As you think about your estate plan, whether creating it or updating it, it is likely that you view your personal property as either tangible property (that which can be physically touched or seen) or intangible property (that which has value but isn’t physical in nature).  In recent years, however, another category of personal property has emerged and is referred to as digital assets.  Planning for these digital assets, how they will be located, accessed, and disposed of, is an important component of a comprehensive estate plan.

What is a digital asset?  According to the Uniform Fiduciary Access to Digital Assets Act (UFADAA), a digital asset is defined as a record that is electronic. The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), which has been adopted by most states, defines it as an electronic record in which an individual has a right or interest.   A digital asset is anything that is created and stored digitally, is identifiable and either has or provides value.  Today, it is commonplace for people to live more of their lives online, to conduct financial transactions electronically and to store information in the cloud.

The more commonly known and recognized digital assets include:

• Personal Assets – those stored on a smart phone, a tablet or a computer, such as photos and videos, documents, domain names, emails and email accounts, texts, music playlists, personal blogs, gaming accounts and digital books.
• Social Media – this includes the interactions you have with others who have accounts with providers such as Facebook, Instagram and Twitter. These interactions include messaging others but the social media sites can also store photos, videos and documents. According to the Pew Research Center’s December 2022 report, over 70% of Americans use social media, and that number rises to over 80% with American young adults.
• Loyalty program benefits – consumers today often take advantage of their spending habits and travel by converting this activity into points, especially if they are loyal to particular providers. Some of these loyalty program providers allow accrued points to be transferred upon death while others do not.  In some cases, knowing the login information of the member allows another to redeem or transfer the member’s remaining benefits.
• Financial Accounts – examples include online bill payment, an Amazon.com account, online media and magazine subscriptions, and online statements.

Newer digital assets, often those using blockchain technology, include non-fungible tokens (NFTs), bitcoin and other cryptocurrencies.

As is true with any type of property or asset that you own, you should plan how your digital assets will be managed and/or disposed of in the event of your disability or your death.  If your estate plan doesn’t account for your digital assets, your representative, agent, trustee and/or heirs may be unable to gain access to them.

How should you plan for the use, management and disposition of your digital assets in the event of your disability or death?  From a legal perspective, digital assets are like other types of assets that can be passed on to other designated parties in your estate plan.  But more unique to digital assets, the laws regarding digital property are still evolving, and gaining access to that property can present significant challenges for anyone other than the original owner.  In addition, the laws governing digital assets and access to digital assets vary from state to state.

The starting point of understanding access to your digital assets can be found in the Terms of Service Agreement (TOSA) you agreed to and entered into with the service or account provider, for example, Google or Yahoo.  The TOSA is a contract between you and the service provider which governs the relationship between you and your digital assets held by the provider. It is likely that the TOSA has rules regarding who can access your digital assets and the sharing of passwords.  Understanding the terms in the TOSA will help you understand your rights in and to your digital assets and the extent to which you can control and transfer them.

Family members of someone who has recently died or become incapacitated are often faced with obstacles in accessing digital assets, which can include challenges with passwords, data encryption and data privacy.  If your agent or family member doesn’t know your password(s), they may be unable to access information or property that is digitally stored.  And the digitally stored information may be encrypted, which adds another layer of protection.  Encryption scrambles your data and can make it practically impossible for someone without the correct passcode or password to unscramble it.  Lastly, federal data privacy laws prohibit online account service providers from allowing persons other than the owner access to your electronic content without your consent, and without this consent, your content may be inaccessible and leave your agents or heirs unable to gain access to your emails, photos and other information stored in the cloud.

By planning ahead, however, and addressing digital assets in your estate plan, you can avoid these obstacles.  But how do you create a digital estate plan?  This involves preparing a list of your digital property, deciding how you want it to be handled and putting a plan in place to make it happen. It is important to be proactive and to make your wishes known.

• Create an Inventory of your Digital Assets

We recommend that you create a comprehensive list of your digital assets which should include how and where these assets are held, as well as necessary information to access the assets, such as usernames and passwords, PINs and answers to secret questions.  In that list, you should also include what you would like to happen to each asset in the event of your disability or death.  Once created, it is just as important to keep it up-to-date as you change passwords and open or close accounts.  Careful storage of this inventory is essential – store this list in a secure location and let your agents and family members know how to access it.

• Back-up the Digital Assets

We recommend you back up any data and digital assets stored in the cloud on to tangible media such as a flash drive, CD or portable hard drive so that your agents or family members can access them with fewer obstacles.  This tangible media can then be stored in a safe place and can be left to beneficiaries in your Will or Trust.

• Authorize Agent(s) to Access Digital Assets

Your power of attorney documents should provide your agent with power not only over the digital assets, but specifically over the content of electronic communications.  Your document must reference access to electronic communications if you wish to authorize your agent to access digital assets and their contents.  Sample language could include “my Fiduciary has the authority to access, modify, control, archive, transfer, and delete my digital assets”.  If you do not want your agent to have access to digital assets, we recommend this be specifically stated in your documents.

• Address Digital Assets in Your Will or Trust

Ownership of your digital asset upon death is governed by the TOSA.  Some digital assets we think we own are not transferrable upon death because we simply have a license to use the digital asset during life. Other digital assets are transferrable, so it is important that your wishes regarding disposition of them known.  If you have substantial digital assets, you may also consider appointing a separate Fiduciary with special skills to handle just the digital assets.

There are other things you can address in your Will or your Trust.  You can specifically reference that there is a digital asset inventory which includes user names and passwords and provides your desires for each account.

Prudent planning requires that you develop a plan for your digital assets.  Digital assets are now a part of everyday life and planning for your digital assets is an integral part of developing a comprehensive estate plan.  Your goal is to ensure that you have an estate plan in place that addresses your tangible assets, your intangible assets and your digital assets.

Renee Q. Boyd is an Associate Attorney with Elville and Associates and a key member of the firm’s busy Estate Planning Department. She partners with clients to educate them and provide them a perfect client experience through the entire estate planning process – along with future maintenance and updating of their planning as changes occur in the laws and their lives. Her client-centered approach reflects the time, effort and care she puts into each interaction.  Renee may be reached at renee@elvilleassociates.com, or by phone at 443-393-7696 x111.

