November 21, 2016April 27, 2024

Two Basic Types of Estate Planning Documents

Estate planning can sometimes seem like it requires a long, complicated list of different documents. It can be helpful to break those documents down into two basic categories.

Once you start planning for your estate you can quickly get bogged down trying to figure out what all of the different estate planning documents are. There are all sorts of different legal documents that are not familiar to most non-attorneys. This often confuses people enough that they give up and delay getting an estate plan.

However, it does not have to be that complicated.

A good way to think about the different documents is to put them into two basic categories, as the Motley Fool discusses in “The Estate-Planning Documents Everyone Needs.”

The first type of estate planning document determines what happens to your belongings after you pass away. This category includes wills, most trusts and even things like a retirement account that has a beneficiary designation.

The second type of estate planning document determines who takes care of your affairs if you are not able to do so. This category includes powers of attorney and advanced health care directives.

Who do you want to have your possessions after you pass away and who would you like to take care of your affairs if you cannot? Answer these questions, and then go to an experienced estate planning attorney. Schedule a consultation with Profit Law Firm, LLC. Tell the attorney your answers, and let the attorney figure out the documents you need to give your answers legal effect.

Reference: Motley Fool (Nov. 7, 2016) “The Estate-Planning Documents Everyone Needs.”

November 15, 2016February 15, 2024

Convincing Parents to Create Estate Plan

Many children with aging parents know that their parents should do estate planning, but convincing their parents of that can be difficult.

Many elderly people in the U.S. believe estate planning is something only the very wealthy need. If they only have a few major assets and modest back accounts, then they believe estate planning is unnecessary for them.

Many of their adult children know better, however.

The children know estate planning is an important responsibility for everyone regardless of wealth. While those children would like to talk their parents into estate planning they may find it difficult. In the Washington Metropolitan area, estate planning is very important. Maryland estate planning is critical because Maryland has both a state estate tax and a state inheritance tax. The District of Columbia also has a state estate tax.

This topic was addressed by NJ 101.5 in “Talking to your parents about a will.”

If you find yourself having this problem with your aging parents, there are some steps you can take.

First, explain to your parents that without an estate plan their estates will have to go through probate and everything will be distributed according to state law and not your parents’ wishes. That means if they would like to leave something directly to their grandchildren, they will not be able to do so in most cases. It also means that they might be subject to Maryland or D.C estate planning axes.

You can also talk to your parents about how costly and time-consuming probate can be and how it could be a burden on the family.

If all else fails and you can afford it, you might offer to pay for your parents to visit an estate planning attorney. They do not have to commit to anything before seeing the attorney, but the attorney can discuss the benefits of estate planning with your parents and give them some options. At Profit Law Firm, we also conduct two generation family planning sessions. Contact us for a consultation with Maryland estate planning attorneys and DC estate planning attorneys.

Reference: NJ 101.5 (Nov. 1, 2016) “Talking to your parents about a will.”

October 31, 2016

To Leave an Inheritance or Not

Many people struggle with the question whether it is better to leave their children an inheritance or not. It is not an easy question to answer.

Recently, FOX Business reported on a survey that found some 23% of retired Americans would prefer to spend all of their money and not leave their children an inheritance in "Should You Leave Your Kids an Inheritance?"

They asked Dave Ramsey for his opinion on the subject. Ramsey suggested that if you have bad kids, then, leaving an inheritance for them just rewards their misbehavior. He went on to say that if you have good kids, then not leaving them an inheritance teaches them money is evil. However, that is not the entire story.

It is understandable why a parent would not want to leave an inheritance to a child who has an unhealthy lifestyle. No parent wants to give a child money that would just fuel a drug habit, for example.

With good estate planning, however, a parent can actually leave an inheritance that encourages the misbehaving child to straighten up and does not give the child funds for bad behavior.

Another possibility is to skip the child with bad habits or behaviors and instead give the inheritance to grandchildren or other relatives.

There are several options for estate planning around a misbehaving adult child.

Visit an estate planning attorney to learn more about them and how you can use them.

Reference: FOX Business (Oct. 12, 2016) "Should You Leave Your Kids an Inheritance?"

October 21, 2016

Estate Planning Awareness Week

If you are one of the millions of Americans who do not have an estate plan, then the upcoming National Estate Planning Awareness Week is a great time for you to get one.

More than half of American adults do not have a current estate plan. The benefits of having a plan should be obvious.

With an estate plan you can say who gets your property after you pass away. An estate plan is the best way to make sure your family is taken care of after you pass away. An estate plan can help ensure your family is not unnecessarily burdened by estate taxes. And, an estate plan can make sure your end of life care is as you want it.

The Wills, Trusts & Estates Prof Blog reports that National Estate Planning Awareness Week is upon us. The article is appropriately titled "National Estate Planning Awareness Week: October 17-23."

If you are one of the people who does not have an estate plan, then why not get one during estate planning awareness week?

