Frequently Asked Questions

Life is unpredictable. A serious illness, accident, or unexpected death can leave your family reeling, facing difficult medical, financial, and legal decisions at the worst possible time. Yet approximately half of all adults in the United States do not have an estate plan. Without the right documents, your loved ones can face unnecessary court proceedings, delays, and expense during an already difficult time.

Estate planning, at its core, is not only about preparing for death or disability. It is about protecting the people you love and making sure the difficult decisions are already made. By you.

No. Accidents, illness, and incapacity can occur at any age. Every adult should have basic estate planning documents, including a Will, Financial Power of Attorney, and Advance Health Care Directive. Estate planning is about protecting you and your family, not simply planning for death or disability.

Every adult should have these three core documents in place: an Advance Health Care Directive, Financial Power of Attorney, and a Last Will & Testament.

A comprehensive estate plan should protect you while alive and after your death. It can:

• Preserve your family’s history and legacy
• Decide who cares for your minor children if both parents die
• Provide for loved ones with disabilities or special needs
• Appoint trusted decision makers for your property, financial affairs, and health care
• Protect your assets
• Minimize or eliminate estate taxes
• Prepare for retirement
• Prepare for long-term care
• Reduce the risk of family conflict and costly court proceedings
• Support the people and causes you care about most
• Ensure your wishes, not the state’s default laws, control what happens to you and or your estate.

The short answer is you lost control. Maryland’s laws allow and encourage us to pre-plan. Take advantage of these laws.

If you die without a Will, Maryland’s intestacy laws, (not you), decide who inherits, what they inherit, and who serves as Personal Representative to your estate.

If you become disabled without planning in place, you may face a formal, involuntary court proceeding, a guardianship.

Not enough. Nationally, about half of adults pre-plan for disability with a Power of Attorney and an Advance Health Care Directive, and for death with a Last Will & Testament. The census statistics also confirm that millionaires also fail to pre plan in the same percentages as those who are less wealthy.

AHCDs, POAs and Trusts involve complexity and should be prepared by an attorney experienced in estate planning and elder law, not another professional, and not using a form from an office supply store or website. You want your planning attorney to be there for years to come.

Your estate plan should never be considered “finished.”

While there may be no major changes, it is important to periodically review your estate plan. At the Law Office of Richard K. Abraham, we recommend reviews occur every three to five years. This ensures your plan continues to reflect your wishes, addresses changes in the law, and can provide the protection and continuity your family needs.

Five Reasons to Review or Update Your Estate Plan:

• You Move to Another State or Country
• Your Family or Personal Circumstances Change
• Your Financial Circumstances Change
• Your Wishes Change
• It Has Been Years Since You Last Reviewed Your Plan

An outdated estate plan can create confusion, additional costs, delay, and unintended results for the people you care about most. If it has been several years since your plan was last reviewed, or if any of the changes above apply to you, now is a good time to have a plan review.

No. Each spouse needs their own documents.

As long as you remain mentally competent you can update or replace your estate planning documents. A POA, AHCD and MOLST cannot be amended and can only be replaced or revoked. However, a Will can be amended with document called a Codicil.

A POA is a written legal document, with scope and duration tailored to your needs. Your POA authorizes someone you trust, (your Attorney-In-Fact or AIF), to manage your income, benefits, other financial affairs if you’re later unable to do so. A properly drafted and followed POA can eliminate the need for a court to appoint a guardian of your property.

These are lengthy documents today because each authority you grant to your AIF must be specifically stated therein.

Depending on your needs, your AIF can be authorized to:

• Manage bank accounts
• Collect income
• Pay bills
• Make sure you receive the benefits you’re entitled to
• Manage your investments
• Buy or sell real estate
• Conduct other financial transactions on your behalf etc.

While you’re competent and over 18, you can create a POA. In Maryland, this document must be signed in the presence of a notary public and two witnesses, who then sign in your presence. While some states do not authorize it, Maryland does allow the Notary to also be one of the witnesses.

Most adults need a Power of Attorney (POA). If properly drafted and followed, it provides real financial protection. Your named Attorney-in-Fact (AIF) makes the same decisions a guardian of property could. If, in the future you become disabled, your AIF collects your income, pays your bills, and manages your property and affairs.

No. Your AIF’s authority is limited to the specific authorities stated in the document. Among other powers, your POA should be broad enough to let your AIF handle banking, hire others such as an accountant, sign your tax returns, and engage in tax or Medicaid planning. Because your AIF may need to access health care bills, it should also include a HIPAA declaration/release.

A POA from an institution or government agency (such as a bank or the IRS) is only valid with that entity.

No. You may appoint any mentally competent person over 18. Consider what authorities you are granting and whether your AIF is willing and able to responsibly fill all of those roles and observe their fiduciary duties.

No. To create a valid Power of Attorney, you must be over 18 and mentally competent at the time of signing. This is why it pays to plan ahead.

