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Trust and Estates Attorneys

3 Common Estate Planning Myths

On August 25, 2017, the Court of Appeals in the Sadie M. Castruccio v. Estate of Peter A. Castruccion et al., No 79, September Term 2016 ruled that a testator’s signature and the witnesses signature do not need to be on the same page, nor do the separate pages need to be physically connected at the time of signing for a Will to be valid.

The court also ruled on page 33 of its decision that “neither a complete attestation clause nor having the testator initial each page of the will are requirements for valid execution.”

The case arose following the death of Dr. Peter Castruccio (“Dr. Castruccio”) at the age of 89 in February 2013.  In 2010, Dr. Castruccio marked up his 2008 original Will and requested that his employee, Darlene Barclay, to transcribe his changes.  Ms. Barclay made the changes, and Dr. Castruccio reviewed the Will with his attorney.  In the presence of his attorney, his attorney’s daughter, and Ms. Barclay’s daughter, Dr. Castruccio signed the new Will.

The 2010 Will contained a residuary clause which named Dr. Castruccio’s wife of 62 years, Sadie, as the beneficiary, but contingent on her survival and filing a valid Will of her own with the Register of Wills in Anne Arundel County prior to his death.  In the event that either of the two contingencies were not met, Ms. Barclay would be the residuary beneficiary of Dr. Castruccio’s estate.

At the time of Dr. Castruccio’s death, Sadie had not filed a last Will and Testament with the Register of Wills for Anne Arundel County, Maryland, leaving Ms. Barclay the beneficiary of Dr. Castruccio’s estate.  By and through Counsel, Sadie filed a Petition to Caveat the Will.  If successful, then Dr. Castruccio’s will would have been deemed invalid, and Sadie would inherit her husband’s estate through the Maryland laws of intestacy.

The court relied on the Md. Code (1974, 2011 Repl. Vol.), Estates & Trusts (“ET”) §4-102 which requires that in order to be validly executed, a will must be “(1) in writing, (2) signed by the testator, or by some other person for him, in his presence and by his express direction, and (3) attested and signed by two or more credible witnesses in the presence of the testator.”

The case provides clarity with regard to the valid execution of Maryland Wills, and highlights a number of concerns for most testators.

First, that a Will be validly executed in the State of Maryland. Most estate planners use a Will signing ceremony to provide the requisite number of witnesses and to sign documents with their clients.  Each state has unique execution requirements for a Last Will and Testament to be valid.  While the State of Maryland’s requirement is stated above, other local jurisdictions differ.

Second, whether Dr. Castruccio understood and intended the provision in his Will to disinherit his long-time Spouse.  While we may never know the answer to the latter question, it is important that testator’s review their last will and testament, and be sure to speak with an attorney where he or she may have questions regarding the language of the document.

Many states, the Commonwealth of Virginia included, do not permit the complete disinheritance of a spouse. While an individual may have broad leeway to craft the provisions in their Will or Trust, state laws often forbid the omission of a spouse. While a spouse may not be named in the document as a beneficiary, he or she still retains statutory rights that allow the spouse to receive a portion of the deceased spouse’s estate. For this reason, many couples choose to prepare prenuptial agreements prior to marriage to document the couple’s waiver of statutory rights in their respective estates.

While the presence of statutory rights in state law is not new, Virginia has revised its laws for the calculation of the elective share and is now effective for decedents dying after January 1, 2017. Prior to the implementation of Virginia’s new statute, and for decedents, the surviving spouse of a decedent was entitled to either one third (1/3) of the decedent’s augmented estate if the decedent had surviving children, or one-half (1/2) of the decedent’s augmented estate if the decedent did not have surviving children. This was a similar calculation to other local jurisdictions.
Virginia’s new statute places less of an emphasis on spousal support and takes a more contemporary view of marriage, treating it as an economic partnership. Now, when calculating the augmented estate, the surviving spouse’s assets and non- probate transfers to others are considered, in addition to the decedent’s assets.

