An Overview of Wills, Revocable Trusts, Powers of Attorney, and Advance Directives
By: Jeffrey B. Ruark, Esq.
Getting older is a part of life. Whether we choose to see aging as a positive or a negative may vary from person to person, but one thing is true for everyone: planning for the future is crucial. Without proper planning, your wishes may not be fulfilled, and your loved ones could be left to clean up the mess in the event of your death or incapacity. The documents described below are designed to ensure that your wishes are followed and to avoid unnecessary conflict and expense.
Last Will and Testament
A Last Will and Testament is a legal document in which you nominate a Personal Representative (also known as an Executor) to distribute your assets to the people and/or organizations of your choosing following your death. If you die without a Will, the state’s laws of intestate succession will determine who receives any assets without designated beneficiaries and of which you are the sole owner.
In Maryland, the actions of the Personal Representative are supervised by the court in the county of the decedent’s domicile. A Personal Representative is required to obtain bond unless waived in the Will or by all interested parties.
Under your Will, you can create trusts, referred to as testamentary trusts, for beneficiaries who may require assistance with managing their inheritance due to age or other factors. You can appoint a trustee to manage the assets until the beneficiary reaches a certain age, or indefinitely, with instructions to use the assets for the beneficiary’s benefit (e.g., education, housing, etc.).
Maryland is one of a handful of states to impose inheritance tax on certain non-exempt beneficiaries. Spouses, lineal descendants, siblings, and charities are among those exempt from the tax, while beneficiaries like nieces and nephews, cousins, and friends are not exempt. In your Will, you can direct that any applicable inheritance tax be paid from your Estate rather than by the beneficiary.
Revocable Trust
A revocable “living” trust is a legal document in which you appoint a Trustee (most people choose themselves as the initial Trustee) and transfer your assets to the trust to be managed by the Trustee. As the name suggests, a revocable trust can be revoked or amended as long as you are living and competent. If you become incapacitated or resign as Trustee during your lifetime, the successor Trustee you name will take over management of the trust and will use the assets in the trust for your benefit. The trust uses your social security number during your life and any trust income is included on your personal tax return. When you pass away, the Trustee will distribute the trust assets to your beneficiaries without court supervision (a properly funded trust avoids probate) and, unlike a Will, without the trust becoming public.
While a revocable trust typically costs more to set up, it can simplify things after your passing and save your loved ones time and money.
Financial Power of Attorney
A financial Power of Attorney is a legal document in which you name an agent to manage your financial affairs if you become incapacitated or are otherwise incapable of handling certain financial transactions. A limited Power of Attorney applies only to specific assets or transactions (e.g., a limited power of attorney to sell real estate), while a general Power of Attorney is broad in scope and provides your agent with a wide range of authority over your financial affairs. A “durable” Power of Attorney means that the document will continue to be effective even after you become incapacitated and are no longer competent to ratify the actions of your agent.
If you become incapacitated and do not have a financial Power of Attorney, a court-supervised guardianship of your property may be necessary. Guardianships are often expensive, can go on for years, and require your Guardian to file annual accountings with the court. A properly executed financial Power of Attorney, naming someone you trust to serve as your agent, can avoid the burden of a guardianship.
Medical Power of Attorney
A medical Power of Attorney allows you to name an agent to access medical records and information (HIPAA restrictions are typically waived) and make healthcare-related decisions for you if you are no longer able to make those decisions yourself. While the Maryland Code provides a list of individuals with authority to make healthcare decisions if no agent has been appointed, referred to as surrogate decision makers, if multiple people with the same priority disagree about a healthcare decision, the issue may need to be referred to the institution’s patient care advisory committee.
It is best for you to decide who should make medical decisions for you and to communicate your wishes to that person to avoid conflict and uncertainty. In some cases, without a medical Power of Attorney, a guardianship of your person may be necessary if you become incapacitated. Like a guardianship of the property, a guardianship of the person involves filing annual reports and ongoing court supervision for as long as the disability exists. This headache can be avoided with a properly executed medical Power of Attorney.
Advance Healthcare Directive
An Advance Directive, also known as a Living Will, provides guidance to your healthcare agent regarding your preferences for medical treatment and instructs healthcare providers regarding such treatment if your agent is unavailable. Take control of your healthcare and make your wishes known before you become incapacitated.
In addition to an Advance Directive, if you have preferences regarding life sustaining treatment (e.g., resuscitation, intubation, etc.), you should speak with your health care professional regarding Medical Orders for Life-Sustaining Treatment (MOLST). An Advance Directive is not a valid DNR (Do Not Resuscitate) order in Maryland. If you do not have a DNR order on a MOLST form, signed by a physician, physician assistant, or nurse practitioner, medics in Maryland must attempt resuscitation. You can learn more about MOLST and view the form at marylandmolst.org.
Plan Now- Before It’s Too Late!
To create or make changes to any of the documents mentioned above, you must be mentally competent. If you wait too long, it could be too late and could lead to legal challenges that may drain your assets and cause family dissonance. For your own peace of mind and to simplify matters for your loved ones while maintaining harmony, contact an estate planning attorney today. Even if you already have a plan in place, your documents may be outdated due to changes in law or personal circumstances. Many attorneys offer free consultations, so take advantage! You will be glad you did.
Jeffrey B. Ruark, Esq.
Heise Jorgensen & Stefanelli P.A.
18310 Montgomery Village Avenue, Suite 400
Gaithersburg, MD 20879
(301) 977-8400
The information contained herein is provided for general informational purposes only and should not be construed as legal or other professional advice from the author or publisher. No reader of this post should act or refrain from acting based on any of the foregoing information without seeking the appropriate legal or other professional advice. The author and publisher assume no liability for any direct, indirect, or consequential damages of any nature resulting from the information contained herein.
