Frequently Asked Questions

Planning for the future involves a lot of legal lingo.

Let’s make sense of some of it now.

Will: A document used to determine how assets will pass to others after someone’s death. This is also where parents of minor children designate guardians and can choose who will manage their children’s inheritance until they turn 18 - or older, if they incorporate a trust in the will.

Probate: The court-supervised process of dealing with someone’s assets and debts after they die. This includes retitling (changing ownership of) assets such as a house or bank account, and passing along property according to the terms of a will. Some families want to avoid this process, the associated fees and court oversight, and the public nature of the proceeding.

Personal Representative/Executor: The person who oversees how your affairs are handled after your death. You can choose who fills this role in a will. If no one is specified, interested people can petition the court to serve in this role, and the court has default preferences for who it thinks should do this important job.

Intestacy: When someone dies without a will, the state’s default plan kicks in. The state sets up rules to prioritize some family members and gives people in certain relationships the right to preset “shares” of property as part of the probate process.

Heir: A person in line to receive property under the Intestacy rules. You can’t know for certainty who your heirs will be until after your death.

Trust: A relationship to property where one person - the trustee - manages the property for the benefit of themselves or others - the beneficiaries. Trusts are like a bucket with a set of rules taped to the outside. They hold property, the trustee holds the bucket and follows the rules, including investing and distributing the property accordingly. There are many kinds of trusts!

• Revocable Living Trusts are highly customizable estate planning tools; the person (or people) who create the trust can continue to manage the property as trustees and continue to benefit from the property. They can change the trust or sell property any time. Trusts help families plan for possible incapacity in the future by providing rules for who can step in and manage the property if the original person who created the trust becomes unable to do so. Property held in trust does not go through probate, so the terms of the trust remain private and beneficiaries can receive distributions of property more quickly after the death of the person who creates the trust.

• Testamentary Trusts are trusts that “spring” into existence out of a will. It doesn’t avoid probate but it can contain the same terms to protect a surviving spouse and children.

• Trusts are often used to hold assets for spouses, minor children, persons with special needs, and even pets, and they may have benefits with respect to saving money on taxes or protecting assets from “creditors and predators.”

Beneficiary: A person who receives the “benefits” of a property held in trust. They may receive income from investments, or be entitled to withdraw or receive distributions of principle, or be able to use the property for certain purposes - such as health, education, or maintaining a certain standard of living.

Pourover Will: A document that partners with a revocable living trust to ensure that any assets left outside of the trust get “scooped up” and “poured over” into the trust.

Taxes: Ok, we all know there are a lot of types of taxes. But legacy planning involves navigating many different types of taxes, and the way we do so depends on your goals. These are some of the tax-concepts we consider when creating your plan:

• Federal Unified Exclusion: This is the total amount of money that people can give away during their lifetimes or at death (with some exceptions, of course). Currently, this is set at $12.92 million per person ($25.84 million per couple), but it is subject to change by congress, and is scheduled to go down to around $7 million per person in 2026.

• Federal Estate Tax: The IRS collects taxes at a rate close to 40% on estates valued over $12.92 million per person ($25.84 million per couple). Most people don’t need to worry much about needing to pay federal estate taxes, and we can accommodate future changes in the law by building flexibility into your plan. That way, your family can take advantage of the best tax-saving options available at the time.

• Gift Tax: Individuals can give up to $17,000 (as of 2023) to as many people as they want each calendar year without needing to file a federal gift tax return. If an individual gives more than $17,000 per year to another individual, the amount in excess is subtracted from the unified exclusion amount (currently $12.06 million). You can eat away at that exclusion amount gradually (or not so gradually) over your lifetime as well as using the exclusion at death.

• State Estate Tax: In Maryland, estates over $5 million per person ($10 million per couple) are subject to Maryland estate tax, at a marginal rate ranging from 8%-16%. In DC, estates over $4.25 million are subject to DC estate tax (11.2%-16%), and couples do not get portability.

• State Inheritance Tax: In Maryland, people in certain relationships to a person who has died and who are receive property passing through a will or trust must pay a 10% tax for the privilege of receiving that property. Parents, children, grandparents, spouses, siblings, etc. are exempt, but friends, nieces/nephews, cousins, etc. are not. We can address how inheritance taxes are paid in your plan. DC does not have an inheritance tax.

• Income Tax: Federal and state income taxes apply to income from many types of retirement accounts. Recent rule changes now require many people who inherit Individual Retirement Accounts to empty the accounts within 10 years, which can significantly impact the amount of income taxes paid by the those who now own the accounts. Sometimes, it may be wise to use a certain type of trust that can shift this tax burden to a trust instead of an individual, though certain types of trusts pay income taxes too - and more quickly reach the highest marginal rate than individuals. We may discuss the value of converting your traditional IRA to a Roth IRA as part of your strategy.

• Capital Gains Tax: The growth in value on investments such as real estate or stocks is taxable. Depending on who owns the investment, some people can receive what’s called a “step up in basis” when they inherit the property, meaning that they only have to pay taxes on the property’s gain in value after they receive it. Sometimes, this influences decisions about whether to give property away during life or to pass it to a loved one after death.

Find peace of mind with comprehensive planning.

A comprehensive plan for the future might require more documents than you expect. As part of our process, we walk you through each one so that you know how these documents work together and what each one does.

Wills and Trusts are tools to determine how your assets will be distributed after you pass away, and in the case of a trust, they can establish rules to provide for minor children, surviving spouses, charities, and future generations of people you want to benefit from your property and savings. A will is the only place where you can name a long-term guardian for minor children.

Emergency Standby Guardian Designation allows parents of minor children to name a guardian for minor children in the event of an emergency when they are unable to care for their children. These circumstances could include travel emergencies, in addition to health crises or accidents. For parents of minor children, we put together emergency packets and provide stickers with important information so that you can communicate these plans clearly.

Personal Property Memorandums attach to a will and outline your desires for who will inherit your personal property - jewelry, collections, books, etc. This document can be updated anytime without needing to formally re-execute your will.

Durable Power of Attorney for Health Care/Advanced Medical Directive designates who can make health care decisions for you if you are unable to do so yourself (this person is called your agent). It’s “durable” because it stays valid even if you become incapacitated. The Advanced Medical Directive allows you to state the kinds of care and medical interventions you want to receive with more specificity. Jen is a certified facilitator of “Respecting Choices” method of helping people work through important conversations with their chosen health care agents, which can be challenging, but are vital to ensuring your wishes are honored.

HIPAA Release allows you to name people who can receive your medical information and records; without this release, it’s more difficult for the people you want to make medical decisions for you to be able to do so - especially in an emergency.

Living Wills allow you to express your wishes for end-of-life care; that is, the care you would like to receive if a team of doctors determine that you will be unable to recover from a condition. This document works together with your Advanced Medical Directive.

Durable Financial Power of Attorney names who you want to be in charge of your finances if you are unable to manage them yourself. This person can continue to pay bills and take care of your property and investments; many people find it to be a big relief to know that someone they trust will be in the position.

Disposition of Remains (optional) is a form people can use to express their wishes for what happens to their bodies after they die.

Memorial Planning (optional) is a way to share with loved ones about the type of funeral, memorial service, or celebration of life you would like to have. You can note preferences and share information so that loved ones will feel confident knowing they are honoring your wishes during a difficult time.

Beneficiary Designations aren’t documents as such, but as part of our process, we’ll discuss updating beneficiary designations on your accounts. Financial accounts and property with these designations can be transferred after death outside of the probate process. In Maryland, there’s a way to transfer cars this way as well, which can save loved ones a lot of hassle.