Estate planning isn’t just for the wealthy. In this conversation, Parker G. Trasborg and estate planning attorney, Adam S. Abramowitz, explain why everyone needs a plan. Learn the difference between wills and trusts, key documents to have, how state taxes differ in Virginia, Maryland, and D.C., and the importance of guardianship for young children.
Introduction
Parker G. Trasborg:
Hello, my name is Parker Trasborg. I’m a Senior Vice President with CJM Wealth Advisers. Today I’m talking with Adam Abramowitz, a partner and estate planning attorney at Fisher Broyles to clear up some common questions people have about estate planning. Adam, thank you so much again for joining me.
Estate Planning Basics: Do You Really Need It?
With the passage of the one big beautiful bill back in July. The estate tax limit stays at about $14 million for this year, but next year bumps up to $15 million and will increase with inflation out into the future. So with that high of a limit, Adam, many people probably think they don’t need estate planning. It’s really only for the wealthy. Is that true?
Adam S. Abramowitz:
So first off, thank you for having me. I appreciate the opportunity and it’s a common question you ask and one that I simply answer with. It shouldn’t change people’s discussions about needing estate planning. To me, everyone needs to have the conversation. It’s just a question of to what level do we get to things like incapacity, post death planning, procedures, protocols, all those things. They still exist. It doesn’t matter if you have $0 to your name or hundreds of millions of dollars. We all still need to have the estate planning discussion. It’s just a question of to what level we get to it.
Essential Estate Planning Documents Everyone Should Have
Parker G. Trasborg:
Yeah, that’s a great point. And I mean, when we’re talking about various types of documents, what are maybe some of the big important ones that people should have in place?
Adam S. Abramowitz:
Well, and this is why it’s important because if you think of it like a Venn diagram, which is the way I like to look at it, on your left side of the Venn diagram, you have your living documents, things like financial powers of attorney, advanced medical directives, HIPAA type release forms. On the right side, you deal with things like post death documents like a will. And then in the middle, to the extent it’s relevant or necessary, we deal with trusts that are what we call living trusts. And those kind of span both sides. And so to the point of the first question you asked of do we still need to talk about this? The answer is yes for all of these various reasons. And because all of these deal with current issues, and when we talk about permanency versus not permanency of an estate tax or any type of law, these documents still will span that gap between all of this and things can change. And so you want to have all this foundational set of documents in place,
Estate Tax Considerations in Virginia, Maryland, and D.C.
Parker G. Trasborg:
Right? It’s the law for now until Congress decides to make a change. And then I mean, the $15 million is the federal limit. Here in Virginia, we’re not really worried about a limit, but I know in Maryland and DC we maybe need to do some planning around the tax situation there, right?
Adam S. Abramowitz:
Correct. So in jurisdictions like Maryland where I’m located or the District of Columbia, we have a state level estate tax. So take Maryland for example, just for purposes of the discussion and comparing it to Virginia, Maryland has a state level estate tax of $5 million. So if you have assets in excess of that amount, you’re going to be looking at potentially having to file, if not incur an estate tax. And so unlike Virginia, where we’re just worried about planning for the federal exemption, for example, in a state like Maryland or in the District of Columbia, you’re talking about level one, a state level estate tax. And then level two, what’s in between the state level and the federal level. And then number three, what’s over and above the federal level. So you have tiers of different types of tax planning that need to go on, which certainly complicate things.
Will vs. Trust: Key Differences
Parker G. Trasborg:
So very helpful. Digging a little bit into the documents, what would you say is the biggest difference between a will and a trust and where would maybe one apply and the other apply?
Adam S. Abramowitz:
Sure. So again, take the different jurisdictions in anywhere, whether it’s Maryland, DC, Virginia, or elsewhere or all over, you’re going to have a process that individuals need to go through when they die. And that process is usually called probate. When you’re looking at the state level and someone dies, their Will will govern where their assets go. That is a court process that you need to go to. What’s usually called the registrar wills or the commissioner’s office in Virginia. And somebody needs to be appointed as an executor or personal representative. And then they go through a public process where there are different deadlines, things of that nature. By using a trust, oftentimes we call it a will substitute or some sort of alternative where we can avoid that public court process. So a couple of the highlights are avoiding the probate process between a will and a trust.
