Welcome to your first e-Newsletter. Our new e-Newsletter provides us with an exciting way to communicate insightful articles, industry specific news, and developments within our firm. We are confident the articles and announcements included in our e-Newsletter will become a valuable and respected source of information for you.

In this Issue

• Think You Don’t Have A Will? You do! The bad news is that seven out of ten Americans don’t have any real plan for the distribution of their belongings or the guardianship of their minor children when they die.
• Hiring Summer Help? Tax Breaks and Rules to Keep in Mind Summer is here and that means many employers are hiring high school and college students for seasonal positions or internships.
• Learn the Basics of Medicare Older Americans are generally eligible for Medicare to help cover medical expenses.
• Are Wills for Everyone? Many people believe, for various reasons, that they do not need a will. But how valid are the more common reasons for not preparing a will?

Read the Full Issue »

Finally, giving while alive may also serve important estate planning goals by reducing your gross taxable estate and shifting future appreciation and income to the recipient (usually in a lower tax bracket).

In some circumstances, however, lifetime gifting may offer some disadvantages. You will lose control over the gift once given – an important consideration in the passing of family business. The gift may also reduce the recipient’s ambition and industriousness. Some donors fear loss of personal attention from the recipient and feel that the threat of recision increases the incentive to visit. In extreme cases, excessive gifting may cause a reduction in estate liquidity, even leaving insufficient funds to pay estate taxes.

Defined as a voluntary transfer of an interest in property for little or no value, your gift must be intentional and the recipient must be aware of it. Your gift is only complete when you give up all rights to rescind it and surrender dominion and control, and there should be either physical or symbolic delivery (as in a stock certificate or deed to property). Also, the interest in the property must be in the present and not a future or contingent interest.

Currently, spousal gifts qualify for an unlimited marital deduction (assuming citizenship). Additionally, the annual exclusion was increased this year, meaning you can give up to

$12,000 each to an unlimited number of recipients. A married couple can give up to $24,000 as long both spouses consent (requiring a IRS form 709). Be careful, however, when giving a $12,000 gift as any additional gifts (including birthday and Christmas presents, dinners, etc.) will be taxable to the donor. In addition to the $12,000 per year, you may give up to $1 million away tax free – any gift tax due can be applied against this amount. There is also a unlimited charitable gift deduction to qualified charities. In addition to removing assets from your estate, you may gain a current year income tax deduction. And if you are considering giving money to another for paying either medical costs or tuition -reconsider. Unlimited medical and educational exemptions mean tuition payments (but not room, board, or living expenses) made directly to educational institution or medical treatments paid directly to provider (including health insurance payments) are tax exempt. So, not only can you not take it with you, but there are many excellent reasons to give it away before you leave! This information is general information only and not legal opinion or advice, nor a complete discussion of estate planning issues. This refers to Maryland law – your state’s provisions may differ. Seek independent legal advice from an attorney for specific information. Tax advice is not intended and cannot be used for the purpose of avoiding penalties imposed under the Internal Revenue Code or by any other applicable tax authority or promoting, marketing or recommending to another party any tax-related matter. Charles R. Stewart is an attorney in Hagerstown practicing exclusively in wills, trusts, and estate planning. Please send questions to PN@LawOfficeStewart.com or visit www.LawOfficeStewart.com.

FICTION: The estate tax takes half your estate FACT: The estate tax currently only applies to 0.5% of estates and this will drop to 0.3% when the $2 million exemption rises to $3.5 million in 2009. For the few that actually pay, the average effective tax rate is only 20%.

FICTION: Repealing the estate tax will lower your overall taxes FACT: Permanently repealing the estate tax will cost about $1 trillion in 10 years starting 2012. As Bill Gates (himself an estate tax proponent) explains, “If that money is not there, then the funds are going to have to be raised in some other form.” According to Alan Greenspan, this shortfall must be made up by increasing middleclass taxes, reducing government services, or further increasing our record deficits.

FICTION: Many farms and small business will be forced to liquidate to pay the estate tax FACT: The American Farm Bureau Federation could not show a single farm being sold to pay estate taxes in a recent New York Times interview. Special exceptions allow small businesses and farms to write-down their value for estate tax purposes, and the few that owe at all can pay over 14 years at special interest rates. The Congressional Budget Office confirms very few businesses face this issue at all (http://tinyurl.com/ydjbtn).

FICTION: The estate tax is a death tax FACT: The estate tax taxes vast accumulations of inherited – not earned – wealth. Instituted in 1916 in response to accumulation of great wealth in the hands of a few robber barons and tycoons, it attempted to limit the concentration of America’s wealth in the hands of the few.

