Nevertheless, many of the “Mass Affluent” are not trust literate.  They are not comfortable with putting their money into a trust and setting parameters for how their wealth will be used for the following generations.  In contrast, another group of clients who are been a beneficiaries of a trust assume that their wealth will be passed on in trust for their children.  ”Old Money” is educated on the value of having a reserve fund that can be used to leverage opportunities or provide for education of their children.

My challenge with the “Mass Affluent” my task is to educate them on the value of what they have accumulated and how trusts can help their beneficiaries to be good stewards of what is given to them.  Even a relatively small amount of money set aside for a young person can make a huge difference as it grows over the years. Often the concern of the older generation is their perception that the younger generation lack financial literacy to utilize the resources left to them.  I concur that financial literacy is a must.  The graduation requirement is a good start.  Trust literacy is a follow on and can be used to reward and develop financial responsibility by a properly drafted trust drafted on those principles.

Visit us at Suite 306

My new office is in Annapolis near the Harbor Center.  The office is on the third floor of the Annapolis Professional Center II.  The location is convenient to Interstate 97 and Route 50 just off Aris T. Allen Boulevard.  I am excited about the space and the ability to better serve my clients.

One of the ways to plan for your child is to separate the financial responsibility for your child from the parental responsibility.  Our office recommends a trustee to handle the money you leave to provide for your child.  The trustee may or may not be the same person who is the Guardian of your child.  The prevailing wisdom is that the Guardian can handle the child’s money as the person responsible of the upbringing of the child.  The other story I like to tell is that your sister may be a wonderful parent.  However, she has always had problems managing her money and her time will be even more limited with another child to raise along with her three children.  So why not name your uncle who has no children, but runs a successful accounting firm as your trustee.

Our office recommends that a trust is created for the child’s benefit with specific instructions to address many of the issues that may arise.  Will your Guardian need money for the increased household expenses for a larger family?  Perhaps, you would be willing to allow use of some life insurance money so your child can grow up in better economic circumstances than what your Guardian is able to provide.  You may want to provide instructions on making travel funds to visit Grandparents, cousins, etc.  Most parents do not want to see their children receive a large amount of money at age 18 or even at 21.  Rather instructions are left allowing payment for college, marriages, first homes, and to start a business.  The trust can continue to run for years depending on the amount of money you have left for your child.

How do name the future Guardian of your children?  Your Guardian should be named in your will.  The priority for naming the child’s guardian is detailed in Md. ESTATES AND TRUSTS Code Ann. § 13-207.  Should you be separated or divorced, the child’s living parent has priority over your designation in the will.  However, a single parent should consider who can be the child’s Guardian in the event of parent’s disability.  Maryland allows for the designation of a Standby Guardian who can step into your shoes and become the legal Guardian of your child.

Finally, the illustration I like to use is what kind of “Babysitter Instructions” do you leave when you leave your child for a few hours or overnight.  My recommendation is that you prepare the same type of instructions in a sealed letter for your Guardian.  This letter should contain your wishes on how the child should be raised, information about his or her habits, strengths, and weaknesses.  In addition, a sealed letter written to your child conveying your love, dreams, and hopes will be a treasure that will help them continue without you.  None of these plans will be perfect or replace two loving parents raising a child, but minimizes many of the obstacles the child will face.

The retirement account can also be used to fund a bypass trust to avoid federal and state estate taxes. The trust can hold assets for a surviving spouse using the deceased spouse’s exemption. The use of this strategy depends on the couples’ estate plan and what other assets are available to utilize the deceased spouse’s estate exemption.

The drafting of a retirement trust depends on the beneficiary’s circumstances, the type of retirement asset, and the other assets available to the beneficiary. I am available to consult with you on whether a retirement trust fits into your estate plan.

Training in Texas.

Wills for Heroes: This program involved preparation of simple wills, powers of attorney, and advance directives for police and firefighters in Anne Arundel County.  For my part I trained ten lawyers from the Young Lawyers Association in the basic concepts of estate planning and answered any “hard questions” that our clients might have.  A generous donation of software from LexisNexis (http://www.lexisnexis.com/) helped speed our clients through the process.  We did not provide tax planning for the first responders, but provided a basic estate plan for our public servants.  Most of all, I was impressed by their awareness of the need to name a Guardian for the children as they stand in harm’s way every day they put their uniform on to ensure our safety and well being.

Legal Services for the Elderly: My involvement with this program is to take on an elderly client and handle an elder law issue for them.  Often the solution is quite easy, but this group is so susceptible to scare tactics and scams.  They are an appreciative group making the work very rewarding.

Washington Area Lawyers for the Arts: My involvement here is to take on clients who have substantial art collections.  I work to preserve the collection after the client’s death or sell the art to fund charitable causes usually involving the arts.

St. Paul’s Lutheran Church and School: I sit on the board that oversees the business part of the church and school.  Although my official title is that of executive vice-president for finance, my duties are closer to that of a corporate attorney.  I answer the questions of: “What is the organization’s liability for that action?”, “Can you review this contract?”, and “How does our tax-exempt status affect our ability to carry on this activity?”.   This position allows me to support an organization that is doing a great deal to improve the lives of its members, school students, and community.

The first step of the will is to name a Guardian avoiding the need for the Court to determine who should be responsible for their children.  In addition to naming a guardian, the parents usually select a Trustee to manage the money (usually life insurance proceeds) they have set aside to raise their children.  The question is always whether that person should be the same person as the Guardian.  The answer is always “It depends”.  A Trustee who is also a Guardian is in a position to watch over all aspects of the child’s development.  An independent Trustee provides a second opinion on the child’s “best interest” and splits the workload of raising the child.

Preparing for the common disaster is often the extent of planning that most young parents accomplish and it is the most important planning they can do.  However, statistics tell us that it is much more likely for just one of the parents to pass away before the children are independent.  A simple will that leaves everything to the surviving spouse may not be the best thing for the children.

My recommendation is to establish a trust for the benefit of the children at the death of either parent.  The trust can reduce estate taxes, provide a means to manage the money set aside for the children, provide creditor protection against the surviving parent’s creditors, and prevent the children’s money from being mixed into the new family’s funds if the surviving parent remarries.

A children’s trust can be setup in a will or by an Irrevocable Life Insurance Trust.  The Irrevocable Life Insurance Trust is going to become a very popular tax planning device with the Federal Estate Tax being reinstated in 2011. Estate planning is not just for retirees.  Think about meeting with an experienced Estate Planning Attorney before your summer vacation or your next business trip.

1.  $1.3 Million of assets determined at date of death.

2.  An additional $3 million for the surviving spouse.

3.  Basis allocation based on the Executor’s discretion.

In addition, there exists the practical problem of finding all the records to determine the basis especially where dividends have been reinvested or improvements have been made to real property.  How many people have all those records that could go back 50 to 60 years or more.

Maryland heirs’ situation is further complicated by the State’s Estate Tax of up to 16% on amounts exceeding $1 million.  The Maryland Legislature did pass emergency legislation to protect the bypass exemption to the December 31, 2009 amount of $3.5 million.  The legislation solves one of the problems that Amy Feldman mentions in her companion article “Wills That Won’t”.  However, for most families putting up to $3.5 million in a bypass trust leaves nothing to pass outright to the surviving spouse creating even more unintended consequences.

Families with wills or trusts that contain bypass provisions should schedule an appointment with their attorney to review their documents.  Changes may be needed to comply with the 2010 Estate Tax Laws.  Most Estate Tax Lawyers predicted that Congress would act to extend the Federal Estate Tax at least by early 2010.  It is now May 2010 and time for astute families to act to ensure their legacy is protected.