Top 10 Estate Planning Misconceptions

1. Top 10 Estate Planning Misconceptions Law Office of JANE FRANKEL SIMS LLC Estates & Trusts

2. Introduction What is Estate Planning? Creation and Preservation of Wealthand Distribution to Heirs and Charities

3. TOP 10 ESTATE PLANNING MISCONCEPTIONS 1.We own everything jointly, so we don’t need an estate plan. 2. All of my property will be distributed based on the terms of my will. 3. There’s no downside to adding a joint owner to my bank account and the deed to my house. 4. The beneficiary designations on my retirement accounts don’t matter as long as I have a will. 5. Only millionaires have estate issues. 6. Life insurance proceeds and retirement account assets are not taxed at death. 7. I’m too young to worry about estate planning. 8. I can download a perfectly good will from the internet. 9. Probate is an awful process that should be avoided at all costs. 10. Revocable living trusts help minimize estate tax.

4. 1. We own everything jointly, so we don’t need an estate plan.2. All of my property will be distributed based on the terms of my will. TITLES TRUMP WILLS: Your home represents most of your net worth and is titled jointly WROS with your second wife Your Will says “I give all of my assets to my children.” Result: everything goes to second wife

5. How Property Transfers ●Property Titling ● Beneficiary Designations ● Wills ● Trusts ● Gifts

6. 3. There’s no downside to adding a joint owner to my bank account and the deed to my house. The story of the dependable child and her forgotten siblings The gift and capital gains tax trap that the helpful title attorney didn’t mention

7. 4. The beneficiary designations on my retirement accounts don’t matter as long as I have a will. BENEFICIARY DESIGNATIONS TRUMP WILLS TOO ●Pay careful attention to the beneficiaries you designate on your retirement plan assets and life insurance policies. ● Now that you have children, you may not want those assets to benefit your sister and brother (or your ex-spouse). ● Certain designations have adverse income tax consequences.

8. 5. Only millionaires have estate issues.6. Life insurance proceeds and retirement account assets are not taxed at death. ●You can pass $1 million free of estate tax in Maryland ●HOWEVER the value of your home, the proceeds of your life insurancepolicies and your retirement plan assetscount towards that $1 million

9. The following assets are subject to estate tax: •Equity in your home • Life insurance proceeds • IRA/401k accounts • Bank/brokerage accounts • Closely held businesses • Tangible personal property

10. Estate Taxes •Tax, and tax again • Spousal exemption • Estate Tax Repeal – not likely and not in Maryland

11. Federal Estate Tax Exemptions and Rates

12. Maryland: An Additional Layer of Estate Tax

13. 7. I’m too young to worry about estate planning. •Wills aren’t just for old people (i.e., appointment of guardians of minor children). • Everyone needs Powers of Attorney/Living Wills (remember Terri Schaivo).

14. Powersof Attorney Durable Financial Power of Attorney Advance Directive • Appointment of Health Care Agent •Living Will •General •Limited

15. 8. I can download a perfectly good will from the internet. “Why should I pay a lawyer?” Having your brother-in-law, a personal injury lawyer, draft your will is not a good idea due to the complexity of the estate tax and inheritance laws. Internet will programs do not address state-specific laws, detailed succession planning, family dynamics or practical considerations.

16. 9. Probate is an awful process that should be avoided at all costs.10. Revocable living trusts help minimize estate tax. Revocable Living Trusts What are they? How do they work? Myths about them REVOCABLE LIVING TRUSTS DO NOT AVOID ESTATE TAX

17. ESTATEPLANNING TOOLS •Title Property Properly • Make Gifts – $13,000 per beneficiary per year ($26,000 if donor is married) • Update Beneficiary Designations • Execute Wills • Create Trusts Grantor Trustee Beneficiary Intervivos/Testamentary

18. Bypass and DisclaimerTrusts & Wills •Don’t just leave it all to your spouse •Permit Segregation of Portion of Estate for Next Generation in order to Minimize Estate Tax •Automatic Creation of Credit Shelter Trust or Discretionary Creation of Disclaimer Trust

19. Life Insurance Trusts •Many people own large term life insurance policies •Life insurance is subject to estate tax (but does not go through probate) •Benefits of a Life Insurance Trust •Proper administration of a Life Insurance Trust

20. G Still Having Estate Tax Issues? Family LLCs Generation-Skipping Trusts Charitable Trusts

21. The Estate Planning Process •Complete Estate Planning Questionnaire • Initial meeting with attorney • Draft estate planning documents • Review and revise drafts • Update titles and beneficiary designations • Final meeting with attorney to sign documents • Review and update estate plan every 3-5 years • Cost – Flat Fee

22. Questions and Answers Jane Frankel Sims, Esquire Law Office of Jane Frankel Sims, LLC Bare Hills Corporate Center 1425 Clarkview Road, Suite 840 Baltimore, Maryland 21209 410.828.7775 p. 410.828.7779 f. jsims@janesimslaw.com