FICTION: The estate tax discourages productivity FACT: Inheriting immense wealth removes incentive to contribute to society through work. A fair estate tax actually supports the American dream that hard work, determination, and talent will determine success rather than the family into which you were born.

FICTION: The estate tax is “double taxation” FACT: “The bulk of assets in taxable estates are appreciated stocks and assets that have never been taxed,” Bill Gates explains. “It’s the opposite of double taxation.” Stocks, artwork, real estate and other highly appreciated inherited assets are taxed only upon inheritance.

FICTION: Repealing the estate tax would leave more wealth for charitable giving FACT: Repealing the estate tax leaves little or no financial incentive for charitable bequests. The estate tax encourages the super-wealthy to contribute tens of billions to charity each year. Already, the increasing exemption has significantly decreased charitable bequests resulting in increased need for government services.

The percentage of the American public supporting estate tax repeal is surprising considering this benefits only the top one percent. This important revenue source and social program needs to be re-evaluated in light of the facts.

Disclaimer: This general information is neither legal opinion or advice, nor a complete estate planning discussion, and refers to Maryland law -your state’s law may differ. As each situation is different, you should seek independent legal advice from an attorney for specific information. Charles R. Stewart is an attorney in Hagerstown practicing exclusively in wills, trusts, and estate planning. Please send questions to PN@LawOfficeStewart.com or visit www.LawOfficeStewart.com.

Living or revocable trusts may be beneficial. A trust can help avoid multiple probate proceedings for properties owned in multiple states. They can be a useful tool if your financial holdings are large and complicated, and can be used to pass a farm or family business to the next generation. And a trust may prevent a will contest. Much of the time, however, living trusts mainly benefit those selling them.

Q. – Do living trusts really reduce taxes? Absolutely not! During life, trust assets and income are taxed as your own. Likewise, after death, trust assets are considered estate assets for federal estate tax purposes. Ordinary tax strategies such as charitable deductions, unified tax credits, and bypass trusts can all be included in a will. Additionally, trusts can actually accelerate Maryland inheritance taxes.

Q. – Can I avoid probate with a living trust? Probably not. Since assets not transferred into the trust must pass through probate, a will is still advised. And probate avoidance is overrated. Recent changes streamlined and simplified procedures, and probate fees do not consume a significant portion of the estate. For example, probate fees for a quarter to a half million dollar estate is only $500 – not exactly worth spending thousands of dollars to avoid! And probate offers advantages a trust does not including court supervision, notice to beneficiaries, and an opportunity for beneficiary participation.

Q. – Must a living trust be used to manage affairs and avoid guardianship? A properly drafted power of attorney is usually far less expensive and more efficient than a living trust, and can be used to manage more than just assets.

Q. – Does a living trust save time and money? Living trust costs are often not justified by potential future savings. The same money in a prudent long term investment would likely more than cover probate and administrative costs. Often, after spending thousands of dollars on a living trust, an individual will fail to transfer all assets and will still have the estate probated. Having trust-titled assets may make matters more difficult during life. And while a will is relatively easy to change through a codicil, a living trust is much more difficult and expensive to modify.

Q. – Does a living trust avoid creditors? No. During life, living trust assets are subject to creditor claims. After death, language protecting a beneficiary from creditors can just as easily be included in a will. Additionally, probate limits creditor claims to six months while a trust is generally subject to a three year statute of limitations.

While living trusts may be useful in certain limited situations, in most cases the cost and burden of transferring all property into it outweigh future theoretical savings. Before committing all your assets to a living trust, make sure you have all the facts and are dealing with a qualified professional.

Disclaimer: This general information is neither legal opinion or advice, nor a complete estate planning discussion, and refers to Maryland law -your state’s may differ. Please seek independent legal advice from an attorney for specific information.

Charles R. Stewart is an attorney in Hagerstown practicing wills, trusts, and estate planning. P l e a s e s e n d q u e s t i o n s t o PN@LawOfficeStewart.com or visit www.LawOfficeStewart.com.

529 plans can be excellent estate planning components to provide for your child or grandchild while removing taxable estate assets. Every year, you can transfer up to $12,000 per person or $24,000 per couple for each recipient without any federal tax consequences. Additionally, 529 gifting shifts future asset appreciation from taxable to tax-free status.

There are two types of 529 plans – prepaid and investment. Prepaid plans allow the owner to pay tuition years in advance and lock in tomorrow’s tuition at today’s prices. Issued either by the state or educational institution, plan performance is based on educational costs – rising tuition results in a better deal. Stateissued savings plans invest the money in specific investment portfolios, similar to many retirement accounts. Some plans even allow the investment mix to become more conservative as the student nears college age. Contributions are Maryland income tax deductible up to $2,500 per account or beneficiary, and withdrawals are free from both federal and Maryland income taxes so long as used for qualified educational expenses, allowing for tax-free growth.

