What is Estate Planning?
Understand the essentials of estate planning—what it is, why it matters, and how it protects your future.
Estate planning is often misunderstood as something only needed by the very wealthy or elderly. In reality, if you have any property, savings, or loved ones, you can benefit from an estate plan. Many people assume estate planning is only for the wealthy, but that's a myth. In fact, studies show that only about one-third of American adults have put any estate planning documents in place. This means most families are unprepared, which can lead to stressful legal and financial problems if the unexpected happens.
For residents of Maryland, estate planning is especially important because our state has some unique laws (like both estate taxes and inheritance taxes) that can affect what your heirs receive. Whether you're a young parent, a single professional, or enjoying retirement, having a clear plan for your assets and healthcare wishes ensures your family is protected and your wishes are honored. In this comprehensive guide, we'll explain what estate planning is, why it matters, the key components of a solid estate plan, and how to get started with estate planning in Maryland.
What Does Estate Planning Involve?
Estate planning is the process of anticipating and arranging how your assets will be managed and distributed after your death, and preparing for decisions in case you become incapacitated. In other words, estate planning means deciding in advance who will inherit your money, property, and belongings when you pass away, who will carry out your wishes, and what should happen if you're ever unable to make decisions for yourself. It usually involves creating a set of legal documents—such as wills, trusts, powers of attorney, and advance healthcare directives—to make your wishes clear and legally enforceable.
At its core, a good estate plan lets you control your legacy. You can name guardians for minor children, specify who gets family heirlooms or real estate, minimize taxes, and set conditions on inheritance through tools like trusts. Estate planning also addresses scenarios during your lifetime: for example, if an illness or accident leaves you unable to manage your affairs, documents like a durable financial power of attorney and a healthcare proxy (medical power of attorney) let you choose trusted people to make financial and medical decisions on your behalf. By planning ahead, you reduce uncertainties, avoid family disputes, and make sure things are handled according to your wishes with as little court involvement as possible.
Why Estate Planning is Important
Estate planning is important for everyone, not just the rich. If you die without a will or estate plan, your assets will be distributed according to Maryland's intestacy laws (the default state laws) – which may not align with your actual wishes. The law essentially writes a one-size-fits-all plan for you, often splitting your property among immediate family in fixed shares. For example, if you're married with no children, Maryland law requires that your spouse share your estate with your parents. Unmarried partners or close friends would receive nothing under these default rules. And crucially, without an estate plan, you have no say in who will care for your minor children if both parents are gone – the courts would appoint a guardian without guidance from you. This can lead to family conflicts or outcomes you wouldn't have wanted.
By contrast, a proper estate plan puts you in control. Here are some key reasons why having an estate plan is so beneficial:
Ensure Your Wishes Are Honored: You get to decide exactly who inherits each of your assets and on what terms. This prevents confusion and infighting among surviving relatives.
Provide for Loved Ones: You can make financial provisions for your spouse, children, or other dependents. For parents of young children, you can nominate a guardian in your will to care for them, ensuring they are raised by someone you trust.
Avoid Probate Delays: Many estate planning tools (like living trusts or proper beneficiary designations) allow your assets to bypass the lengthy probate court process. This means your heirs can receive their inheritance faster and with less legal expense.
Minimize Taxes & Expenses: With strategic planning, you can reduce estate taxes and inheritance taxes. Maryland, in particular, has an estate tax on large estates (over $5 million) and a 10% inheritance tax on certain beneficiaries. A plan can help maximize what your family keeps by using trusts, gifting, and other tax-efficient strategies.
Plan for Incapacity: Estate planning isn't only about death – it's also about life. By preparing powers of attorney and healthcare directives, you decide in advance who will manage your finances or make medical decisions if you become incapacitated. This avoids the need for a court-appointed guardian and makes sure someone you trust is in charge of your affairs.
Peace of Mind: Perhaps most importantly, having an up-to-date estate plan gives you peace of mind. You know that you've taken care of your family and that there is a clear roadmap in place. This relieves your loved ones of additional burdens during an already difficult time, as they won't be guessing about your wishes or dealing with unnecessary legal hurdles.
In short, estate planning matters because it puts you in the driver's seat. It protects your family from uncertainty, preserves the assets you've worked hard for, and reflects your values (such as charitable giving or caring for a relative with special needs). Without a plan, even a modest estate can get caught up in court or go to unintended people, causing added grief and cost.
