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Estate Planning Questions & Answers

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What is a Will?

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A Will ensures that your assets are given to the loved ones in the way in which you direct. If you do not have a Will, your property will be divided and distributed under the law, without regard to your wishes.

Why Do I Need a Will?

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After your death, all property and assets owned solely by you will become part of your Estate and will be subject to probate. Some assets can be distributed without a Will. For example, if you own real estate with your spouse as "tenants by the entirety,” this property will automatically become the sole property of your spouse after your death. Certain other assets such as retirement accounts, life insurance and annuities will allow you to name beneficiaries directly. If you fail to name a beneficiary, however, that asset will also become part of your Estate and become subject to the terms of the Will.

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I Have a Will. Do I Need a New One?

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Generally, you should review your Estate plan and documents every 3-5 years to make sure that they reflect your wishes and the most current estate and tax laws. If there are changes in your family, such as a birth or death or divorce it may be necessary to modify your documents to reflect this. You may also want to revise your documents if there are significant changes in your finances.

What is a Power of Attorney?

A Power of Attorney is a legal document in which you authorize someone else to act on your behalf.  You can authorize someone to act only in a particular situation, or you can authorize someone to do anything legally or financially that you could do yourself.  A Power of Attorney is extinguished on your death.

There are many kinds of Powers of Attorney, including General Powers of Attorney (which authorize your agent to perform almost any act), Financial Powers of Attorney (which authorize your agent to perform financial acts) and Medical Powers of Attorney (which authorize your agent to act on your behalf with respect to medical decisions and information).

What is a Living Will?

A Living Will, also called an Advanced Directive, is a legal document that details your desires regarding your medical treatment in a situation in which you are no longer able to express those desires.  In this document you appoint an Agent, who acts on your behalf.  Some Living Wills will also include a Medical Power of Attorney.

What is a Trust?

There are many kinds of trusts. Many people use trusts to help with estate planning. Trusts can be established while you are living and used to hold and/or protect certain assets. Trusts can also be included in your Will and are often used when there are minor children who may inherit significant assets, if both parents were to pass. These Trusts are not in effect until your death.  After you pass, assets from your estate are placed in the Trust created in your Will, with restrictions on the use of the assets. A Trustee is appointed to oversee the management of the Trust.

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Probate Questions & Answers

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Who Initiates the Administrative Probate?

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The Personal Representative or someone who intends to be the Personal Representative.

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How Do You Determine the Personal Representative?

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The deceased identifies the Personal Representative in his will. If the deceased does not designate a Personal Representative in his or her Will, then Maryland law will govern who can be the Personal Representative. Maryland gives priority to the surviving spouse, followed by children, grandchildren, and further down the line. You may also petition to be appointed as the Personal Representative.

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What Are the Responsibilities of the Personal Representative?

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First, the Personal Representative should petition the Court to open an estate and be appointed by the Court.  The Court will issue Letters of Administration, which allow the Personal Representative to act on behalf of the decedent. This person will be required to prepare an inventory of all the deceased’s assets. A loved one’s estate planning attorney, accountant, or financial advisor may be able to fill in any gaps. After determining assets, the Personal Representative should open an estate checking account, apply for an Employer Identification Number under the estate, and make sure beneficiaries receive designated assets. There may be additional duties and responsibilities of the Personal Representative such as filing tax returns or documents that must be filed with the Court. It is a good idea to check with a probate attorney in Maryland to make sure that everything is done properly.

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What Is Inheritance Tax?

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Inheritance tax is the amount of money applied as privilege for inheriting property from the deceased.  In Maryland, lineal relatives (parents, children, siblings, grandchildren) do not pay inheritance tax.  However, non lineal relatives (cousins, nieces, nephews) and friends do pay inheritance tax.

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How Much Is Inheritance Tax in Maryland?

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Inheritance tax is 10% of the property’s value.

Do I have to Pay Inheritance Tax Before Selling a Property?

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Only an estate can sell property, which can occur as soon as the estate is open.  However, Inheritance Tax must be paid before property or cash is distributed to heirs.

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What Is an Insolvent Estate?

An insolvent estate is one with less assets than liabilities. In the case of an insolvent estate, all debts must be paid in order of priority.

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Medicaid Planning Questions & Answers

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What Are the Latest Medicaid Income Limitations to Qualify for Long-Term Care?

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A person can qualify for Medicaid assistance for long-term care if their income is less than the cost of the nursing home. You may keep a small amount per month for personal needs and can also pay for health insurance from this income. The remaining income must be used to contribute to the cost of the nursing home. If the applicant is married, their spouse has an additional income allowance. Income includes wages, Social Security benefits, pensions, veteran’s benefits, IRAs, annuities, and other forms of income.

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What Are Asset Limitations?
 

Non-exempt assets (also known as available assets) must be liquidated and used toward nursing homes or long-term care. In Maryland, there is a five-year look-back period that penalizes individuals who sell assets below market value, transfer assets, or give assets away during this time. Spouses may keep a limited amount of non-exempt assets. Maryland considers certain assets exempt. These assets do not need to be sold or used in order to qualify..

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What Does Maryland Consider Exempt Assets?

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As of 2021, here are some items that Maryland considers exempt assets:

• $2,500 or less in cash

• Household goods and personal effects

• A home (with certain equity limits depending upon circumstances) as long as the applicant intends to return home or a spouse, child under 21, or a disabled individual lives in the residence (homes can be transferred without penalty to spouses; children under 21; blind or disabled individuals; or certain other individuals that qualify for the transfer)

• A motor vehicle of unlimited value if it is used to facilitate a person’s medical treatment, to maintain employment, is modified to address a disability, or if it is the spouse’s primary vehicle

• Burial plot and prepaid funeral
   

How Much in Non-Exempt Resources Can Spouses Keep Without Being Denied for Medicaid-Funded Long-Term Care?
 

In addition to the home, in 2021, spouses can keep a maximum of $130,380.