An even better idea would be not to wait for a special week.

Call an estate planning attorney in your area today and schedule an appointment. Getting an estate plan is not a difficult task for most people. You just need to tell the attorney what you want, listen to the options your attorney provides to accomplish your goals and let the attorney do the work of drafting the plan.

There is no reason to wait.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 3, 2016) "National Estate Planning Awareness Week: October 17-23."

October 18, 2016

Life Insurance Trusts

Life insurance is a great way to provide your family with liquid assets after you pass away, but if the policy benefits would put your estate over the estate tax exemption, then you might consider a trust.

When planning the estate of a family's primary breadwinner one of the biggest concerns is providing the necessary cash assets for the rest of the family to live on while everything else gets settled. This is especially the case if the estate is expected to go through probate or if most of the estate assets are difficult to sell quickly.

One of the best ways around this problem is through the use of life insurance. The policies pay out in cash almost immediately. However, as Forbes points out in "3 Considerations for an Irrevocable Life Insurance Trust" the solution is not always perfect.

One of the problems with life insurance policies is that the benefits can be counted for estate tax purposes. This is especially problematic if the benefits would put your estate over the exemption limit when it would not be otherwise.

One way to get the advantages of life insurance while avoiding the estate tax problem is to create an irrevocable life insurance trust. The trust becomes the owner and the beneficiary of the life insurance policy and keeps the benefits out of the estate tax calculations. However, if you transfer ownership of an existing life insurance policy, then you must live for three years to avoid having the IRS include the death benefit value in your estate anyway.

If you have questions about irrevocable life insurance trusts or other ways to provide liquid assets to your family after you pass away, then speak with an estate planning attorney about the options.

Reference: Forbes (Sept. 19, 2016) in "3 Considerations for an Irrevocable Life Insurance Trust."

October 11, 2016February 15, 2024

How to Get an Estate Plan

People seeking retirement advice often express concerns about needing to leave an inheritance for their loved ones. They should get an estate plan to do that.

Different professionals have different roles in your financial well-being. Accountants can assist you with your tax returns. Retirement planners can assist you with your investments. And, as Morningstar explains in “Get Your Estate Plan in Gear” estate planning attorneys can assist you with an estate plan.

The article discusses a couple looking for retirement advice. They wanted to make sure their daughter with special needs would be adequately provided for after they passed away.

The author suggested that they get an estate plan and gave some tips about how to do it, including:

Hire an attorney who specializes in estate planning. If you want to make sure that your loved ones are taken care of, then you do not want to create an estate plan on your own.
Take stock of all the assets you own so you know what needs to be distributed in your estate plan.
Figure out who you want to include in your estate plan as heirs, beneficiaries and in key roles, such as executors and trustees.
Try to learn what type of estate planning documents you might need. If you are not certain, then make sure that you let your attorney know that.
After you get an estate plan from the attorney, make sure you manage the physical documents themselves so they are in good shape and can be found if anything happens to you.
Keep your estate plan up to date and makes changes whenever your life circumstances change.

Reference: Morningstar (Sept. 23, 2016) “Get Your Estate Plan in Gear.”

October 4, 2016

Rise of the Super Rich

More and more Americans are amassing large fortunes. That means that more and more Americans are concerned about how passing that wealth on to their children could impact their children's lives.

In "Penta Millionaires: The New Rising Class" Barron's reports that the number of American families with wealth is growing and diversifying. More families have wealth of over $5 million than ever before. Many more of these wealthy are female and younger than ever before.

What many of the new wealthy are discovering is the old truth that having money in and of itself does not necessarily translate into a worry-free life. Instead, being wealthy comes with its own set of worries about maintaining that wealth and how best to pass it on to the next generation.

Wealthy people, especially those who have earned the wealth themselves, often fear that if they leave it to their children, it could ruin their children's lives.

The children might inherit the wealth and decide they do not need to work hard at their own careers and they can just live off of their parents' money. Some parents also fear their children will waste their inheritances on frivolous pursuits and possessions.

There are several ways to help alleviate these concerns about the effect of large inheritances on children.

One way is to make sure the children receive a proper education in how to handle finances. Another complimentary way is through proper estate planning.

Inheritances can be structured to ensure that assets are not squandered and that the children who inherit wealth continue to pursue their own careers.

Contact a qualified estate planning attorney about how to bless your heirs instead of curse them with your wealth. Profit Law Firm can provide information on how to pass wealth in a manner that encourages children to handle it responsibly.

Reference: Barron's (Sept. 17, 2016) "Penta Millionaires: The New Rising Class"

September 28, 2016March 27, 2024

What is a Simple Will? When do you need more?

The term “simple will” is often used to describe a certain standard type of will that many people get. Before getting one for yourself, you need to understand what it means.

