Common Myths About Estate Planning

Myth: Estate planning is something people do when they are about to retire.

Fact: Estate planning is something people should begin when they are beginning their careers, or starting families. By beginning the estate planning process while you are young, as you acquire additional assets you are able to ensure they fit into your already established estate plan.

Myth: The only purpose of setting up a comprehensive estate plan is to prepare for one's death.

Fact: Planning for what happens to your estate is a large component of the process, but equally as important is planning for potential incapacity. With a carefully drafted inter vivos trust, durable power of attorney, and advance medical directive, one can adequately ensure that their property and their own well-being are taken care of in the event of temporary or permanent incapacity.

Myth: If I have a lot of debt, there is no point to executing a Will since my entire estate will be taken away by creditors.

Fact: Depending on how your assets are titled, your assets may be protected from creditors attaching to them. As part of the estate planning process, assets may be retitled to ensure creditor protection. For married couples in which one spouse has a lot of debt and the other does not, a comprehensive estate plan may reduce the amount in which creditors may claim against the estate.

Understanding The Various Estate Planning Tools

Estate planners use various tools to achieve an individual's estate planning goals. Some of those tools include:

  • Will: A Last Will and Testament, or Will, disposes of assets in a testator's estate by naming specific beneficiaries and by including provisions that would facilitate the administration of the individual's estate. A testator is an individual who has executed a Will. A Will only disposes of probate assets. Non-probate assets, such as life insurance policies, retirement accounts, and assets held in trust, pass outside the probate process and to any beneficiary designated on those accounts. A parent may appoint a guardian of any minor children they may have within their Will, and there is judicial deference to such appointments so long as no natural parent survives.
  • Trust: A Trust is an agreement that allows the settlor, the person creating the Trust, to determine how and when Trust assets will be given to the Trust's beneficiaries. Trusts can be testamentary (created within a Will) or inter vivos (created during the lifetime of the settlor). Testamentary Trusts are funded with probate assets, and the settlor creates the Trust in order to have more control over the disposition of Trust assets than what would normally be afforded in a Will, and may be able to minimize the estate's tax consequences. In contrast, an inter vivos revocable Trust, also known as a Living Trust, is used to avoid probate on certain assets, but also allows the settlor to have more control over the disposition of the Trust assets. A Living Trust must be properly funded during the life of the settlor, which requires retitling assets in the name of the Trust. Examples of specific trusts include Pet Trusts and Special Needs Trusts.
  • Guardianships: In some situations, it is necessary for a guardian to make decisions on behalf of a minor child or disabled adult who cannot make decisions for himself or herself.
  • Power of Attorney: A Power of Attorney creates an agency-principal relationship between the person who is creating the Power of Attorney and their designated Attorney-in-Fact. The Power of Attorney expressly authorizes an agent to act on behalf of the principal in many capacities including banking transactions and real estate transactions. In Maryland, a Power of Attorney is presumed to be durable, meaning that the Power of Attorney is still effective in the event the principal becomes incapacitated.
  • Advance Medical Directive: An Advance Medical Directive incorporates the designation of a Health Care Power of Attorney and a declarant's wishes in certain medical conditions. A declarant, the person who is creating the Advance Medical Directive, can decide whether to withhold or withdraw life-sustaining procedures and withhold or withdraw artificial hydration and nutrition if the declarant develops into one of three statutory conditions: 1) end-stage condition, 2) persistent vegetative state, or 3) terminal condition. In Maryland, women may choose to include a provision to alter their decisions in the event they are pregnant.

Call Margaret H. Oliver and Lauren Leffler to discuss how to protect your future and your loved ones through estate planning. Call 410-740-1180 or contact the firm online today.