Low initial payments and automatic deductions (as low as $25 per month) make these plans a convenient vehicle for college savings. Ownerretained control and the ability to change beneficiaries ensure maximum flexibility, as does the ability to use savings plan proceeds at nearly any educational institution (over 8,000 at present). Up to $250,000 can be placed into these accounts and will be protected from bankruptcy. Additionally, a special exemption allows up to five years of payments to be made up-front for increased tax-free growth.

The plans, however, are not without drawbacks. The owner can’t manage the assets directly and can only change the investment mix once a year. In addition to the fees and charges the plans incur, the savings-based plan is subject to market fluctuations. And tax advantages are minimized for those who need the benefits the most – those in lower tax brackets. The accounts may also be counted as an asset and thus affect some financial aid, in addition to government benefits such as TANF, SSI, food stamps, etc. Finally, withdrawals may be subject to a 10% penalty and income tax if not used for qualified educational purposes.

Still, 529′s should be seriously considered not just for income and estate tax advantages, but as a way to provide for the future of your family’s education. More information about these plans is available at www.CollegeSavingsMD.org.

Disclaimer: This general information is neither legal opinion or advice, nor a complete estate planning discussion, and refers to Maryland law -your state’s law may differ. As each situation is different, you should seek independent legal advice from an attorney for specific information. Tax Advice is not intended and cannot be used for the purpose of avoiding penalties imposed under the Internal Revenue Code or by any other applicable tax authority or promoting, marketing or recommending to another party any tax-related matter.

Charles R. Stewart is an attorney in Hagerstown practicing exclusively in wills, trusts, and estate planning. Please send questions to PN@LawOfficeStewart.com or visit www.LawOfficeStewart.com.

Joint ownership is the simplest planning tool as property generally passes to the joint owner outside of probate. Joint ownership may be undesirable though, as it gives present access to and ownership of the property or account, and is usually treated for tax purposes as a gift.

Payable-on-death (POD) accounts (a.k.a. totten trusts) allow the account holder to retain full ownership, use, and control of the account while alive. Upon death, the account transfers to the beneficiary(s). POD accounts are not restricted to bank accounts either – government securities, savings bonds, certain securities, stock and brokerage accounts, automobile titles, real property deeds, and other assets may all carry a POD designation. Although an excellent tool to provide for a partner while bypassing probate, the account is still the grantor’s taxable estate so potential tax issues should be considered.

Living trusts are a popular and effective method to protect assets and preserving privacy by avoiding probate. Especially important when a will contest is likely, trust assets pass outside of probate and are not easily challenged. Revocable trusts give the grantor complete control and flexibility over assets while living and provides for a partner after death outside of probate. The trust can also provide for another beneficiary after the death of the first. If drafted properly, a trust can offer protection from the beneficiary’s creditors as well. Trusts, however, may be initially expensive and useless (or worse) if assets are not actually transferred into the trust (a “dry trust”). And a trust alone is not necessarily an effective tax planning tool as it remains in the grantor’s taxable estate.

Life insurance is an often overlooked but highly useful tool as the proceeds can quickly be paid directly to someone or into a trust for their benefit. As with trusts the proceeds pass outside of probate and the policy is not subject to claims of the beneficiary’s creditors (though the proceeds may be once received). There are, of course, down sides. Family members receiving insurance proceeds may be given monetary war chests with which to challenge the will. Life insurance can be a factor in estate tax liability as the policy is part of the taxable estate (though the proceeds are not subject to Maryland inheritance taxes). The policy can be removed from the estate for tax purposes by use of an irrevocable life insurance trust (ILIT) in which the trust purchases and owns the policy and is the beneficiary, but such techniques are subject to strict IRS regulations and should only be attempted with professional assistance.

As part of an overall estate plan, these and other techniques can be used for the nearly challengeproof and tax efficient transfer of assets. With proper planning, you can leave your estate without family conflict and preserve your estate for your family and partner.

Disclaimer: This general information is neither legal opinion or advice, nor a complete estate planning discussion, and refers to Maryland law – your state’s law may differ. As each situation is different, you should seek independent legal advice from an attorney for specific information.

Charles R. Stewart is an attorney in Hagerstown practicing exclusively in wills, trusts, and estate planning. Please send questions to PN@LawOfficeStewart.com or visit www.LawOfficeStewart.com.

