Author: Ally Legal Planning

Status of the Estate Planning and Tax Laws as we Enter 2022

As we kick-off the new year, where do things stand as far as the federal and state estate planning and tax laws?  We certainly suffered a bit of whiplash with all the potential changes that were initially proposed as part of the Infrastructure Investment and Jobs Act but ultimately not included in the final legislation that was signed into law on November 15, 2021.  Still on the table is the Build Back Better Act (BBBA).  The BBBA was passed by the House of Representatives on November 19, 2021, and will be put before the Senate later this month.  If passed, the...

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ESTATE TAX PORTABILITY EXPLAINED

You may have heard the term “portability” thrown around in the past few years in consultation with your attorney or tax preparer, but do you really understand what it means?   In this post, we will take the time to explain portability and why it could be an important tax planning tool for you. Portability, in the simplest of terms, is the “ability” of a surviving spouse to “port” their deceased spouse’s unused estate tax exemption amount (“DSUEA”) remaining at the time of death. As explained in our last blog post (https://allylegalplanning.com/estate-and-gift-taxes-explained/), the amount each individual can exempt from the federal estate...

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Estate and Gift Taxes Explained

The estate tax is a one-time tax that may be assessed against a person’s estate at the time of their death.  There is currently a federal estate tax, and some states also have a separate state estate tax, including Maryland. At the most basic level, if the total value of a deceased person’s assets minus liabilities at the time of death (the “net estate”) is over the allowable exemption amount, the estate tax will be assessed against that person’s estate.  If an estate tax is due, the payment is typically made from the net estate prior to distribution to any...

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Refinancing when your Home is Titled to your Revocable Trust

With interest rates dropping to a historical low during the pandemic, lots of people took the opportunity to refinance their mortgages.  If you refinanced your mortgage in the past year and you also have a revocable living trust as part of your overall estate plan, you need to check the titling of your property to make sure your property is still titled to your revocable living trust.  Most people who set up a revocable living trust understand that retitling their assets to be owned by the trust is a critical part of the process to ensure the trust will work as...

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The “School Supply” Your Child Should Not Head Off To College Without

Do you have a child heading off to college for the first time in the Fall?  If so, I’m sure you have been busy planning with your child to make sure they have everything they need to be ready for the big move: school supplies, clothing, food, and those personal touches that will make their dorm room feel at least a little like home.  But have you thought about making sure your now adult child has signed an Advance Directive?  Imagine this: In mid-August, you get your son settled in his dorm room at an out-of-state college. A few weeks into...

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Business Entity Formation: The Basics

In this post we provide a general overview of the various business entities that can be formed in the State of Maryland. Choosing the right business entity for your situation has both legal and tax considerations.  While there are multiple subcategories of business entities, there are four general basic classifications of business entities: (1) sole proprietorship, (2) general partnership, (3) limited liability company, and (4) corporation.  The most basic business form is the sole proprietorship.  A sole proprietorship has one owner and all income and loss from the business operations flows directly to the owner.  As such, the income and expenses...

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New Elective Share Law in Maryland Increases the Need for Prenuptial Agreements

In case you missed it because of all the other changes we had to deal with during the pandemic, there was a significant change to Maryland’s elective share law that went into effect as of October 1, 2020.  What exactly is the elective share and why should you care?  Simply put, the elective share is a surviving spouse’s right to file a claim (i.e. make an election) against their deceased spouse’s estate to inherit a portion of assets even if their deceased spouse has an estate plan that says otherwise.  This largely impacts Marylanders who are considering getting married again...

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The Revocable Trust: The Will-Substitute

Most people understand the importance of having a Will to handle the distribution of their assets upon death.  As described in our prior post (Trust Basics), when you use a Will as your primary estate planning tool, some of your assets have to pass through the formal court process (called probate) before they can be distributed to your designated beneficiaries.  The good news is that there is an estate planning tool that, when used correctly, completely cuts out the need for probate:  the revocable trust. A revocable trust is commonly referred to as a “Will substitute” because the trust can be...

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Wills Part 2: What Assets are Controlled by Your Will?

Last week we introduced the Will, identified what it is and why every adult should have one.  This week we will discuss what assets are controlled by a Will and the importance of asset titling.  A common misconception about Wills is that your Will controls the disposition of all of your assets upon death regardless of how those assets are titled when, in fact, it is the titling of those assets that actually controls their disposition. When it comes to understanding how assets are distributed upon death, it helps to group assets into two main categories: “Probate” assets and “Non-Probate” assets.  Probate...

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