 

“Just Do” Your Estate Planning – Perfection Will Come Through a Lifetime Process 

 

By: Stephen R. Elville, J.D., LL.M. – Managing Principal and Lead Attorney – 

Elville and Associates, P.C. 

 

Lately I’ve been thinking about the theme Elville and Associates has been talking to clients about so much since late 2022 and now into 2023, and that is achieving perfection in estate planning.  While this concept is important, and an idea that sets the bar higher than it’s likely ever been set before, it’s important to also understand that the object is not to focus on perfection at the outset – meaning perfectionism is not what I am referring to.  This problem is what holds so many people back, and not just in estate planning.  Many of us won’t move ahead with something unless we know it’s perfect or otherwise we are afraid we will make a mistake; or, we actually do get started with a project and then don’t finish for various reasons, oftentimes because we want to be perfect or we lack focus; or, perhaps something we don’t want to admit – we are afraid to finish because we’re afraid of what finishing means.   

 

For example, in the past two years I’ve had clients who have attempted estate planning multiple times in the past and did not or could not follow through.  The problem is this: when we think about estate planning, we think in terms of having to get it right and having to get it right from the get-go.  We don’t give ourselves permission to fail.  Why?  Well, because we think in terms of failure not being an option.  But that’s not how estate planning works and not how everyday life works.  In estate planning we feel that we must make perfect choices because we have no alternative – we have to plan as if death or incapacity would occur or could occur tomorrow.  While this is always true, and no one knows what tomorrow may bring, this approach is fatal to success in estate planning.   

 

Rather, the best choice and the healthy choice when it comes to estate planning is to engage in an estate planning process where there is counseling and education so that you know all of the choices that are available to you, and in that estate planning process you obtain advice about what choices may be best for you based on your own individual circumstances and family situation.  As part of this estate planning process, you have a goal or develop a goal that drives your planning forward.  You make the best choices you can now, not only about how the structure of the plan works, but also who your trusted fiduciaries will be, namely, your personal representatives under your last will and testament, your guardians for minor or disabled children, your trustees, your agents under financial powers of attorney and advance medical directives, your trust protectors, and more.   

 

Having made these decisions, you eventually realize that estate planning is not just a single transaction, but a process – a lifetime process.  You eventually realize that just like financial or tax planning, or other life planning, including healthcare, fitness, or education, you don’t just set it and forget it.  You work on and develop your planning throughout your lifetime.  When you realize this and have this estate planning epiphany, you will realize that you do not need to feel under pressure about being perfect in estate planning from the outset, and this releases you to make the highest and best decisions based on what you know now.  You can then maintain and update your estate plan throughout your lifetime, and in this way you then take the real steps towards the perfection of your estate plan as an overall goal so that when your estate plan matures and you are no longer living, it will work the way you envisioned.   

 

Here’s the point:  we want to encourage and strive for perfection in estate planning.  But perfection usually does not come in one sitting or one meeting or one phase of a process (or in one workout, one piano lesson, or one audition).  Rather, perfection in an estate planning process happens as part of an overall commitment to excellence in planning throughout your lifetime and continuing legal education for yourself, your family members, and your trusted fiduciaries.  Don’t try to be perfect.  Instead, achieve perfection in your estate planning, elder care planning, or special needs planning, over your lifetime, taking into consideration all of the changes that have, and will surely continue to occur, in the coming years.  Just do your estate planning and don’t worry about being perfect. 

 

Managing Principal and Lead Attorney Stephen Elville’s work is centered in “estate planning, elder law, and special needs planning with special emphasis in the areas of tax planning and asset protection. As a member of the Academy of Special Needs Planners, the National Academy of Elder Law Attorneys, and the National Network of Estate Planning Attorneys, he works to bring peace of mind to clients by creating solutions to their needs through counseling and education using the very best legal-technical knowledge available. He is a seasoned speaker and each year presents at dozens of webinars, workshops, conferences, and continuing education events. Steve has also been named to the Maryland Super Lawyers list eight times, including the past seven consecutive years. Steve is also the founder and president of the firm’s charitable organization, the Elville Center for the Creative Arts, in 2014, a 501(c) (3) organization that partners with school music programs and other organizations such as the Annapolis Symphony Orchestra to give the gift of music to children who want to participate in music but don’t have the means to do so on their own. Steve may be reached at steve@elvilleassociates.com, or by phone at 443-393-7696 x108. 

 

Authored by: Renee Q. Boyd – Associate Attorney – Elville and Associates, P.C.

Oftentimes when I meet with clients to discuss their estate planning needs or to review their documents, I am asked “If we move to another state, will our documents be valid in the new state?”.

Generally, the answer is yes.  It is likely that you won’t need to execute new documents when you move, however, it is a good idea to have the documents reviewed when you move to ensure they conform with the state laws of the new state to which you have moved.  States have different laws that govern estate planning and these state-specific estate planning laws can have an impact on your documents.  Therefore, we recommend you have your documents reviewed to determine if any updates are required.

Last Will and Testament

Every state has different requirements for the execution of wills but the good news is that most states will accept out-of-state wills if they were properly executed under the laws of the state when they were created. The probate courts of most states will recognize a will executed in a different state, as long as it was validly executed.  That said, however, it is quite possible that some rules in the new state can differ from those in the old state.

For instance, state laws can vary on the number of witness signatures needed on a will, and whether or not those signatures need to be notarized.  Another issue is the “proving” of the will, which is a sworn statement signed by the maker of the will and the witnesses that attests to the validity of the will.  In some states, probate courts wlll accept the sworn statement as evidence that the will is valid.  However, not all states allow for self-proving wills.  States also differ regarding which types of wills are valid.  Some states will allow self-written wills but have state-specific rules about how the wills must be written.

Another consideration involves the Personal Representative or Executor who is named to administer the will.  While most states allow out-of-state personal representatives to serve, they may have requirements for them to be able to serve, such as posting a bond.  Some states put limitations on who can serve as the Personal Representative, for instance only someone related to you by blood or marriage, and many states require that an out-of-state Personal Representative appoint an in-state agent to accept legal documents for the estate.

Revocable Living Trusts

Trusts are governed by contract law, so a revocable living trust, because it is considered to be a contract, is afforded respect by the Full Faith and Credit Clause of the U.S. Constitution.  This makes the revocable living trust portable which means you can move to another state and it should be valid there.  The main consideration with a revocable living trust is that it is funded with the assets you want to pass to your beneficiary(s).  When you move to the new state, if you purchase a home there, you will want to make sure to assign the new property to your revocable living trust and that the deed to the property is drafted accordingly.

