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Fundamental Estate Planning

There are many legal strategies involved in estate planning, including wills, revocable living trusts, irrevocable trusts, durable powers of attorney, and health care documents. New clients often say that they do not have an estate plan. Most people are surprised to learn that they actually do have a plan. In the absence of legal planning otherwise, their estate will be distributed after death according to Maryland's laws of intestacy. Of course, this may not be the plan they would have chosen. A properly drafted estate plan will replace the terms of the State’s estate plan with your own.

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Your Last Will and Testament

Your last will and testament is just one part of a comprehensive estate plan. If a person dies without a Will they are said to have died "intestate" and state laws will determine how and to whom the person's assets will be distributed. Some things you should know about wills:

Trusts: Revocable Living Trusts, Irrevocable Trusts, Testamentary Trusts, Special Needs Trusts, etc.

Trusts come in many "flavors," they can be simple or complex, and serve a variety of legal, personal, investment or tax planning purposes. At the most basic level, a trust is a legal entity with at least three parties involved: the trust-maker, the trustee (trust manager), and the trust beneficiary. Oftentimes, all three parties are represented by one person or a married couple. In the case of a revocable living trust, for example, a person may create a trust (the trust-maker) and name themselves the current trustees (trust managers) who manage the trust assets for their own benefit (trust beneficiary).

Depending on the situation, there may be many advantages to establishing a trust, including avoiding probate court. In most cases, assets owned in a revocable living trust will pass to the trust beneficiaries (or heirs) immediately upon the death of the trust-maker(s) with no probate required. Certain trusts also may result in tax advantages both for the trust-maker and the beneficiary. Or they may be used to protect property from creditors, or simply to provide for someone else to manage and invest property for the trust-maker(s) and the named beneficiaries. If well drafted, another advantage of trusts is their continuing effectiveness even if the trust-maker dies or becomes incapacitated.

Powers of Attorney

A power of attorney is a legal document giving another person (the attorney-in-fact) the legal right (powers) to do certain things for you. What those powers are depends on the terms of the document. A power of attorney may be very broad or very limited and specific. All powers of attorney terminate upon the death of the maker, and may terminate when the maker (principal) becomes incapacitated (unable to make or communicate decisions). When the intent is to designate a back-up decision-maker in the event of incapacity, then a durable power of attorney should be used. Durable Powers of Attorney should be frequently updated because banks and other financial institutions may hesitate to honor a power of attorney that is more than a year old.

New Maryland Power of Attorney Law

On October 1, 2010, a new law became effective in Maryland that we believe is important to share with our clients. The Maryland General and Limited Power of Attorney Act (the Act) provides new rules regarding the validity and enforceability of powers of attorney. In the past, clients have been frustrated by banks or other account custodians that refused to accept a valid power of attorney. The Act directly addresses this concern. It provides that a power of attorney is valid and enforceable as to all persons dealing with the Agent. In addition, the Act gives the Agent and other interested parties the right to petition a court for an order requiring the acceptance of the power of attorney.

Statutory Form Powers of Attorney

That Act also creates Statutory Powers of Attorney. These are form powers of attorney designed by the Maryland legislature. The Act applies to all powers of attorney executed in accordance with the provisions of the Act. However, an additional benefit of the Statutory Powers of Attorney includes the authority of a Court to require any party that refuses to accept a Statutory Power of Attorney to pay all court costs and attorney's fees associated with obtaining the court order requiring its acceptance. As a result, it is anticipated that the Statutory Powers of Attorney will become more commonly accepted by banks and other financial institutions. There are two different Statutory Powers of Attorney created under the Act; the personal financial power of attorney, and the limited power of attorney. Which Statutory Power of Attorney is best will depend on each individual’s circumstance and personal preference. We will advise each client on which power of attorney is best for their particular needs.

The Statutory Powers of Attorney provide a simplified mechanism for creating a power of attorney that will be accepted by banks and other persons dealing with the Agent. However, as with all forms written for a broad audience, the forms may not provide a comprehensive list of powers that may be necessary in your particular situation. In many situations, we are advising clients to execute two powers of attorney; a Statutory Power of Attorney and another power of attorney that includes a more comprehensive set of powers. We believe this technique will provide our clients with a reliable and simple power of attorney that will be widely accepted while allowing for the flexibility offered by more comprehensive powers of attorney.

Please feel free to call our office if you would like for us to review your power of attorney for compliance with the Act. We will make any necessary recommendations to make sure your powers of attorney are enforceable.

Health Care Documents (or Advance Directives)

An advance directive is a document that specifies the type of medical and personal care you would want should you lose the ability to make and communicate your own decisions. Anyone over the age of 18 may execute an advance directive, and this document is legally binding in Maryland. Your advance directive can specify who will make and communicate decisions for you, and it can set out the circumstances under which you would not like your life to be prolonged if, for example, you were in a coma with no reasonable chance of recovery.

A document that goes hand-in-hand with your advance directive is an authorization to your medical providers to allow specified individuals to access your medical information.  Without this authorization, your doctor may refuse to communicate with your hand-picked decision maker.

Have Questions?

If you have a a question, a comment, or simply want to have a conversation and explore how we can help, we'd love to hear from you.

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Maryland Estate Planning Attorneys Frank R. Campbell, Michael E. Lehr, Jennifer B. Gaffney, and Ronald R. Holden (Of Counsel) serve clients in Annapolis, Baltimore, Severna Park and throughout Anne Arundel County Maryland, as well as Virginia and the District of Columbia. Please feel free to contact Holden & Campbell Attorneys at Law if you or a family member is in need of legal assistance with Maryland Estate Planning, Asset Protection, Business Succession, Special Needs Planning, Charitable Planning, Wills, Trusts, Probate and Estate Administration.