Yes, as long as you remain mentally competent, you can revoke a POA at any time. You can have an attorney draft the revocation. Copies should be distributed to any institutions that dealt with the original, such as a bank of financial advisor. Make sure your AIF also receives a copy.

Yes, you should update. Although POAs technically do not become stale, many financial institutions do not want to accept them once they are older than are 5-7 years. Also, Maryland case law established precedent that the authority granted in your POA must be specifically stated. Merely checking off boxes may not accomplish this. Lastly, during the past decade, many newer uses for POAs arose including the need to manage email and social media accounts. Your named Agent needs the authority to manage these too.

No. A Financial Power of Attorney and an Advance Health Care Directive serve different purposes and cannot be combined into one document. Comprehensive estate plans include both.

A trust is a legal document that owns and manages assets for specific individuals, causes, or purposes. Depending on your goals, a trust can take effect during your lifetime or be created through your Will taking effect only after your death.

Every trust involves three parties: the Grantor, who creates and funds the trust; the trustee, who manages and distributes the trust’s assets and income according to its terms; and the Beneficiary(ies), who benefit from the trust. Each trust is governed and operated according to the terms stated therein.

There are many reasons to establish a trust. Some Trusts can be used to:

• Avoid or simplify probate
• Manage assets in blended families or second marriages
• Reduce or eliminate estate taxes
• Hold and protect assets for children and future generations until they reach an age you chose
• Provide ongoing care for a loved one with a disability while preserving eligibility for government benefits
• Provide for the care of a beloved pet.

Revocable Living Trusts, Irrevocable Life Insurance Trusts ILIT, Special Needs Trusts, Trusts to minimize or eliminate estate tax, Trusts for Minor Children, Medicaid Asset Protection Trusts, Pet Trusts, and Gun Trusts

An RLT can be one of the most misunderstood estate planning tools. During your lifetime, you create the trust and transfer ownership of assets into it. Those assets are then managed by the trustee, often you, and are distributed according to the trust’s terms when you die. Because they avoid probate, RLTs are increasingly popular. Unlike an irrevocable trust, you can amend or terminate a RLT at any time during your life. But these trusts do have limitations and drawbacks. (See the video posted to the firm’s web site.)

Insurance policies with a named beneficiary pass directly to that person at the insured’s death and avoid probate. However, their value still counts toward any estate tax calculation. An ILIT can solve this by naming the trust, not you, as the policy’s owner. The trustee pays the premiums, at your death, collects the proceeds and distributes them according to the trust’s terms. The IRS has very specific rules concerning these trusts. If your trustee fails to fully comply with these rules, the IRS may bring the policy date of death value back into your estate.

Maryland allows a minor to inherit property, but not to own or control it directly. A Trust for Minors lets parents or others give a minor a sum of money, which is deposited into the trust. This can help prevent frivolous spending. According to the trust’s instructions, the trustee oversees how the funds are maintained, invested and spent, for example, on tuition or housing.

When the beneficiary reaches a certain age, (at least 18), or a milestone, trust assets are distributed to them. An important feature of a Minor’s Trust is that you decide the purposes and ages for distribution which is not necessarily at 18.

Maryland allows you to create a trust to care for a beloved pet. Trust assets fund the animal’s care for the rest of its life. After the pet’s death, any remaining balance passes to the grantor or those persons named to take the distribution

Planning for a loved one with a physical or mental disability requires careful coordination and document preparation. A single misstep, such as distribution or inheritance left to a disabled person can unintentionally disqualify them from government benefits they depend on.

A properly designed and administered Special Needs Trust (SNT) can solve this problem. It allows a loved one to receive financial support for things like care giving, education, and quality of life without jeopardizing eligibility for means-tested programs such as Supplemental Security Income (SSI) and Medicaid.

An SNT can be created during your lifetime as a stand-alone trust or included within your Will. The two approaches have important differences: a lifetime SNT can be funded and put to work right away, while a Will-based SNT only comes into existence after your death. The right choice depends on your circumstances and goals for your loved one.

“Special Needs Trust” and “Supplemental Needs Trust” are closely related, and the terms are sometimes used interchangeably. The distinction is whose assets fund the trust.

A Special Needs Trust, (sometimes called a “first-party” or “self-settled trust”), is funded with assets that belong to the beneficiary, for example, an inheritance, a litigation award, or lump sum the beneficiary receives directly. This Trust must include a “pay back” (reimbursement) provision for the Medicaid benefits received.

A Supplemental Needs Trust (a “third-party” trust) is funded with assets that never belonged to the beneficiary. These can be gifts or inheritances from parents, grandparents, or other family members, and the trust is not subject to a Medicaid payback requirement.

Maryland guardianship can occur when there is no less restrictive option available to protect an “alleged disabled person, (ADPs)” income, property and/or health care and treatment and they become disabled without having their POA and/or AHCD documents in place.

