A will is the most basic and important estate planning document. It controls how certain assets in your estate are distributed and makes sure that you, not a judge, will determine who will administer your estate. If you do not have a will your assets may be distributed as required by the law in your State. This often means that your spouse may not receive all of your distributable assets or, in the case of a second marriage, your children may receive much less than you would otherwise desire!

If both parents of a child are deceased, it is usually the case, with minor exceptions, that a minor child (under 18 years of age) may not hold title to property or make personal decisions regarding their care. In your will, you need to name a guardian who will be the person or persons that will care for your child in the event of your death. Usually, the guardian is als0 the person who manages your children's assets, however this does not have to be the case. The management of a minor's assets may be accomplished under the Uniform Transfers to Minors Act or a trust established under your will.

What Is A Trust?

A trust is created by a written agreement between the individual creating the trust (known as a "grantor") and the person or institution (known as the "trustee") the grantor gives the right to manage and control the property placed in the trust. The trust document provides:

• The trustee the legal right to manage and control property
• Identifies the persons or institutions ("beneficiaries") who will receive income or principal
• Guides the trustee in the management and distribution of the trust property

The trustee must be someone in whom the grantor has trust and confidence. Without the grantor's express written permission, the trustee cannot use the assets in the trust for personal benefit, but may only act in the interests of the designated beneficiaries of the trust.

Many types of trusts are used. They include:

• Revocable trusts
• Life insurance trusts
• Charitable trusts
• Trusts for minor children and disabled adults

What Is A Revocable Inter Vivos (or "Living Trust")

A revocable living trust is a written document that is established with you as the grantor of the trust and usually with you as the trustee of the trust as well. This type of trust serves two purposes:

• It contains your instructions for the management of assets if you become disabled
• Avoid probate. Although it gives your instructions for distribution of assets after death, you will also need a will known as a "pourover" will. The name of this type of will comes from the fact that any assets that go through the probate process "pour into" the trust after death.

If the purpose of avoiding probate is to be met, after the trust is created, it is VERY IMPORTANT to change the title to your assets into the name of the trust or the work which has gone into establishing the trust is wasted. Some individuals can take care of most of the changes of title without an attorney. Real property is transferred into the trust by a deed. In Maryland , the deed must be prepared under the supervision of an attorney licensed to practice law in Maryland .

A revocable trust will not affect your income taxes as long as you remain the trustee of your own trust. However, if you beome unable to act as your own trustee, and another person occupies that position, the trust must obtain its own version of a social security number, called a "tax identification number" and file a seperate tax return. The income you receive from the trust must be reported on a Form K-1 which is reported on your personal tax return. Furthermore, contrary to a widely held misconception, you will not save estate taxes with a revocable trust!

A revokable living trust has both advantages and disadvantages. Some of the advantages are:

• Assets do not go through probate and can be distributed more quickly and with less cost than probate
• A trust helps to keep your affairs more private than with a will
• It may make it more difficult for someone to challenge the disposition of your estate
• If you own real property in more than one state you may avoid probate proceedings in each state
• Continued management of your estate by the person of your choice, on your terms, without court intervention

Some of the disadvantages are as follows:

• Sometimes probate is desirable to avoid long term exposure to creditors
• Costs to create a trust are more than a will
• Placing your assets in a trust requires your time and/or the assistance of counsel and some assets are difficult to transfer
• If you transfer your residence to the trust it may make refinancing more difficult
• Potential abuse, mismanagement and/or fraud by the trustee which will be more difficult to detect due to the private nature of a trust, including the failure to distribute assets after the grantors death due to lack of knowledge by the beneficiaries
• Some assets are not well suited to being transferred to a living trust

What Is Probate?

Probate is the legal process during which the court supervises the distribution of assets following an individual's death (the "decedent"). By this process legal title to the decedent's property is passed to the "heirs" if there is no will or to the "legatees" if there is a will. This process also insures that the decedent's oustanding debts, taxes and estate taxes will be paid.

Property that does not pass through probate includes property owned as

• Joint tenant with right of survivorship
• Tenancy by the entirety (for married individuals only)
• Assets in the name of a revocable trust
• Life insurance and annuities
• Retirement accounts and accounts set up as payable-on-death which are payable only to a named beneficiary

The probate process takes place in the State and County where the decedent was domiciled - had their permanent residence. In both Maryland and the District of Columbia the Register of Wills Office in the courthouse oversees the administration of the probate proceedings. If property is owned in another state then an "ancillary administration" in the second state will be necessary.

The "Personal Representative" is responsible for administration of the estate. This person will be designated by the decedent's will (and usually approved by the Court), and if there is no will, be chosen by the Court. The Personal Representative will be required to do many things including (often with the assistance of an attorney):

• Identify, collect and inventory the assets of the decedent
• File a notice to creditors (people who the decedent may owe money) in newspapers of general circulation for several weeks
• File a Petition For Probate
• Set up an estate account to receive any payments due the estate
• Pay funeral bills, outstanding debts, valid claims, and costs of administering the estate
• File insurance claims and notify various parties of the decedent's death
• Insuring that the decedent's income and estate taxes, if any are paid.
• Prepare a final accouning

If the decedent dies with a will, once the adminsitration period is over, the remaining assets of the estate will be distributed to the persons named in the will and a final acounting is prepared for approval by the court. If there is no will then the remaining assets are distributed according to the laws of the decedent's domicile

There are occasions where the it is possible to simplify the probate process. However, the laws differ based on the jurisdiction where the estate must be filed. We stand ready to advise and assist you should you have any questions.