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Four Reasons Why You Need Advanced Estate Planning Now

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When clients first consider estate planning, they often believe they need a “simple will” because their situation and assets are straightforward. After spending a few minutes discussing their goals, family, and assets it is obvious that their situation is anything but basic. Below are four examples where your estate plan needs advanced planning and guidance from your trusted estate planning attorney.

  1. High Net Worth. This may be the most common reason for advanced planning. A goal for many is to reduce taxes and probate fees. Those fees will only increase as your estate value grows. The Federal and Maryland estate tax calculates all of your assets as of the date of your death including the value of your real property, personal property, business interests, life insurance policies, and cash assets among other types of assets that you may own at your death. In 2024, the estate value is the highest it has been in history but it will sunset on December 31, 2025, if tax laws do not change before that. It is important to act right now. There is planning that married couples can take advantage of by utilizing the deceased spouse’s unused tax exemption at the death of the first spouse. This planning needs to be written in your estate plan during the life of both spouses and the surviving spouse should act quickly after the death of the first spouse to make sure they comply with any deadlines in the documents or tax reporting. There is also an opportunity to take advantage of the exemption during life by utilizing a Spousal Lifetime Access Trust (SLAT). This trust utilizes making a gift to the trust during life by using some of your federal lifetime gift exemption and removing it from their combined estate. The trust can provide support to the beneficiary- including the other spouse- during the lifetime and they can generally access the income and principal through distribution made by the trustee. The time to consider this is now and before the exemption goes down.
  2. Blended Families.  Advanced estate planning tools can be critical for blended families. Many blended families will want to provide for the surviving spouse but ultimately have their estate passed to their direct descendants. This can be accomplished by creating a family trust at the death of the first spouse and providing for the surviving spouse. We also encounter that many blended couples will come to the marriage with different assets in their name. The funding of the trust or estate plan becomes critical when you want to provide for the surviving spouse but limit their ability to make changes or deplete the family trust during their remaining years.
  3. Special Need Beneficiaries.  It is critical to plan if your beneficiary is receiving a means-based government benefit like Medicaid or Social Security Income (SSI) or if they will need extra assistance managing their inheritance.  A trust can be created during life or at the time of your death through your will or revocable living trust to ensure that any inheritance received by your loved one does not disrupt their benefits. The ability to protect your loved one’s benefits once they receive an inheritance or any other asset that will put them over the asset limit becomes much more difficult and will generally require that the State is the primary beneficiary for anything left in the trust at the beneficiary’s time of death. Taking the time and consideration for proper advanced estate planning now will protect your special needs beneficiary and make it easier for your trustee to step in and manage those assets for them.
  4. One spouse is not a United States citizen. There are special considerations when one spouse is not a citizen. A United States citizen who is married to a noncitizen should know that their spouse does not generally qualify for the 100% estate tax marital deduction and portability of the deceased spouse’s unused estate tax exemption. The advance planning tool to consider is a Qualified Domestic Trust (QDOT) which allows a taxpayer who survives a deceased spouse to take the marital deduction on estate taxes even if the surviving spouse is not a U.S. citizen. Even after utilizing a QDOT, additional special considerations are generally advised to continue to minimize the potential tax for the estate.

This short list shows several circumstances where advanced estate planning is needed but is certainly not exhaustive. We will be reviewing these techniques in an upcoming Advanced Estate Planning Seminar next month. If you are ready to address your advanced estate planning needs, please register to attend the seminar or contact our office at (410) 573-4818.

Sinclair Prosser Gasior
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