Protect Your Family With Effective Estate Administration and Planning

Protect Your Family With Effective Estate Administration and Planning

If you intend on leaving assets that need to be distributed to your heirs after you pass—whenever that may be—estate planning is an incredibly valuable endeavor.

This is not something to be ignored until your golden years, particularly if you have minor children. If the unthinkable happens, you want to make absolutely sure your family members will be well cared for.

Making an estate plan gives you a chance to convey your final wishes. Then, the act of estate administration, which is the reconciliation of debts, filing of forms, and distribution of your assets, will happen in accordance with your desires—rather than state law.

Reasons to Start Working on Your Estate Plan Now

There are many very good reasons to be proactive about estate planning. Here are three of the biggest ones:

It Protects Loved Ones Who Rely on You

Estate planning is the best way to protect your family in the event of your death. It will let you choose who cares for your children, and how to use your estate assets to give your heirs financial security.

If your heirs depend on you financially, estate planning will reduce the time it takes to make your assets available to support them.

It Reduces the Risk of Family Disputes

Unfortunately, even the most loving family can struggle with conflict when it comes to an inheritance. The death of a loved one is emotional, and while everyone processes grief in their own way, some things can’t be unsaid. In addition, letting the state divide the decedent’s estate may have undesirable side effects, like requiring the estate to sell the house that a surviving spouse lives in.

In the USA, each state has its own laws for estate planning and administration, so it’s important to make sure you understand the requirements, taxes, and forms required by your state.

It Can Save Money During the Estate Administration Process

As with most things, proper planning reduces expenses. Without a valid will or trust, the estate may be more costly to settle. Those costs, naturally, will be paid out of the decedent’s assets—which means less will remain to be distributed to family members and other named beneficiaries.

RELATED: What Is the Estate Administration Process in Maryland?

Estate Planning Documents

There are different ways to create a plan for your estate, with different documents to use to set up financial security for your beneficiaries. The differences are very important to how your estate is handled.

Will

A will is a document that determines how your assets are distributed after your death. Guardianship can be appointed with a will. The public process of probate is required to distribute the deceased person’s property per the will.

A will only comes into effect after you have passed, unlike a trust, which becomes effective if you become incapacitated.

Trust

A trust is an arrangement for asset management both during your life and after you pass. It can be used to hold and distribute assets for beneficiaries (which can include minor children or charitable giving), on a timeline chosen by you or the trustee. This is a way to provide financial security for heirs who are not financially responsible, either due to age or maturity.

Trusts are private and do not require probate court, but if you have any assets that are not included in the trust you may choose to also have a will to handle those assets.

Guardianship Designation

A trust does not include guardianship designation, so if you have a trust set up for your minor children, you also need to designate a guardian. Otherwise the court will choose one for you.

Which Should You Choose?

Every estate has different circumstances and needs. To figure out which scenario would fit your situation, you would benefit from speaking to a professional.

In general, a will is a good choice for a simpler estate, with fewer assets. A trust can be more costly to set up, but is generally better for larger estates. A trust will also allow you to avoid the cost and publicity of probate court, and is a good way to provide for your minor children until they reach adulthood.

Why You Should Avoid Estate Probate

All wills go through the public process of probate, which is known as “Orphans’ Court” in Maryland. A well-planned will can streamline the probate process, but it may take up to a year to settle the estate. And if someone contests the will, the timeline can grow even more.

Without a will, the timeline may be unpredictable. If a surviving spouse or other heirs are dependent on these assets, it could be a long time before they get the financial support they need. In addition, the longer the process, the more costly it will be. The court fees are paid by the estate, so more time in court reduces the probate assets available as inheritance.

Lastly, probate court is a public process. If you want to keep your affairs private, you can only do so by avoiding probate.

The easiest way to avoid probate is to create a revocable living trust, so that your assets are held by the trust (you remain in control of your assets until your passing), and a trustee distributes those assets after your death.

Choosing Your Personal Representative for Estate Administration

If you do not choose an executor for your estate, the court will appoint one for you. This is why it is important to name someone trustworthy, who will be impartial in an emotional time. After your death, this representative will be responsible for carrying out your will, filing and paying taxes for you and the estate, and settling debt owed by the estate.

For these tasks, you will want to choose someone who is financially savvy and able to handle complicated tasks. Some estates are simple, but if a person does not have experience with estate administration, even a simple estate will require a lot of learning.

If you do not have a trusted person in your life who can fill the role of executor, or you do not want add to the burden on your family during this time of loss, you can name an estate administration attorney as the executor. An expert estate attorney will know the legal system as it applies to estate administration, and will be able to better protect your assets and ensure that they are fairly distributed per your will. An estate lawyer will also make sure that taxes are filed properly for the decedent and the estate.

Do You Need A Federal Estate Tax Identification Number?

If the estate generates income of $600 or more, then the estate administrator needs to file for an estate Tax ID Number, so that they can file Form 1041, U.S. Income Tax Return for Estates and Trusts.

Your estate may need this if the estate gets income from rental properties, a business, or income generated through interest, stocks and bonds.

RELATED: What Are the Tax Responsibilities of an Estate Administrator?

Learn More About Estate Planning in Maryland

Estate planning is an important process, but it is unfamiliar to many people. If you are making a plan for your assets, or if you have been appointed the estate administrator for someone else’s assets, here is a guide to the estate administration process in Maryland.

This is often unfamiliar territory, but it can be critical for your heirs. You would benefit from enlisting the help of a skilled estate attorney like S.H. Block, to make sure your estate planning is thorough and comprehensive. Our law firm can assist with estate planning and estate administration, and help you make ensure your assets are protected so that your heirs have financial security.

For a free consultation, call us at (410) 727-6006 or fill our our contact form and we can review your case.

 

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.

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