Maryland has a vested interest in protecting its citizens and what they own. A guardianship is a formal court proceeding where it is alleged the individual lacks capacity because of age or disability. Sufficient evidence must be presented to the court to justify the State’s intervention.

Guardians of the Person and Property are appointed by the Circuit Court to help someone who can no longer manage their medical care or financial matters. In Maryland, this only occurs when there is no less restrictive option available and the statutory evidentiary standard is met.

A Guardian of Property manages the disabled person’s income, property and financial affairs, and benefits pays bills.

A Guardian of the Person manages where someone lives and their medical care.

Both must file annual reports with the court. A Petition to Terminate is filed when the person dies or recovers.

Having a properly drafted Advance Health Care Directive and Power of Attorney will usually prevent court intervention and the need to appoint a guardian.

The Law Office of Richard K. Abraham continues to represent clients in guardianship cases throughout Maryland. Mr. Abraham is retained as petitioning counsel. The circuit courts also appoint him to represent alleged disabled persons, to protect their rights.

The law firm also represents fiduciary clients who need assistance fulfilling the financial and legal duties they’ve accepted.

A fiduciary is appointed from a position of trust and confidence. This can occur in a court order or them being named in a document to protect another’s health care and treatment and financial affairs including income and benefits. Common examples of a fiduciary include:

• Personal Representatives, (Executors) appointed by court order in an Estate
• Trustee, appointed in a Trust
• Attorneys-in-Fact, appointed in a Power of Attorney
• Health Care Agents, appointed in an Advance Health Care Directive
• Guardians of Person and/or Property appointed by a Court

When requested by a court, Richard Abraham serves as Guardian of Property. Clients also appoint him to serve in the other fiduciary capacities in their documents.

Legal documents protect the interests of a business and its owners throughout the company’s lifetime. Common formation and growth documents can include:

• Partnership Agreement
• Articles of Incorporation and Corporate By Laws
• LLC Agreements and Operating Agreement
• Employee Handbook
• Employment Agreement
• Employee Non Disclosure Agreement
• Employee Non-compete Agreement
• Employee Confidentiality Agreement
• Customer Contracts

In addition to formation documents, from the initial planning phase of a new business you should have a plan for closing, selling or ending it and what happens to the business if you become incapacitated or die.

Business owners also need their personal estate plan to align with their business’s legal planning.

Together these form a Business Continuity Plan that lets the business carry out your vision as circumstances change. This should occur without conflict between your personal and business documents. The Law Office of Richard K. Abraham helps business owners plan for both.

Recent surveys consistently show that 50 to 65% of business owners don’t have transition plans in place.

A transition plan builds flexibility into your business. It can lead to better operations, stronger profits, and more favorable tax outcomes. As a component of your start-up, these plans can minimize the economic impact of a crisis giving peace of mind to you, your family, co-owners, and employees.

A strong plan also defines the role your business plays in your retirement and estate plans.

Basic questions to consider:

• Do you intend to sell the whole business, or a part of it, while continuing to draw income from it?
• If the company is a partnership or LLC, how will that relationship affect succession, retirement, and estate planning?
• Is your team in place from the outset?

As a business owner, you owe it to yourself, your family, your employees, and your clients to plan ahead. The plan should reflect your goals. Involve your financial, tax, and legal advisors from the outset.

A corporation, partnership, or LLC (Limited Liability Company), are three common ways to organize a business.

Corporation: A corporation is a formal, independent legal, and financial entity separate from the people who own and/or run it. Owners are called shareholders. Corporations provide personal liability protection. Shareholders are rarely responsible for business debts. Corporate profits can be subject to “double taxation,” meaning the business pays taxes on its profits and shareholders pay taxes again on the dividends or profit sharing they receive.

Partnership: A partnership can be a simple business arrangement where two or more people own and operate a company together. The Partners typically are the owners. There can general and limited partners.

Limited Liability Company (LLC): An LLC is a flexible business structure that combines the personal liability protection of a corporation with the tax benefits of a partnership. LLC owners are called members. The LLC can have 1 or multiple members. The members are normally protected from personal responsibility for business debts and lawsuits.

Partnership Agreements: An agreement is made by the partners establishing how they shall operate the business. While this is not a requirement, partners usually benefit from having one. Without it, the default rules under the Maryland Revised Uniform Partnership Act apply. This Act’s provisions may not favor everyone equally.

Operating Agreement: An operating agreement is to an LLC what a partnership agreement is to a general partnership. It sets the terms under which the business operates. It’s not required, but without one, LLC members are subject to default statutory rules. Therefore it’s usually to their benefit to have their agreement in writing.

An employment agreement sets out the terms of employment. In Maryland, employment is at-will unless an agreement states otherwise. This means the employer or the employee can end the relationship for any reason. An employment agreement can specify length of employment, termination circumstances, compensation, and the circumstances and reasons for employee discharge.