Where There’s a Will… or When There Isn’t…

By:  Thad Ismart, CFP ® – Financial Planner

What do Picasso, Abraham Lincoln, Martin Luther King Jr., and Howard Hughes have in common? They all passed away intestate—that is, they passed away without a Will. If you have not created a Will, then you have something in common with some of the richest and most famous people in history! However, this is not good news.

You might be thinking, “Why does this matter?” If you pass away without a
Will in Maryland, your probate assets will go to your closest relatives under state “intestate succession” laws. Probate assets are assets that have predeceased or missing beneficiaries, individually owned assets, and tenant-in-common assets. Under “intestate succession” laws, the distribution of your assets follows an order of succession, depending on whether or not you have living children, parents, or other close relatives when you pass away. In addition, the courts will appoint a guardian for your minor children and a custodian for any assets transferred to them. Not only is it possible that the guardian and custodian might not be the same person, but he and/or she might not even be someone you would have liked to fulfill these responsibilities. Finally, without proper tax planning, you would not be able to take advantage of the Maryland estate-tax exemption, potentially paying unnecessary state estate taxes.

Everyone has an estate plan. Even if you have not created any estate documents, your state has created an estate plan for you. Your state has decided how your assets pass, based on your living heirs. There is an order of succession that is followed until a living relative is found. For example, when Howard Hughes passed away without a Will, his assets were divided evenly among his 22 cousins, who were his closest living relatives at the time of his death. Why let the state decide who gets your assets? Creating a Will ensures that your intentions will be honored.

If you have minor children, naming a guardian is the most important reason to create a Will. This will ensure that your children are cared for by the person(s) whom you deem best suited, rather than letting the courts decide whom that will be. In addition, you can include a minor’s trust in your Will and name a trustee who will manage any assets left to your children. Without a Will, Maryland courts will appoint a custodian (who may or may not be your child’s guardian) and establish a Uniform Trust to Minors Act (UTMA) account for each child’s inheritance.   The custodian will have to present to theMaryland courts an accounting of the expenditures from the UTMA accounts. In addition, the children will receive the assets in the trust at age 21 (often too young to responsibly manage a large sum of money).

If you are married and your net worth (investments, house, life insurance, etc.) is greater than $1,000,000 and you have not created any estate documents or done any tax planning, then you might pay more state estate tax than necessary when you pass away. By including tax-planning strategies in your Will in the state of Maryland, you can take advantage of its estate-tax exemption. In order to take advantage of each spouse’s state estate-tax exemption, you must plan for it in your Wills.

Your Will and other estate documents should be reviewed every two years to make sure they still fulfill your wishes. Spend time now to give you and your heirs the peace of mind that comes from knowing that your affairs are in order.

Contact us if you would like to learn more about how BWFA can work with you and an estate attorney to create an estate plan suited to your needs and circumstances.