Furthermore, the length of the marriage determines the percentage of the augmented estate that is the marital property portion of the augmented estate. The surviving spouse has a right of election to take up to 50% of the value of the marital property portion of the augmented estate, depending on the length of the marriage. Thus, only in marriages lasting fifteen years or more is the surviving spouse entitled to the entire 50%. If a decedent and the surviving spouse were married for five years, the surviving spouse would be entitled to 30% of the 50% of the augmented estate. If a decedent and the surviving spouse were married for less than a year, the surviving spouse would only be entitled to 3% of the 50% of the augmented estate.

This new elective share calculation acknowledges the joint efforts that both spouses put into the marriage, as partners in a partnership, and therefore includes both spouses’ property and increases the percentage of the augmented estate the surviving spouse is entitled to, based on the length of the marriage.

The impact of this change is best seen through an example of a shorter marriage. For instance, under the prior statute, if a decedent died with assets totaling $500,000.00 and was survived by a spouse of 11 months and no children, the surviving spouse would be entitled to claim an elective share of one-half (1/2) of the decedent’s augmented estate. Under the new statute, if the decedent and surviving spouse’s assets combined totaled $500,000.00, the marital property portion would be $250,000.00 (50% of the total assets) and the surviving spouse would only be entitled to claim an elective share equal to 3% of the marital property portion. Therefore, under the old scheme the surviving spouse would be entitled to claim an elective share totaling $250,000.00 and under the new scheme, the surviving spouse would only be entitled to claim an elective share totaling $7,500.00. Under the new scheme, surviving spouses of marriages lasting 15 years or longer are entitled to claim an elective share of 50% of the marital property. The percentages increase as the marriage, or economic partnership, matures and therefore, encourages and rewards the long-term stability of the marriage.

It is important to note that the right to an elective share does not trigger automatically. It must be claimed by the surviving spouse within six months from the later of the time the decedent’s will is admitted to probate or from the time an administrator is qualified in an intestate estate. Thus, the surviving spouse can make an elective share claim regardless of whether a will exists or not.
Estate planning has become increasingly challenging. Reviewing estate planning document in preparation for marriage or a separation may be helpful to determine how assets will be distributed at death.

By Trusts and Estates Attorney Kerri Castellini

I find myself in a number of initial estate planning meetings defending the underdog:  Probate.  Clients tell me that their sole goal for estate planning is to avoid the dreaded P word.  When I inquire further for the reasons in wanting to avoid probate, I receive a litany of answers, but most often the following three:  (1) “I don’t want my money tied up in the courts for years” (2) “I don’t want the state to take my estate” and (3) “everyone told me to do it.”  So what is this probate that so many seek to avoid?

Probate is the term used to describe the court process of administering a decedent’s estate.  Probate, or the “proving of the Will,” often requires at minimum the filing of the original last will and testament with the Court.  Whether any additional estate administration is required, will depend on the assets that remaining in the decedent’s sole name on the date of death.

The term probate and mystery surrounding the process itself often garners the circulation of misinformation.  Foremost, that probate can be avoided after someone passes away.  While avoiding probate may be a goal for many, planning to avoid probate occurs while an individual is alive.  Once an individual passes away, any assets remaining in his or her sole name without a joint owner or beneficiary designation will be subject to the probate process.

Secondly, probating an estate does not mean that the state is going to automatically take the assets of the estate.  Estate assets only escheat to the state when no heirs exist or an heir cannot be located.  Most risk for assets escheating to the estate can be avoided by preparing an up to date last will and testament.

Finally, often the probate process does not have much bearing on the length of time that it takes to administer an estate.  While the probate process does require certain filing deadlines, often the process of administering an estate, regardless of probate, takes at least one (1) year.

Probate can be beneficial in certain cases. Probate in Maryland and the District of Columbia can be a streamlined process if up to date estate planning is prepared by the decedent prior to death.  In addition, probating an estate can shorten the statute of limitations on certain claims, as well as provide some court oversight to the Personal Representative’s actions.

The process of probate can often trigger action by a grieving family after the death of a loved one. Because action is necessary to access assets, other deadlines, such as the filing of income tax returns, or the nine (9) month estate tax return deadline are more likely to be on the radar of the duties required by the Personal Representative.

