Estate planning is comprised of many different aspects, including, but not limited to wills, trusts, powers of attorney, and advanced health care directives.
A will is a written document directing how a person’s assets should be distributed upon his/her death. It is important to have a will to be sure that your assets are transferred upon your death to those persons whom you wish to receive them. If you do not have a will, Maryland law will determine who will receive your assets. In order for a will to be valid under Maryland law, it must be signed by the person making the will, and signed by two credible witnesses in the presence of the person making the will.
There are two types of wills: a “simple” will and a “complex” will. A simple will may be prepared for persons whose assets, including life insurance benefits, total less than $1,000,000.00, and that do not desire to set up any trusts. After the $1,000,000.00 threshold, an estate may be subject to federal and state estate taxes. In these cases, your will should be drafted by an estate planning attorney with specific knowledge in addressing estate and inheritance taxes and who is more familiar with the complexities of drafting trusts.
Once your original will is drafted, it is not permanent – it can be changed. It is recommended that you review your will every 3-5 years to determine if the instructions in your will are still as you wish. Additionally, if a significant change in your personal or financial circumstances occurs, you should consider changing your will. Your will can be changed any time prior to your death, so long as you are competent.
For more facts about wills, consider reading this list of Frequently Asked Questions on the Maryland Register of Wills website.
Trusts can be an effective estate planning mechanism, especially if you expect to have assets that total more than $1,000,000.00 at the time of your death. If you fall into this category or believe that you would like to include a trust in your simple will, your will should be drafted by an estate planning attorney with specific knowledge in addressing estate and inheritance taxes and who is more familiar with the complexities of drafting trusts.
A power of attorney is a document prepared at your request giving another person permission to act on your behalf. The powers granted to your agent may be limited to only certain acts or may be a general grant of authority.
On October 1, 2010, Maryland’s new General and Limited Power of Attorney act went into effect. The Act included two optional statutory forms: the Personal Financial Power of Attorney and the Limited Power of Attorney. The Personal Financial Power of Attorney form allows your designated agent very broad authority to act on behalf of you, the principal, in financial and business matters. The Limited Power of Attorney form allows you, the principal, to specify which powers you would like to grant to your agent. Both of these statutory forms are considered durable, i.e. the form permits another person to act on your behalf now and after you become disabled, unless you provide otherwise.
Prior to the passage of this Act, many persons and entities, including banks, financial institutions, and insurance companies refused to accept or acknowledge a person’s power of attorney. With the passage of this new law, a person or entity may not refuse to accept either of the statutory power of attorney forms. If a person or entity refuses to do so, a Court can order them to accept the form and they may be held liable for the reasonable attorneys’ fees and costs incurred in an action or proceeding that either confirms the validity of such statutory form or mandates its acceptance.
An advance health care directive is more commonly known as a living will. A living will designates another person as your health care agent to make decisions for you should you become unable to do so for yourself. Additionally, a living will states what kind of care you would like to receive if you become terminally ill, are in a persistent vegetative state, or are suffering an end-stage condition. You may also state your desire to make organ donations after death in a living will.