Everyone has “an estate plan,” whether you know it or not! But it may not be the plan you actually want: If you have not drafted your own will or trust, state intestacy laws will determine what happens to your property upon your death.
A well-designed estate plan, on the other hand, ensures that upon your death, your property will be distributed as you want it distributed, to whom you want it distributed, and when you want it distributed. The estate planning process involves preparation of a last will and testament and possibly a revocable trust, both of which govern the distribution of certain of your assets after death. These documents may or may not include some estate tax planning, depending upon the value of those assets, your entire estate, and the jurisdiction where you reside. Estate planning also involves other decisions and documents to insure your wishes are carried out fully.
Some assets — like retirement accounts, life insurance and annuities — are distributed by beneficiary designation form and not by a will or a trust, except in certain instances where life insurance is made payable to a probate estate or a trust for particular reasons. Since retirement accounts and life insurance are often a significant part of an individual’s wealth, I assist clients in preparing or reviewing beneficiary designation forms that govern the distribution of these assets after death to insure that these assets are distributed consistent with the client's wishes and overall "plan."
One important note about naming children as beneficiaries of insurance policies or retirement accounts:Minors cannot “own” property. So, if you wish for a minor child to inherit all or part of your life insurance or your retirement account in the event of your death, it is absolutely essential that you speak with an experienced estate planner. Otherwise, these assets could sit in limbo (or require expensive court intervention) until the minor beneficiary reaches the age of majority. Please read more here: The Importance of Understanding Beneficiary Designation Forms.
It is extremely important for everyone to have in place an up-to-date durable power of attorney document (authorizing someone to handle your financial affairs if you are unable to do so) and a health care power of attorney and advance directive (often called a “living will”) that authorizes someone to make medical decisions for you if you are completely incapable of communicating those wishes yourself. These documents, which you can often prepare on your own, are also considered part of the “estate planning process.” Maryland has so-called “statutory forms” that you can prepare yourself, without an attorney — both of which are available on my website: view Maryland statutory forms.
Many attorneys try to sell their potential clients on a revocable trust, even though it may not be appropriate or necessary, depending upon the client’s situation. Here is a memorandum that I have written on this topic that should answer your questions: What are the Advantages of Utilizing a Revocable Trust as Part of Your Estate Plan?
Most married couples own some of their assets jointly, meaning that both names are on investment and bank accounts and their real property is usually owned “tenants by the entirety” (a fancy way of saying that the two persons each own the whole). What this means is that the particular asset will be immediately distributed to/owned by the surviving joint owner when one of the owners dies. What most people do not understand, however, is that when you add another person to an investment or bank account to facilitate that person’s ability to pay your bills, deposit your checks, etc., the investment house or bank most likely will consider that other person to be a “joint owner,” meaning that the particular asset will also be immediately “owned by” that other person upon your death. This may not be your intention but it can lead to huge problems in the administration of the estate after the account owner’s death.
Good estate planning attorneys take all of the above issues — and more — into account to help you plan for your children and your assets. The best estate planning attorneys help you in this endeavor both cost effectively and with genuine concern for your wishes and well-being. I strive to bring all of these elements to each of my clients. If you live in Maryland, Virginia or the District of Columbia and need estate planning advice, I encourage you to contact the Law Office of Catherine R. Mack to discuss how we can help you!