Frequently Asked Questions About Estate Planning
Knowledge & Insights from Attorneys with 20+ Years of Experience
Our legal team at Adams Law Office, LLC compiled these frequently asked questions about estate planning. This is general information, however, and we will be more than happy to provide guidance for your specific situation when you retain our services.
Q:What is estate planning?
A:Your estate is made up of your real property, personal possessions, insurance proceeds, investments, and any other tangible or intangible property. Estate planning aims to preserve and protect property during life and govern the distribution of property after death. It involves the preparation of applicable documents and legal devices, such as wills, trusts, powers of attorney, and advance healthcare directives. If you fail to create your own estate plan, the state will create one for you.
Q:Why have a will?
A:Without a will, state laws of “intestate succession” kick in.* In MD, the following distributions would apply if you died without a will.
If survived by spouse and parents: ½ of estate, plus $15,000 to spouse; Balance to parents.
If survived by spouse and children: ½ of estate to spouse; ½ to children.
If survived by spouse and adult children: ½ of estate, plus $15,000 to spouse; ½ of estate to children (not including stepchildren).
If no living heirs or stepchildren: Estate goes to the Board of Education.
If the intestate laws do not precisely reflect your wishes, you will need a will and/or revocable living trust.
*See MD Code Ann., Estates and Trusts §§ 3–101 et seq. (2003) for a complete description of intestate distributions.
Q:What are the benefits of a will?
A:1) You, rather than the government, determine the distribution of your property; 2) Potential to reduce taxes and fees; 3) Avoid court-appointed guardianship; 4) Minimize time and complication of probate; 5) Designate guardian(s) for your children; 6) Express your wishes regarding life support and other medical treatments.
Q:What is a revocable living trust?
A:A revocable living trust (RLT) is a separate legal entity that holds the title to property for the benefit of a third party (i.e. beneficiary). The person who creates an RLT is called the settlor, and they can adjust or revoke the trust at any time. Until your death, you are the original trustee, managing and distributing the property held in trust. Upon your death, a designated successor trustee transfers the property to the successor beneficiaries. Thus, the settlor retains control over their property throughout their life, and the transfer of property after death occurs without probate. If you have property in more than one state, a trust can eliminate the need for probate proceedings in multiple jurisdictions. Also, if your estate, including life insurance, exceeds the estate tax exemption amount ($11.58 million as of 2020), a revocable living trust for you and your spouse can save your beneficiaries tens of thousands in estate taxes. Additionally, a trust can allow for great specificity regarding distributions for beneficiaries, asset protection, retirement distribution planning to limit income taxes, provisions for special needs children, blended family planning, and provisions to prevent guardianship.
Q:What is probate, and should it be avoided?
A:Probate is the process by which a court supervises the distribution of a decedent’s estate (i.e. property of the person who died) according to a verified will or the laws of intestate succession. The primary reasons for avoiding probate involve the costs, time, and potential publicity associated with the process. For small estates in Maryland and DC, the actual court costs and probate fees involved are nominal, and the probate process is now more streamlined than it once was. For many estates, a valid will and individualized planning can minimize the hassle of the probate process. Estate plans effectively utilizing a trust can even avoid probate altogether, allowing for the distribution of assets without court involvement or delay.
Estate planning can also: Keep the estate plan private (if it avoids probate); Minimize and/or delay estate taxes for estates with assets (including life insurance); Place assets into a trust and distribute them over a period of time; and/or Designate a person to manage assets if the property owner becomes incapacitated.