Downs Law Firm, P.C.

Will

super-agers

Remarriage Can Create Estate Plan Challenge

When a remarriage takes place late in life, potential problems can arise over an existing home. It may be hard to broach the subject of death when you are getting married later in life. If you have children from a prior marriage, what will happen with assets and control is a necessary difficult conversation. It’s not always an easy situation when a spouse moves into the home of their spouse when they marry. Would the surviving spouse receive the home when the other dies? Does the home go to children from a previous marriage or previous arrangement? A good estate plan can resolve many potential problems in a remarriage situation, according to the Times Herald-Record, in “How to preserve your home’s value when remarrying.” With poor planning, you might end up with your assets going to your second spouse and then, to his or her own children, leaving your own children empty-handed. A common approach is to leave the surviving spouse the right to use and occupy the residence, with a provision in a trust or a will that the surviving spouse pays taxes and home insurance costs and maintains the house. The right to live in the house can be for a limited number of months or years or until they pass away or enter a care facility. When the surviving spouse dies, or the time limit is reached, he or she leaves the house, the house is sold and the proceeds are divided among the children of the owner’s spouse. Some questions to consider: What if the house needs to be sold? Can the spouse use the proceeds to purchase another house? How long is the usage of time? Who can be there? There are other ways to provide more flexibility to the surviving spouse. If the house is too large or expensive to maintain, he or she may be given the right to use and occupy a substituted property, which may be purchased with the proceeds from the owner spouses’ home. Another arrangement allows the owner spouse’s home to be sold with the surviving spouse using the income from the proceeds of the sale of the house to pay for a rental. When the surviving spouse dies (or when the term expires), the children of the first spouse inherit what is left. A few important things to consider: how well the surviving spouse will be able to maintain the house, either for financial or physical reasons. If the surviving spouse is not taking care of the house and it falls into disrepair, the children may have to file an eviction proceeding. If the trust or will does not specifically instruct the surviving spouse to pay for home maintenance, the children of the owner spouse would be responsible for those costs, and depending on how long the surviving spouse lives, that could be a large burden for a long period of time. This situation requires thoughtful planning, with many “what if’s” to be asked. An experienced estate planning

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SSI recipient

How to not pick a guardian

Waiting for the perfect answer often leads to no answer at all Picking a Guardian for your children is no picnic. I am an estate planning attorney and have three children. They are now thankfully adults, and I am very proud of them. I am also one of eight children. My wife is one of 10 children.  When our children were young, we had a great deal of difficulty trying to figure out who would be the best choice for guardian if we both died. We had many candidates to choose from in our siblings alone. In my 36 years of advising young parents on this topic, I find it is often an emotionally charged “Bone of contention.” I carried a draft will in my briefcase for longer than I care to admit because we could not resolve this problem. Every time the topic came up it was an unpleasant conversation, one that was best left unresolved. That is a good way to not pick a guardian: Avoid the touchy subject altogether. Eventually, we finally figured out that although we couldn’t agree on who should be named the guardian, we could easily agree on who shouldn’t be, which left a short list. I find that this is almost always the case. A couple may not agree on who should be first and who should be second as guardian, but they can usually agree on who should be on the list and who shouldn’t. Making sure that the right people only are involved in the conversation is an important parental act. Imagine for a moment that you have died, and are now a spirit in the room, watching all the people who think that they are supposed to be guardian vying to be appointed. Exactly how would that go? Wouldn’t it be better to have only the people on the short list be in the conversation? We were able to compromise once we got there. It also often helpful to have a third party, such as an estate planning attorney, put in their two cents. Complex issues of ego and family pride that burden the parents are not baggage of the lawyer, at least not for your family. What if your child was at school and needed a ride home, but neither parent was available? Having no one handle the pick up would not seem a viable option, right? What if you were never going to be there? You need an answer to the critical question of “Who raises your child?”: it’s a paramount parental duty. An imperfect plan would be far better than none at all. Waiting for an answer to arrive which “rings true” is another problem. The only answer that rings true is that you are there to see your child grow to adulthood, as I have had the good fortune to experience. Anything short of that won’t seem right. Deciding is great, but not enough. Reducing your choice of a guardian to writing in your Last Will

