ESTATES, WILLS & TRUSTS

Do I Need A Will?

Whether you know it or not, everybody who dies in the United States has a Last Will and Testament.  Really!  You do.  You just do not know it.   Congress and the State legislatures have written a Last Will and Testament for you in the event you do not write one for yourself.

 The simple truth is, if you fail to prepare your own Last Will and Testament, the State of Maryland will provide you with a Last Will and Testament.  The State’s Will for you is printed in the Estates and Trusts Article section of the Maryland Code.  The District of Columbia will also provide you with a Last Will and Testament if you die in the District without a Will.  Every state does… under the law it is referred to as “intestate” succession.  If you die without leaving a Last Will and Testament, you are deemed to have died intestate, and the state’s intestate provisions will govern the distribution of your property upon death.

 So why should you have a Last Will and Testament?  The answer is simple.  Ask yourself: Whom do I want to decide who gets my property upon my death, me or the State Government?  If you want to determine who gets your property upon death, then you need a Will.   If you do not care who gets your property upon death, then do not read any further about Wills… it will be a waste of your time.

 If you die in Maryland without a Last Will and Testament, the State had mandated by law that your property will be distributed as follows:

  • Costs and expenses related to your death and burial up to the statutory maximum amount; and then,
  • Costs, expenses and fees for attorneys and/or the Personal Representatives for the estate administration; and then,
  • Family Allowances as allows by law; and then,
  • To pay all taxes owed to the government both before and after death; and then,
  • To pay all enforceable claims or unpaid debts, and then,

 If you have no minor children, your spouse will receive $15,000.00.   If there are minor children, my wife or husband will receive $10,000.00. (Md Code Ann. Estates and Trusts §3-102 and 3-201);

 If there are unmarried minor children, they each will receive $5,000.00, to be held by a guardian for use of family allowances. (Md Code Ann. Est&Tr §3-201 and 13-501)

 Thereafter, one half of the balance of your estate will go to your spouse and the other half will go to your children. (Md Code Ann. Est&Tr §3-102 and 3-103).

 The surviving parent of the minor children will be appointed the guardian of the property of the minor children, but if assets are to go to the minor children and is more than $10,000, then the Court will get involved to determine how to manage the child’s assets.  The court will require the guardian of the property report to the Orphan’s Court, or the Circuit Court, regularly and account how, why, and where the money is spent.  (Md Code Ann. Est&Tr §§13-207, 13-208, 13-209 and Md. Rule 10-706).

 The person appointed as your Personal Representative to probate your estate will most likely be required to post a bond or ask for a bond waiver, to ensure that proper judgment is used in probating the estate. (Md Code Ann. Est&Tr §5-604).

 Your children will have the right to review all financial records of the guardian. (Md Code Ann. Est&Tr  §10-706).

 As soon as your child(ren) reach eighteen, they will be able to withdraw any and all money that they are entitled and do with it as they want, with no one having the ability to question their spending.  (Md Code Ann. Est&Tr §13-214 and Md. Rule 10-710).

 If the other parent of your unmarried minor child(ren) lives longer than you, then they will be allowed to appoint whomever they want to be the next guardian of your child(ren) should they pass.  (Md Code Ann. Est&Tr §13-701).

 If the other parent of your unmarried minor child(ren) less than fourteen predecease you, then the Court will appoint the next guardian for your children and can make its selection from anyone who petitions the Court to be appointed as guardian for the property. (Md Code Ann. Est&Tr §13-702).

 If your child(ren) are more than fourteen but less than eighteen, then the Court may appoint a guardian that the child(ren) chooses. (Md Code Ann. Est&Tr §13-702).

 Upon your passing, there may be minimal efforts made to minimize taxes and the government may benefit substantially by your passing because it will be too late for pre-death tax planning.

 The Orphans Court will appoint either your adult children or your spouse to handle the estate and they will have to file a performance bond to guarantee that the estate is handled properly.  (Md Code Ann. Est&Tr §5-104, 5-105 and 6-102).

 Only $10,000 will be allowed for all funeral expenses, unless there is approval of the Court to exceed this amount. (Md Code Ann. Est&Tr  §8-106)

 If you do not want the above provisions to appeal to you, YOU MUST CREATE A WILL.  It is your choice, and yours alone, whether to die “testate” (with a Last Will and Testament) or “intestate” (without a Last Will and Testament).   It is your choice to avoid having the Government decide who benefits from your death, or who gets what and how much.   It is for those reasons (and many more) that everyone should have a Last Will and Testament, regardless of the size of your estate.

Wills

Why create a will?

The rules of law are strict and not individualized.  State intestate laws make no room for gifting to charity, the establishment of a trust, forgiveness of loans, or anything else.  Your wishes are not relevant to state intestate laws.  State intestate laws do not allow for bequests of any nature to anyone absent their being provided for by state intestacy statutes. Friends, family (other than immediate) get nothing.  Your Church, Synagogue, Mosque, or other religious affiliations get nothing.  Charitable giving will not occur.   You spend your entire life working and saving, but without a Last Will, the government, and only the government, will determine what happens to your estate.

What is a Last Will and Testament?  What goes into a Last Will and Testament?

