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FAQ
Who is authorized to file a challenge to a will?
Only “interested parties,” meaning individuals or entities 1) who are beneficiaries of the will that was admitted to probate (and this includes creditors who may file a claim against the probate estate) or, 2) who would have inherited from the decedent if the will that has been admitted to probate is found to be invalid or unenforceable.
What is the time limit for contesting a Will in Maryland and the District of Columbia?
With some exceptions, a challenge to a will must be filed within six months of the appointment of a personal representative (the same as the executor) in the probate matter.
Is there any disadvantage to probate?
Yes, it is easier for a disgruntled party to challenge the validity of a will than for such a person to challenge a trust. Also, probate is a public forum whereas trust administration is more private.
Isn’t probate something I should avoid?
Not necessarily. In Maryland and the District of Columbia, probate is relatively inexpensive and efficient. And in Virginia, the matters are typically handled by the Personal Representative/Executor (and not the attorney) at least at the initial stages of probate.
Does everyone need a will?
If you do not have a will, then the state “creates” a will for you because of the laws of intestacy. So, in my opinion, everyone who has any assets that will be distributed through probate should have a will. See my discussions of Washington D.C. Intestate Succession Laws and Maryland Intestate Succession Laws, which address how assets are distributed in your jurisdiction if you don’t have a Will. It’s not the way you probably imagine it will be!
Why is a guardianship so expensive?
First, the person seeking to be appointed guardian needs to hire and pay an attorney. Second, the judicial process requires that numerous individuals and agencies are sent certified letters with copies of the pleadings. Third, the court appoints an attorney to represent the prospective ward, and the fees to this attorney are paid from the prospective ward’s assets. Next, the court almost always orders a hearing at which both the attorney for the guardian and the attorney for the prospective ward must appear. Finally, the guardian must file annual accountings each year and that process, which is burdensome to say the least, may involve accountants and attorneys in the reviewing of the documentation. One must seek to avoid guardianship if at all possible!
Does a revocable trust serve to avoid the need for a guardian?
Yes, at least with respect to your financial affairs and assets are owned by / have been transferred to the trust. If you are elderly, it often makes sense to create a revocable trust and have title to your assets in your name as trustee of the trust. This assists in the management of your assets if you become too ill to handle the assets yourself. This also avoids the need for a guardianship through the court and avoids the necessity of your successor trustee filing any reports with a court. The cost and time savings are enormous. But it’s important that asset ownership be in the trust, a task that is relatively easy to accomplish.
Can I be penniless and still not qualify for Medicaid?
Unfortunately, with the new Medicaid rules, individuals may be without any financial resources whatsoever and still not be eligible for Medicaid. Many elder lawyers are working with the legislature to fix this situation.
Does Medicare pay for nursing home care?
Yes, in certain circumstances, Medicare will pay for several weeks of nursing home / rehabilitative care after a patient is released from a hospital after a stay of several days (not just overnight) and needs additional “rehabilitative” care. The rules governing Medicare coverage are strictly construed, however, and if the resident is not perceived as “improving,” then Medicare can cut off any coverage. One must then assume the cost of the nursing home or rehabilitative care.
Is there gift tax in Maryland, D.C. or Virginia?
No, but there is gift tax at the federal level for gifts in excess of $ 12,060,000 per person or $24,120,000 per couple (in 2022). The annual gift tax exclusion amount has also increased to $16,000 per year per gift recipient. Gifting during life is an EXCELLENT way to reduce the state estate tax exposure of your probate (or trust) estate. Few people today need worry about federal estate taxes in the District, Maryland or Virginia because of this extremely high exemption at the federal level (which might change under a Biden administration). The District’s estate tax exemption was reduced to $4 million per person for 2021 and in the District, this estate tax exemption is NOT PORTABLE to a surviving spouse so you “use it or lose it”. We don’t have a final message on the DC exemption for 2022.
Is the level for estate tax the same at the state and federal level?
It used to be so, but now it is not. As of 2022, Maryland taxes any estate valued in excess of $5 million (or $10 million per couple, which means that whatever is not “used up” by the first to die is available to the surviving spouse upon the death of the surviving spouse provided tax returns are correctly filed.) The District of Columbia taxes any estate valued above $ 4 million (as of 2021) (and this is per person and is not “portable” to the surviving spouse.) The federal government imposes an estate tax on estates valued above $12,060,000 per person or $24,120,000 per couple.
Disadvantages
- Initial cost and trouble of set up or “funding” of the trust. Property must be transferred to the trust and if you do not do that, then the trust is perhaps not worth doing.
- It slightly complicates subsequent dealings with the property (but only slightly).
- It may require payment of an annual trustee’s fee if an institution is the trustee.
- At the time of termination, there may be fees to the trustee or for property recordation and transfer.
- There are no immediate tax advantages. Tax planning can be done in a Will or in a trust.
What is your role in retirement planning?
I help my clients organize “what they own” in order to obtain a complete understanding of what is out there for them when they retire. Often this brings them peace of mind and sometimes it causes them to retain a financial planner to better assist them in investing their assets wisely. Understanding your retirement situation is just part of the estate planning process, but it’s a very important part.
Do you do financial planning?
No, but I know people who are first rate performers in this field, who do not sell any products. You can trust the advice rendered because the person has no bias or conflict of interest since he or she does not sell products or manage assets.
If I am a sole proprietor, is there any reason for me to create a business entity?