Advance Medical Directives

Advance medical directives, also known as living wills or health care proxies, are usually valid across state lines.  Some states have laws that require health care providers to honor legal documents regarding health care wishes if they were executed out of state, however, not all states have provisions that address validity of documents executed out-of-state. This makes it difficult to be sure if the out-of-state advance directive will be honored in the new state.  Because each state has its own provisions and forms, it is recommended that you have an attorney in the new state review the advance directive to ensure its validity.

Powers of Attorney

Similar to advance directives, each state has its own laws that govern granting someone Power of Attorney.  The various states also have their own forms.  Generally, a power of attorney that is valid when and where you sign it will remain valid even if you move to another state.  Although you may not need a new power of attorney just because you have moved, it is a good idea to have it reviewed by an attorney in the new state to make sure that the nuances of the new state’s laws are addressed.

Summary

In summary, your estate planning documents should be valid in the new state if they were properly executed according to all the required provisions of your former state.  But because the laws of each state are different, it is advisable that you have your documents reviewed, and possibly updated, by an attorney who is familiar with the new state’s estate planning laws.  If you intend to permanently remain in the new state, we recommend that you work with the attorney there to prepare new advance medical directive and power of attorney documents.  Also, if a revocable living trust is part of your estate plan, and particularly if you purchase real property in the new state, we recommend having the situs and state law updated in the trust for state income tax purposes.

Introduction:

When most people think about Estate Planning, they think about planning for how their assets (the estate) will be distributed when they die and how to facilitate smooth administration.  But Estate Planning encompasses much more – it is also planning for and deciding who will manage your assets during your lifetime, if and when you are incapacitated.  It is equally important for you to prepare for a time when you are still living but may be unable to make decisions for yourself — for your health care and financial matters. Whether you are just starting out in your career or preparing for your retirement years, it’s never too early to consider how you want your health and financial affairs to be managed if something happens to you and you are not able to exercise control over your affairs for one reason or another. This is known as incapacity planning.  For your health care decisions, incapacity planning is addressed with an Advance Medical Directive.  Planning for your financial decisions is addressed with a Power of Attorney document.

What is a power of attorney? 

Powers of Attorney are extremely significant tools to help you prepare for your future, and are perhaps the most important of all planning documents.  A Power of Attorney is a legal document you sign to grant someone you trust with authority to make decisions on your behalf. The “principal” is the person who creates the power of attorney and the “agent” (aka the attorney-in-fact) is the person who is receiving power by way of the document. This agent, or attorney-in-fact, has the legal authority and right to make certain decisions that you would make if you were able. You, as the principal, have not given up your own power to perform these same functions, but rather have granted legal authority to the agent to perform various tasks on your behalf if you are not able to do so.

Why do I need one? 

A Power of Attorney arrangement is important, even essential, to managing your financial affairs in the event you become unable to manage things on your own. Planning for the future with a power of attorney can minimize complications to achieving your financial goals. This important document:

• Provides the ability to choose who will make decisions for you (rather than having a court decide).

If you sign a Power of Attorney document and later become incapacitated and unable to make decisions, the agent named can step into your shoes and make important financial decisions on your behalf. Without a Power of Attorney in place, a court-appointed guardianship or conservatorship may need to be established, and that can be a time consuming and very expensive process.

Someone who does not have a comprehensive Power of Attorney at the time they become incapacitated may have no lessor restrictive alternative and a third party would have to petition the court to appoint a guardian or conservator. The court would then choose who is appointed to manage the financial and/or health affairs of the incapacitated person, and the court would continue to monitor the situation as long as the incapacitated person is alive. While this is not only a costly process, the incapacitated person would likely have little or no input in deciding who will be appointed to serve.

• Provides family members the opportunity to discuss wishes and desires.

Much thought and consideration goes into creating a comprehensive Power of Attorney. One of the most important decisions is who will serve as the agent. When you or a loved one make the decision to sign a Power of Attorney, that provides a good opportunity to discuss wishes and expectations with the family and, in particular, the person named as agent in the Power of Attorney.

• Minimizes questions about principal’s intent.

There are often times court battles over a person’s intent once that person has become incapacitated. A well-drafted Power of Attorney, along with a health care directive, can eliminate the need for family members to debate or disagree over a loved one’s wishes. Once written down, this document is excellent evidence of your intent and is difficult to dispute.

 

• Allows agents to talk to other providers.

An agent under a Power of Attorney is often in the position of trying to reconcile bank charges, make arrangements for health care needs, engage professionals for services to be provided to or on behalf of the principal, and much more. Without a comprehensive Power of Attorney giving authority to the agent, many companies will refuse to disclose any information or provide services to the incapacitated person. This can result in a great deal of frustration, as well as lost time and money.

• Allows agents to plan for the principal’s eligibility for public benefits.

Having a Power of Attorney is extremely important in helping a loved one become eligible for public benefits, such as Medicaid and/or Veterans Administration benefits, as well as in assisting them with maintaining their eligibility and in making benefit-related decisions.  The Power of Attorney gives the agent the authority to access the supporting documentation required during the application process and to manage and potentially transfer the loved one’s assets and income to gain eligibility.  Once eligible for public benefits, the Power of Attorney provides the agent with the power to write checks on behalf of the benefit recipient to cover co-payments or share of the costs.

• Provides peace of mind for everyone involved.

Taking the time to create and sign a Power of Attorney lessens the burden on family members who would otherwise have to go to court to get authority for performing basic tasks, like writing a check or arranging for home health services. Knowing this has been taken care of in advance is of great comfort to families.

How do I get a Power of Attorney in place?

The laws governing Powers of Attorney are specific to each state, so it is important that you understand the applicable laws both where you live, and where you have assets. Most states require that your Power of Attorney be in writing, witnessed and notarized. You must sign when you are still mentally competent for your Power of Attorney to be valid. This is a good reason to plan early for your later years, so that your affairs are in order.