Transitioning to a trust will get you there for the most part is what we’re looking to do. And number two, one of the big highlights is privacy. When you’re doing a trust administration, it’s typically a private process versus a will where documents are public record. People can find out what your assets are, who’s getting what, again, depending on the jurisdiction of what they can get access to, but it’s usually public. Now, one of the things to keep in mind is so many of us nowadays hear about I need a trust. I need a trust. And usually the first question we get is, why do I need a trust? Or people come in saying, I need to have a trust. Please draft a trust for me. And oftentimes we have to look at, well, what are the goals to accomplish, right? Because we can’t just draft a document and have it automatically do everything that we’re talking about.
And so oftentimes what people need to look at is not just the difference between what a will does and what a trust does, but does trust make sense? And so you need to make sure that there are different assets and things of that nature to fund the trust with in order for it to function the way you want it to. And that can come by way of ownership or beneficiary designation, which certainly we can go into all the different complexities, but that’s some of the highlights of the differences. And I will say, just to kind of come full circle, when you do a trust plan, you’re going to have a will because you need a catchall just in case something doesn’t get into the trust. But you’re not always going to have a trust when you have will.
Estate Planning for Parents with Young Children
Parker G. Trasborg:
So important to have various documents done. And it’s not only just for people that are maybe approaching the end of their life, people like you, people like me with young kids, what are maybe some of the most important things that we should think about and have in place?
Adam S. Abramowitz:
Sure. And one of the things when I went through the Venn diagram example that you didn’t hear was necessarily talking about guardianship, which is one of the most important pieces for our contemporaries and for a lot of folks that have young kids. And so there are a lot of mechanisms that deal with guardianship to in particular are nominating a guardian under a will in case something were to happen post death. There’s a nomination of who you would want to be the guardian. And number two, often in various jurisdictions, there are forms called standby guardian forms to put in place a temporary guardian in the event of incapacity or in the event of a death. And in between the timeframe of the triggering event and when a court actually appoints someone. And the factors that you need to think about are who do you trust? This is a big decision.
Who do you want your kids to potentially go live with? What’s their geographic location? What are their parenting philosophies? What are their financial philosophies? And all of those different factors that you’re looking at. I think with all this stuff too, you have to think about all of this can change over time. What you say today is not necessarily going to be what you want to have happen a week from now, three months from now, five years from now. So if I have little children that could change two years from now, maybe I want my parents today, but they can’t change my kids around in the future, so I’m going to change that. So I think that’s important. I think that I like to focus on the lifetime planning for folks like us that are younger things like power of attorney, medical directive. If something happens and you need somebody to pay your bills or run your day-to-day operations, you have to have the right documents in place for someone to literally pick up and do everything that you’re doing.
And if it’s someone who is young, this could be a 30, 40, 50 year process that takes the place of an adult guardianship. And so oftentimes it’s looked at as this doom and gloom post death planning, I don’t want to talk about it. Why do I have to address this? But there are so many lifetime components to this that are important, whether you have minor children or whether you’re older and are looking at making sure that there’s someone there on a daily basis to be able to stand in for you and do what you need to do.
Final Thoughts and Next Steps
Parker G. Trasborg:
Yeah, certainly a lot to cover. And we only just scratched the surface today, and that is about all the time we have. And I know it gets a little bit more, but a little bit depressing. Adam deals with this on a daily basis so he can keep a nice level head and be very cheerful as he’s kind of helping guide people through this. Adam, thank you again so much for joining me today. I think, again, very helpful information for everyone across the spectrum. If you’d like to learn some more about estate planning, please reach out to your planner directly and we can help provide some guidance on your specific circumstance and get you in touch with an estate planning attorney to be able to help you out, whether that’s Adam or someone in another form, or at least a couple of different options to be able to choose from. Again, thank you all so much for viewing the video and we will see you next time. Thank you.
Adam’s Biography: https://fisherbroyles.com/people/adam-s-abramowitz/
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