Key Components of an Estate Plan
Every estate plan is personalized, but most will include a few core documents and tools to cover all bases. Here are the key components of a comprehensive estate plan:
Last Will and Testament: The will is the foundation of most estate plans. In this document, you specify who should inherit your assets when you die and who you nominate as the executor (personal representative) to carry out your wishes. If you have minor children, a will is where you name a guardian to raise them in case something happens to you (and the other parent). Without a valid will, state law will decide these issues. Maryland law requires a will to be in writing and signed in the presence of two witnesses to be valid.
Revocable Living Trust: A living trust is an arrangement where you transfer ownership of your assets into a trust (managed by a trustee) for the benefit of your chosen beneficiaries. You can be the trustee of your own living trust during your lifetime, and name a successor trustee to take over if you become incapacitated or pass away. Assets in a trust can avoid probate, allowing them to be distributed to heirs privately and quickly. Trusts also provide more control over when and how your beneficiaries receive funds – for example, you can stipulate that your children inherit at certain ages or milestones. Many Maryland families use revocable trusts to simplify estate settlement and even to plan for potential estate taxes.
Durable Power of Attorney: This document allows you to appoint someone as your agent to handle your financial and legal affairs if you are alive but unable to manage them yourself. For instance, if you are in an accident or develop an illness that leaves you incapacitated, your appointed agent can pay your bills, manage bank accounts, handle real estate transactions, and so on. In Maryland, powers of attorney must include certain language from state law to be honored by financial institutions, so using a proper Maryland statutory form or an attorney-drafted document is important.
Advance Healthcare Directive: Also called a living will or advance medical directive, this lets you outline your healthcare preferences and end-of-life wishes, and designate a healthcare agent to make medical decisions on your behalf if you cannot communicate. You can spell out what kinds of medical treatment you do or don't want (for example, decisions about life support). Having an advance directive in place means doctors and family won't have to guess what you would have wanted during a health crisis.
Beneficiary Designations: Some assets don't pass through your will at all – instead, they go directly to the named beneficiaries on the account or policy. Life insurance policies, retirement accounts (401(k), IRAs), and payable-on-death bank accounts are common examples. A crucial part of estate planning is reviewing and updating these beneficiary designations so they match your overall plan. This ensures, for example, that an ex-spouse or deceased individual is not still listed to receive an account. Beneficiary designations typically override what's written in a will, so keep them current to avoid unintended outcomes.
Other Documents: Depending on your situation, there may be additional pieces. For instance, you might have a Letter of Instruction to leave personal messages or guidance to your family. Business owners might need a business succession plan. If you have a family member with special needs, a special needs trust can be set up to provide for them without jeopardizing government benefits. An experienced estate planning attorney will tailor the plan to include the right documents for your needs.
Estate Planning in Maryland: State-Specific Considerations
Estate planning laws and practices can vary from state to state. If you live in Maryland, here are some Maryland-specific considerations to keep in mind as you plan:
Maryland Estate Tax: Maryland is one of the few states that imposes its own estate tax in addition to the federal estate tax. As of now, Maryland's estate tax generally applies to estates worth over $5 million(this is the exemption amount; estates below that value are not subject to the state estate tax). The Maryland estate tax rate is graduated up to 16% on the amount above $5 million. If you're a Maryland resident with substantial assets, your estate plan should include strategies to minimize this tax (such as marital deductions, credit shelter trusts, or lifetime gifting). Also, Maryland allows portability of any unused estate tax exemption to a surviving spouse, but only if a timely Maryland estate tax return is filed after the first spouse's death – something to remember when administering an estate.
Maryland Inheritance Tax: Maryland also has an inheritance tax of 10% on certain beneficiaries. The good news is that close relatives (spouses, children, grandchildren, parents, siblings, etc.) are exempt from Maryland inheritance tax, but more distant relatives (like cousins, nieces/nephews) or friends will have to pay 10% of the value of what they inherit. Charitable organizations are also exempt. If you plan to leave assets to non-immediate family or friends, your estate plan should account for this tax. Often, people use life insurance or specific bequests to cover or minimize the impact of inheritance tax on those beneficiaries.