Nobody can predict exactly which powers will be needed in the future. Although each client’s goals are different, generally the primary goal is to have a Power of Attorney in place that empowers your agent to do whatever needs to be done in the future.  At Elville and Associates, we take a two-tiered approach to meeting these planning goals. The first tier is use of the Maryland Statutory Power of Attorney that was created under the Maryland Power of Attorney Act of 2010.  This is a straight-forward document that, while not customizable, must be accepted by law at the financial institutions in the State.  It is a simple document, enforceable by law, that provides the average person with the ability to grant his or her agent with basic powers.

Many people, however, choose to supplement the statutory Power of Attorney with a durable Power of Attorney which can be customized, and which allows much broader and more extensive powers to be granted to your agent.  Examples of these enhanced powers are powers granted to your agent:

• To establish, amend, revoke or terminate revocable and irrevocable trusts during the principal’s lifetime
• To fund or make withdrawals from trusts
• To create or change beneficiary designations
• To manage government benefits
• To care for and deal with pets
• To make a gift of money or property
• To perform a Medicaid spend-down of assets
• To be compensated

Using the combination of the statutory and the durable Power of Attorney documents is a powerful tool because each has a tactical advantage.  The statutory document is enforceable through the state statute which requires banks and other financial institutions to accept it.  The durable power of attorney document, on the other hand, is much more comprehensive and places the principal in a much stronger position should need arise when the principal becomes incapacitated.

Summary:

No one likes to think about a time when he or she is unable to make their own decisions, but it is critical to plan for it.  Accidents happen and illnesses can come on unexpectedly.  If and when you become incapacitated, your family and loved ones will not automatically have the access and authority to make your decisions and manage your affairs.  Without that access and authority in place, your wishes may not be followed and your assets may not be protected.

In Maryland, unlike with health care decision making, there is no such thing as surrogate decision making in financial matters.  This is why the Power of Attorney is essential.  Powers of Attorney can and do provide you with peace of mind – you choose who will act for you when you are unable to act for yourself, and you define that person’s scope, authority and limits.  Even if you are unable to handle the decision making yourself, having a Power of Attorney document in place assures you that everything you have worked for during your life will continue to be managed according to your wishes.

For more information or to schedule a time to discuss your incapacity and estate planning needs, including a “powerful power of attorney,” please contact me at renee@elvilleassociates.com, or by phone at 443-393-7696 x111.  All initial estate planning consultations are free and typically run about 1-1/2 hours.  This is a time for you to get to know Elville and Associates and me, ask questions, and have me learn about your overall situation, your goals and you so I can create a solution and path forward for your planning.  I look forward to meeting you!

 

 

Aid & Attendance – The “Secret” Benefit for Aging Veterans and their Spouses 

By: Lindsay V.R. Moss, Esq., Senior Principal, Elville and Associates, P.C., Lindsay@elvilleassociates.com  

Aid and Attendance Improved Pension Benefit (A&A), is a little known benefit offered through the Veteran’s Administration (VA) for Veterans and surviving spouses of Veterans.  A&A can be used to cover the cost of in-home health care, or be used towards the cost of Assisted Living.  To qualify, a veteran does not need to have suffered a service-related injury.  They need only to have served one (1) day of a 90 day minimum active duty military service during a time of war.  Additionally, they must require caregiving oversight for activities of daily living (such as dressing, toileting, bathing, etc.), and must fall within the established income and asset requirements. For 2022, the asset limit is $138,489 (with the house and any life insurance policies exempt as assets).  The eligible wartime periods are: 

• World War I (April 6, 1917 – November 11, 1918) 
• World War II (December 7, 1941 – December 31, 1946) 
• Korean conflict (June 27, 1950 – January 31, 1955) 
• Vietnam era (February 28, 1961 – May 7, 1975 for Veterans who served in the Republic of Vietnam during that period; otherwise August 5, 1964 – May 7, 1975) 
• Gulf War (August 2, 1990 – through a future date to be set by law or Presidential Proclamation) 

(If the active duty occurred after September 7, 1980, one must have served at least 24 months or the full period that one was called up) 

Other requirements include: 

• Age 65 or older with limited or no income; or 
• Totally and permanently disabled; or 
• Receiving Social Security Disability Insurance; or 
• Receiving Supplemental Security Income 

A&A is a tax-free monetary benefit through the VA that can supplement a family’s income and enable the use of services that would otherwise be unaffordable.  

For 2022, the maximum monthly pension rates and income limits (excluding healthcare expenses) are: 

• Veteran – Income less than $24,610 per year, monthly pension – $2,050 
• Veteran with one dependent – Income less than $29,175 per year, monthly pension – $2,431 
• Surviving Spouse – Income less than $16,456 per year, monthly pension – $1371 
• Veteran Couple – Income less than $39,036 per year, monthly income – $3253 

Pension benefits are needs-based and the “countable” family income must fall below the yearly limit set by law.  However, with the cost of in-home health care and Assisted Living increasing each year, it is often the case that the cost of one’s health care expenses exceeds the family income.   

One important thing to consider is that the income limit does not include medical expenses.  For example, if a Veteran and spouse have a combined income of $70,000 a year, but $60,000 of their yearly income is going towards the expense of an Assisted Living (which equates to $5,000 a month… a relatively low/average cost for an Assisted Living facility), then the Veteran would qualify for the full A&A amount of $2,431 per month.  That’s about 50% of the cost of the Assisted Living!  The additional income can make a huge difference in the quality of life for those receiving the benefit.  It could also mean the difference between affording an Assisted Living Facility and needing to be institutionalized in a Skilled Nursing Facility (SNF) and qualify for Medicaid.  

A&A can also be used towards the cost of in-home health care.  For example, if a Veteran (or spouse) is living at  home, but is racking up medical expenses utilizing a home health care agency, A&A can be used to supplement the cost.  It can even be used to pay the adult child(ren) (or other family members) of a Veteran or spouse, if they are providing care for their parent, and a valid caregiver agreement is in place.  

On October 18, 2018, the VA restructured the way they compute assets.  Prior to 2018, there was no “lookback” period.  Since the institution of the new VA Rules in 2018, the VA requires a 3-year lookback period for all assets and expenditures.  Similar to the Medicaid 5-year lookback period, the VA lookback period was instituted to ensure that Veterans/surviving spouses that were well over the maximum asset limit were not transferring or gifting away assets soley for the purpose of immediately qualifying for this monthly pension.   

