Frequently Asked Questions
Powers of Attorney
There may be times in your life when it is necessary for another person to act on your behalf. A document called a Power of Attorney allows you (the principal) to name someone as your agent to make decisions for you when necessary. A Power of Attorney may be granted to someone for either financial or health related purposes. It should be established while you are still mentally stable enough to make decisions on your own. Otherwise a court proceeding may be required to appoint a Guardian or Conservator to make decisions for you
Unless your Power of Attorney clearly states otherwise, it will end if you become mentally incapacitated. A Durable Power of Attorney states that the Power of Attorney remains in place if you become disabled or incapacitated. Durable Powers of Attorney can be drafted to address two situations:
- You want your agent to have authority only if you become incapacitated
- You want the Power of Attorney to take effect immediately and to continue if you become incapacitated.
When granting a Power of Attorney, an agent may be entrusted with the authority to make crucial financial decisions that impact you and your family. Because the agent will typically have access to all or your financial assets, it is important to assign this role to someone that you trust has your best interests at heart. An Agent may be authorized to:
- Manage your financial matters
- Buy or sell things for you
- Apply for public benefits (like Medicare, Medicaid, or Social Security) for you
- Collect your debts
- Manage your business
- Sue a person or entity on your behalf
- Invest your money
- Cash your checks
Your agent may also have the power to make health related decisions, but it is normally best to establish a separate Health Care Power of Attorney for that purpose.
Yes. As long as you are mentally competent, even if you have given the power for your agent to act immediately, you may still make your own decisions and conduct business on your terms. If your agent does not respect your wishes, you may revoke the Power of Attorney.
Problems may arise, however, if an agent with a Durable Power of Attorney believes you lack the mental capacity to act independently or revoke the Power of Attorney, but you disagree. If this occurs, a court proceeding may be necessary to determine whether you are of sound mind.
Advanced (Medical) Directives & Living Wills
An Advanced Medical Directive is a legal document that states a patient’s wishes about the type of healthcare they wish to receive should they become incapable of making their own medical decisions. It has two components: 1) a Living Will; and 2) a Durable Power of Attorney for Health Care.
A Living Will is a legal document in which you provide instructions for your own medical treatment if you become incapacitated, suffer a terminal medical condition, or fall into a state of permanent unconsciousness.
A living will may discuss your wishes with respect to pain management and identify specific treatments, that you would and would not want doctors to use to keep you alive. Items to consider include:
- Mechanical ventilation
- Tube feeding
- Palliative care
- Organ and tissue donations; and donation of your body for scientific research.
A Healthcare Power of Attorney allows you to appoint an agent to make healthcare decisions when you cannot.
You may name anyone over the age of 18 as an agent except for the physician providing your care. The agent has no legal obligation to serve and is not responsible for paying medical bills. The agent does not need to be an attorney.
In states where Advance Medical Directives are authorized, a Living Will and Healthcare Power of Attorney are combined into a single document. The Living Will states in advance what you know you want or don’t want. The Healthcare Power of Attorney names someone as your agent to make all other health related decisions.
If you die without a will, you are deemed to have died “intestate” and your property will be distributed in accordance with the law of the state where you died. Generally state statutes split the estate between the surviving spouse and children. In Maryland a surviving spouse receives one half of the estate if there are minor children and one half of the estate plus $40,000 if the children are all adults. In the District of Columbia assuming that children are all from the same marriage, the surviving spouse will receive 2/3 of the estate and the children receive the balance. As long as you have some living heirs, your estate will not be lost to the government.
Anyone of sound mind who is 18 or older may draft a legally binding will. In order for a will to be valid, in either the District of Columbia or Maryland, it must generally be in writing, and signed in the presence of two disinterested witnesses before a notary public.
Being of sound mind means that you understand what your possessions are and to whom you’re leaving them. Being elderly or intellectually challenged does not mean that a person is incapable of making their own decisions, and does not preclude them from writing a will. Even a person diagnosed with dementia, may be considered competent to execute a will if at the time of the signing they had the requisite understanding of the terms of the document, including the nature of their assets and those whom they wish to receive them.
No. You do not have to leave assets of your estate to your children or your spouse; however, if either exist, regardless of whether you leave them anything, you should mention them in the will. Otherwise they may file a claim against the estate arguing that you simply forgot them.
Although you need not leave anything to your spouse in your will, if you don’t, he or she will likely have the right to file a claim against your estate based on what’s known as the “elective share”. State elective shares vary, but usually range between 1/3 and 1/2 of your assets. In determining the amount of the elective share, some states only include those assets passing under your will (“probate assets”) while others include non-probate assets as well.
Yes. You may name a charity as a beneficiary in your will. If the charity no longer exists upon your death, the court will usually distribute the property as closely as possible to your wishes. In some instances, however, the gift could lapse and be distributed to your residuary beneficiaries named in your will.
For the year 2020, there is no federal estate tax on estates under $11,580,000. 13 states including the District of Columbia impose a local estate tax.
In the District of Columbia you will pay no estate tax unless your estate exceeds $5,600,000. In Maryland no estate tax is imposed unless your estate exceeds $5,000,000.
In addition to it’s local estate tax, Maryland imposes a 10% inheritance tax on assets passing to certain individuals. Individuals exempted from the tax include:
- Children, stepchildren and grandchildren
- Parents and stepparents
- Spouses of a child, stepchild or grandchild
- Surviving spouses of a deceased child, if the surviving spouse has not remarried.
