An Estate Plan is how Families prepare their family for unexpected or unfortunate events. Think of it as a Fire Escape Plan, but instead of how to exit your home, it's how to protect or distribute your assets. For example, if you are in a car accident and you become disabled, who will Manage the Bills? Who will assist you with Medical Decisions? And how can you protect your assets from any Personal Injury Liability? Furthermore, if you were to pass away who would receive your assets and how? Generally, a family member will have to represent your Estate to the Probate Court in order to transfer assets after death and if any beneficiaries have Special Needs, these assets could disqualify them from Government Programs such as SSI and Medicaid.
The good news, is there is a way to make a plan to mitigate all of these concerns and many more! It's called an Estate Plan and it is typically composed of a Will or Trust (asset management), a Medical Directive (medical management), and Power of Attorney (bills and household management).
Although there are some common components of an Estate Plan, there is no one-size-fits-all option for everyone. Although each plan must be tailored to fit the goals and risks of your family, the main documents that comprise a typical plan can be written to encompass most situations.
The first type of document is a Will, also known as a "Last Will and Testament". This document is a list of instructions which directs who will get which assets at death. It is only effective after the person who created it has passed away. That "death event" activates this document and permits one of two main actions. One) Nominate the Personal Representative who will represent your Estate to the Probate Court of Maryland where permission will be asked to distribute your assets as requested in your Will. Two) Identify any persons that you would like to be Guardians of your Minor Children. If you do not have a Trust in place, your Personal Representative will then embark on an 8 - 16 month process called Probate to access and distribute your assets. More information about this process can be found here: How Do I Probate or Administer an Estate in Maryland?
The Trust is an Estate Planning document and pre-dates the formation of the United States. It is almost identical to a Will, but can function during life and after death. The Will cannot function during life and can complicate mitigating risks while an individual is ill or otherwise unavailable during life. In addition to these benefits, a well written Trust can avoid the entire Probate process and the Trustee is appointed more easily to rapidly manage the assets in your Estate. This is why so many Americans choose to use a Trust almost as a wrapper around their Will so that it can be effective during their life. A Trust used during your life may allow you to edit or update it at anytime is called a "Revocable Living Trust". These Trusts are also known as a "Inter-Vivos Trust" which literally translates from Latin to "between living persons".
The advantage of a Revocable (or Editable) Living Trust is that you have full control of everything in it. This does not however provide for Asset Protection or Supplemental Needs protection for services such as Social Security payments or Medicaid Long Term Care assistance. There are too many types of Asset Protection Trusts to cover here, but that selection and customization would be based on your specific needs and goals. There are Trusts for Tax Purposes, for the protection and privacy of Firearms (such as the Family Gun Trust or the NFA Trust), there are Trusts for the protection of Pets, for the care of family members with Special Needs, Trusts for Rental Property and Liability Isolation, and so many more.
A Medical Directive nominates Agents who may make medical decisions for you on your behalf and may have access to your Medical Records and Speak with your doctors. This Agent does not need to be the same person who assists you with your Financial arrangements like paying bills. Many people have a family member with a Nursing or Medical background that would be happy and well suited to serve as your Medical Agent. In this document you can detail what types of medical decisions you want your Agent to advocate for you on your behalf such as life support choices, life preference choices during pregnancy, how long to wait before determining a terminal condition, etc. These choices are very difficult for family members to make on your behalf and detailing your preference takes a lot of stress, guilt and worry off of their shoulders.
A well-formed and statutorily compliant Power of Attorney is the most powerful document in an Estate Plan. It is similar to the Queen piece in a chess game. This document can be written with any level of power, but generally authorized another individual the ability to write checks on your behalf and can be expanded to enable your Agent to avoid guardianship, gift assets for asset protection under the advisement of an attorney, pay your bills, manage expenses, make tax related decisions with your accountant, and many other powers. The important component is that this document stays up-to-date and compliant with Maryland's ever changing laws and statutory requirements.
We often start the planning process by determining which of your goals will be accomplished with each of 3 general structures. Within each of these plans there are many options and considerations, but these structures will dictate the various price ranges of your plan. When you meet with one of our attorneys, you will be presented with a list of your specific goals and how they relate to each of these plan options. The choice of planning is completely up to you depending on your goals or budget.
This is the most affordable plan and generally includes a Will, Personal Property Memorandum, Medical Directive, Power of Attorney, and an Estate Summary. The Personal Property Memorandum is a great tool to easily update specific bequests without amending your Will and can help prevent family infighting over sentimental items during the Administration of your Estate.
For those who wish to have more control of their assets and avoid probate, the Revocable Living Trust might be a good fit. This would include everything in the Will-based Plan, but instead of a Last Will and Testament there would be a Pour-Over Will and a Revocable Living Trust. Additionally, we can craft a Care Plan for yourself, your spouse, your children and your pets. These Care Plans enabled a care taker to more comfortably fill in when you are unavailable with the least disruption possible to your Pets or Children.
Lastly, an Asset Protection Plan can include a large range of planning choices and document and therefore tends to be the most expensive and elaborate type of planning. These plans most typically include everything found in a Revocable Trust Plan as well as specific Trusts designed for your family. A common type of trust is an Asset Protection Trust also known as a Family Trust that potentially enables you to preserve assets if you need Long-Term or Nursing Home Care, or if you are ever sued in a Personal Injury claim. The high costs of Nursing Homes are crippling for the "Well Spouse" and this is a way to manage those costs while protecting your more fixed assets such as your House or specific Investment Accounts. Another common type of Trust is for Rental Properties or Vacation Properties so that any injury that occurs on that property is limited to access the funds in that asset itself.
