Estate planning is the process of planning and preparing for how to dispose of your assets after your death, how to manage your affairs if you become incapacitated, and how to care for your dependents in either event. A thorough estate plan can help you avoid unnecessary taxes, and can possibly bypass all or part of the probate process. An estate planning attorney with knowledge of the laws in DC and Maryland can tell you more about what kind of plan would be best for you.

What Is the Estate Planning Process?

You will begin by talking to an estate planning attorney, who will ask you questions about your assets and debts, and ask you to make some important decisions.

Last Will and Testament

Your estate plan begins with your last will and testament. This document provides instructions on what to do with your assets after your death. It will name someone to act as your personal representative, also known as your executor, who will be responsible for carrying out your wishes. Your will can also include instructions about funeral arrangements, burial plans, organ donation, and other matters.

Powers of Attorney

A power of attorney is a document that grants someone legal authority to act on your behalf, such as by signing documents, engaging in financial transactions, or making medical decisions. A durable power of attorney can grant broad or limited powers to a person known as your “agent” or “attorney-in-fact.” It can take effect immediately, at a specified time, or when you become incapacitated.

A financial power of attorney gives someone the authority to manage your assets and debts, and to handle other financial affairs. It can take effect at any time. A medical power of attorney gives someone the authority to make medical decisions, including giving consent to medical procedures. This type of power of attorney usually only takes effect once you have become incapacitated.

Advance Medical Directives

In addition to a medical power of attorney, you can also express your wishes about certain medical matters with an advance directive to physicians. This document can address issues like life support, nutrition, and organ donation in the event that you are completely incapacitated.

Care for Minor Children

If you have minor children who rely on you for care, your estate plan can make arrangements for them. This might involve naming a guardian for them, or creating a trust to set aside assets for their benefit.

Care for Pets

You might also want to make sure a beloved pet will be cared for after you are gone. It is increasingly common for estate plans to include provisions for the care of pets.

Trusts

Estate plans often include various types of trusts. Moving assets into a trust keeps them out of the taxable estate. It can also help your personal representative avoid at least some of the probate process.

• Living trust: You can use this type of trust to manage assets while you are alive. After your death, a trustee can continue to manage the trust for the benefit of someone else, or they can distribute the assets largely outside of the probate process.
• Testamentary Trust: You can create this kind of trust in your will. It will come into being after your death, when a trustee will manage it for the benefit of individuals or organizations that you have named.
• Special needs trust: A special needs trust provides benefits to someone who needs help supporting themselves because of a chronic illness or a physical or mental disability.
• Life insurance trust: This type of trust keeps the proceeds from a life insurance policy out of your taxable estate.
• Other trusts: Your estate plan could include other types of trusts, including trusts set up to benefit family members or pets.

Estate and Inheritance Tax

Your estate plan should take possible estate and inheritance taxes into account. As of 2021, federal estate tax only applies to estates with total assets of at least $11.7 million. DC and Maryland have their own estate taxes, with exemptions of $4 million and $5 million, respectively, in 2021.

While an estate pays federal estate tax, inheritance tax is the responsibility of the heir receiving property from the estate. Maryland is one of the few states with inheritance tax, but most family members of a decedent are exempt from paying it.

Business Succession

If you own your own business or are part of a family or other closely-owned business, your estate plan can include how you want the business to continue after you are gone, or if you are no longer able to make decisions for the business.

Estate Planning vs. Estate Administration

The term “estate planning” sometimes refers to both parts of a two-part process. First, there is the actual planning, which involves gathering information, making decisions, and signing documents.

The process of “estate administration” comes next. It begins once an event occurs that triggers some part of your estate plan. If, for example, you become incapacitated because of an injury or illness, meaning that you are no longer mentally capable of making important decisions, parts of your estate plan will take effect. If you have granted power of attorney to someone, they will now be authorized to act on your behalf.

Can I Avoid Probate Altogether?

In all likelihood, your personal representative will have to go through probate proceedings as part of the administration of your state. You can save your representative some time, however, by transferring assets out of your name and into the name of a trust. This is one of several ways to avoid much of the probate process.

Joyce Ann Williams is an estate planning lawyer who represents individuals and families in the District of Columbia and Maryland. She can advise you about wills, trusts, and other estate administration issues, helping you to understand your rights and options. Please contact her at info@jwilliamslaw.com or at (301) 585-1970 today to learn more about her probate services.