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ESTATE PLANNING
"Do I need a living trust to avoid estate taxes?"
There is nothing inherent in a living trust that will avoid estate taxes. Any estate tax saving provisions that are provided in a trust can be included a properly drawn up will. Living trusts, often sold as products at trust seminars, are not a panacea for estate planning. Like most other things in life, they are appropriate for some people, not appropriate for others, and of marginal help to others. Our firm does many living trusts, but only where appropriate to benefit our clients.
"Will the state, district or commonwealth get everything if I don't have a will?"
Without a will, property will be distributed to a person's next of kin in accordance with a statutory priority list. The statutory list rarely matches people's individual desires for distribution of their property. The state only receives your property if there is no surviving family, or the family cannot be located.
"Will my spouse inherit all my property if I don't have a will?"
In most states, including Maryland, Virginia and D.C., a spouse gets only a portion of the separately titled assets belonging to a decedent. The remainder is often divided among children, including those from a prior marriage) and parents.
"Does having a will avoids probate."
A will must be probated in order for it to be effective. The general purpose of probate is to inventory, account for and transfer title to assets that a person owns at the time of death. Probate proceedings must be initiated to appoint a person to act on behalf of a deceased person in carrying out the terms of a will.
"Does my Will disposes all of my property."
A will only covers property titled in a deceased person's name at the time of death. Certain property, such as jointly held assets, life insurance proceeds, transfer-on-death accounts, and retirement plans will pass to the surviving owner or beneficiary. As a result, a will does not affect the transfer of these forms of property. A will is an important estate planning tool, but it must be drafted as part of a plan that coordinates with other methods of transferring assets.
"Can I complete my own estate plan?"
There are advantages and disadvantages to every tool used by estate planners. Many kits and do-it-yourself software programs allow you to create a document. However, estate planning is more than just creating a form document. You cannot create an effective document without understanding how or why it will work at the time it is needed most. Even more importantly, one or two simple mistakes can waste time and money during the administration process. A professionally prepared estate plan is usually very cost-effective. After all, estate planning documents usually cannot be changed after you die or become ncapacitated.
"Do I still need to plan even if all of my property is owned jointly with
another person?"
Sometimes owning property jointly with another person is a good idea. However, most people do not understand the legal implications of joint ownership. For example: (1) transfers to a joint tenant can be exposed to federal and state gift tax; (2) joint tenancy does not avoid probate, it just postpones it until the death of the survivor; (3) joint tenancy may not take advantage of the estate tax exemptions available to both tenants and does not avoid estate taxes at all; (4) jointly owned property is subject to the judgment creditors of all joint tenants; (5) joint tenancy will result in the complete transfer of ownership to the surviving owner, even if that was not intended by a deceased owner or the deceased owner's will would provide otherwise; (6) joint ownership can affect qualification for public assistance programs such as Medicaid; (7) all owners, not just the original owner, must agree to sell a jointly-owned asset; (8) all owners may have equal access to a jointly-owned asset, even if it is a bank, stock or other cash account.
"Does the same estate plan works for everyone."
The choice to use a trust, will, or other estate planning technique depends on a variety of factors. Every will or trust must be carefully tailored to fit a particular situation, and there are numerous other factors to consider for every individual. Unless two people had exactly the same property, family make-up, life situation, and objectives, then no single plan could possibly work for more than one person.
"I only need a Will - Isn't estate planning is only for the wealthy?"
Many factors other than wealth affect the need for estate planning, such as:
(1) Caring for a minor or disabled child;
(2) Transferring ownership of property in accordance with your desires;
(3) Caring for a surviving spouse;
(4) Transferring closely held business interests;
(5) Transferring ownership of property in another state;
(6) Charitable giving; (7) avoiding probate;
(8) Avoiding taxes; and (9) care of pets.
These are only a few of the reasons to plan your estate. Each person has their own objectives, but having a large amount of property is usually not the primary reason to plan.
"Don't estate taxes only impact the wealthy?"
As a general rule, estate taxes are assessed on the value of all property transferred upon a person's death. This property can include jointly owned property, most life insurance, homes, all retirements accounts, investments regardless of how they are transferred, personal property and lifetime gifts that are not otherwise excluded. It is common for people to be quite surprised at the extent of their assets when they add the total value that would be transferreda at the time of their death.
Please refere to the prior questions regarding estate taxes for more information.
"Aren't I too young to plan" or "Will there even be an estate tax when I die?"
Estate planning deals with possibilities as well as probabilities.? It is probable that young people who do estate planning will revise their estate plan many times before they die. It is possible that same young person could suffer an accident just after signing.
The estate tax is an entirely political question. It is unlikely that the states, including Maryland and DC, will do away with their estate tax, and increasingly unlikely that the federal estate tax will be permenantly repealed.
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