The basic structure of a Last Will and Testament is:

  1. Preamble: name and domicile of the testator and a statement of the family and heirs;
  2. Funeral provisions (we will also make provisions for this outside of your Will too so that your desires are sure to be taken care of by your family or Personal Representative);
  3. Payment of taxes;
  4. Specific Bequests;
  5. Residuary Bequests;
  6. Fiduciary and Guardian appointments;
  7. Attestation clause;
  8. Signatures

 Just as we are all different, no one size fits all when it comes to drafting a Will.   Your situation will be unique to you, and therefore you Last Will and Testament should, and will be, different from everyone else’s, including your spouse.  No two Wills should be alike, although they could be similar.  For more than twenty years, we have assisted both rich and poor, young and old, single and married, with the drafting and execution of their Last Will and Testament.  We know the questions  to ask so that your wishes are fulfilled by the Personal Representative.

What about my children?  How are the affected by a Last Will and Testament?

Minor children (under 18) cannot hold title to property.  If you have children under 18, transfers to a child can be very problematic absent a Last Will and Testament.   If your estate will exceed $10,000, and you have children, then we know what you must do to protect your children, protect property that you may leave for your children, and how to make life easier for any future guardians of your children.

 Maryland has a Uniform Transfers to Minors Act (UTMA) that governs the transfer of property to minors.  However, UTMA transfers do not work under all circumstances, and more important, may actually do more harm than good.   Think of it this way, none of us knows how we are going to die or under what circumstances.   Assume that your death comes prematurely, and as a result there is a multimillion dollar insurance settlement as a result of the same.  Now assume that your children are your only survivors, and you were to die intestate.   Would you want your children upon reaching their eighteenth birthday to become instant millionaires?  Most parents would say no, and we would too, because not many children know how to handle that much money. We know how to protect your children from themselves.  We know how to insure that  your values are reflected in your Last Will and Testament.

What if I have a Last Will and Testament that I do not like?

We can assist you in modifying, altering, or the outright drafting of a new Last Will and Testament.  Under almost all circumstances, your Last Will and Testament can be changed.  The key is that have must continue to have the capacity to make a Will.  We know when it is best to modify your Last Will and Testament by way of a codicil, or via the revoking of your prior Wills and drafting a new Last Will and Testament.

What is a codicil?

A codicil is an amendment to a Last Will and Testament.  If only a bequest is to be changed, then a codicil will most likely be the best method to make this change.  When you execute a Codicil to your Will, you will republish your existing Last Will and Testament, but replace only the inconsistent provisions from your “old” Will that you want to supersede into your new and revised Last Will and Testament.  A Codicil can be used in lieu of re-writing an entirely new Will.   We know if a Codicil is appropriate for your needs, or if a new Last Will and Testament is better in your situation.

If I already have a Last Will and Testament do I have to get it renewed?

No, Last Will and Testament’s do not have to be renewed.  However, you should seriously consider having your Last Will and Testament reviewed and revised every five to ten years.  Not only does the law change that could affect your Last Will and Testament, but we all get older too.  As we get older, our needs change, there are life changing events that occur (like the addition of children, grandchildren, or the loss of loved ones).  Your Last Will and Testament should reflect the life changing events that have affected you.  As an example, suppose all of your children are now grown, have their own careers, and you now have grandchildren.  You decide that instead of providing for your children upon your death, you would prefer to establish an educational trust for the grandchildren.  We know how to do that.   Suppose you have decided to retire to Florida.  We know how to make provisions for that event too.   Or suppose you are thinking about moving into assisted living, or an independent living facility.  We know what senior citizens need to do to protect their property, and families.

Trusts

What is a Trust?

A trust is an arrangement that allows for a third party (known as a “Trustee”), to hold or take custody of property (known as the “trust corpus”) that was owned by one party (known as the “Settlor”) for or on behalf of a party or group of parties (known as the “beneficiary”).   The beneficiary can be the settlor, a charity, corporation, or person.  Trusts are generally classified as either revocable (can be changed) or irrevocable (cannot be changed).  Under a revocable trust, property moved into trust can be removed, and any provision of the trust can be changed at any time.  A revocable trust can also be revoked (terminated) at any time up until death.  In some cases, trusts are also used as an asset protection device.

 Trusts are arranged in many ways so that the Settlor can control exactly how and when trust assets pass to a beneficiary.  A trust is not just for wealthy people.  When the Settlor places assets in trust, they are in reality gaining additional control over that asset for either their personal benefit or the benefit of others.  A trust is beneficial to provide tighter financial management and protection for the settlor.  A trust can also protect the assets from creditors of the Settlor and a beneficiary.  A trust can also take property out of the probate process to avoid all types of taxes.  Trusts are excellent tax planning tools.  Having a trust can serve for far more than one purpose.

 In all but a few cases, we recommend that our clients establish a trust for their assets as they approach their sunset years.  We all know that at some time in our lives, we may no longer be able to take care of ourselves or manage our own property.  By establishing a trust, the Settlor avoids the possibility of having a guardian appointed, or a lot of the problems that come from banks and other financial institutions who refuse to accept a power of attorney (yes, it does happen).  A Trustee has greater powers and flexibility to serve the beneficiaries, which in most cases of estate planning, starts with the Settlor.  You owe it to yourself to contact our office to learn how a trust would be beneficial to you.  Call now.  Your initial consultation is free.

