Law Advisor Blog


The Foundation to an Estate Plan Starts Here

Danielle M. Cruttenden

What is an Estate Plan?

           Estate planning means that you are putting into place the necessary legal documents to help manage  health decisions and your property in the event of disability and to arrange for the orderly distribution of your assets at your death. There are three basic documents that everyone should have for proper estate planning: a Will, Durable Power of Attorney and Health Care Directive. For some, a Revocable Living Trust may also add value to their estate planning. As part of the process reviewing who is named as beneficiary on retirement, bank and brokerage accounts, as well as annuities and life insurance policies is also important. An improper beneficiary designation can cause an estate plan to fail. Understanding how joint property arrangements are set up on real estate and accounts should also be considered in the overall estate plan.

What is a Will?     

        A Will provides certainty as to who receives the assets that are titled solely in your name at your death. It may also specify how the beneficiaries receive those assets. A Will should also name guardians for minor or disabled children, and establish a trust to hold property for their benefit.  A personal representative, also known as an executor, is named in the Will to handle the administration of your estate after you die and is charged with carrying out the wishes in your Will. Without a Will the laws of intestacy dictate who receives your property and the Court decides who will be the Personal Representative of your Estate. Without a Will, the Court will also decide who becomes the guardian of the person and property of your children.

What is a Durable Power of Attorney?

            A Durable Power of Attorney is a document in which a person, (the “Principal”) gives someone (the “Agent”) the authority to control and make decisions over one’s financial and legal matters. It allows the Agent to act on behalf of the Principal and is particularly useful during times of the Principal’s poor physical health or cognitive decline.  A Durable Power of Attorney is written to grant very broad powers to the Agent from banking, paying bills, buying or selling property, filing tax returns, handling mail and other matters.  The document may be written so that the Agent’s powers are effective only upon a doctor’s certification as to the Principal’s incapacity (“springing power of attorney”), or the powers may be effective immediately upon the Principal’s signing of the document (“non-springing power”). There are advantages and disadvantages to both. The non-springing power is a useful way to provide support to the Principal even when the Principal may still have some level of capacity, whereas the springing power of attorney may give the Principal more comfort knowing that the Agent has no ability to access the Principal’s accounts unless needed due to a disability.  Only trusted persons should be named as an Agent. Without a Durable Power of Attorney, a Court needs to appoint a guardian over the person and property of a disabled individual. The process is time consuming and expensive. The guardian must usually be bonded and must file annual reports to be approved by the Court.

What is a Health Care Directive?

            A Health Care Directive is similar to a Durable Power of Attorney in that it names an Agent, but for health care purposes. Similarly, the Health Care Agent’s authority to obtain health information and make health care decisions for a person may be effective immediately upon the execution of the Health Care Directive document or only upon the determination of a doctor that the person is unable to make their own health care decisions. In all cases, however, the person always maintains control of his or her own health decisions as long as they are able to, meaning the Health Care Agent may not override any medical decisions that the person is capable of making on their own. The Health Care Directive may also, but is not required, to set forth the person’s wishes with respect to the implementation or withdrawal of life supporting treatment. The Maryland Attorney General’s website has a form available for use that may be found here. In addition to the appointment of a health care agent and instructions for end of life, the form includes the donation of organs, the donation of the body for a medical study program, cremation, the disposition of one’s body after death and funeral arrangements. While Maryland law does provide for ways in which a health care surrogate can serve in the event that a person has not completed a Health Care Directive, the best and easiest way to plan for one’s health care in the event of disability and at the end of life is to complete a Health Care Directive form making their wishes known.

What is a Revocable Living Trust?

            For those who are interested in avoiding the probate process and maintaining privacy, or who want easier assistance in the management of their assets in the event of disability, a Revocable Living Trust should be considered. Unlike the probate process, in which a Will and details of the estate can be viewed by the general public, a Revocable Living Trust is a private agreement between the person creating the Trust, called a Settlor, and a Trustee in which the Trustee agrees to hold, administer and distribute assets for the benefit of the Settlor according to terms spelled out by the Settlor in the trust agreement. The Revocable Living Trust may also provide for distributions to be made during the Settlor’s life to support the Settlor’s spouse and minor children, and to allow for lifetime gifts to be made from the trust for certain designated individuals or charities. The Settlor may serve as the initial Trustee of the Trust and may appoint others to serve as a Co-Trustee.  Successor Trustees should be named in the agreement who will assume administration over the Trust when the initial Trustee(s) are no longer able to serve due to death, disability or resignation. Like a Will, the Revocable Living Trust agreement specifies how the trust assets are distributed upon the Settlor’s death. Although more expensive to set up than a Will, due to the fact that assets need to be re-titled to the Revocable Living Trust in order for the Trust to fulfill its intended purpose of avoiding probate, there may be some savings in avoiding probate fees.  The Revocable Living Trust serves in lieu of a Will as the primary document setting forth the distribution of one’s assets upon death. Nevertheless a Will is still required naming the Revocable Living Trust as beneficiary of the Will. This insures that the assets still titled in the name of the Settlor, and which were not titled in the name of the Revocable Living Trust for whatever reason at the time of the Trustor’s death, will be distributed in accordance with the terms of the Revocable Living Trust.

            A Will, Durable Power of Attorney and Health Care Directive are considered the foundation to any estate plan. A Revocable Living Trust can add value by avoiding probate and providing privacy. It is important to note, however, that beneficiary arrangements also avoid probate and provide privacy without the cost associated with creating a Trust. All are valuable tools to ensure smooth management of one’s affairs during life and at death. Planning ahead avoids the financial strain and uncertainty that comes with going to court to solve problems associated with one’s incapacity and allows control over the disposition of assets upon death. Other added benefits of more advanced planning can include minimization of  income, estate and inheritance taxes. Having an estate plan is important regardless of the size of one’s estate. Having an existing estate plan reviewed periodically is also important as life’s circumstances change, as do the tax laws. Consulting an attorney with experience in probate and trust law is key to the development and maintenance of a good estate plan.

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