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If asked the question “what is estate planning?”, many would struggle to answer confidently and correctly. Too many people mistakenly believe that estate planning is only for the wealthy. In reality, an estate plan is an important financial document that everyone should have, no matter how many assets they currently own. To better understand why this is the case, it’s important to understand the basics of estate planning.

 

What is an estate?

In layman’s terms, an estate is all the real and personal property owned by an individual. An estate can include the following: bank accounts, investment accounts, stocks and bonds, patent and trademark rights, copyrights, business interest, automobiles, jewelry and clothing, household fixtures, and real estate. But an estate is more than everything you own; an estate also includes everything you owe. Your estate will need to satisfy payments to potentials creditors before beneficiaries receive assets from your estate.

 

What is estate planning?

Estate planning is the process of creating a plan in advance and naming who you want to receive the things you own after you die. Believe it or not, everyone has an estate plan in place even if you have never proactively created one. This estate plan is commonly known as the “State Intestacy Laws.” Or as we like to call it here at McDonald Law Firm, the “Annapolis Plan.” If you’re a resident of the State of Maryland, and you die without creating a formal estate plan (Will or Living Trust), your assets, held solely in your name and without a beneficiary designation, will be distributed according to the intestacy laws of the State of Maryland. However, an excellent estate plan is much more than naming who you want to receive the things you own after your death. It should also include, instruction for your care if you become disable, name a guardian for minor children, plan for family members with special needs without disrupting government benefits, minimize taxes, court cost and legal fees; provide for creditor protection for beneficiaries, and be an ongoing process, not a one-time event. Your plan should be reviewed and updated as your family and financial situations (and laws) change over your lifetime.

 

What makes up an estate plan?

At McDonald Law Firm, we believe that an estate plan could either be a Will base plan or a Trust base plan. Choosing whether a Will base plan or Trust base plan is best for you will depend on individual circumstances. Nevertheless, we think that the following should be included in an estate plan:

 

Will Base Plan (Essential Estate Plan™)

Last Will and Testament

Power of Attorney

Health Care Power of Attorney

Living Will

HIPAA Authorization

 

Trust Base Plan (Enhanced Estate Plan™)

Revocable Living Trust

Pour-Over Will

Power of Attorney

Health Care Power of Attorney

Living Will

HIPAA Authorization

 

For more information, check out the following Estate Planning Guides:


DISCLAIMER: THE INFORMATION PROVIDED IN THIS GUIDE IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND IS NOT INTENDED TO CONVEY LEGAL OR TAX ADVICE.

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For help with estate planning, special needs planning, elder law or business planning needs throughout Howard, Montgomery, Prince George’s, Anne Arundel, and Baltimore County; and Baltimore City, contact McDonald Law Firm, LLC.

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