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Charitable giving

Passing on Assets? Perhaps Some Can Be Given Away

Want to make a big impact? Consider passing on some of your assets through charitable giving. While many people transfer their assets to the next generation, there are many who want to give some, or even all, of their assets away through charitable giving. That can make a big impact, according to MarketWatch in “Giving your money away when you die: 10 questions to ask.” If you haven’t thought about charitable giving or estate planning, these 10 questions should prompt some thought and discussion with family members: Should you give money away now? Don’t give away money or assets you’ll need to pay your living expenses, unless you have what you need for retirement and any bumps that may come up along the way. There are no limits to the gifts you can make to a charity. Do you have the right beneficiaries listed on retirement accounts and life insurance policies? If you want these assets to go to the right person or place, make sure the beneficiary names are correct. Note that there are rules, usually from the financial institution, about who can be a beneficiary—some require it be a person and do not permit the beneficiary to be an organization. Who do you want making end-of-life decisions, and how much intervention do you want to prolong your life? A health care power of attorney and living will are used to express these wishes. Without these documents, your family may not know what you want. Healthcare providers won’t know and will have to make decisions based on law, and not your wishes. Do you have a will? Many Americans do not, and it creates stress, adds costs and creates real problems for their family members. Make an appointment with an estate planning attorney to put your wishes into a will. Are you worried about federal estate taxes? Unless you are in the 1%, your chances of having to pay federal taxes are slim to none. However, if your will was created to address federal estate taxes from back in the days when it was a problem, you may have a strategy that no longer works. This is another reason to meet with your estate planning attorney. Does your state have estate or inheritance taxes? This is more likely to be where your heirs need to come up with the money to pay taxes on your estate. Maryland has a 10% tax for gifts to people who are not close relatives. This would include nieces and nephews. There is no such tax on life insurance proceeds. Your decisions of “Who gets what” can include significant tax consequences. A local estate planning attorney will be able to help you make a plan so that your heirs will have the resources to pay these costs. Should you keep your Roth IRA for an heir? Leaving a Roth IRA for an heir, could be a generous bequest. You may also want to encourage your heirs to start and fund Roth IRAs of their

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Die without a will

What Happens if I die without a will?

Estate problems can sometimes lead to a fractured family. We speak to many people who believe that if they die without a will, everything goes to the State. This is almost never the case. “Dying intestate” is the term used to describe the legal status of someone who has died without a will. The laws of your state law will then dictate what happens to your assets. Most of your tangible possessions will be distributed following probate. If your estate is complex, for example, and you own property in more than one state, the process will take a long time and the costs can be high. With a will, you can control who gets what, when they get it, and who is in control of the process. Without a will (or possibly a Revocable Living Trust), you have a plan, drafted by your legislature,  but forfeit the right to decide these things. Some of your assets do not pass to heirs through a will. Jointly titled assets pass by title regardless of what your will might say. Other assets usually transfer at death by the contract that controls the asset, such as retirement accounts, life insurance policies and annuities. All accounts that have named beneficiaries go directly to the people who are named. If they predecease you, then the contingent beneficiary receives the asset. The companies do not care what your will instructs. Reconsidering your joint ownership decisions and beneficiary designations are important parts of reviewing your entire estate plan. If you name only your son as the beneficiary for your insurance policy, then later welcome a daughter into your family by birth or adoption, you’ll want to add her as a named beneficiary as well. Otherwise, when you die, only your son will receive the proceeds. Anytime a life event occurs—births, deaths, divorces, marriages—is the right time to review your beneficiary designations. You can make these changes when you are living. When you die, the designation is irrevocable. A will—and an estate plan that is updated regularly—can prevent surprises and ensure that your choices are honored. Family members can end up feeling mistreated by the distribution of an estate. However, a good estate plan can help prevent those hard feelings from developing, according to the Observer-Reporter in “Improper estate planning can lead to familial conflict.” Keeping that plan current can lessen the trauma of something happening by oversight instead of intention. Here’s a celebrity story that serves as a perfect example. A famous father made his third wife his executor and gave her total control over his business, despite the fact that his son was equally famous and the top executive in that business, as well as its public face. The son was baffled when he learned that the third wife now controlled the business, including the rights to his own name. When the father died, a long, expensive and unpleasant estate battle began. The son was Dale Earnhardt Jr. An estate planning attorney can advise you in creating

