Category Archives: Estate Planning and Probate

Do I Need to Update My Will When I Move Out of State?

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Author: Denise A. Martin

I am routinely asked whether an estate plan needs to be updated when one moves to a different state. The answer I give is maybe not, but it is always worth having an attorney in the new jurisdiction review your estate plan. An estate plan that was properly drafted and executed in one state will be legally enforceable in another state. The validity of wills and trusts is controlled by the law of the jurisdiction where they were signed, and so those documents are enforceable in any state as long as they were properly drafted and executed under the law of the originating state. For other estate planning documents, such as powers of attorney and medical directives, the full faith and credit clause of the U.S. Constitution requires states to recognize such documents prepared validly in other states. So if you prepare and sign an estate plan in Maryland but later move to Florida, you do not necessarily need to have a completely new estate plan prepared. That being said, a big life change, such as moving to a different state, provides an excellent opportunity to review your estate plan.

Estate plans should be reviewed after major life changes, as well as every five or so years; changes in state or federal law and the birth, death, or marriage, etc., of close family members or friends may result in your estate plan becoming out-of-date. Tax laws, including state “death taxes” like estate tax and inheritance tax, also vary from state to state, such that an estate plan in one state may result in no tax being owed upon the death of the individual but that individual’s passing in another state could have numerous, significant tax consequences. For example, Maryland has both an estate tax (levied on estates of a certain dollar value) and an inheritance tax (levied on bequests made to distant family members or non-family members), while Virginia has neither; so your loved ones may be subject to the imposition of a significantly greater tax burden if you pass away while living in one state compared to another.

Another reason why a move out-of-state provides a good reason to review your estate plan is that while certain estate planning documents may be legally enforceable in a new state, the function of actually using those documents may be difficult enough that it is worth updating them. For example, many states have statutory powers of attorney and medical directives; i.e., the state legislature codified into law a standard form power of attorney and/or medical directive that is legally required to be accepted throughout the state. Where a state has such statutory forms, financial institutions and hospitals are used to seeing the statutory form and will generally be apt to accept such forms without delay. However, if your agent appointed in your power of attorney or medical directive presents a statutory form from another state that may look quite different, there may be delays and headaches while the legal department of the institution reviews the form. So even though that document may ultimately be legally enforceable, it may make sense from an ease-of-use standpoint to just update the document.

In any case, if you think the substantive provisions of your estate plan need to be updated (e.g., the distribution scheme, who your trustee or personal representative is, who the agent in your power of attorney or medical directive is, etc.), then I definitely recommend you meet with an attorney sooner rather than later to have your plan reviewed!

Can I Disinherit My Spouse?

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Author: Denise A. Martin

For various reasons, clients sometimes ask if they can exclude their spouse from receiving anything under their will or other estate planning documents. For example, their marriage may be a second marriage for one or both or may have occurred late in life, such that they have separate assets and separate beneficiaries they would like to benefit upon their death. The short answer is: you can try to disinherit your spouse, but you may not be successful. Under Maryland law, even if you explicitly exclude your spouse from receiving assets under your will, they are entitled to claim an “elective share” of your net estate (i.e., the remaining probate assets after the payment of funeral expenses, probate expenses, family allowances, and enforceable estate debts). See Md. Est. § Trusts Code Ann. § 3-203. The amount of the elective share depends on whether the predeceased spouse had surviving children. If the predeceased spouse had surviving children, the surviving spouse may elect to receive one-third of the net estate. If the predeceased spouse did not have surviving children, the surviving spouse may elect to receive one-half of the net estate. A surviving spouse is also entitled to receive an allowance of $10,000 from the estate for personal use. Md. Est. § Trusts Code Ann. § 3-201. Now, while a surviving spouse has the right to elect the spousal allowance and the elective share, there is no requirement that they do, and they may choose not to do so.

There are ways to avoid the potential risk of a spouse claiming the elective share, such as through trust planning or establishing a pre-nuptial or post-nuptial agreement. Contact our office if you have questions!

What is an Employer Identification Number (EIN)?

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Author: Victoria Chan-Pablo

What is an EIN? An EIN, short for Employer Identification Number is a tax identification number you may apply for through the IRS website. An EIN generally needs to be issued for the administration of an estate for purposes of opening up an estate bank account. An EIN would also need to be obtained if you are establishing a business entity for purposes of tax filings and/or opening up bank account for the business.

The offices of McChesney & Dale can help you obtain your EIN. If you would prefer to file the application for an EIN yourself, the IRS has an online application available. Check out the IRS website for more information on EIN’s.

Flexibility of Bequests to Minors

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Author: Denise Martin

Maryland law provides great flexibility to individuals seeking to leave assets to minors or young adults after death. Generally, assets cannot be titled solely in a minor’s name, and further, many minors and young adults do not possess the fiscal responsibility to be entrusted with valuable assets. So what should a parent, aunt, uncle, grandparent or family friend seeking to pass assets to a minor upon their death do?

One option available is to include a simple bequest in a will or trust document to a minor under the Maryland Uniform Transfers to Minors Act (UTMA). Typically, a parent of the child serves as the custodian of the account until the child reaches age 21. However, that property typically becomes the minor child’s outright at age 21, which may be sooner than one would prefer.