Though there is now a 3-year lookback period, there are still many ways to implement asset protection strategies in order to qualify for this benefit.  Creating a VA Asset Protection Trust is key, especially if the sale of home is being contemplated.   

There are several documents that are needed to start the application process.  The application requires, among other documents, a copy of the Veteran’s DD-214 (discharge paperwork), a medical evaluation from a physician, proof of current medical expenses, net worth and income information, and documentation of current out-of-pocket medical expenses.  

Lindsay Moss, Esq. is a VA Accredited Attorney through the Veteran’s Administration, trained in navigating the intricacies of the VA system.  Call her at 443-393-7696 with any questions about VA A&A.  

By: Shannon Werbeck – Associate Attorney – Elville and Associates, P.C.

In initial consultations with clients, one of our main goals, among other things, is to determine which type of estate plan will best suit a client. The two main types of estate plans are a Last Will and Testament or a Revocable Living Trust. Once we determine which estate planning tool would best meet a client’s needs, we further customize and build on the plan based on the client’s current assets, goals and needs. Not every estate plan is alike and designing an estate plan can become overwhelming for a client – that is why we as attorneys are here to advise each client in a direction that will best suit their needs!

 

Most people are familiar with what is called a Last Will and Testament. A Last Will and Testament is a document that dictates what you want to happen with your assets and property at death as well as who you want to handle your affairs (your personal representative). It is only relevant to assets that do not contain a beneficiary designation and that are not jointly owned with a spouse or third party at death. If you own assets jointly with a third party or own assets individually but said asset contains a properly completed beneficiary designated (such as life insurance, 401(k), IRA, etc.), then at death your assets will be owned solely by that person.

 

A Last Will and Testament controls assets that do not fall into the category of being jointly owned or beneficiary designated and is therefore considered an individually owned asset with no beneficiary designation. In order for said asset to go from a deceased individual owner to the person meant to inherit the asset (the inheritor), it has to go through what is called probate.  Probate is a court process of administering someone’s estate which has to take place when there is an asset with no living owner and no designated beneficiary. If probate occurs, then the court will inquire as to whether the decedent has a Last Will and Testament which the court will rely on when administrating the probate estate. Through this process your documents are open to the public to view at any time.

 

The administration process associated with a Last Will and Testament can take up to nine months, sometimes more depending on the size of the estate. It involves opening an estate with the Register of Wills Office, the probate process, which includes the filing of an inventory outlining what assets are part of the probate estate and allowing time for claims from any possible creditors who you may have owned money, as well as a filing of an accounting to display to the Register of Wills what is taking place inside of the estate. There are also costs associated with probate with the primary cost being payments to the probate court to process your documents, having to pay for professional assistance in filing final tax returns and even retaining the assistance of an attorney to assist with the probate process.

 

In some cases, clients wish to avoid probate. Many people have aversion to dealing with the court, the administration process or do not wish to have their documents open to the public eye. When an individual is motivated to avoid probate – that is when a discussion regarding a Revocable Living Trust plan occurs.

 

 

A Revocable Living Trust is essentially a substitute for a Last Will and Testament, and it accomplishes the goal of avoiding probate. It does not give asset protection or avoid taxes unless further estate planning is conducted. A Revocable Living Trust is similar to a Last Will and Testament in that it is an estate planning tool that designates the distribution of your properties and assets at death and the person(s) you wish to take care of the administration process (your successor trustee(s)). However, unlike a Last Will and Testament, a Revocable Living Trust comes into existence the moment it is created and is therefore relevant during life and at death. While you are alive, you are the grantor, initial trustee and beneficiary of your Revocable Living Trust and although your assets and properties will be aligned to the trust, you still have the ability to change anything in regard to your tax filings and have control over your money or ability to sell your properties – you are free to do whatever you want with your assets. Another way to view a Revocable Living Trust is as a “contract” that you sign and enter into with yourself as the initial trustee. You can change the terms of the “contract,” revoke it, restate it and amend it.

 

After a Revocable Living Trust is signed, we help you through a process called asset alignment, where our firm carefully reviews your assets and properties with you and ensures that certain assets and properties are properly titled to be owned by your Revocable Living Trust. While alive, there are two ways in which your assets will be held when doing a Revocable Living Trust Plan:

 

1. Inside of your Revocable Living Trust where we help you change the owner of your assets and property, including but not limited to: your properties, cars, savings accounts, and Tangible Personal Property (jewelry, furniture, etc.).

 

2. Outside of your Revocable Living Trust which includes your beneficiary designated assets, such as your 401(k)/IRAs and life insurance.

 

Asset alignment is a very important part of Revocable Living Trust planning. Signing a Revocable Living Trust in combination with asset alignment is what avoids probate. If this process is not conducted, then a client is essentially creating a more enhanced and expensive Last Will and Testament that will have to go through probate. Since assets will be owned by the Revocable Living Trust and not by an individual, there will not be anything required to go through probate and there will be no court involvement.

 

At your death, your Revocable Living Trust will become irrevocable and your successor trustees who you have named within the document will privately carry out the terms of the trust.

 

The reality is there is going to be cost and effort with either plan. With a Revocable Living Trust, the cost and effort are upfront so that there is less cost and effort at death, as there would be with a Last Will and Testament. A Revocable Living Trust is seen as being more streamlined and cost-effective in the long run than a Last Will and Testament with the court process of probate. The additional cost upfront for a Revocable Living Trust is attributed to the complicated process associated with a Revocable Living Trust which requires more work and effort during life so that in turn there will be less cost and effort required by your designated successor trustee at your death.

 

A Revocable Living Trust might not be the best option for everyone at this time, which is completely understandable. Our job is to advise clients what we believe is best for each individual or family. With that said, estate planning documents are not meant to last forever and should be reviewed frequently as assets, the people in our lives and Maryland law are forever changing.  No matter what plan you decide on, our firm always ensures that your assets will flow properly during life and upon your death through your estate plan and that your documents, a Last Will and Testament or Revocable Living Trust, will best suit your estate planning goals and needs.

 

Shannon F. Werbeck is an Associate Attorney with Elville and Associates and an integral member of the firm’s busy Estate Planning Department. She educates and counsels clients through the entire estate planning process – beginning with the initial consultation, followed by the design and implementation of their plans, as well as the necessary maintenance and updating of their planning as changes occur in the laws and their lives. Shannon may be reached at shannon@elvilleassociates.com, or by phone at 443-393-7696 x148.