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Prove you're an adult

Reviewing Your Estate Plan in January

Put away the estate plan when it is completed. However, take a good look at it frequently. There are many reasons why an estate plan needs changing, because your life changes as do your goals, according to the Times Herald-Record in “5 steps to securing your elder estate plan.” What might be some of those changes? It could include your divorce, your marriage or even the marriage or divorce of your children. It can also be that your financial situation has changed, and you need to make changes. A ten-minute review at the beginning of a New Year will be an annual reminder, and can verify that you are still on the right course. The process of review may seem challenging but here are some steps to consider: Step One: gather up all your documents, which may take some time. This includes your will, powers of attorney, health care proxies, living wills, any trusts and any other documents. For clarity, here are some definitions. A will is the document that states where you want your assets to go when you die. It is reviewed by the court in a proceeding called probate, but only after your death. Assets in a living trust (or other types of trusts, depending on your situation) do not go through this process. Creating a trust results in a legal entity that owns the assets it contains. The trust assets go to beneficiaries upon death, as directed by you to the trustee. In many instances, trusts save time, money and avoid litigation over inheritances. Powers of attorney name the person you appoint to make any legal, business or financial decisions for you, should you become incapacitated. A health-care proxy names the person to make your medical decisions, if you are unable to do so. Living wills are used to express your wishes for end-of-life care. Step Two: review your documents. Make sure that everything is signed. You would be surprised how many important documents aren’t signed. Read the documents to see who was named as the executor of your will and who is the trustee of your trusts. Are those people still able to undertake these responsibilities? Do you still want them making decisions for you? Step Three: make a list of all of your assets. Note how they are titled—what names are on the accounts—and what are the values of each. Include retirement accounts like IRAs, 401(k)s, insurance policies and annuities and check to see if you named a beneficiary. Do you still want that person to be the recipient of the asset? Make sure that you have also named a contingent beneficiary. Step Four: what information would your loved ones need should you become unable to communicate? They’ll need information about your medications, the name and contact information for your primary care physician, your estate planning attorney, your CPA and your financial advisor. You may want to arrange for a “family meeting” with your healthcare team and your legal and financial team (two separate

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Relocating

Take a Fresh Look at Estate Plan If You Relocate

An estate planning attorney in your new state of residence should go over your estate plan. We have noticed a distinct trend: Many people are choosing to leave Maryland and to relocate for retirement and often relocate to a warm, sunny state. The weather an retirement friendly tax environments make this easy to understand. If you decide to relocate, it would be a good idea to have an estate planning attorney review your estate plan, according to TC Palm in “Should new Florida residents update their out-of-state estate planning documents?” An example of why it’s a good idea to have an estate plan review is that in the State of Florida, as long as your will from another state is valid under that state’s law, it will be honored in Florida. That is generally true. However, there may be laws in Florida that could cause some problems with the out-of-state will. That applies to other states as well. Here’s a good example. Let’s say you now own a home–known in Florida as a “homestead”—and your out-of-state will transfers your residence at the time of your death to a trust for the benefit of your spouse and your children. The only person who can receive a homestead in Florida is the spouse. If your will from out-of-state was used, the house would result in a life estate going to the spouse with a vested remainder to your children. This doesn’t achieve the result you wanted: to have the property controlled by a trustee and not your spouse and children. If this was a second marriage, the potential could be a family blow up, even litigation. Even in a first marriage, if the children and their mother differ on what should happen to the family homestead, there would be trouble ahead. Taking that example further: What if your out-of-state will directs the sale of your home in Florida and the distribution of proceeds in equal shares to your children? If you die with creditor claims, you lose the homestead exemption for creditor protection purposes. Your children’s inheritances could then be at risk. More food for thought: if your out-of-state will appoints a non-relative who is a resident of the state where your will was originally executed to serve as your personal representative, they won’t be able to do much in Florida. That’s because they are not eligible to serve as a personal representative under Florida law, which only allows a nonrelative to serve, if they are a Florida resident. Maryland has its own unique rules, including a 10% inheritance tax for assets left to people who do not qualify as close relatives, such as nephews and nieces. Every state has its own laws, and while some issues are fairly consistent from state-to-state, that is not always the case. To take advantage of the laws in your new home state, an plan review should be done. If you decide to relocate it would be a good idea to meet with an estate planning attorney, in