While I am not opposed to the probate process, it is not without some of the shortcomings that have given the process its ugly reputation. The probate process is a public process, more so in some jurisdictions that others.  Any filing with the court becomes part of the public record, and can be available to see by anyone who requests copies of the docket.  This may mean that details regarding assets, heirs, and even the decedent’s Last Will and Testament are available for view by anyone that requests the information.  In addition, probate can be difficult to navigate by those not familiar with the process.

For those that are still not convinced that probate is not so bad, a frequently used method to avoid probate is signing and funding a revocable living trust.   A revocable living trust allows any assets that have been pre-funded into the trust to avoid the probate process.

However, it should be noted that the assets have to be actually retitled into the name of the trust prior to the decedent’s death to avoid probate. This means that real estate needs to be deeded, account names need to be changed, and beneficiary designations need to be coordinated for the trust to control the disposition of assets.

Another common misunderstanding is that while a revocable living trust may remove assets from a decedent’s probate estate, it does not remove assets from their taxable estate.  Assets titled in the name of the revocable living trust may still be subject to state and/or federal estate tax.

The major takeaways regarding probate include:  (1) Probate gets a bad reputation because of misinformation, (2) The discussion regarding avoiding probate, and how to properly do so, is one that may be had with your estate planning attorney, and (3) If probate is required, all is not lost.  An attorney can assist with navigating the probate process and the administration of the estate.

By Trusts and Estates Attorney Kerri Castellini

The 2016 Summer Olympics kicked off on August 5, 2016.  Until the closing ceremonies, over 500 American athletes are slated to compete in over 28 different sports ranging from swimming to gymnastics, and even table tennis.  The first modern Olympics were held in 1896.  The United States has participated in 49 Olympic Games and is the current leader of the country with the most medals received throughout the history of the Olympic Games.

Making it to the Olympics requires laser focus on the goal for most athletes throughout their lifetime.  Countless hours of practice, self-discipline, and extreme dedication to their sports has led many athletes to Rio.  However, participation in the Games alone may be life changing, athletes may not be prepared for their own unique set of new found estate planning issues.

The first unique issue is the gold medal, itself.  Although not made entirely of gold, placing a monetary value on the medal may be difficult.  Currently, the medal may be worth just around $500 in scrap value.  However, athletes have sold their medal for much more than scrap value due to the medal’s worth as a collector’s item.

Vladimir Klitschko reportedly sold his gold medal earned at the Atlanta games for $1 million dollars.  While the value of the medal may be difficult to determine, the medal is considered tangible personal property and may be addressed in an athlete’s Last Will and Testament.

The gold medal, along with the prize money for the US Olympic Committee and subsequent endorsement deals raises another interesting issue for Olympians:  a sudden increase in wealth.

While the US Olympic Committee currently pays an athlete $25,000 for each gold, $15,000 for silver, and $10,000 for bronze, endorsement deals for athletes could be much more significant.  With an increase in wealth, there can also be an increase in exposure to estate taxes.

The current federal estate tax exemption is $5.45 million.  Some states and jurisdictions, such as Maryland and the District of Columbia have a much lower exemption amount.  Endorsement deals and the value of their own Olympic memorabilia may easily push athletes over the filing thresholds.

The issue of a sudden increase in wealth may also be a concern for athletes under the age of 18.  Because they may not be able to hold assets in their own names, parents or other adults may need to seek guardianship of the minor athlete to accept proceeds and sign endorsement deals on their behalf.

The Rio Olympic Games has viewers from around the world tuned to cheer on their country or favorite athlete.  While it is one of the most renowned sporting events in the world, it is also a financial game changer for a lot of athletes. After the closing ceremonies, Olympians may wish to tackle their estate planning with the same dedication as their sport.

By Trusts and Estates Attorney Kerri Castellini

June 26, 2016, marked the one year anniversary of Obergefell v. Hodges, 576 U.S.____(2015), the landmark case that legalized marriage between same sex couples throughout the United States. The effects of the case have had an impact on many areas of the law, but arguably, a significant impact on estate planning.