Inter vivos and testamentary Trusts.

When establishing a trust, it is either inter vivos (while you are alive) or testamentary (via a Last Will and Testament).  We know how to establish both inter vivos and testamentary trusts, and when it is to your benefit to have either, or both, a inter vivos and testamentary trust.

 An inter vivos trust or “living trust” is where property is moved into the trust while the grantor is still alive.  Some websites may refer to an inter vivos trust as a “will substitute.”   However, we at Shechtel and Associates, P.A. caution you not to be fooled.  An inter vivos trust is not a Last Will and Testament Substitute.   Even if you have a Trust, you should also have a Last Will and Testament.  Why?   As we have noted before, none of us knows how we are going to die or under what circumstances.   Upon your death, you could own assets that are not held in trust, and those assets, absent a Last Will and Testament, will pass via intestate succession.  That could including any insurance settlement that may arise after your death (like from a lawsuit, refund, inheritance, or otherwise).

 The three main goals for having an inter vivos trust are: 1) to avoid probate; and, 2) to provide for someone to manage your property for you after you are no longer able to do so yourself; and, 3) privacy.  Property held in trust rarely must be disclosed to third parties upon death (including the Government).   Under most instances, property held in trust is not subject to probate laws, and can immediately be transferred upon death.  Unfortunately, property held in a revocable trust will be included in your overall gross estate for the calculation as to whether your estate will be subjected to Federal estate and inheritance taxes.  This is not so for irrevocable trusts that were properly drafted and administered.   In some states, trust property is not subject to state estate and inheritance tax laws.  You need to consult with us if your state excludes trust property from state estate and inheritance taxes.

Testamentary Trusts

A testamentary trust is a trust that comes into being upon your death that was drafted into a Last Will and Testament.  Testamentary trusts are always found somewhere within a Last Will and Testament.  Because they come into being upon death, a testamentary trust is deemed to be irrevocable (the testator is no longer around to make changes after death).  Assets are not transferred into a testamentary trust until after the become available through the probate estate.  It is therefore why a testamentary trust does not become subject to state or federal taxes until sometime after death when the trust assets are received by the trustee.

 Because a testamentary trust comes into being only after trust assets are received by the trustee,  testamentary trusts are not subject to probate.  Testamentary trusts are separate entities for income tax purposes upon the receipt of assets by the Trustee.  Changes in tax laws are frequent, and under the new American Taxpayer Relief Act of 2012 the un-distributable tax income under a trust was  graduated from 15% to 39.6%.

Other types of Trusts

We are familiar with all kinds of trusts.  Just to name a few: Charitable Remainder Trusts, Charitable Remainder Trusts, AB Trust, Rabbi trusts, By-Pass Trusts, Marital By Pass Trusts, Spousal Election Trusts, Children’s Trusts, Educational Trusts, Special Needs Trusts, Foundations, Generation Skipping Trusts, Credit Shelter Trusts, Crumme (Life Insurance) Trusts, Annuity Trusts, Grantor Retained Income Trusts (“GRIT”), Qualified Personal Residence Trusts (“QPRT”); Qualified Terminable Interest Property Trusts  (“QTIP Trust”), Spendthrift Trusts, and more.

 You owe it to yourself to telephone and speak with one of our attorneys to learn how a Trust would be beneficial for you.  Upon contacting our office you will be given an Estate Planning Questionnaire.  Our questionnaire will assist you in identifying what type of estate plan will best suit your particular situation or needs.  We will then sit down with you (and your spouse if you both wish) and after we are both versed in what your needs, desires, and situation requires, we will make recommendations so that you can decide what’s best for you.

Power of Attorney

The word “power” means document and the word “attorney” means agent.  Having a power of attorney gives written documentary authority to another on your behalf.  Having a power of attorney will give a third-person the power and authority to do, or not to do, certain things.   A power of attorney is not permanent.  The authority of an agent, when revocable, may be revoked by a simple and private declaration.  You as a principal have the power to revoke the authority of such an agent at any time with or without reason therefore.   A power of attorney is not permanent because the death of the principal terminates the authority of the agent.  In addition, the agents loss of capacity terminates or suspends his authority.  If the agency is coupled with an interest – it survives death.

We here at the Law Offices of Shechtel and Associates, P.A. can help you create a power of attorney.

Living Wills

A Living Will (also sometimes known as an “Advance Directive”) is a document that directs your medical providers and loved ones what your wishes are in the event that you are terminal and in need of extraordinary life saving measures.  A living will directs that your dying shall not be artificially prolonged if you are diagnosed with an incurable injury, disease, or illness certified to be a terminal condition by that number of physicians you dictate that your death will occur whether or not life-sustaining procedures are utilized.  By having a living will, the pressure of making an end of life decision is removed from your immediate family members.  Here at the Law Offices of Shechtel and Associates, P.A. we can assist you in creating a living will that best suits your beliefs.