probate Administration necessary?

Because we are not here to speak for ourselves after death the law safeguards our last wishes. Probate proceedings are conducted under strict court supervision to safeguard both beneficiaries and creditors of the estate.

What Costs, Taxes and Time can be expected?

Costs can consume four to eight percent of the estate, depending on various factors. Administration of a formal probate estate takes five to nine months, and longer if complicated.

A legal process called probate has been created to assure that your wishes are carried out. Probate process begins with the filing of your Will and a petition to the courts to begin probate. Your executor will present your Will to the court and obtain its ruling on the validity of it. Your executor must publish notification of the death and contact all the creditors so that they can submit their claims against the estate. Probate provides certain benefits that living trusts do not. The probate process allows supervision of estate administration by the probate court and provides notices to beneficiaries, who are given an opportunity to object. In some states, the probate process can be time-consuming and expensive, but in Maryland it is relatively uncomplicated.

How can I avoid Probate?

The only way to avoid probate and the court system is by good planning to transfer your assets outside the Probate system. The safest way to do this is by creating a trust during your lifetime. Not only will you save money, but you will remain secure throughout your life but is subject to certain limitations that you need to discuss and know.

Trusts

A Trust is a written document the Grantor creates to manage property. The person who benefits form the Trust is known as the Beneficiary. The person who manages the Trust is called the Trustee. Trusts efficiently and effectively transfer assets without undue interference from the government and significantly reduce administration expense.

Trusts also may serve a variety of useful purposes for individuals besides their estate planning objectives. They may be used to transfer wealth to subsequent generations, on terms that promote its responsible use. They may be used to provide for dependents that are incapable of taking care of themselves.

A well-conceived and skillfully arranged trust may advance any number of your aspirations for the future use and disposition of your assets. Please remember that assets in a revocable trust are treated as owned by the grantor and are subject to grantor’s creditors. A grantor may place a spend-thrift clause in a revocable trust and it would help in protecting the beneficiary’s interest in the trust. However, the same clause may be used in a will. Thus, a revocable trust provides no additional protection of assets. One more thing to be remembered is that when a person dies with a will, the statute of limitations for the creditors is six months to make a claim against his or her estate. In case of trust, the statute of limitation is three years – when this period commences is unclear.

Revocable Living Trust:

It is created during your life to hold and manage your assets throughout your life and then to manage and /or distribute assets after your death. The benefits of the Revocable Trust are the following:

  • Immediate transfer of assets at death
  • Privacy
  • Avoiding family conflicts after death
  • Save estate taxes with Credit Shelter, By-pass, QTIP and other tax avoidance Trusts
  • Protecting your beneficiaries form creditors
  • Avoiding probate administration and expense.
  • Retaining control over your assets even if you become incompetent, thus avoiding the need for a court supervised guardian
  • Easily amended when situations warrant
  • No additional annual tax return filing

Living trusts do offer certain benefits to you. To list a few, if you own real estate in two or more states, additional probate proceedings may be avoided. If you anticipate that your will may be contested on grounds of incompetence or undue influence, a trust may be more difficult to such challenges. A living trust can be useful if you are in poor health, and you want someone else to manage your assets. Additionally, if you want to designate a trust as the beneficiary of a qualified retirement plan, is permitted under the current laws. However, it is to be remembered that trusts are the best estate planning choice for most people in most circumstances.

If total value of your gross estate is under $1,000,000, a basic will and power of attorney documents are most likely appropriate for your situation. If the total of your gross estate exceeds $1,000,000 (or if other special concerns exist), you may like to have a consultation on how to distribute assets more effectively and protect against estate taxes upon death.

Some important terms:

Testamentary Trusts:

These are embedded in a Will and become operational only after death. Persons who do not mind the costs of probate and younger persons who need to plan for special situation in the event of untimely death use this estate planning tool.

Generation Skipping Trusts:

These transfer assets directly to grandchildren and save taxes in your child’s estate.

Irrevocable Insurance Trusts:

These are created to avoid tax on insurance proceeds.

Irrevocable Trusts:

A trust which cannot be changed or canceled once it is set up without the consent of the beneficiary. Contributions cannot be taken out of the trust by the grantor. Irrevocable trusts offer advantages that revocable trusts do not.

Incapacity: Durable Power of Attorneys:

You should consider the possibility of your incapacity as well, and the extent to which you want extraordinary life-extending measures taken in the event of a terminal illness or injury. Some living trust proponents may argue that a living trust saves the time and expenses involved in the guardian appointment. These circumstances can be addressed by a durable power of attorney. A power of attorney generally is less expensive and more efficient than a living trust. An agent appointed by a durable power of attorney could make decisions concerning assets and financial affairs.

All of the above documents allow you to determine in advance what happens to you and your estate when death or disability deprives you of your ability to control events.

Tax Returns:

Even though the person is deceased an income tax return must be filed for his or her year of death. If the person was married, a joint return could be filed.

An estate tax return may be required as well. The estate for federal estate tax purposes includes all personal and real property a person held, including jointly owned property and other property which do not require probate or trust administration such as life insurance proceeds, and retirement accounts.

A person’s social security number is void at death; a tax identification number must be obtained if a probate estate or trust is administered.

It is our great pleasure to assist you with your lifetime planning needs.

Please print and complete the form below before coming to the office for your scheduled estate planning consultation with the attorney.

Estate Planning Interview Questionnaire

Download word or pdf file.


The information contained on this site is offered only for general informational and educational propose and does not constitute a legal advice or opinion. All efforts are being made to keep this information current, but it may not be guaranteed that it applies to your specific case, and should not be relied upon or acted without seeking the advice of qualified attorney.