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As estates and trusts attorneys, we often hear similar questions and misconceptions about what the estate planning process actually entails. Prospects and new clients will ask questions like, “Do I have enough assets to qualify for an estate?” Or “I thought estate planning was something only the ultra-wealthy do.” And the most common of the bunch, “I already have a last will and testament. Is that not enough?”
The estate planning process is simultaneously simpler and more complex than many are led to believe. If you are new to estate planning, you may have some incorrect ideas in your head about what to expect.
The Word “Estate” May Not Mean What You Think It Means
Culturally, the word “estate” has become synonymous with fancy cars, mansions, and large investment portfolios. Part of the confusion may be attributed to the multiple definitions of the word “estate.”
Aside from being a word we use to define large areas of land, the common law definition of the word “estate” refers to the total of a person’s assets. Estate planning involves the inventory of your collective assets—regardless of your total net worth.
So, whether you own an expensive beachside property, or an old RV you use to camp out across the country, either count toward being part of your overall estate. Another reason estate planning has become so closely associated with vast wealth can be attributed to the nature of estate taxes. Currently, the federal estate tax applies only to estates valued at more than $11.7 million. The Maryland estate tax applies only to estates valued at more than $5 million.
Keep in mind that most Americans are exempt from federal and state estate taxes, so even if your total net worth is below the amount necessary for the IRS to take notice, your estate still requires careful planning and consideration prior to your passing.
Your Total Number of Assets May Be Greater than You Realize
Some clients are surprised to find that their list of assets is more complex than they imagined. Your total list of assets includes items such as real estate holdings, vehicles, and personal collectibles, as well as intangible assets such as bank accounts, insurance policies, online accounts, and stocks. Viewing your complete and comprehensive inventory often reinforces the notion that your estate plan should be updated regularly.
Regardless of whether your list of assets is larger or smaller than you expected, an estate plan is crucial to ensure that everything you currently own is passed on to the right people after you pass away.
Estate Planning Goes Well Beyond Your Last Will and Testament
Your last will and testament sets forth guidelines for how you would like your assets to be distributed after you pass, but it does not account for everything your family and beneficiaries would need should you become ill or incapacitated.
In addition to asset distribution, a comprehensive estate plan will help settle:
- Who the executor (“Personal Representative”) of your estate is
- Who will act as your financial agent
- Who will act as your healthcare proxy
- The terms and the beneficiaries of any trust you decide to create
Do Not Hesitate to Get Started
The early stages of the estate planning process may feel intimidating. An experienced estate planning attorney will be able to walk you through the steps in a clear and thoughtful way.
At Sessa & Dorsey, we consider the bigger picture at hand and advise our clients on the best trusts for their specific needs and desires. If you have questions about estates and trusts, please contact us at (443) 589-5600.
Related blog posts:
Estate Planning 101: What is an Estate Plan and Why Do I Need One?
What Happens If I Die Without a Will in Maryland?
When Should I Update My Estate Plan?
How the Probate Process Works in Maryland