Are you facing issues, or do you have a need for, legal instruments along the lines of wills (including simple wills), power of attorneys (POA), trusts, guardianships, conservatorships or business succession planning in Harford County, Maryland? These are relatively complex legal issues and should only be handled by an experienced Harford County estate planning lawyer.

Please contact the Bel Air estate planning lawyers at The Law Offices of John P. Downs for a free initial consultation. Mr. Downs has a wealth of experience handling all types of estate planning matters in Maryland.

Estate Planning Overview

Estate planning is the process of anticipating and arranging, during a person’s life, for the disposal of their estate. Estate planning can be used to eliminate uncertainties over the administration of a probate and to maximize the value of the estate by reducing taxes and other expenses. The ultimate goal of estate planning can be determined by the specific goals of the client, and may be as simple or complex as the client’s needs dictate. Guardians are often designated for minor children and beneficiaries in incapacity. The law of estate planning overlaps to some degree with elder law, which additionally includes other provisions such as long-term care.

Devices: Estate planning involves the will, trusts, beneficiary designations, powers of appointment, property ownership (joint tenancy with rights of survivorship, tenancy in common, tenancy by the entirety), gift, and powers of attorney, specifically the durable financial power of attorney and the durable medical power of attorney. After widespread litigation and media coverage surrounding the Terri Schiavo case, estate planning attorneysnow often advise clients to also create a living will. Specific final arrangements, such as whether to be buried or cremated, are also often part of the documents. More sophisticated estate plans may even cover deferring or decreasing estate taxes or winding up a business.

Probate: Countries whose legal systems evolved from the British common law system, like the United States, typically use the probate system for distributing property at death. Probate is a process where 1) the decedent’s purported will, if any, is entered in court, 2) after hearing evidence from the representative of the estate, the court decides if the will is valid, 3) a personal representative is appointed by the court as a fiduciary to close out the estate, 4) known and unknown creditors are notified (through direct notice or publication in the media) to file any claims against the estate, 5) claims are paid out (if funds remain) in the order or priority governed by state statute, 6) remaining funds are distributed to beneficiaries named in the will, or heirs if there is no will, and 7) the probate judge closes out the estate.

Tax Issues: Income, gift, and estate tax planning plays a significant role in choosing the structure and vehicles used to create an estate plan. In the United States, assets left to a spouse or any qualified charity are not subject to U.S. Federal estate tax. Assets left to anyone else—even the decedent’s children— are taxed if that part of the estate has a value of more than $5,430,000 for a person dying in 2015.

One way to avoid U.S. Federal estate and gift taxes is to distribute the property in incremental gifts during the person’s lifetime. Individuals may give away as much as $14,000 per year (in 2015) without incurring gift tax. Other tax free alternatives include paying a grandchild’s college tuition or medical insurance premiums free of gift tax—but only if the payments are made directly to the educational institution or medical provider.

Other tax advantaged alternatives to leaving property, outside of a will, include qualified or non-qualified retirement plans (e.g. 401(k) plans and IRAs) certain “trustee” bank accounts, transfer on death (or TOD) financial accounts, and life insurance proceeds.

Because life insurance proceeds generally are not taxed for U.S. Federal income tax purposes, a life insurance trust could be used to pay estate taxes. However, if the decedent holds any incidents of ownership like the ability to remove or change a beneficiary, the proceeds will be treated as part of his estate and will generally be subject to the U.S. Federal estate tax. For this reason, the trust vehicle is used to own the life insurance policy. The trust must be irrevocable to avoid taxation of the life insurance proceeds.

Trusts: Trusts may be used to provide for the distribution of funds for the benefit of minor children or developmentally disabled children. For example, a spendthrift trust may be used to prevent wasteful spending by a spendthrift child, or a special needs trust may be used for developmentally disabled children or adults. Trusts offer a high degree of control over management and disposition of assets. Furthermore, certain types of trust provisions can provide for the management of wealth for several generations past the settlor. Typically referred to as dynasty planning, these types of trust provisions allow for the protection of wealth for several generations after a person’s death.

Contact Our Bel Air Estate Planning Lawyers

Do not hesitate to reach out to the Bel Air estate planning lawyers at The Law Offices of John P. Downs for a free initial consultation. Mr. Downs and his associates serves all of Cecil County and Harford County, Maryland including Aberdeen, Bel Air, Cecilton, Chestertown, Perryville, North East, Rising Sun, Churchville, Cherry Hill, Aberdeen, Havre De Grace, Towson, Joppa and Joppatowne.