 

End of Year 2021 Tax Legislation Update – The Eagle Has Not Landed (But The Geese Have) 

By:  Stephen R. Elville – Managing Principal and Lead Attorney – Elville and Associates, P.C. 

Here on the east coast when a hurricane or tropical storm is first identified in the Caribbean Sea or Gulf of Mexico, what do we do?  If you are like my wife, you know about this immediately because like her, you’re on top of the weather situation at all times, you read about weather daily (if not more frequently), and you even watch the Weather Channel as you (and they) ask the obvious but unspoken question:  is this the big one that’s going to develop into a large storm, track up the coast or possibly an inland route, and have a tremendous effect on me, barreling straight into Maryland causing massive flooding, power outages, lines at grocery stores, property damage, or worse?  Or, if you are like me, you often hear about weather through osmosis as you go through your busy daily routine, and you ask the same unconscious question about the potential for a looming disaster.  But you tell yourself – it won’t happen; it never does; the experts are very often wrong; that you’ve been through these false alarms before and they’re all such a waste of time, energy, and resources; and that it’s best to just act as if it won’t happen (like many of the Maryland snow predictions), and you go about your business as usual until it becomes painfully obvious that the thing is, as we used to say in the seventies, “for real.”  So which approach is better?  It may be hard to say because there are so many variables.  But two things are clear in this sea of clouds: (1) there is great uncertainty in predicting the weather; and (2) no matter what philosophy or approach you subscribe to, you may end up being right or wrong depending on actual events that are completely beyond your control.  Well dear reader, your correspondent here and Elville and Associates, along with the entire estate planning and tax planning community across the country of which we are a part, have done our best to keep you informed over the past twelve months about the tax legislation winds of change on Capitol Hill.  Beginning with Senator Sanders’ For The 99.5% Act, to Senator Van Hollen’s Step Act, to President Biden’s American Families Plan, through the doldrums of the summer of 2021, to the seemingly definitive September 2021 House Ways and Means Committee draft legislation, through the maelstrom of October and Senator Wyden’s out-of-the-box ideas, and then beyond the surprising election results of early November and the resulting stasis, it now appears that the Fall 2021 political hurricane season has produced nothing more than cooler temperatures and no real direction about new tax legislation to speak of, with nearly all of the major proposals, conjecture, negotiations, and impending changes on ice. 

So what do you do if you were ahead of the curve, dedicated and in touch with all of the information available to you these many months, a good and faithful student and steward of your estate, tax, and financial planning, now that the impending legislative storm has not (yet) happened by near end of calendar year 2021?  In short, you congratulate yourself.  And if you were not only ready and informed, but you took proactive steps to implement appropriate planning strategies based on your particular needs, then I encourage you to accept that you did the right thing based on the information you had available to you and the relative risk of not acting.  Why?  Because is there any reasonable doubt that significant changes are going to eventually come (even though they have not (so far) come as predicted by end of this year)?  For example, the current federal estate tax, gift tax, and generation skipping transfer tax exemption amount is $11.7 million per person.  But this huge (temporary) exemption amount is slated to be reduced by law (unless changed by congressional action) to $5 million per person, adjusted for inflation, by January 1, 2026.  If and when this happens, is it not reasonably predictable that in the next legislative session to follow, that Maryland will also lower its current $5 million per person state estate tax exemption?  And with the huge deficits caused by the COVID-19 disaster and all the serious talk (and eye-popping proposals) about eliminating the cost basis adjustment at death, limiting the use of grantor trusts, and much more, and the relatively recent passage of the SECURE Act that accelerates income taxation of retirement plan assets for the vast majority of Americans, is there any reasonable doubt that the federal government is looking for ways to significantly increase revenue?  So dear reader, have no doubt about what you did to be proactive, and know that all of your work to board up your estate, tax, and financial planning windows, buy emergency water and supplies in the form of studious and careful consideration of the political shifts brought about by the new Biden Administration since January 2021, and build a wall of planning sandbags around your estate, was the right thing to do for you.  Do not be discouraged and know that the political weather developments are not over but remain ever-changing on the radar.   

For those of you who ignored most of the political tropical depression of 2021 either because you are numb to politics (and who can blame you); or you generally do not believe that this Congress can get things done; or you just don’t react to political storm predictions until they become perfect storms or the path of the storm is one that will be a direct hit, then as your correspondent I say the following:  the most you may be able to do now is watch for political black ice and make sure that you salt your porches, decks, walkways, and driveway to keep yourself and others from slipping during this political deep freeze by (a) continuing to stay abreast of potential changes in the laws; (b) keeping in touch with your financial and tax advisors; (c) remaining consistent in your estate planning annual or bi-annual updates; and (d)  if you are not a Member of Elville and Associates’ Client Care Program (CCP), be sure to join so that you are committing in a partnership-type relationship to a predictable and repetitious review of your estate plan, continuing client legal education for you and your family members and fiduciaries, and social connection with other like-minded persons who, like you, are committed to excellence in their legacy planning.   

In closing, I welcome you to our Fall 2021 Edition of the Elville Benefactor, and I encourage you, whether you are a current or past client of Elville and Associates, a professional advisor or referral partner of our law firm, or a prospective client who is interested in establishing a new relationship with a progressive estate, elder law, and special needs planning firm, to always remember that client and family (and advisor) continuing education is the key to planning success by and through an intentional process.  Whether you were proactive in 2021 concerning the never-ending tax legislation discussion or not, the fundamentals of estate planning never change – individuals and couples need to plan for incapacity; appoint financial and health care agents; make health care decisions and understand health care decision making policy; plan for death by providing for spouses, minor children, grandchildren, nieces and nephews, and others; appoint guardians for minor children and persons with disabilities; protect assets for at-risk beneficiaries; address tax ramifications; satisfy charitable or other specific goals; facilitate wealth transfer; address long-term care issues; and more.  Don’t be discouraged or dissuaded by the ever-changing political forecast.  And regardless of whether you are like my wife, and always at the forefront of news and weather events, or like many of us who keep an umbrella in the car just in case it rains, Elville and Associates is here for you to engage with you in a process-driven partnership-type relationship to address, in the highest and best ways possible, the atmospheric changes and developing currents in our world, be they political, social, economic, or health-related, in coordination with your planning team of advisors.   

