FTM Estate Law

FETTMANN, TOLCHIN & MAJORS PC

Text Box: "The nicest thing about not planning is that failure comes as a complete surprise…." John G. Preston, Boston College If you do not make your own estate plan, the state will make one for you. Do you know what that plan is? The intestacy plans (meaning that you die without a Will) for Virginia, Maryland and the District of Columbia are all different. A successful estate plan is a plan which is suitable for you. It must be appropriate for your family circumstances and your wealth – however modest or substantial. It must be consistent with your goals and objectives. At times, clients have objectives which may be in conflict or which may be frustrated by certain legal constraints. At FTM, we help clients identify their goals and objectives; we advise clients when those objectives are in conflict and when legal obstacles exist. We advise our clients of the alternatives and we advise them of the benefits and risks associated with those alternatives so that each client can make an informed decision in developing his or her estate plan. We approach estate planning by putting you first, by developing a plan that fits you rather than making you fit the plan. We explain the probate process; how probate can be avoided by using a Revocable Trust; and the advantages and disadvantages of avoiding probate. We are committed to dispelling certain myths surrounding estate planning and we are committed to avoid "over-planning" our clients. In the final analysis, estate planning is not about you; it is about your family and those for whom you care. For many clients, the motivation for estate planning is their desire to save taxes. At FTM, we belief that the non-tax objectives must be achieved before the tax issues can be addressed. If non-tax objectives are ignored, your estate could pass to unintended beneficiaries – which is functionally the equivalent of a 100% tax. Non-Tax Concerns There are many non-tax reasons why reliance on the Virginia, Maryland or the District of Columbia intestacy plans is not appropriate. Some of these reasons are as follows: You want your entire estate to pass to your spouse but, in certain circumstances, the intestacy plan of Virginia, Maryland or the District of Columbia prevents that from happening You have a minor child Your spouse is incapacitated Your spouse is not good at managing money Your adult children are too immature to manage money You or your spouse (or both) have children born from a prior marriage or relationship You have a disabled child You have a relative you do not like who would inherit under the intestacy plan of Virginia, Maryland or the District of Columbia You have a child who is in a "bad" marriage and you want to protect that child should that child divorce after inheriting from you You have a child with substantial debts (whether to the IRS or others) and you want to prevent that child's inheritance from being lost to the IRS or other creditors You want some or all of your estate to pass to a charity or to someone who is not an heir under the intestacy plan of Virginia, Maryland or the District of Columbia Tax Concerns For decedents who die in 2009, the first $3,500,000 of estate assets (not passing to a surviving spouse) are excluded from the federal estate tax with the excess taxed at a 45% rate. Virginia has repealed its estate tax and both Maryland and the District of Columbia impose an estate tax on all estate assets in excess of $1,000,000 which do not pass to a surviving spouse. In addition, Maryland has a 10% inheritance tax which is imposed on the value of all assets passing to anyone other than a child or other lineal descendant, spouse of a child or other lineal descendant, spouse, parent, grandparent, stepchild or stepparent, siblings or a corporation having only certain of these persons as stockholders. The Maryland inheritance tax is allowed as a reduction (but not below zero) in the amount of the Maryland estate tax. In other words, the Maryland death taxes is the greater of the Maryland inheritance tax or the Maryland estate tax before the reduction allowed for the inheritance tax. If you have substantial wealth, your intended beneficiaries (other than charities) are at risk that their inheritance will be substantially eroded if you do not have adequate planning. At FTM, we develop and provide clients with the tools that reduce and even eliminate this erosion. Some of these tax planning tools implement transfers at death and others implement transfers during life. Some tax planning tools are best used in low interest rate environments and others are best used in high interest rate environments. Some tax planning tools are best used if the client has a long life expectancy and others are best used if the client has a short life expectancy. Many of these tax planning tools can be designed so that the client some degree of control and indirect benefit without jeopardizing the plan. Testamentary Planning Testamentary tax planning is accomplished at the client's death by means of either a Will or a Revocable Trust which directs the establishment of one or more of the following irrevocable trusts: By-Pass Trust Disclaimer Trust Generation-Skipping Trust Qualified Domestic Trust Marital QTIP Trust Maryland Marital QTIP Trust Special Needs Trust Charitable Lead Trust Charitable Remainder Trust It is FTM's standard practice to include spendthrift provisions in the design of irrevocable trusts. This protects each beneficiary's inheritance from creditor claims and divorce risk. Other non-tax objectives can be achieved by including the following design provisions as part of the testamentary planning: Delayed Distributions Special Powers of Appointments Restricted Withdrawal Powers Incentive Trusts Alcohol and Substance Abuse Provisions Education Trusts Special Needs Trust Customized provisions designed to address a client's unique concerns or issues Lifetime Planning Lifetime tax and non-tax planning is accomplished prior to the client's death by any one or more of the following: Irrevocable Life Insurance Trusts Grantor Trusts Sales to Grantor Trusts Grantor Retained Annuity Trusts Dynasty Trusts Qualified Personal Residence Trusts Private Annuity Agreements Private Split Dollar Agreements Business Succession Planning and Buy-Sell Agreements Limited Liability Companies and Family Limited Partnerships Pre-Marital Agreements Charitable Lead Trusts Charitable Remainder Trusts Stan Majors is among the area’s premier estate planners. Please contact him with your questions or to schedule an appointment.

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