Absolutely! If you run your business in your own name, you are exposing all your assets to liability. If you run your business in the name of an entity, you may be able to shelter your individually owned assets from liability, depending upon the type of business. There also may be some advantages under the new income tax law. The specifics are being worked out.
If a company wants to hire me, do I need an attorney to review the proposed employment agreement?
Absolutely! I cannot tell you how many individuals have come to me after signing an employment agreement, the terms of which the person did not understand. Even if the company says that it will not entertain any changes to the document, you owe it to yourself to find out exactly what that proposed agreement says. As former general counsel of a New York Stock Exchange company, I am very familiar with employment agreements and the provisions that you should insist upon in such an agreement.
Should a personal representative or executor of a probate estate sign the standard real estate contract presented by a real estate agent?
No, absolutely not! It is important to have an experienced attorney review such a document as there are several important changes to the form that will insulate the personal representative / executor from possible liability. The personal representative / executor rarely knows all about the real estate and should not represent or “warrant” anything concerning the property about which that individual is not informed.
Should married couples always own their real property as joint tenants with right of survivorship (called “tenants by the entireties”)?
Joint titling of property is a good way to avoid probate on jointly titled assets (and also provides some asset protection). But joint titling is not necessarily appropriate in other situations and can often work to complicate estate tax avoidance. I often advise my clients of the options and the consequences.
What does a trustee do after the death or disability of the person who created the trust?
After death (or if the person who created the trust becomes disabled during life), the trustee of a trust is responsible for “running the trust,” making sure that assets are property invested and/or distributed to the beneficiaries of the trust. The trustee is also responsible for communicating with beneficiaries about his or her needs. The District of Columbia, Maryland and Virginia have adopted the Uniform Trust Act (with differences in each jurisdiction) and this new law governs interpretation and administration of trusts.
What are the key characteristics I should consider in choosing a trustee?
This depends upon the type of trust involved and its purpose. The possible players are a family member, a friend, your accountant, your business partner or the trust department of an institution like a bank or other type of financial institution.
Can I have an out of town person serve as personal representative (executor) of my estate?
Yes, but it is important to include specific language in your last will and testament so that this person’s travel and other incidental expenses will be covered from the probate estate assets.
Can I create/handle/manage a life insurance trust on my own?
No, it is important that the insured party NOT initiate nor control any aspect of the life insurance trust, other than retaining an experienced estate planning attorney to navigate the process.
Do I need a revocable (living) trust in order to avoid estate taxes?
Absolutely not! Estate tax planning can be incorporated into a last will and testament just as it can be incorporated into a revocable trust.
What is the purpose of a durable power of attorney?
If you are incapacitated in any way and unable to handle your financial affairs, the durable power of attorney document appoints someone to handle your financial affairs for you. You should choose someone whom you trust completely. Maryland currently has a “statutory” power of attorney form. At a minimum, if you live in Maryland, you should download that form, fill it out and get it witnessed and notarized. It is very important.
Why is it not advisable to name my minor children as beneficiaries on my life insurance?
Minor children cannot own or manage assets. If a minor is named as a beneficiary of life insurance, the life insurance company often holds the assets until the child reaches the age of 18 and then distributes the proceeds to the beneficiary at that point in time, when the child is often not responsible enough to handle the money. When this happens, the minor child is often denied the benefits of the assets when the child most needs the money. This is not what the insured party wants to occur. Read more about designating minor children as life insurance beneficiaries.
How are buy-sell agreements funded?
Frequently life insurance is used to fund the possible buy-out of a partner, although if the parties are sufficiently wealthy, life insurance may not be necessary. Each situation is unique.
Do I need to be concerned only about the death of my partner?
No, you also should be concerned about disability and the possibility of retirement. Each situation is unique.
Does everyone need a life insurance trust?
No, in fact, these trusts are only appropriate only in certain rare situations and I can quickly tell if your situation calls for the implementation of this vehicle for controlling or paying taxes after death. With the increased estate tax exemption, these trusts will go out of favor (except for the .0001%!).
What are the advantages and disadvantages of having a revocable trust?
Advantages
- You retain control over your assets.
- If you are not your own trustee, you observe the trustee in action handling your assets.
- You avoid probate and the trust can be used to avoid an ancillary probate of property in another state.
- You avoid the attendant publicity of probate, although now the beneficiaries do receive notice of the existence of the trust — and their right to request a copy of the trust document — after the trust becomes irrevocable (which is usually after your death).
- You will probably save your probate estate fees and court costs.
- You can provide for uninterrupted management of your assets in case of your incapacity.
- You can avoid interruption of asset management when disability occurs or at death.
- You can change your mind at any time.
Disadvantages
- Initial cost and trouble of set up or “funding” of the trust. Property must be transferred to the trust and if you do not do that, then the trust is not worth doing.
- It slightly complicates subsequent dealings with the property (but only slightly).
- It may require payment of an annual trustee’s fee if an institution is the trustee.
- At the time of termination, there may be fees to the trustee or for property recordation and transfer.
- There are no immediate tax advantages. Tax planning can be done in a Will or in a trust.
What is trust implementation?
A trust is a legal document that governs the investment, administration and distribution of assets that are titled in the name of, and thus “owned” by, the trust. The document can be customized to fit a person’s situation and wishes. A trustee is the person or institution responsible for following the directions set forth in the trust document.
