Bottom line, while the tax laws and state provisions have changed for the good, the need for effective and comprehensive estate planning remains. We're here to help!

Frequently Asked Estate Planning Questions

Q.  What is an "estate plan"? 

A.  Always tailored to each client's unique requirements, an estate plan generally includes a testamentary will along with other documents that work in harmony to maximize control of your assets and affairs, both during your lifetime and after you decease.  A comprehensive plan may additionally include specialized trust instruments, durable power documents, healthcare directive(s) and business succession provisions.

Q.  With the 2013 and successive year federal tax law changes, how has traditional estate planning guidance changed?

A.  Simplified estate planning available for many clients.  The $5.49 million lifetime combined estate and gift tax exclusions (2017) and the codified estate-tax portability principle means that many clients may now require different levels of federal (and, state!) estate tax planning.  If assets, including insurance and retirement funds total less than $5.49 million, the imposition of federal estate tax is minimal, if any.  For a married couple, portability means that federal estate tax can be successfully mitigated if total joint assets are valued at less than $10.98 million and effective portability language is included in your estate plan.   Our planning techniques now focus on the attainment of personal goals and not simply what you need to do to minimize federal and state estate tax consequences.

Q.  What happens if I don't have an estate plan?

A.  Most likely, your surviving family members will need to probate your estate.  Many of us have previously stood to this responsibility and know, first-hand, of the expense, complications and time-consumptive nature of judicially probating a loved one's estate.  Absence of an estate plan also permits the government to determine how a decedent's asset are distributed in a process known as intestate succession.  Often, such consequences are neither desired, nor controllable.  Effective estate planning can help protect an estate's assets, promote harmony amongst estate beneficiaries, provide for the special needs of a surviving spouse or child, and avoid both the intrusion and publicity of the probate process.

Q.  How expensive is probate and how long does it take to complete?

A.  Each estate and probate jurisdiction is different.  For those clients who own real property in multiple states, unfortunately, multiple probate proceedings will be required.  It is not unusual that probate fees --- to include court, attorney and executor fees --- will consume about 8 - 10% of your estate.  Many attorney and executor fees are fixed by state law.  Local law also prescribes how long estates must be held open to receive creditor claims.   Assuming that a decedent's asset are fairly well-organized and that there are no challenges made to the probate process, it is reasonable to assume that a probate procedure can be concluded within one year.  Larger estate always take longer, sometimes spanning years.

Q.  What assets are managed by the estate plan?

A.  To make the most effective estate plan possible, all of your assets and debts must be considered --- both today and with eyes to the future.  Different assets require specialized treatment; some will be governed by a trust, some by a testamentary will, and others by "will substitutes".  Each client's personal and business holdings, insurance coverage, retirement plans and family composition require consideration to form an appropriate plan.

Q. Do the recent changes in the federal tax law similarly reduce local estate or inheritance tax burdens?

A.  Virginia, like many other states, abolished its estate tax years ago.  The District of Columbia just this year (2017) changed it's estate tax imposition to estates valued at greater than $2 million.  Maryland finally indexed it's estate tax exclusion level to equal that of the federal estate tax, while lowering the maximum rate to 16%.   But,  Maryland still sees fit to impose an inheritance tax --- just because they can!  Planning techniques can be employed to reduce or eliminate the state tax burden in many planning scenarios.

Q.  I crafted my original estate plan in 2005.  Do I now need to update or change that plan?

A.  Short answer --- yes!  Most estate plans executed before 2013  should be reviewed.  Even though federal estate tax consequences have considerably changed, the "portability" requirements under the new law may not properly reflect the benefits that our now available to many individuals and couples; and, just as importantly, some of the former "tried and true" estate planning techniques then-employed to reduce tax liability may no longer be required and, by their mere inclusion in older plans, unnecessarily complex estate plan execution and administration!!!  Prior plans which based distributions on the estate tax exclusion may now have unintended consequences.  Earlier plans provided that one or more charities were to receive any assets which exceeded the maximum amount that could pass free of estate tax.  Today's exclusion provisions may mean that the charity will receive nothing!

Q.  If the federal estate tax has changed, have the unified federal gift tax provisions similarly changed?

A.  Yes!  The federal gift tax exclusion  is now $5.49 million (2017), to be annually subject to inflation adjustment.  This exclusion amount is reduced by certain gifts --- the "taxable gifts".  Certain conditions and reporting are required to ensure that both the gift donor and recipient receive the intended benefits and gift tax treatment.  The traditional "annual exclusion" gifts (limited to $14,000 per gift per individual recipient per year) remain excluded from the $5.49 million federal gift tax exclusion ceiling.  And, like the federal estate tax rate increase, so too has the federal gift tax rate increased to 40%.