Estate Planning

The Will

The Will governs the disposition of your property.  Without a Will, you will be deemed to die “intestate” which means your assets will be distributed according to the laws of the state in which you live.  In other words, you will have no control.  If you allow this to occur, don’t be surprised if your assets end up in the hands of some remote or estranged heir whom you had no intention of benefiting.   In addition if you have minor children, a judge will decide who will be their guardian and who will manage the assets that you leave them. Although a Will must be administered through the public process known as “Probate” (something that can be avoided with proper planning) it should be included as part of every estate plan.

Testamentary and Revocable Living Trusts

Even when estate taxes are not a consideration, a Trust can be a valuable addition to your estate plan.  Whether established at death (Testamentary Trust), or during life (Living Trust), they provide a means to control how, when, and for what purpose, assets pass to future generations. Living Trusts provide several other advantages. First, because they can be revoked at any time and are not considered to be a separate taxable entity, they allow you to maintain complete control over assets during your lifetime without the necessity to file a separate tax return.

Second, a properly drafted and funded Living Trust eliminates the need to go through the public, time consuming, and often arduous process of probating your assets. Third, the Living Trust provides for orderly control of assets during your life (as well as at death) including the ability to provide for any disability or incapacity that may occur. Although the Living Trust must be funded to be effective, the process is primarily administrative and can usually be preformed with relative ease.

Financial Power of Attorney / Drable Power of Attorney

A Power of Attorney is a legal document that names one or more individuals that you designate, to make decisions concerning your property. Unless drafted properly, the power may end if you (the grantor of the power) become physically or mentally incapacitated.  This can be cured through a “durable” power of attorney, which lasts through incapacity, or a “springing” power, which only comes into being in the event of incapacity.  A Power of Attorney ends at death and cannot be used as a means to avoid probate or transfer ownership of assets.  In addition, some financial institutions refuse to honor this document unless it is drafted on their form.  Finally, if drafted too broadly, the power of attorney can be easily abused leaving your assets at risk. Consequently, although we often recommend this document, we are cognizant of its limitations and advise clients accordingly.

Medical Directive

A Medical Directive (also sometimes called a “Durable Power of Attorney for Health Care”), is an important legal document that we think is an essential part of every estate plan. In many jurisdictions (including Maryland), it serves two functions. First, it acts as a ‘Living Will” containing provisions determining your desires as to what medical treatments should be utilized to keep you alive should death become imminent or if you are in a persistent vegetative state without any chance of recovery. Whether or not you are in such a state is determined by medical professionals, usually including your attending physician and at least one other medical doctor.

Second, in addition to acting as a Living Will, your Medical Directive will also designate the person that you want to make medical decisions for you when you are unable to express your preferences. Typically this occurs in situations where you are unconscious or in a mental state where you do not have the legal capacity to make decisions for yourself. During this stressful time, having a clear understanding in writing of your desires will prevent family disharmony and assist your physicians in providing the appropriate treatment.

In some jurisdictions (like the District of Columbia) that recognize Living Wills by statute, it may be preferable to have both a Living Will and a Durable Power of Attorney for Health Care drafted in two separate documents. Is Your Estate Plan Current?