For the first time in all states, same sex spouses could plan for the future and the future of their families by fully utilizing the advantages and rights afforded opposite sex married couples.

Although the petitioners of the case included fourteen (14) same sex couples, the most well-known petitioner is John Obergefell. John Obergefell and John Arthur had an almost two decades old committed relationship.[1]

When John Arthur fell terminally ill, the couple traveled from their home state of Ohio to Maryland to be legally married.[2] John Arthur was so ill, that the couple was married inside the transport plane on the tarmac.[3] After John Arthur’s death, Ohio did not recognize John Obergefell as his spouse, but rather treated him as a stranger in the eyes of the law.

Justice Anthony Kennedy wrote the majority opinion, and was joined by Justices Ruth Bader Ginsburg, Elena Kagan, Sonia Sotomayor, and Stephen Breyer. The opinion was hinged on the due process clause of the Fourteenth Amendment.

Although John Obergefell and John Arthur’s story is heart wrenching, it is neither a new nor a novel tale. For states that did not recognize same sex marriages, same sex surviving spouses did not enjoy the same rights and elections as other married couples. For example, many states provide certain statutory inheritance rights or right to elections.

For many same sex couples, the surviving spouse’s treatment at the death of the first spouse was dependent on the laws of the state of residency at death. With Obergefell, the Supreme Court legalized same sex marriage in all states.

Prior to Obergefell, same sex couples resorted to creative estate planning techniques to provide for their surviving partner. Although these techniques, such as adopting their partner, were a patch to the laws, they often fell short of the full range of options available to heterosexual couples. Now, all families can estate plan with the equal rights and the availability the full scope of planning techniques.

In addition to full spousal statutory rights, the ruling offered married couples the same state income, gift, and estate tax benefits as other married couples. For example, spouses could now take advantage of the marital deduction for states that have their own estate tax, and which previously did not recognize same sex marriages.

Although Obergefell made estate planning easier, it has not remedied all issues that may arise and states are still grappling with the application of the case to their state inheritance laws.

Same sex couples may still have issues that are unique to their family dynamic, such as adoption and children born through assisted reproductive technology. In addition, couples’ prior legal status, titling of property, and beneficiary designations should be reviewed carefully and updated in light of the current law.

i. Obergefell
ii. ID at 5

By Trusts and Estates Attorney Kerri Castellini

Sumner Redstone, the 93-year-old American businessman and majority owner of the National Amusements Theater chain, is no stranger to family dispute. For almost a decade, he has been plagued by lawsuits concerning the use and control of his vast wealth, estimated by the New York Times to be over $5 billion.

Through the National Amusements Theater Chain, the Redstone family has majority control over entertainment companies such as CBS Corporation, Viacom Media Networks, and Paramount Pictures. Although it is alleged that the nonagenarian has extensive estate planning which includes the use of at least one trust, his recent removal of current trustees has resulted in a flurry of litigation surrounding his competency.

Sumner Redstone’s saga highlights a number of issues that are present in every estate plan: family dynamics, selection of fiduciaries, and loss of capacity. Estate planning documents are often created and tailored to a client’s goals, assets, and family dynamic. Although two estate plans may look the same from the outside, often, how an attorney and clients arrive at the decisions memorialized in the plan are very different.

A key component of the decisions made often revolve around family dynamic. For example, it is often tempting for some clients to name their oldest child as the Personal Representative of their estate. However, whether or not the oldest child is the best fit for the job may depend on their attention to detail, ability to manage assets, and relationship to his or her other siblings. And of course, an additional strain on family dynamics is the grieving process.

Every individual grieves differently, and grief can also turn quasi-functioning relationships on their tails. Some individuals choose to plug away while grieving and keep themselves busy. Others may choose to procrastinate and avoid dealing with their feelings. The result can be detrimental when a grieving individual is also a fiduciary.

