Life is unpredictable, and no one knows what tomorrow may bring. So, without a doubt, estate planning is one of the most significant steps that you can take to ensure that your financial and personal matters are handled according to your wishes and that your family and loved ones are provided for and protected. Indeed, making sure that your estate is in order is not only practical, but it also provides you with a sense of empowerment.
Planning for end-of-life legal concerns is a fairly straightforward process that involves preparing a will, which deals with financial matters, and an advance directive, which deals with health care issues during incapacity caused by injury or illness. Completing these documents allows you to make your own decisions. You can also express your wishes to your family, which helps eliminate confusion. Most important, taking control of end-of-life issues gives you peace of mind because you know that your wishes will be honored.
Asset protection
A properly drafted irrevocable family trust can be designed to protect trust assets from being attached by creditors or divided in a divorce and serve as a source of funds available for the needs of a beneficiary.
Professional management
In some cases, a family trust can be designed to designate professional trustees and other trust advisors to manage the trust assets. Professional trust managers include financial institutions, certified public accountants, and attorneys. Designating a professional to the role of trustee may be beneficial because it allows knowledgeable professionals to manage the trust to achieve its intended results.
Flexibility
Although a family trust is often drafted to be irrevocable to achieve its desired tax or asset protection goals, it can also be created to be very flexible, so it can address changes in the law or family circumstances.
Tax savings
An irrevocable family trust can be designed to be protected from federal and Maryland estate tax upon the death of the beneficiary. A properly drafted trust can protect the trust assets from being subject to estate taxes.
Preparing Estate Planning Documents
Obviously, you know that a will allows you to determine how you want to distribute your assets after your death. What you may not know, however, is why a will is such an important document. The law of estates and trusts is built on the foundation of freedom of disposition, which means you can decide how you want to distribute your property and to whom. But according to state law, if you don’t have a will or a trust, a default system takes effect, and the decision is determined by the state statute.
Many people choose to use a revocable trust instead of a will. This document serves as a “will substitute,” but has the added benefit of providing for asset management if you become disabled. For this reason, a revocable trust may be a better option as you grow older.
Lawyers encourage everyone—from elderly couples with grown children to young couples just starting their families—to exercise their right to decide where their assets go. If you have young children, you may not think that you need a will or a revocable trust—or that there is time to prepare one later—but you need to make plans now. A will allows you to choose the guardian of your children, while a revocable trust permits you to control how the assets are handled for your children’s benefit until they are old enough to make their own financial decisions.
The bottom line: It doesn’t matter how old you are or what your life circumstances are. Plan ahead and prepare a will or a revocable trust, so you can decide what you want. Give your family members an inheritance, donate money to your alma mater or your favorite charity, or set aside money for your pet. After all, pets are members of your family, too, and they need to be provided for after your death.
You can plan for pets in your will by designating a person to take custody of your beloved animal companion. You may also want to give him or her a cash gift that can be used to care for your pet. Another option is a pet trust. Under Maryland law, you can create a trust that allows money to be set aside for your pet’s care.
Besides a will or a revocable trust, another type of estate planning document that you may consider preparing is a family trust, which is a broadly defined term that can be used to describe different trusts. For example, a family trust may refer to a revocable trust; in other cases, it may apply to an irrevocable trust that is designed to achieve estate planning goals beyond avoiding probate, such as asset protection, professional management of trust assets, or estate tax savings. In general, a family trust can serve a variety of purposes, so it may be an ideal document for you, depending on your individual circumstances and needs. Some of the benefits include the following: υ
Your lawyer can help you prepare your will, revocable trust, or family trust based on your particular life circumstances. He or she can offer advice, address your questions or concerns, and provide an objective perspective. To validate your will, you must sign it in the presence of two witnesses. A trust does not have the same witness requirements as a will, but it is a good idea (although not required) to follow the same witness procedure that is required for a will. Like any legal document, you should review your estate planning documents periodically, especially when there are significant changes in your life (new children, grandchildren, business sales, etc.).
Preparing an Advance Directive
Under a Maryland law called the Health Care Decisions Act, you can prepare an advance directive, which allows you to specify your preferences regarding health care if you’re no longer able to make your own decisions due to incapacity. For your convenience, the Maryland Office of the Attorney General provides forms online at www.oag.state.md.us/Healthpol. However, you aren’t required to use these specific forms, and you may even change them or use different forms if you wish. (An advance directive may also be prepared electronically if it meets certain technical requirements set forth in law.) Although you can complete an advance directive without the assistance of a lawyer, you may want to consult your lawyer if you have any questions or concerns.
A valuable document for adults of any age, an advance directive includes two sub-documents: a durable power of attorney for health care and a living will. A durable power of attorney for health care allows you to designate a health care agent to make decisions for you. You can decide how much authority your agent has and may select a family member or someone else. Choose someone who knows you well and talk to him or her about what type of medical treatment you would want if you were unable to speak for yourself. Make sure that he or she understands your wishes and is willing to accept the responsibility of making decisions on your behalf. Since this is a very personal decision, choose the person who you feel is best qualified—even if your family may not agree with you.
Unlike a will, which indicates your decisions regarding financial matters, a living will specifies your decisions about medical treatment, including your preferences about life-sustaining procedures, such as the use of a breathing machine or a feeding tube. Although you don’t have to prepare both a durable power of attorney for health care and a living will, it’s in your best interest to do so because it makes your wishes as clear as possible. This not only helps your doctors, but it also creates a guideline that further helps your health care agent make decisions on your behalf.
To validate your advance directive, you must sign it in the presence of two witnesses. (If you named a health care agent, he or she may not be a witness.) Since your family circumstances or medical issues may change, you should re-evaluate the document periodically.
In addition to an advance directive, another document that you should complete with your doctor is a Medical Orders for Life-Sustaining Treatment (MOLST) form. This document can be used in conjunction with an advance directive—further ensuring that your wishes are honored—and includes more specific orders regarding life-sustaining treatments as well as a Do Not Resuscitate (DNR) order. Talk to your doctor about the appropriate time to complete this form.
For more information about advance directives or the MOLST form, contact Paul Ballard, assistant attorney general and counsel for health decisions policy, at 410-767-6918.
Revocable Trusts vs. Wills
Revocable trusts are increasingly popular as “will substitutes.” Unlike a will, a revocable trust holds your property, and you are your own trustee as long as you are able. At death, it operates quite similarly to a will. The main benefit is that a revocable trust is a better tool for handling your possible disability than a durable power of attorney. Revocable trusts also avoid the state probate system.
