The primary purposes of estate planning are to give your property upon your death to those individuals whom you wish to receive it and to preserve your assets, during life as well as after death, from depletion by taxation. Therefore, estate planning often involves preparation of a last will and testament and related documents, review of your life insurance policies, and transfer of assets.
Through proper estate planning, it is possible to make sure there are sufficient liquid assets to pay for the immediate expenses of your spouse, children, and/or other dependent persons such as older parents; to pay the costs of administering your estate; and to pay taxes, debts, and other expenses. It is also possible to protect your beneficiaries (those to whom you leave your property upon your death) from the influence of spouses and significant others, as well as from criminals who prey on individuals who have recently suffered the loss of a loved one. Such criminals obtain “leads” from obituaries and death notices such as: John Doe, the decedent, was employed as the manager of a financially well respected company, that he was on the following boards and commissions, that he supported the following charities, that he was the Salesman of the Year for six successive years. You don’t have to be a rocket scientist to understand that the decedent was financially secure or a person of means and that he most likely left large sums to his spouse and/or children. Also many times addresses of the spouse and/or children are given or a criminal can just go to the telephone directory. Your loved ones can be protected from falling prey to such individuals through the preparation of a trust document.
For a beneficiary who may not have experience in handling large sums of money, a trust is also a very good vehicle to give structure and help to the beneficiary. Trusts can be established to provide an income to the beneficiary and to deal additionally with health, education, and general welfare needs of the beneficiary. Staggered payments of the principal of the trust can be made over a nine-year period by, for example, designating the distribution of the principal to occur as follows: one-third at age 25, one-half at age 28, and the balance at age 31. Also, a trust can include a Spend Thrift clause so that if there is a large judgment against your beneficiary, the principal of the trust cannot be obtained.
Avoidance of Taxes: Effective estate planning employs a number of strategies to reduce or totally avoid federal estate taxes and Maryland estate taxes, and possibly even to eliminate the need to pay inheritance taxes. The US Congress passed, effective in 2011, a Federal Estate and Gift Tax Law that has established the ”exemption equivalent”, which is the financial threshold where federal estate and gift taxes begin. For the next two years, 2011and 2012, the exemption equivalent is Five Million Dollars ($5,000,000). Many folks are not aware that the State of Maryland also has an estate tax, the threshold of it being One Million Dollars.
To avoid federal estate taxes, a properly prepared will with tax avoidance clauses and tax avoidance strategies may result in less federal estate and gift taxes. Similar strategies may be employed regarding Maryland estate taxes. Estate taxes should not be confused with inheritance taxes. Direct line beneficiaries such as children or grandchildren, brothers and sisters, and other beneficiaries specified by statute, do not pay Maryland inheritance taxes.
Our Confidetial Information Form can help you prepare an inventory of your assets. Through the use of your computer’s software, you can enter your assets by category and indicate how each asset is titled, the account number, and the name of the custodian or company holding each asset such as your stock broker, pension administrator, bank, etc. The spreadsheet automatically totals each category and provides a grand total of all assets. Using the spreadsheet provides both you and me the flexibility to easily make changes, often for the purpose of realigning your assets to reduce taxes.
Review of primary documents: Lawyers are not supposed to accept as true their clients’ perceptions of how their assets are titled. Many clients will describe an asset as being titled one way when, in fact, upon a review of the primary document, we find it to be titled some other way. Also, insurance policies should be reviewed to be sure the values are sufficient for the current need and that the beneficiaries are designated properly. Many times when a trust is established, through a last will and testament or otherwise, the beneficiary designation on a life insurance policy needs to be changed.
Other Estate-Planning Documents: When preparing an estate plan for my clients, I often encourage the preparation and execution (signing) of a General Power Of Attorney, Advance Medical Directives, and a Living Will. At no charge, we can mail you forms for the Advance Medical Directives and Living Will that you can complete on your own. These are the same forms that are used by hospitals when you are admitted for surgery. They are also available in the Estates and Trusts Article of the Annotated Code of Maryland.
Estate Planning does not end after a plan is made. Periodic review of the Plan is needed, especially when there are significant changes in your assets or wealth, or upon the loss of a spouse or beneficiary.
Our office is available to prepare an Estate Plan for you which will meet the requirements of Maryland law.
CONTACT US: Call this Maryland Estate Planning Attorney located in Columbia, Maryland for an appointment—Call us at 410-730-4404