Estate plans help everyone, regardless of income, assure that their assets are transferred fairly and smoothly, and your needs are competently handled if you become incapacitated. Strategies should be undertaken sooner rather than later so that your estate planning meets your needs.
Important agents
An executor will carry out your will’s instructions. If you have minor children when you die, a guardian will raise your children and make decisions on their behalf.
A durable power of attorney authorizes an agent to make financial decisions on your behalf if you are unable to make these decisions independently. An agent will make medical decisions for you under your health care power of attorney.
Carefully consider who will perform these important duties. Discuss their roles and assure they will undertake these roles when needed.
Beneficiaries
Most people’s assets are in 401(k)s, IRAs, and other retirement accounts. A beneficiary is named on these accounts who will receive their assets after you die. A beneficiary designation overrides any instructions or heirs contained in you will.
Beneficiaries were named when these accounts were established, and it is important to periodically review them. If these are not changed after major life events, account assets may inadvertently go to a divorced spouse or end up in probate court.
Trusts
Different trusts can address certain situations. A revocable or living trust can be changed or cancelled any time.
Placing assets in a revocable trust allows you to control them and any produced income. Its assets are transferred directly to the named beneficiaries after you die. This is part of your taxable estate but avoids probate.
An irrevocable trust is similar but cannot be modified or terminated without your beneficiaries’ permission. Assets transferred into the trust are no longer in your estate and are not subject to estate taxes.
A grantor retained annuity trust may contain stock that is expected to increase in value. You can receive an annuity over the trust’s typical two- to five-year term. Afterwards, the stocks are distributed tax free to your beneficiaries. If you die during the GRAT term, these assets are part of your estate.
An irrevocable life insurance trust is funded by a life insurance policy. After you die, the trust collects its insurance benefits and pays them to your beneficiaries without income tax liability.
A charitable remainder trust allows you to seek a partial tax deduction for contributions. You can receive income from the trust during your life. At the end of its term, its assets are distributed to your selected charities.
Attorneys can help establish a plan that meets your needs. They can also prepare documents that meet Maryland’s legal requirements.