The death of an individual can often start the clock running for the time to make certain elections and file tax returns. If a fiduciary delays in administering an estate or trust, there could be penalties or interest that result. The difficulty with estate planning is that often clients cannot predict how their family will react to their death.

The selection of Sumner Redstone’s trustees is significant, because those same individuals can assert control over the companies that provide for the family wealth. However, the selection of trustees in an estate plan can be critical even for individuals with significantly more modest wealth. As a result, some clients entertain naming an individual who is not a family member, or a professional that can manage assets and make decisions more objectively.

Finally, the underlying issue of loss of capacity is often addressed with estate planning. Even though many trusts include language to address the loss of a capacity of the settlor or the trustee, a determination of incapacity can be difficult. For example, with many individuals, they may have moments of forgetfulness, and other moments of complete capacity. As a result, some medical professionals may come to different conclusions regarding the capacity of an individual to manage his or her own affairs.

Estate planning can be complicated, made even more so by Sumner Redstone’s ultra-high net worth and tricky family dynamics. Although estate planning has not spared him the troubles of litigation, it is likely that without it, even more litigation may have ensued.

By Trust and Estates Attorney Kerri Castellini

The Maryland Fiduciary Access to Digital Assets Act (SSB239/HB507) was signed into law by Governor Lawrence J. Hogan, Jr. and is slated to take effect on October 1, 2016.  The law is a significant leap by the State of Maryland to catch up to the digital age.

Prior to the passage of the law, the pervasive use of electronic banking and investing has posed a problem for many fiduciaries. Without the receipt of paper statements, Personal Representatives, attorney(s)-in-fact, and guardians of the property have had a difficult time locating an individual’s assets, sometimes leading to an exhaustive search of several banking and financial institutions before asserts are uncovered.

Even when the accounts were known and the fiduciary was aware of an individual’s required credentials, their access was limited by the provider’s terms of service agreement, which often did not allow the fiduciary to access another individual’s account.

This was particularly frustrating for loved ones who were searching for answers or wished to access their deceased relative’s final words on social media accounts. With the passage of the MFADAA, an individual can grant or prohibit a fiduciary, such as an attorney-in-fact, trustee, personal representative, or guardian the ability to access his or her digital assets.

The MFADAA defines the term “digital asset” as “an electronic record in which an individual has a right or interest.”  The bill states that a user may “in a will, trust, Power of Attorney, or other record, allow or prohibit disclosure to a fiduciary of some or all of the user’s digital assets, including the content of electronic communications sent or received by the user.”

The bill also provides that user can grant full or partial access to the account, and that a custodian of the account may charge a reasonable fee for disclosing the digital asset.

Many estates and trusts attorneys have incorporated this grant of access to digital assets in their documents in anticipation of the law catching up.

The bill also provides for a change to the Maryland Statutory Power of Attorney, which now recites with regards to digital assets, “With respect to this subject, in accordance with the Maryland Fiduciary Access to Digital Assets Act, my agent shall have authority over and the right to access:

1) The content of any of my electronic communications;

2) Any catalog of electronic communications sent or received by me; and

3) Any other digital asset in which I have a right or interest.”

In addition, some estate attorneys and financial advisors have strongly urged clients to create a list of electronic accounts, including bank accounts, electronic investment accounts, and social media account, along with their user credentials and to store said list in a secure location.

The MFADAA was based on the Fiduciary Access to Digital Assets Act created by the Uniform Law Commission.  According the Uniform Law Commission legislative fact sheet[1], similar bills have been proposed in 18 other states, and enacted in 14.  Notably, and as of the date of this blog, it does not appear that either the District of Columbia or the Commonwealth of Virginia has proposed a similar law.

Although the full effect of the new law is yet to be tested, it is clear that this is a step in the right direction for Maryland in addressing an issue that is bound to be more complicated in the future.

[1] http://www.uniformlaws.org/LegislativeFactSheet.aspx?title=Fiduciary Access to Digital Assets Act, Revised (2015)

By Estate Planning Attorney Kerri Castellini

The decisions required throughout the estate planning process can be difficult. Not many individuals revel in thinking how to prepare themselves and their loved ones for a myriad of worse case scenarios.