Wishing you a wonderful Thanksgiving and holiday season,   

Stephen R. Elville, J.D., LL.M.  
President and CEO of Elville and Associates, P.C. 

 

Stephen R. Elville, Managing Principal and Lead Attorney of Elville and Associates, works with individuals and families to provide a unique attorney-client experience through a proactive and collaborative approach to planning. As a member of the National Academy of Elder Law Attorneys, the Academy of Special Needs Planners, and the National Network of Estate Planning Attorneys, he works to bring peace of mind to clients by creating solutions to their needs through counseling, client education and the use of leading-edge legal-technical knowledge.   

Mr. Elville brings a unique, personalized approach to planning and has extensive experience in working with clients involved in crisis situations and pre-crisis matters.  

He is a seasoned speaker and each year presents at many webinars, workshops for businesses and their employees, conferences, and continuing education events.   

He was named to the Maryland Super Lawyers list for a sixth time in 2021, and also had a feature story written about him in the national Super Lawyers Magazine about the Elville Center for the Creative Arts, the firm’s charitable organization he founded in 2014. 

Mr. Elville routinely handles client matters in elder law, estate planning, special needs planning, tax planning, guardianship, asset protection, estate and trust administration, fiduciary representation, and more. Mr. Elville may be reached at steve@elvilleassociates.com, or 443-393-7696 x108. 

When Inheriting Real Estate, Consider Your Options

original article from: https://elvilleassociates.com/inheriting-real-estate/

By: Stephen R. Elville, J.D., LL.M. – Managing Principal and Lead Attorney – Elville and Associates, P.C.

The SECURE Act, passed at the end of 2019, changed a number of rules regarding inherited IRAs, making it more difficult for most beneficiaries to save on taxes by “stretching” distributions over many years. However, an exception to the new rules potentially changes advice that special needs planners often give clients, and leaving an IRA to a special needs trust is no longer such a bad idea.

For many reasons, it’s usually not advisable to make an individual with special needs the beneficiary of an IRA or 401(k) plan (i.e., leaving an IRA to a special needs trust). She may not be able to manage the funds, and owning the account may render her ineligible for vital public benefits. This is why planners always recommend that parents with children with special needs leave their share of their estates in a special needs trust for the child’s benefit. But parents are often encouraged to leave their retirement plans to other children, if any, because holding a retirement plan in a special needs trust gets complicated.

Why a SECURE SNT Can Save in Taxes

But in light of the SECURE Act’s new rules, this advice may no longer apply, especially in the case of people with larger retirement plan accounts. Under the terms of the SECURE Act, most people who inherit retirement plans now must withdraw all the funds, and pay income taxes on them, within 10 years of inheriting them. One of several exceptions to this rule is recipients who are disabled. They can withdraw the funds over their life expectancies, which can be several decades, both postponing tax payments and potentially paying at lower rates for two reasons.

First, by spreading out the withdrawals over many years, the withdrawn funds are less likely to push the recipient into a higher tax bracket. Second, a beneficiary with a disability is likely to be in a lower tax bracket in the first place than a non-disabled beneficiary.

Happily, the new law states that the retirement plan owner can designate a SNT as the beneficiary, and the trustee can use the required minimum

distributions to pay for the care and support of the person with special needs. Leaving an IRA to a special needs trust is now a viable option.

For these reasons, it may well make more sense for some people to have some or all of their retirement plans payable to a special needs trust for their children or grandchildren with special needs, including leaving an IRA to a special needs trust. It’s still more complicated to make use of a trust, but now the benefits of doing so are more likely to justify the added expense and complications. Whether it makes sense in your case depends on your exact situation.

Review Your Existing SNT

You should also be aware that if you have an existing special needs trust that was designed to accept retirement plan benefits, it needs to be updated to conform with the SECURE Act. Whether you have questions about your existing plan or would like to consider creating a SECURE special needs trust, contact your special needs planning attorneys at Elville and Associates. Through their educational approach to planning, they’ll counsel you on the best approach for you and offer peace of mind along the way. You can also reach out to the firm’s Legal Administrator, Mary Guay Kramer, at mary@elvilleassociates.com or at 443-741-3635, and she’ll gladly work with you to set a convenient time to meet with one of our attorneys to discuss your planning needs.

 