Another, more flexible option available is the use of a trust established in one’s will (a “testamentary trust”) or other estate planning document, such as a revocable trust agreement. A trustee is appointed to oversee the trust on the child’s behalf and to make disbursements. The individual creating such a trust has the ability to determine at which age or ages the child should receive the asset outright. For instance, the trust creator may want to delay the minor’s receipt of the asset until age 25 or allow for graduated disbursements (e.g., 50% at age 25 and 50% at age 30). Others may wish to incentivize life achievements by limiting disbursements based on accomplishments, i.e., graduation from college. Limitations can also be placed on what disbursements may be used for, i.e., for educational purposes, for the purchase of a home, etc. The possible structure of such a trust is so flexible that the options are virtually limitless.

Estate Planning for Young Adults

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Author: Shameka Sterling

Estate planning, which includes wills, power of attorneys, living wills, etc., is a very important life process and helps families prepare for difficult or unexpected scenarios. These documents provide instructions to our family and the court as to what we want to happen in certain situations.

In general, young adults may think that estate planning is just for older or wealthy people. They do not understand that you do not have to have significant assets or be elderly to start preparing. They may not understand the importance of these documents because they do not know exactly what the documents are or what they mean.

While young adults may not think about estate planning, it is just as important for young adults, especially those who have children or may be heading off to college, to consider this issue as it is for their parents. As our lives get busier and more complicated, estate planning becomes increasingly important.

Last Will and Testament: A will states who will receive your assets, assume guardianship of your children or pets, and more. For example, if you have a treasured piece of jewelry or a prized model car collection that you wanted your sister to have, your will would provide for this.

General Durable Power of Attorney: A general durable power of attorney appoints someone you trust, such as a family member, to make financial and legal decisions on your behalf. This document can be used to allow the person you appoint to make these decisions in the event that you cannot make them on your own. It is not only for use in the event of your incapacitation. For example, if you travel for vacation or are away at college, this person can act on your behalf as your agent.

Living Will and Advance Medical Directive: A living will, or health care directive, lets you set specific medical wishes in a case where you may be alive but unable to speak for yourself. It allows you to specify your preference for any and all pain medications, life support, medical procedures, etc., if you fall terminally ill, into a vegetative state, or into a coma.

While it may be difficult to think about these topics, we cannot predict or control the future. Every family’s legal needs are important, but perhaps the most important step is starting the conversation. Speak with the young adults in your family about preparing their estate planning documents.

If you or any of your loved ones have any questions about the process of preparing or about the documents themselves, please give the attorneys at McChesney & Dale a call at (301) 805-6080.

Trying to Write Your Own Will May Result in Undesired Consequences

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Author: Charles F. Fuller

Most of us put off estate planning because it deals with circumstances we do not wish to think about. However, failing to address how you wish your assets to be distributed upon your death could lead to unintended consequences. A recent case in our office provides a good example why you should not delay having a will prepared.

We were recently retained to represent clients who were named as beneficiaries in the will’s residuary clause, or the clause that disposes of the remaining estate property after the satisfaction of any specific bequests. The will was self-authored by the decedent, who was not an attorney. The residuary clause that left the majority of the decedent’s estate to our clients was incomplete and ambiguous. The will arguably left the residuary estate to both the decedent’s grandchildren and to our clients, who were friends of the decedent. Under Maryland law, the decedent’s closest heirs were his daughters, and the next closest heirs were his grandchildren. An earlier provision of the will specifically excluded his daughters from receiving anything under his will but did not reference his grandchildren.  As a result, the personal representative of the estate petitioned the probate court to instruct him how to distribute the proceeds of the residuary estate and litigation ensued. Ultimately, the case settled, with the residuary estate being split among the decedent’s friends and his grandchildren; the wishes of the decedent were not fully accomplished, and his estate had to pay thousands of dollars in attorney’s fees. Had the decedent sought counsel in preparing his will, an appropriate will could have been drafted to carry out his wishes and save the estate the expenses associated with litigation. Further, an experienced estate planning attorney would have advised the decedent how to properly and clearly exclude certain individuals from his will under Maryland law.

A will is an important and essential document for anyone who wishes to pass assets upon their death. It should be prepared by a competent attorney practicing in the field. When done properly, the will can distribute the individual’s assets to the people of his/her choice, in accordance with any terms and conditions that the assets may be subject to, and in an economically reasonable fashion. When wills are self-authored in a legally deficient manner, or not prepared at all, extensive litigation can follow and the likely result is that much of the assets intended to be passed onto the beneficiaries are expended on unnecessary litigation. In order to avoid undesired consequences and to ensure your assets pass only to those you want to receive them, give us a call.

What Does it Mean for an Estate to be Insolvent?

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Author: Victoria Chan-Pablo

What is an insolvent estate?