Estate planning attorneys are used to clients saying they just need to get a simple will. Many people are told by others, long before they visit an estate planning attorney, that a simple will is what they need to get. However, what a client might mean by a simple will is not necessarily what the attorney thinks it is.

Estate planning attorneys use the term to normally mean a particular type of will that has standard features.

Recently, the Courier Journal explained what those features are in “Thank You and Simple Wills.”

A simple will normally refers to a relatively short document the primary feature of which is directing that all of the testator’s assets should go to a spouse. In the event the spouse has predeceased, then a simple will almost always directs that all assets be shared between the testator’s children in equal shares. A simple will might also include basic information about who should be the guardian of any minor children the testator has.

That is normally all that a simple will contains, but there might be a few more basic provisions in some circumstances.

It should be obvious that a simple will is not the appropriate estate planning document for everyone. Particularly in Maryland and DC, which are among the minority of states with either a state estate tax or an inheritance tax a simple will does not reduce tax liability or defer taxes. In the District of Columbia which has an estate tax of $1 million and in Maryland which has BOTH an estate tax o $2 million and an inheritance, an individual may need more protection that simple will provides. Middleclass homeowners, for instance, based on the value of their house and insurane or IRAs, often exceed these thresholds and need more complex wills and/or trusts to reduce state tax liability. Consult Profit Law Firm, for a consultation to see if a simple will provides enough protection for your heirs.

Essentially, before telling an estate planning attorney you need a simple will, tell the attorney what you hope to accomplish with your estate plan. The attorney can then help direct you to the proper legal instrument for your needs.

Reference: Courier Journal (Sept. 13, 2016) “Thank You and Simple Wills.”

September 27, 2016

Do You Need a Revocable Living Trust in Maryland?

Contrary to popular belief estate planning is not one-size fits all and not everyone needs a revocable living trust. However, they are a good option for many people.

When you start asking around for estate planning advice, you will probably find the first thing many non-experts say about it is that you need to get a revocable living trust. They are extremely popular instruments and articles abound on the Internet extolling their virtues. They are so popular that a common belief is that everyone should get one.

That noted, they do have drawbacks and these drawbacks might make some people decide to go another route. Contrary to popular belief, revocable living trusts do not offer tax protection. Different trust and estate planning tools can be used to reduce tax liability. Another drawback, is that revocable living trust give take assets out of probate, and sometimes you lose valuable benefits found in probate. For example, in Maryland, creditos can only come after assets in the estate for six months after death, versus the usual three year period. Placing assets in revocable trusts take them out of probate and give them longer exposure to unwarranted creditor claims.

Specifically, the Motley Fool looked at the benefits and drawbacks of revocable living trusts in "Is a Revocable Living Trust Right for You?"

The biggest benefit of a revocable living trust is that your primary assets, as long as they are transferred into the trust, do not have to go through probate when you pass away. As probate can be an expensive and time-consuming experience, this can make handling your estate much easier for your heirs. In Maryland, probate is relatively inexpensive and less lenghty, so some people may find it to their benefit to be in probate. Probate is also normally a public process, but if you have a trust you can keep your estate details private. Probate is public in Maryland and DC. Finally, should you become incapacitated a successor trustee can take over your finances instead of having to go through court to get a guardian.

On the other hand, trusts can be more expensive to set up than other estate planning instruments, but they might save your estate money in the long run depending on probate costs. Transferring assets into your trust can also be very time-consuming depending on what you own. Having a revocable living trust also does not mean you do not need a will. You will still need a simple will to deal with anything left out of the trust. If you want a consultation on whether revocable living trust is right for you, contact the Profit Law Firm.

Reference: Motley Fool (Sept. 10, 2016) "Is a Revocable Living Trust Right for You?"

September 26, 2016February 15, 2024

Basic Estate Planning Mistakes to Avoid

If you would like to make sure that your estate goes to the people you want it to go to, then it is important to avoid making some basic estate planning mistakes.

It is impossible to avoid making mistakes in every aspect of your life. No one can always be perfect at everything. Estate planning is no different.

CNBC recently wrote about some of the common estate planning mistakes we can avoid in “Don’t drop the ball when planning your estate.”

They include:

Many people do not make a will. Without a will, then you cannot decide who gets your property. Every estate plan should have a will of some sort.
After making a will some people never update it. This is a mistake as a will should be changed whenever there is a significant change in circumstances to make sure the will reflects the new circumstances.
It is a mistake to not consider how your heirs will handle their inheritances and whether they are capable of being responsible with anything you leave them.
It is a mistake to not consider getting a trust, especially if your heirs have the potential to be irresponsible. A trustee can oversee the inheritance and make sure it is used appropriately.
Finally, it is a mistake to not think carefully about who to appoint as an executor of a will or as a trustee.

If you realize that you need a will or trust, call Profit Law Firm for a consultation.

Reference: CNBC (Sept. 13, 2016) “Don’t drop the ball when planning your estate.”

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Tag: Maryland Estate Planning