By default, they have no say in end-of-life decisions, or the funeral and burial of their loved one and might not be spoken of or invited to the memorial service. When the decedent’s estate is distributed, the partner may have no claim to any of the decedent’s belongings. In the appointment of an executor, even the decedent’s creditors have a higher claim to the position. And one partner’s children might be removed from the care of someone they’ve known all their lives as a parent.

Unmarried couples can still give each other quasi-marital rights through a durable power of attorney. With this powerful document, one can give another power over property, businesses, accounts, health care, legal rights, and other life aspects. The POA can be made to operate immediately for convenience or be restricted to become effective only upon incapacity.

A domestic partnership agreement, much like a prenuptial agreement, definines legal rights and responsibilities for partners in a long-term committed relationship and reflects mutual intent. In the event of a successful challenge to the will, the surviving partner can still enforce the agreement’s provisions providing for the partner as a contract right.

Married persons have the right to make health care decisions for their spouse and the ability to make end stage decisions, options unavailable to non-married couples. Without proper planning, a non-spouse may not even be allowed hospital visitation. A designation of health care agent conveys the power to make important health care decisions while a living will specifies end stage wishes in advance.

The central element of any estate plan is the will. When dealing with non-married couples, extra care and attention needs to be given to its drafting to avoid or defeat a challenge. Directives must be clear and unambiguous, with reasons explicitly stated for persons excluded. Including intended recipients for specific items of personal property may head-off conflicts. Naming the partner instead of a family member as executor may forestall difficulty as the executor may wield significant power and discretion. As the will may not be read until later, funeral and burial instructions should be re-stated in a separate document – or better yet pre-planned and pre-paid.

While the will, power of attorney, domestic partnership agreement, designation of health care agent, living will, and final instructions should form the essential framework of a nonmarried couple’s estate plan, more advanced techniques should be considered as well. In the next column, we will explore revocable trusts, pay-on-death accounts, joint ownership, life insurance and benefit designation, and other advanced planning tools.

Disclaimer: This general information is neither legal opinion or advice, nor a complete estate planning discussion, and refers to Maryland law – your state’s law may differ. As each situation is different, you should seek independent legal advice from an attorney for specific information. Charles R. Stewart is an attorney in Hagerstown practicing exclusively in wills, trusts, and estate planning. Please send questions to PN@LawOfficeStewart.com or visit www.LawOfficeStewart.com.

The effort spent on estate planning will be worth it. And consider updating an out of date will and estate plan. A comprehensive estate plan gives peace of mind to you and your family and provides a clear guidance as to your wishes in a number of areas.

Asset Allocation A primary purpose of your will is to determine who will receive each asset. Absent a will, most of your belongings will likely be sold and the proceeds distributed according to the state’s intestate provisions. The state’s asset allocation may be quite different that what you have in mind. Wouldn’t you rather assign the items so they will mean much more than just auction value?

Children Failing to designate who will raise and care for your children turns this important decision over to a stranger – the judge – who will attempt to act in the children’s best interest. After hearing testimony and considering legal priority, the judge may or may not take into account religious values and practices, current schooling, proximity to family and friends, and keeping siblings together. This may also result in a stressful and expensive legal battle by various family members. Additionally, a complete estate plan can provide for educational resources and resource management for those not able to pay for college or ready to handle significant finances.

Financial Federal and state estate tax reduction may be an issue for those with significant assets. Also, state inheritance taxes may be a consideration, especially if you plan on passing assets to someone who is not an immediate family member. As your estate becomes larger and more complicated, myriad other financial considerations come into play. And you may also find the gathering and organizing of legal, personal, tax and financial documents necessary for a complete estate plan not only helps with the estate administration, but may actually help you in the here-and-now.

Miscellaneous Goals A properly crafted estate plan tailored to your needs and desires may promote additional goals. Perhaps you wish to avoid future family conflict and ill-will. A proper plan provides cash to pay final expenses, taxes, and family living expenses awaiting for settlement of your estate. You may wish to protect a family business or farm and pass it onto a suitable heir. Regardless of your reasons and objectives, one thing is certain – now is the time to begin planning. Don’t let this resolution end up on next year’s list!

Disclaimer: This general information is neither legal opinion or advice, nor a complete estate planning discussion, and refers to Maryland law -your state’s may differ. Please seek independent legal advice from an attorney for specific information. Charles R. Stewart is an attorney in Hagerstown practicing wills, trusts, and estate planning. P l e a s e s e n d q u e s t i o n s t o PN@LawOfficeStewart.com or visit www.LawOfficeStewart.com.

