Effective January 1, 2015 the Maryland estate tax exemption increased to $1,500,000 and the Maryland Trust Act become effective. Those two items mean that more families do not need a revocable living trust and can accomplish their estate planning with a will. The old rule still stands that most couples under the age of 50 need a will containing trust provisions to ensure for the care and education of their children. Now for the over 55 crowd with a traditional family with a modest estate with most of their wealth based on their home equity and retirement accounts can forgo trust planning. Only a small part of their assets will be subject to probate and capital gains taxes can be minimized with the surviving spouse holding the assets upon death.
Since estate tax savings are not driving most families to establish trusts, then why did the Legislative felt the need to regulate trusts. The reasons are many for the increase in the number of trusts, but it is driven by the change in our families. There are more families where not all the children are the biological children of both parents. As the age of first marriages increases more people have accumulated sufficient assets that are not held jointly. As a corollary the boomer generation is receiving large inheritances that are also held separately. As life expectancy increases so does the number of second marriages. The increase in divorce rates gives pause to many parents leaving large bequests outright to their children that could become part of a separation agreement. Finally, the increase in litigation makes protecting your heirs from lawsuits and creditors a reasonable action.
Additionally, the 2014 Supreme Court decision in Clark V. Rameker set forth the principle that an inherited IRA is not given the same protection as one’s own retirement account. At the same time the number of large retirement accounts is increasing while very few workers not have defined benefit retirement plans. A standalone retirement trust is the solution to protect those accounts for your beneficiaries.
In sum, the estate planning landscape has changed making planning easier for some families. Planning is still necessary for everyone and the same plan for everyone does not work. There is no better time to start then now. Consider giving our office a call or use our website to schedule an appointment to start planning your estate.