#elvilleeducation

At the outset, you should understand that my purpose here is to alert clients, professional advisors, and others that the following information should be given credence and thoughtful consideration for the protection of assets, inheritances, and your general legacy, all of which may now be considered to be under attack (for all practical purposes) in 2021. Let’s begin with the following alert: the long-awaited Biden Administration legislative discussion about tax increases has begun. How do we know this? Because what was up until now only speculation throughout the 2020 presidential campaign, then further suggested in President Biden’s Green Book, now continues to take form and substance. On March 25, 2021, the “For the 99.5% Act” was introduced by Senator Bernie Sanders. Then, on March 29, 2021, the Van Hollen “Sensible Taxation and Equity Promotion (STEP) Act” was introduced by Senator Chris Van Hollen, Senator Sheldon Whitehouse, Senator Elizabeth Warren, and Senator Sanders. Then, on April 28, 2021, President Biden’s “American Families Plan”, was released by the White House. The 99.5% Act, as I will refer to it throughout the remainder of this Article, was co-sponsored by other prominent Senators, and according to Forbes, the bill is slated to be introduced into the House of Representatives (Forbes Magazine, Alan Gassman, Senate Estate and Gift Tax Bill Will Reduce Exemption to $3,500,000 And take Away Many Opportunities, March 27, 2021). The proposed 99.5% Act, in my view, represents the beginning of the real discussion, and is potentially the most impactful. Among many things being proposed (collectively) in these three Act proposals are the following: a reduction in the federal estate tax exemption to $3.5 million per person ($7 million for a married couple), but indexed for inflation and with no loss of “portability”; a reduction in the federal gift tax exemption to $1 million per person, but not indexed for inflation (it should be noted that if the federal estate tax exemption is decreased to this level, it is reasonable to think that the Maryland estate tax exemption will surely decrease as well, possibly to $1 million); progressive rate increases for the estate tax to 45%-65% (from the current 40%); capital gains tax increases – no stepped up basis at death for property owned by certain grantor trusts, and there are at least four (4) ideas being floated about potential changes/limitations in how capital gains are treated, including switching to a Canadian system-type approach where all capital gains are paid upon death (no cost basis adjustment), a system where capital gains are “trued up” and payable each year (“market to market”), or a carry-over basis; significant limitations on valuation discounting rules; limitations on annual exclusion gifts to $10,000 per donee (!), $20,000 per donor(!), and $30,000 per year to trusts! – these types of changes, if passed into law, would, for example significantly impact the traditional funding of common life insurance trusts; effective elimination of grantor retained annuity trusts (GRATS) as a viable planning tool; Generation Skipping Tax changes that impose significant limitations on the tax effectiveness of dynastical trusts (GST exemption limited to 50 years, for example); and more. Some good news – the Van Hollen (STEP) Act would provide for a $1,000,000 exclusion from capital gains tax, deductibility of capitals gains tax against estate tax owed at death, and a $500,000 capital gains tax exclusion for a primary residence – but with the downside that STEP would be retroactive to January 1, 2021! The American Families Plan would provide for a $2,500,000 exclusion from capital gains tax for a couple, bring back the SALT deduction, and leave the current $11.7 million per person (indexed for inflation) ($23.4 million per couple) basic exclusion amounts from estate and gift tax as is (at least for now at this stage in the discussions), but would otherwise increase the top income tax rate on individuals back to 39.6%, increase corporate tax rates from 21% to 28%, increase capital gains rates to 39.6% plus the 3.8% net investment income tax (combined 43.4%), or higher; and limit annual exclusion gifts in similar ways to the other proposals. But we simply do not know the outcome and what the compromises will ultimately be. The proposed tax changes in the 99.5% Act, STEP Act, and American Families Plan will have far reaching impacts on a substantial number of Americans for their estate and tax planning. Because the real discussion has begun, the question appears to be when and not if significant tax increases will occur. The real question is whether you (clients, professional advisors, and others) will be ready. Initial indications are that the coming six (6) months remaining in 2021 represent the ticking clock of time remaining to anticipate and prepare for these changes, subject to the retroactive provisions of the STEP Act and other potentially retroactive laws. Yes, let me repeat that. Political and economic indicators, a general consensus among many in the legal community (the estate planning community), and the effective dates set forth in these Acts (most are January 1, 2022) suggest that while there are no clear answers as to when such potential changes to the tax laws may or will occur, it is more likely than not that major changes in the laws will occur, and for those who have not already proactively engaged in advance planning, the remaining months of 2021 may be the last chance to do so.

So what does being proactive mean right now and what should clients (along with their professional advisors), and others do? Here is a brief checklist: As soon as possible:

(1) Contact your estate planning attorney, CPA, and financial advisor (your advisory planning team) to begin a discussion of the impacts of this possible legislation on your estate planning and tax planning. This discussion should include the very serious question of “how can we be assured that the advisory planning team you have assembled are working together in an organized and collaborative fashion?”;

(2) Review all advanced planning strategies for implementation in 2021 well before the proposed effective dates of these various Act proposals or other similar legislation (proposed effective dates mainly reference January 1, 2022, but some proposed legislation is slated to become effective January 1, 2021), including:

1. Educate yourself about the potential use of the current (large) temporary estate and gift tax exemption amounts before they go away (i.e. review gifting strategies – such as potentially making large gifts prior to 1/1/2022). This discussion should include understanding how gifting works in this context, and that only “larger gifts” will succeed in using the “temporary” exemption amounts, along with the possibility of “retroactivity” and how to protect against the possibility that any changes to the estate tax exemptions could be made effective retroactively to a date prior to any such gift(s);
2. Project future estate values;
3. Explore accelerating the implementation of grantor trusts in 2021;
4. Organize and potentially use annual exclusion gifts in 2021;
5. Plan for the possible end of the step-up in basis;
6. Understand all capital gains issues and how you could be affected;
7. Gain a working knowledge of the concept of “Portability” and how the Deceased Spouse’s Unused Exemption Amount (DSUE) is utilized;
8. Consider capturing valuation discounts in 2021;
9. Contemplate potentially paying estate tax for gifts prior to 2022;
10. Analyze the possibility of harvesting capital gains in 2021; and …
11. Grasp the many other proposed income tax, estate tax, gift tax, and GST tax changes being proposed by working closely with your Advisory Team.

(3) Review all basic planning considerations for implementation before (or as soon as possible after) the proposed effective dates of the possible legislation (proposed effective dates mainly reference January 1, 2022, but some proposed legislation is slated to become effective January 1, 2021). In closing, there are many flashing red lights and cautionary yellow lights in our lives, and oftentimes fewer green lights or completely clear paths for us to choose and follow. And certainly the state of political, civil, and cultural unrest in our country over the past few years has left many with more questions than answers.

But our job and commitment at Elville and Associates is to keep our clients, professional referral partners, and the community at large informed about changes in federal and state law affecting estate planning, elder law-related planning, and special needs planning. Along these lines therefore, the advice of this writer is to view the potential ramifications of the For the 99.5% Act, the Van Hollen STEP Act, and the American Families Plan and any similar proposed legislation that may arise in 2021, for what it is – a bright white light coming towards us in a straight line, seemingly from a fairly long distance away, but with a strangely familiar sound – a sound that as it gets closer begins to roar, reverberate, and shake the earth, as the shape of a locomotive comes into view. Our job and yours, is to be ready when this train arrives, and to not be left behind after the Biden-era tax law change caboose rolls past us and into the distance. I’ll leave it to your imagination about who the conductor will be.

 

Stephen R. Elville, Managing Principal and Lead Attorney of Elville and Associates, P.C., an estate planning, elder law, and special needs planning firm with locations throughout Maryland, works with individuals and families to provide a unique attorney-client experience and peace of mind through a proactive and collaborative approach based on leading edge legal-technical knowledge. Mr. Elville has extensive experience in working with clients involved in crisis situations and brings a unique and personalized approach to pre-crisis planning. Mr. Elville routinely handles client matters in elder law, estate planning, special needs planning, tax planning, guardianship, asset protection, estate and trust administration, fiduciary representation, and more. Mr. Elville may be reached at steve@elvilleassociates.com, or 443-393-7696 x108.