1. Prepare and Execute a Will – Your will, the central and most important element of your estate plan, determines who inherits your property and serves as a guardian for your minor children (and manages their inheritance). You can also specify wishes for burial and/or cremation arrangements. Be aware, however, that without proper execution your may be declared invalid.
2. Consider a Trust -Despite all the hype from “trust factories,” probate is no longer the expensive and arduous process it used to be. Still, in certain circumstances a trust can be a useful tool to quickly pass assets outside of the probate process or for tax planning purposes. For larger estates, trusts may be an important component of effective tax planning.
3. Create a Power of Attorney- A durable power of attorney for finances enables a trusted friend or family member (called an agent or attorney-in-fact) to handle your finances and property should you not be able.
4. Assign Beneficiaries -Naming a beneficiary on bank and brokerage accounts, stocks, bonds, and retirement assets can conveniently pass the assets outside of the probate process. These “pay-on-death” accounts automatically transfer to the recipient when you die.
5. Investigate Life Insurance – Life insurance can effectively and quickly provide for your spouse and/or children and pay off significant debt owed at death. Also, proper planning by qualified professionals may be effectively used to minimize estate taxes, especially when insurance is combined with trusts.
6. Succession Planning- If you are the owner or part owner of a business, you may wish to plan to protect the business in the event of your demise. Common solutions include provisions for either the business or your to partners to purchase your share. Insurance policies can often be used for funding the purchase.
7. Specify Health Care Directives in Advance -Specifying wishes in advance protects you during incapacity and makes difficult decisions easier for your family. Health care directives should include a living will should you end up in a terminal state, and a health care power of attorney or designation of health care agent in case you are unable to make your own health care decisions. Don’t forget to specify your wishes regarding organ and/or body donation.
8. Final Arrangements – While prepayment plans may carry risks and be unreliable, a pay-on-death account can be an effective way to transfer assets for funeral, burial, and other expenses. This, along with stated intentions in your will, help ease the burdens of those you leave behind during a difficult time.
9. Access to Documents – In the event of disability or death, important documents will need to be quickly located. Be aware that your bank safe-deposit box may be sealed at death, preventing access to the documents at the time when most needed. Make sure your family knows where to find and has access to your: will; trusts; insurance documents; real estate deeds; stock and bond certificates; bank account information; retirement account information; access to information regarding debts and bills; information on any other assets; and your final arrangements.

Disclaimer: This general information is not intended as legal opinion or advice, nor a complete estate planning discussion, and refers to Maryland law – your state’s provisions may differ. As each situation is different, you should seek independent legal advice from an attorney for specific information.

Charles R. Stewart is an attorney in Hagerstown practicing exclusively in wills, trusts, and estate planning. Please send quest ions to PN@Law O f f i c e St e w a r t . c o m o r v i s i t www.LawOfficeStewart.com.

What does this “Will” have to say?

FIRST: If none of my children are minors, I give my spouse fifteen thousand dollars ($15,000.00).

SECOND: I give one half (1/2) of the balance of my estate to my spouse and (1/2) to my children.
(a) I appoint my spouse as guardian of my minor children, but as safeguard, I require that he/she report to the Court regularly and give an accounting of how, why, when and where he/she is spending the money necessary to care for my children.
(b) As a further safeguard I require my spouse to pay a court fee to guarantee that he/she exercises proper judgment in the handling, investing and spending of the children’s money, unless my spouse can prove to the Court that such fee is unnecessary.
(c) As a final safeguard, my children shall have the right to review the financial records of my spouse pertaining to all his/her financial actions.
(d) When my children reach the age of eighteen (18), they shall have full rights to withdraw and spend their shares of my estate. No one shall have any right to question my children’s actions on how they decide to spend the money.

THIRD: Should my spouse die before me or die while any of the children are minors, I do not wish to nominate a guardian for my children. Rather than nominating a guardian I prefer the court to choose for me. If the court wished, it may appoint anyone who asked the court to be a guardian and is interested in caring for my minor children. If any child has reached the age of sixteen (16), they may ask the court to appoint the guardian of their choice.

FOURTH: Should my spouse remarry, his/ her second husband/wife shall be entitled to take 1/3 share of what my spouse possesses or 1/2 share if there are no surviving children. The second husband or wife shall have the sole right to decide who gets his or her share, even if he/she excludes my own children.

FIFTH: Under the present tax laws there are certain legitimate avenues open to me to lower death taxes for my family. I prefer that the money be used by the government as tax rather than for the benefit of my surviving spouse and children. I direct to make no effort to lower my death tax so the government can benefit substantially from my death.

SIXTH: I appoint my spouse to administer my estate and require he or she pay for a bond to do so.

SEVENTH: Unless there is court approval, I direct that the maximum funeral expenses paid from my estate is five thousand dollars $5,000.00.