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Remember to Update your Will and Estate Planning Documents

Friday, February 19th, 2010

Individuals and couples often times forget that Wills and other estate planning documents are ongoing, vibrant documents that need to be updated as personal circumstances change. I emphasize to clients that they should review their estate planning documents periodically to determine if changes need to be made. Examples of personal circumstances that clients must keep in mind for estate planning purposes include, among other things, marriage and divorce, birth of children, death of a beneficiary or other loved one, starting and selling a business, the purchase or sale of significant assets like stock and real estate, and any other significant increase or decrease in the size of one’s estate.

For instance, if the person you designate in your Will as your Personal Representative dies or is no longer in position to act on your behalf, your failure to name a successor P.R. could allow someone who you did not intend act as your P.R. This circumstance also applies to the person you name as the Guardian of your minor children, any Trustee of a Trust you form, as well as other estate planning documents like the attorney-in-fact named in your Power of Attorney and the Health Care Agent named in your Advance Medical Directive.

Also be aware that if you sell stock or real estate that you specifically left in your Will to a beneficiary and then fail to change your Will to replace that gift, the beneficiary will end up with nothing, as the proceeds from such a sale will go into your residuary estate and be distributed accordingly.

My message is that you should remember to update your estate planning documents when significant life events occur. As a best practice, I recommend that my clients review their estate plan every two years in order to prevent an error which could prove extremely costly to those the clients are intending to help in their Estate Plan.

Beneficiary’s Right to Demand an Accounting of a Trust

Tuesday, November 17th, 2009

The Maryland Court of Special Appeals in Johnson v. Johnson, interpreting Maryland Code section 14-405, supports the position of the beneficiaries of an A/B Trust to demand an annual accounting of all receipts and disbursements from both Trust A and Trust B. Upon demand by any beneficiary, the Trustee must provide an accounting of both Trusts. The Court held:

Because James has a future interest in the Trust, despite the uncertainty of his actually benefitting from that future interest, we hold that he is entitled to an accounting from the Trustee. Maryland Code (1974, 2001 Repl. Vol.), § 14-405(j)(1) of the Estates and Trust Article (“ET”) lists several categories of people who are permitted to request an accounting of trust property and transactions. The relevant parties included in the list are “The beneficiary or the beneficiary’s legal representative.” ET § 14-405(j)(1)(ii). In response, “(2)The trustee shall provide a written accounting of all trust property and trust transactions for the previous year, or for a longer period if needed for tax purposes, upon request by and at reasonable times to a person authorized in paragraph (1) of this subsection.” ET § 14-405 (j)(2). In In re Clarke’s Will, 198 Md. 266, 81 A.2d 640 (1951), the Court of Appeals expounded on who was permitted to request an accounting. The Court stated that, “[i]f the petitioner has any interest at all he is entitled to invoke the court’s protection.” Id. at 273 (citations omitted). The Court continued by explaining that “[t]he mere fact that future interests are involved will not defeat the power to declare rights . . . .” Id.

When last confronted with this issue, we relied on In re Clarke’s Will, 198 Md. 266, 81 A.2d 640, Austin W. Scott and William Fratcher’s The Law of Trusts, and George Bogert’s Treatise on the Law of Trusts and Trustees and we held that “[t]he fact that a beneficiary has only a future interest . . . does not preclude him from compelling the trustee to account.” Jacob v. Davis, 128 Md. App. 433, 448, 738 A.2d 904 (1999).

With regard to the request for an accounting of Trust A, in addition to Trust B, the Court held:

Alternatively, Catherine contends that if James is entitled to an accounting, it should be limited to Trust B. We disagree and conclude that James can request an accounting of the entire Trust. While his interest in Trust B is more defined, he has an interest in Trust A and how Catherine manages it. While Catherine is living, she has access to both trusts and the management of Trust A potentially affects the proceeds available for Trust B. In short, the trusts are inextricably linked and limiting James’s right to an accounting of Trust B will not satisfy the Trustee’s legal responsibility to him.

We now adopt this reasoning and conclude that a trustor cannot, by including limitations in the Trust instrument, circumscribe the trustee’s duty to account to beneficiaries. This conclusion is in line with recognized Maryland law regarding trusts and accountings.

The relevant portion of Maryland Code § 14-405 – Administration by Trustee, states as follows:

(j) Accountings — In general. –

(1) The following persons in the order listed may request an accounting of trust property and transactions:

(i) The transferor or the transferor’s legal representative;

(ii) The beneficiary or the beneficiary’s legal representative;

(iii) The guardian of the person of the beneficiary;

(iv) An adult member of the beneficiary’s family or that family member’s legal representative; or

(v) A person interested in the trust property or a person interested in the welfare of the beneficiary, either of whom the court determines to have a legitimate interest.

(2) The trustee shall provide a written accounting of all trust property and trust transactions for the previous year, or for a longer period if needed for tax purposes, upon request by and at reasonable times to a person authorized in paragraph (1) of this subsection.

Interestingly, the Maryland Court of Appeals granted certiorari and agreed to hear an appeal of the Johnson v. Johnson case. Stay tuned!

5 Tips Regarding Your Maryland or District of Columbia Estate

Tuesday, June 2nd, 2009

Need an Attorney to help you plan your Maryland or DC Estate? Contact Raymond McKenzie at 301-330-6790 or ray@mckenzie-legal.com

In its simplest terms, a Will allows you do things like dispose of your property in the manner you deem fit, name a guardian for your minor children, and name a personal representative to administer your estate. For a person that does not have a Will, I ask why not? For those that do, the following tips and questions may prove helpful.

  1. Review your Will every few years to make sure it is current. Does your Will say exactly what you want it to say? Sometimes the Will you had drafted 10, 15, 20 years ago needs to be amended. Have you obtained new assets not mentioned in your Will? Have children, grandchildren, nieces and nephews been born since the last time you reviewed your Will? When the time comes to amend your Will, you can execute a Codicil which amends your original Will, or you may execute a new Will entirely.
  2. Who is the Personal Representative of your Estate as named in your Will? That person should at minimum be someone that you trust, who has organizational and administration skills, and who will have the time and energy to devote to the administration of your Estate when that time comes.
  3. Who did you name in your Will as guardian(s) responsible for the rearing of your children until they reach the age of majority? Are those person(s) still alive and person(s) that you wish to have such responsibility?
  4. Do you know where your Will is? Is it kept in a fire proof place like a safety deposit box? Is it easily accessible by a close family member? You do not want to leave your family in a position where the Will cannot be found and therefore your wishes are undetermined.
  5. Along with your Will, do you have a living will, otherwise known as an advance medical directive, which expresses your medical wishes in case you should be rendered in a vegetative state? Failing to have a living will could have severe emotional and financial consequences on your family. Also, do you have a power of attorney that would allow a person close to you (your attorney-in-fact) to act on your behalf if you were incapacitated, regarding your bank accounts, bills, and other monetary and non-monetary issues that arise while you are unable to act?

Need an Attorney to help you plan your Maryland or DC Estate? Contact Raymond McKenzie at 301-330-6790 or ray@mckenzie-legal.com