Frequently Asked Questions about Estate Planning
Take a look through these commonly-asked questions regarding estate planning in Maryland and reach out to DK Rus Law to get additional help in planning for your family’s future.
Q: What is an Estate?
A: An estate is everything you own, including:
Real property – Houses, buildings, land
Personal property – Bank accounts, stocks, bonds, mutual funds, furniture, automobiles, art, jewelry, etc.
Life insurance polices
Q: Who needs Estate Planning?
A: Everyone. Naturally, the older you get the more you begin to think about how to transfer assets to loved ones and grown children, but families with small children should also have an estate plan. An estate plan protects and helps guide the person you choose to care for your children in the event of your death or incapacity. Individuals who have children from previous marriages also need estate planning. Without proper planning, your assets will be divided up according to the statutory “Intestate” laws of Maryland.
Estate planning is not only for the wealthy; it is important for everyone who has family and/or loved ones, property they care about, and concerns regarding their healthcare treatment in the event of disability or incapacity.
Q: Why do I need an Estate Plan if I own property jointly?
A: Joint Ownership is one of the most common plans used by families. In fact, if you are married, you likely own most of your assets jointly with your spouse. The type of ownership, also referred to as Joint Tenants with Right of Survivorship, assures that when you die, the survivor has full ownership of the property.
Many people think that having joint ownership of assets will allow them to avoid probate, but unfortunately it often just postpones it. For example, let’s say Partner A and Partner B are married. Partner A dies, leaving Partner B the joint-owned property. The assets will not be subject to probate at this time. However, the property will go through the probate process when Partner B dies, unless someone else has been added onto the title of the property.
Owning assets jointly can also cause other problems. If Partner B were to remarry after Partner A dies and hold the property as joint tenants with the new spouse, the new spouse is not under any obligation to give anything to Partner B’s children. Even if Partner B states in her will that she wants her property to go to her children, the property is now owned solely by the new spouse, and he/she can use it as they wish.
Q: Can’t I just name my assets' beneficiaries instead of Estate Planning?
A: Today, many assets including retirement, IRA accounts, insurance polices and bank accounts let you name a beneficiary. The idea is that, when you die, those assets pass to the named beneficiary without having to go through probate. Unfortunately, this is not always the case.
- If your beneficiary is incapacitated when you die, the court may take control of the assets for that person.
- If you and the beneficiary die at the same time, the assets will have to go through probate to be distributed to the rest of the estate.
- If a minor child is the beneficiary, the court will get involved to protect the child’s interests and disburse the funds according to statutory requirements.
- If the only action you take to ensure your beneficiaries get your assets after your death is by using beneficiary designations, your estate will remain open for possible probate and court supervision of assets.
Q: What is Estate Planning?
A: Estate planning is the process of considering alternatives for effective arrangements that meet your wishes in the event death or disability occurs. An estate plan has goals that are both financial and personal. Having an estate plan assures that your assets will be directed and used in accordance with your wishes.
From a personal standpoint, a proper estate plan is a set of directions; a guide on how to carry out your wishes regarding your healthcare and financial matters as well as guardianship of minor children and disabled loved ones. A good estate plan will let you, not the courts, keep control of your assets and control your decisions about medical care and the care of your loved ones.
Q: What happens if I die without an Estate Plan?
A: In Maryland, if one does not make any type of estate plan they are considered as having died “intestate”, meaning without a will or other testamentary document such as a trust. In these cases, property will be distributed to the decedent’s closest living relatives as follows:
To surviving spouse and children
To children in equal shares if no surviving spouse
To parents if no surviving spouse or children
…and so forth.
Without an estate plan in place, there is no guarantee that your assets will be distributed in the way you desire after you pass away.
Q: Can’t I Just Add my Child’s Name to the Title of my Home?
A: When you add a name to the deed or title of your property, you legally make the person a joint owner of the property. The joint owner of the property can sell or transfer his or her half, or can force a sale of the property. The joint owner may be legally entitled to live within that property, or to require the other persons living on that property to pay rent.
Another problem with joint ownership is that you expose the property to the other owners’ debts. If one of the joint owners has a significant unpaid debt, or is sued, the property could be seized or sold. There can also be significant tax consequences to this action that could result in a tax bill that far exceeds any savings you may have gotten on probate costs.
Having another individual’s name added to the deed of your property is a step that should never be taken without consulting a professional who can advise you as to all of the applicable financial, legal and tax consequences.
Q: Do I Need an Attorney to Prepare my Estate Plan? Isn’t it Expensive?
A: The expense of retaining an attorney to prepare an estate plan is often minimal versus the money saved on taxes, probate and other administrative expenses. Tax, estate and property laws change very quickly and only an attorney who regularly practices in the area of Maryland Trusts and Estates is able to provide you with sound advice and a comprehensive plan that encompasses all of your specific needs.