Estate taxes laws are subject to change. You should consult a knowledgeable estate lawyer for more information
Revocable Trusts (Living Trusts)
A trust is an arrangement in which one person agrees to hold property for the benefit of another. Every trust generally includes the following:
- The Grantor (also known as the Settlor or Trustor) who establishes the trust
- The trustee who holds and manages the assets of the trust for the benefit of another person
- The trust corpus or property held by the trustee for the benefit of another person and
- The beneficiary who receives the assets of the trust as directed by the trustee according to the provisions of the trust.
When properly funded, a revocable living trust allows you to control your assets during your lifetime as well as after you die. Because the trust is “revocable,” you may alter or amend it at any time. A revocable living trust is not a separate taxable entity and does not require the filing of a separate tax return.
A revocable living trust should be included in your estate plan if you want to:
- Control your assets during lifetime and after you die without court interference
- Keep your affairs private and provide for quick distribution to your beneficiaries after your death
- Avoid the time and expense of probate
- Protect your assets for your spouse and family upon your death
- Allow those you love and trust to make decisions regarding your capacity without waiting for a physician’s letter that may never come
- Avoid the necessity to appoint a guardian or conservator of your estate.
Even if your estate plan includes a living trust, you still need a will. Often not all of your property will be able to be owned by your living trust. Sometimes this occurs by neglect because you failed to complete the necessary paperwork. In these situations, your property will need to pass through probate. Without a will you would lose control over the assets and they would be distributed in accordance with the states intestacy law.
In addition, your will can provide that your assets going through probate get distributed in accordance with the provisions set forth in your living trust. This is often referred to as a “pour over will”. By including this type of will in your estate plan, you can ensure that the assets passing to your beneficiaries through your will are protected against claims from creditors and predators.
Estate Administration & Probate
Probate is a public process controlled by the state in which assets you own at your death are are transferred to your heirs or legatees. Every will must go through probate. Other assets must go through Probate even though they do not pass through your will. “Probate assets” may include:
- Real property that is titled solely in the decedent’s name
- Personal property not transferred to a living trust
- Bank accounts solely in the decedent’s name
- A life insurance policy or brokerage account not naming anyone or naming the estate as beneficiary
- A retirement account not naming anyone or naming your estate as beneficiary
Assets that do not need to pass through probate or “Non-probate” assets may include:
- Property held jointly
- Bank or brokerage accounts held jointly
- Property held in a trust
- A life insurance or brokerage account that names someone other than the estate as a beneficiary
- A retirement account that names someone other than the estate as beneficiary
The time it takes to complete probate, and the cost can vary depending on several factors, such as the value and complexity of your estate, the existence of a will, and the location of real property owned by the estate. Will contests — in which a party objects to your will — and disputes with creditors over the estate’s debts may also lengthen probate and increase the cost. Common probate expenses include:
- Executor fees
- Attorney’s fees
- Accounting fees
- Court fees
- Appraisal costs
- Surety bonds
Asset Protection Trusts
An asset protection trust is an irrevocable trusts that can protect your assets from creditors, lawsuits, divorce, long-term care costs or family indiscretions. Unlike your revocable living trust, an asset protection trust can protect your assets during your life time as well as after your death
Generally, because the trust is irrevocable, you cannot modify, amend, or terminate an asset protection trust yourself. If the trust is properly drafted, however, others you appoint may able to do this for you. Accordingly, even though the trust is irrevocable, you can maintain substantial control over the trust assets.
Medicare is a government administered health insurance program for older Americans generally over the age of 65. Because it is an entitlement program, anyone can qualify for Medicare regardless of their income or net worth.
Medicaid is a state- and federally-funded program that provides health coverage for low income individuals and families. Each state administers its own Medicaid program. It is “means tested” meaning that it is available only to those who meet certain income and asset tests.
Generally, the basic benefits of Medicaid include:
- X rays and lab tests
- Family planning
- Physician, nursing, medical surgical and dental services
- Nursing facility services for adults 21 or older
- Home healthcare for people eligible for nursing facility services
- Pediatric and family nurse practitioner services
- Screening, diagnosis, and treatment services for people under 21
To qualify for Medicaid in Maryland, you can have no more than $2,500 ($4,000 in DC) of countable assets. Countable assets generally include everything other than your home, your automobile, household furnishings, and other personal effects such as, wedding rings and heirloom jewelry.
Yes, but not without careful planning beforehand. Otherwise the transfer may either disqualify you or subject you to a penalty period before you could become eligible for Medicaid. For example, if you give away assets to someone and then apply for Medicaid within 60 months following the date of transfer, you would be subjected to a period of ineligibility. You should speak with a Medicaid planning lawyer to learn more.
Business Succession Planning
A business succession plan will protect your business from the impact of your death or incapacity. Without planning ahead, you could quickly lose the business you’ve worked so hard to establish. Business succession planning ensures that your interest in your business is protected if you die, become incapacitated, or retire.
If you have partners or other family members who own the business with you, a Buy-Sell agreement is essential. Without one, you may find yourself in business with someone’s spouse or child who may not want as a business partner.
You may consider a Buy-Sell Agreement if you do not plan to pass your business down to your children. This type of agreement guarantees that you or your loved ones will receive the fair market value of your interest in the business if you sell it at a future date. A Buy-Sell Agreement is a binding agreement between you and someone who agrees to purchase your interest in the business in the future.