However, most of my clients tell me that they feel a sense of relief and calm after they sign their documents. Although the estate planning process ends temporarily once the documents are signed, there is more estate planning homework to be done.

  • Where should the documents be stored? After someone passes away, the original Last Will and Testament is required to be filed with the District of Columbia Superior Court, Probate Division. Many individuals store their important documents in their safe deposit box. Unfortunately, after the owner of the safe deposit box passes away, court intervention is needed before the box can be accessed. Sometimes, this requires the court appraiser and a locksmith to meet at the bank, before the Last Will and Testament can be retrieved. In situations where individuals have not discussed their estate plan with their Personal Representative, often, there is confusion regarding which family members or friends were nominated to serve as Personal Representative. The delay caused from opening the estate can be significant. To solve this problem, our firm offers a free service to our clients to store their original Last Will and Testament in our firm’s safe deposit box.
  • When should the documents be reviewed? As a rule of thumb, it is often helpful for individuals to reread their estate planning documents every three to five years. However, if an individual has experienced a major life event, such as a marriage or divorce, birth or death, significant increase or decrease in overall wealth, purchased a new home or moved to another jurisdiction, it may be prudent to review the documents sooner. In addition to major life events, the tax laws and the District of Columbia probate laws change from time to time. An up to date estate plan is often the first step in ensuring a smoother estate administration. Although with many modern estate planning techniques it is possible to build flexibility into an estate plan, estate planning documents are meant to be organic documents that are revised and changed to meet a client’s current goals, family dynamic, and nature of assets. With major life events and changes in the law, it is often necessary to review and tweak estate planning documents.
  • How are the assets coordinated for the overall plan? After estate planning documents are completed, it is necessary to coordinate asset ownership and beneficiary designations to fund the estate plan. For example, the creation of a revocable living trust alone does not allow for any assets to be governed by the provisions of the trust. It is necessary to re-title assets into the name of the trust. Many estate plans fail because they remain unfunded at the death of the decedent.

A well-coordinated and up to date estate plan is often one of the best gifts that an individual can leave his or her loved ones. Remaining organized during life can lead to a more streamlined and cost-efficient estate administration, and a smoother transition of assets to either the surviving spouse or children.

By Trust and Estates Attorney Kerri Castellini (Photo Courtesy of Nico7Martin)

On April 21, 2016, the music industry lost an icon with the death of Prince. Born Prince Rogers Nelson on June 7, 1958 in Minneapolis, Minnesota, the artist’s music spanned both generations and genres. Monuments around the world such as the Los Angeles City Hall and the Melbourne Arts Center were lit in purple to honor the artist.

Although mystery still surrounds the circumstances of his death, speculation has begun about how Prince’s estate will be distributed. Rumored to be close to $300 million by BET and the Los Angeles Times, but not yet confirmed by a representative of his estate, the inheritance would be significant even if divided by a number of friends, relatives or charitable institutions.

Prince was not survived by a spouse or children, and his death highlights an interesting dilemma in estate planning: the bachelor. Although there have been some mumblings that Prince took precautions by planning for the disposition of his assets at his death, many single individuals do not.

Most individuals are prompted by marriage or the birth of their first child to begin the estate planning process and execute either a Last Will and Testament or a trust. However, many single individuals with no children, do not have the same motivation to complete an estate plan.

In the District of Columbia or Maryland, when an individual dies without a Last Will and Testament, or assets prefunded into a trust, any assets in his or her sole name are distributed pursuant to the laws of intestacy. The laws of intestacy are generally based on the degree of blood relation to the decedent.

For example, Prince had no surviving children, spouse, or parents, but was survived by a half-sister. D.C. and Maryland do not make a distinction between whole blooded and half-blooded siblings. If Prince died as a resident of DC or Maryland, his entire estate would likely be distributed to his sister, if he did not complete any estate planning prior to his death.