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Young Family Estate Plan

Young Family- Consider an Estate Plan

For a young family, when is the right time to put together an estate plan? Right before you die is the correct, but not realistic, answer. Estate planning is especially important for families with young children, and to be updated to pass on assets in later years, according to the Lodi News Sentinel in “Planning for what comes last.” Think of an estate plan as a gift for the next generation, as is making funeral plans in advance. I used to avoid doctor visits, until a friend pointed out, the visit is not just for me, but the whole family. Doing what you should is for them. You can’t assume that your adult children will know what you want for your funeral and you don’t want them to have to make decisions during a time of great sadness. These are gifts, that parents who love their children can give: taking care of the business side of their lives and their deaths, so that a difficult time is manageable. Once you have worked with an estate planning attorney to prepare all the necessary documents and made funeral plans, the next step is to share that information with your heirs. It’s not an easy conversation to have. Most of us tend to keep that side of our lives private from our kids, no matter how old we become. However, sharing this information can keep families from fighting in the future. It is not easy to know how much different members of the family can handle and who can be trusted with what information while you are living. There are times when people who appear completely selfless suddenly become greedy when an inheritance is being probated. It’s hard to anticipate this. However, there are several things that you can do now to make it easier for those you love. Have a will and if appropriate, a trust, created with an estate planning attorney. Don’t neglect a power of attorney for health and for finances. Make funeral plans and tell your family about those plans. Make an end-of-life plan. Don’t leave it to others to make these difficult decisions, if you know what you want to have done. Plan for your pets, in case they outlive you. Protect your digital assets by obtaining the correct information for all your social platforms, so your loved ones are empowered to access and close accounts after your death. An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances. Reference: Lodi News-Sentinel (July 1, 2018) “Planning for what comes last”

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Your Estate Plan’s Right Documents

There are some important documents that should always be in your estate plan to protect your family. However, some people still leave them out, according to Consumer Reports in “8 Essential Steps for Estate Planning.” A survey from Caring.com showed that as many as 60% of adults don’t have estate planning documents. When they asked families with young children, fewer than one in ten have even designated a guardian to take care of their children, if both parents should die. Worse yet, we have worked with numerous cases where people thought they had documents in place, but due to their own misunderstanding of the law or requirements, their plans were agonizing disappointments of what should, and could have been… What happens when there’s no planning in place? Even the simplest things become more complicated, and complicated things become financial and legal nightmares. When there’s an emergency and decisions need to be made, the entire family is subjected to more stress and costs than would otherwise be necessary. Here are the eight steps you need to take, right now, to protect your family: Get the professional help you need. The change to the tax law may or may not impact your family and your estate plan, but you won’t know until you sit down with an estate planning attorney. Trying to do this online, may seem like a simpler way, but you will not have the same peace of mind as when you sit down with an experienced attorney—and one who knows your state’s laws. Create a will. This is a legal document that explains how you want your assets to be distributed after you die. It names an executor to carry out your instructions. If you have minor children, this is an especially important document, since it is used to name their guardian. If you have no will when you die (called dying “intestate”), then the laws of your state determine how your assets are distributed and who rears your children. Depending on where you live, your spouse might not automatically inherit everything. Discuss whether you need a Revocable Living Trust. In most states, when you pass away, your estate goes through a process called “probate.” The courts basically review your estate plan and determine whether everything looks right. The problem is that your will becomes a public document—and so does information about your assets. Some people prefer to keep their lives private by transferring assets to a revocable living trust, which distributes assets according to your instructions at your death. Titles to the assets must be changed so they are “owned” by the trust. This is known as “funding” the trust. You still retain complete control of your assets, since you are the trustee. However, if you fail to retitle assets, the estate goes through probate. You will also still need a will to protect your minor children. Review your beneficiaries. Whether you remember it or not, when you open many different kinds of accounts—banking, investment—you assign a beneficiary

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