An estate is insolvent when the decedent’s debts exceed the value of his or her assets and there are insufficient estate assets to pay for expenses of the estate, such as administration expenses, funeral expenses, and valid claims against the estate, etc. In other words, an insolvent estate is one in which the debts exceed the value of the assets. In this circumstance, creditors of the estate may reduce the debt or write off the loss, and unfortunately the heirs or beneficiaries of the estate will not receive a distribution.

What is a solvent estate?

A solvent estate is an estate in which there are sufficient assets to pay all debts, funeral expenses, and administrative expenses in full. In other words, a solvent estate is one in which there are still assets left over after all the debts have been paid. In this circumstance, after all debts of the decedent and all administration expenses are paid, the remaining balance of the decedent’s estate is distributed to the decedent’s heirs or beneficiaries pursuant to the decedent’s last will and testament. If the decedent did not have a will, the remaining balance of decedent’s estate would be distributed in accordance with the rules of intestacy. Rules of intestacy go into effect when a person dies without leaving a valid will and determine the order of distribution among the decedent’s heirs.
Of course, having a solvent estate is ideal so that your beneficiaries and heirs inherit a portion of your estate. Talking with an estate planning attorney and preparing a will are important to help plan for a solvent estate. To learn more about creating your own estate plan, please contact our office.

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Planning for Your Pets After Death

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Author: Denise A. Martin

Many of us have pets that are beloved family members, and as responsible pet owners, it makes sense to plan for the possibility that your pet(s) will survive you. Estate planning documents, such as your will or a trust, enable you to set aside money for your pet’s care after your death, as well as to appoint a caretaker for the pet. In recent years, Maryland legislators established a Pet Trust Statute, MD. CODE ANN., EST. & TRUSTS, § 14-112. This statute enables you to include a pet trust provision within your will or a separate trust document to provide for the care of your pets, and this provision is enforceable by the individual you appoint as the pet(s)’ caretaker. Your pet trust can provide for the care of multiple animals, as long as those animals were alive during your lifetime.

A pet trust must terminate upon the death of the last animal beneficiary of the trust, and any remaining assets will be distributed to the individuals or entities designated in the pet trust. If no such designation is made, the assets will be distributed to the residuary legatees under the owner’s will, or, if there is no will, to the owner’s heirs at law.

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The Current Status of Estate and Inheritance Taxes in Maryland

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Author: Charles F. Fuller

At some point in time, many of us are confronted with the issue of whether or not to have tax planning included in our estate plan, i.e., within a will or trust. Dating back to 2002, the Maryland Legislature decided that Maryland would impose its own estate tax, separate from the federal estate tax. This process was known generally as “decoupling.” As a result, since 2002, decedents in Maryland were subject to an estate tax at the rate of 16% on assets in excess of $1 million. A married couple with appropriate estate tax planning could shield up to $2 million in assets from the Maryland estate tax.

During the 2014 legislative session, the Maryland Legislature amended the Maryland estate tax law. Over the next several years, the amount of assets that a decedent must have before the Maryland estate tax is imposed upon them will increase until this amount is equivalent to the amount exempt from Federal estate taxation. Under the new law, effective January 1 of each year, the amount of assets exempt from Maryland estate taxes will increase as follows:
Year Assets Exempt From Tax
2015 $1.5 Million
2016 $2 Million
2017 $3 Million
2018 $4 Million
2019 Equal to the Amount of Assets Exempt Under Federal Estate Tax Law
Currently, it is projected that in 2019 both Maryland and Federal estates will be free from estate taxes so long as a decedent’s estate does not have assets exceeding $5.9 million. The estate tax is paid by the estate, and the personal representative is responsible for filing the necessary estate tax returns and paying the required estate taxes.

While Maryland has changed its estate tax laws, its inheritance tax has not been changed. Currently, Maryland imposes a 10% inheritance tax on both probate and non-probate property that passes to certain beneficiaries who are not exempt from the tax. As a general rule, close family relatives are exempt from the inheritance tax in Maryland, and all others receiving property are subject to the tax. The group that is exempt from the tax includes the following family members of a decedent: a surviving spouse, parents and grandparents, children and other lineal descendants, spouses of children and other lineal descendants, stepparents, stepchildren, brothers and sisters, and corporations where all of the stockholders consists of the above exempt family members. It is important to note that this tax applies to property received by non-exempt beneficiaries that was jointly owned with the decedent at the time of death and to transfers made by the decedent within two years of death. Thus, inheritance taxes are imposed upon persons who receive an interest in property from the decedent outside of their estate. The inheritance tax is often paid by the personal representative prior to distributing property to the beneficiary. If there is no estate to be administered or if the personal representative does not pay the tax prior to distribution, the beneficiary is liable for payment of the inheritance tax directly to the Register of Wills in the county of the decedent’s residence or where the property is located.

Although the law has changed recently in regards to the Maryland estate tax, it can still be very important for you to include in your estate plan appropriate tax planning to avoid the imposition of the estate tax while the exemption amount is being incrementally increased. Further, it may be important to plan gifting and other transfers of property in order to attempt to avoid the imposition of the Maryland inheritance tax.

Please feel free to contact me or any of the other attorneys at McChesney & Dale at (301) 805-6080 if you have questions regarding the Maryland estate or inheritance taxes.