Distribution of assets aside, with an estate as large as Prince’s there could be massive DC or Maryland as well as Federal estate tax liability. The State of Maryland has a $2 million estate tax exemption for decedent’s dying this year, while the District of Columbia only protects $1 million of estate assets from estate taxes. If Prince died as a resident of DC or Maryland, or even held real estate in either jurisdiction, the local estate tax could be as high as $47 million.

The current Federal estate system is more generous, and offers an exemption for $5,450,000 for decedent’s dying this year. The maximum tax rate of estates that exceed the exemption is 40%. An estate similar in size to Prince’s could be subject to around $117 million in Federal estate tax.

Although Prince’s estate is much larger than the average resident’s, there are a couple of takeaways that can be learned from his passing. Estate planning is just as important for unmarried individuals as it is for married couples. In addition to possibly preserving the estate by minimizing exposure to estate taxes or reducing administrative expenses, estate planning can often be the first step in reducing risk for estate disputes. Furthermore, beyond passing on assets at death, estate planning can also help create a plan for incapacity while an individual is still alive.

Prince fans and the music industry alike will continue to mourn the loss of the artist. His music and inspiration will live on for generations to come. Hopefully, he ensured his legacy and the distribution of his royalties that he fought so hard for by creating a proper estate plan. For now, we will continue to honor his memory with repeat choruses of “Purple Rain.”


By Trusts and Estate Attorney Kerri Castellini

Estate planning is the process of preparing for the loss of capacity and ultimately passing on of your assets after you have died. When defined in these dismal terms, the process sounds unpalatable and intimidating.  However, the reality is that estate planning is a vital necessity for the future and providing for your loved ones.  A comprehensive and up-to-date estate plan can be the best gift you can leave your family.

Estate planning can be as simple as creating a last will and testament, or as complicated as preparing several trusts, as well as implementing other techniques to manage estate and income tax exposure.  To help you better understand estate planning, I have addressed some common myths:

Myth: I am too young (too poor, too busy, too fabulous, etc.) to worry about estate planning.

Truth:  Everyone, regardless of their age or wealth, may wish to consider estate planning.  Preparing a durable power of attorney may allow someone else to assist an individual if he or she experiences a catastrophic event, or even, just on vacation.  Anyone over the age of 18 may benefit from having an up to date and properly executed power of attorney.

In addition, preparing a medical power of attorney nominates a health care agent to act in the event that an individual can no longer make medical decisions. Furthermore, a medical power of attorney waives the HIPAA regulations so that the named agent can access medical records.  Finally, a medical power of attorney can express an individual’s wishes for the administration of life support, nutrition, hydration, medicine and procedures to alleviate pain and provide for organ donation.

Myth:  I have a power of attorney, so I don’t need a last will and testament.

Truth:  The authority given in a power of attorney dies with the creator.  A personal representative or executor may need to be appointed by the court to access the assets in the decedent’s sole name to pay funeral bills and other expenses, and ultimately, make distribution of the estate assets.

Without a last will and testament to nominate a decedent’s choice for a personal representative, the court will rely on State (or District of Columbia) law to determine which individual has priority to serve.  In addition, the estate assets will be distributed pursuant to State (or District of Columbia) law, which often does not reflect the decedent’s wishes for distribution.

Myth:  Life insurance is not taxed.

Truth:  This is partially true, and partially false.  Although the proceeds of life insurance policies are generally not subject to income tax, any income that accrues from the date of death of the covered individual may be taxable.  Furthermore, life insurance proceeds are considered part of a decedent’s gross taxable estate for estate or death taxes where the policy remains in the decedent’s control at the date of death.

For example, the District of Columbia estate tax filing threshold for decedent’s dying in 2016 is $1 million.  If a decedent died owning a life insurance policy worth $2 million, the decedent’s estate would likely have to file a District of Columbia estate tax return and estate taxes may be due.

These are just a few of the several misunderstandings that I frequently hear from clients. Unfortunately, because so much incorrect information exists, individuals sometimes take estate planning into their own hands.  Working with an estate planning professional and beginning to assemble a team of trusted advisors can often help ensure that you are provided for during your lifetime and that your loved ones are taken care of after your death.