Probate and Court Supervision: When a Maryland resident dies, any assets held in their sole name (without a beneficiary or joint owner) typically go through probate in the Orphans' Court (Maryland's probate court). Probate in Maryland is a public process that can take months or longer, but it is generally straightforward for most estates. Still, to simplify things for your heirs, you might use tools like joint ownership, payable-on-death accounts, or revocable living trusts to reduce the number of assets that must go through probate. Maryland offers a "small estate" proceeding for estates under a certain value (currently $50,000, or $100,000 if the spouse is the sole heir), which is faster and easier. A well-crafted estate plan will consider which assets will or won't go through probate and plan accordingly.
Legal Formalities: It's vital to follow Maryland's legal requirements for each estate planning document so they are valid when needed. For instance, as mentioned, a will needs two witness signatures in your presence. If the will is notarized and made "self-proving," it can speed up probate. Maryland also has a statutory Maryland General Power of Attorney form – using the state-approved wording for powers of attorney can ensure banks or institutions in Maryland accept the document without hassle. An experienced attorney will ensure your documents meet all state law criteria.
Updates for Life Changes: Maryland law (like all states) can change, and your own life circumstances can change too. Major events like marriage, divorce, the birth of a child, or moving into or out of Maryland are triggers to review and update your estate plan. For example, if you move to Maryland from another state, you should have your documents reviewed under Maryland law. Our state recognizes out-of-state wills as valid if they were valid in the state where executed, but there may be differences in state tax law or other nuances. Regular reviews — we recommend every few years — will keep your estate plan aligned with both Maryland law and your current wishes.
How to Start Your Estate Plan
Getting started with estate planning may seem daunting, but it can be broken down into manageable steps. Here's how you can start creating an estate plan (and remember, you don't have to do it alone – a qualified estate planning lawyer can guide you through each step):
Take Inventory of Your Assets and Debts: Make a list of everything you own – bank accounts, investments, retirement accounts, real estate, vehicles, life insurance, personal valuables, etc. Also note any significant debts or mortgages. This gives you a clear picture of what will be part of your estate.
Think About Your Goals and Beneficiaries: Decide who you want to inherit your assets and in what proportions. Consider specific bequests (like leaving a particular item to someone). If you have minor children, think about who should be their guardian. Also consider your wishes for funeral or burial arrangements, charitable gifts, or any special instructions.
Choose Trusted Decision-Makers: Select the people you trust to carry out important roles. This includes an executor for your will (to settle your estate), a trustee if you're setting up a trust, a guardian for minor kids, an agent for your power of attorney, and a healthcare proxy for medical decisions. Talk to these individuals to ensure they are willing and able to serve.
Consult an Estate Planning Attorney: Especially in Maryland, where specific laws and tax rules apply, it's wise to work with an experienced estate planning attorney. They will draft the legal documents tailored to your needs, ensuring all formalities are followed. An attorney can also advise on complex issues like tax planning, business succession, or trusts for special situations. Connect with a Maryland estate planning attorney to discuss your needs.
Execute the Documents Properly: Sign your will and other documents in accordance with Maryland law (e.g., two witnesses for the will, notarization for powers of attorney, etc.). Your attorney will usually organize proper execution. Once signed, ensure your executors/agents know how to access the documents when needed (for instance, keep the original will in a safe place and let someone know where it is).
Update Your Plan Over Time: Estate planning is not a one-and-done task. Revisit your plan every few years or whenever you have a major life change (marriage, divorce, birth of a child, significant change in assets, etc.). Laws can also change (for example, estate tax thresholds or power of attorney statutes), so staying up to date is important. Keeping your plan current will give you continued confidence that it meets your family's needs and your wishes.
By following these steps, you'll create a solid foundation for your estate plan. Even just having the basics – a will, powers of attorney, and updated beneficiaries – is far better than leaving everything to chance. To make sure you’ve covered all the essentials, check out The Ultimate Estate Planning Checklist for Every Adult.
Working with a Maryland Estate Planning Attorney
While there are online forms and DIY kits available, estate planning is one area where professional guidance is invaluable. A qualified Maryland estate planning attorney brings detailed knowledge of state and federal laws, ensuring your documents are correctly prepared and legally sound. They can advise you on the best strategies to achieve your goals – whether it's protecting assets from taxes, setting up a trust for a family business, or navigating complex family dynamics. Perhaps most importantly, an attorney will tailor your estate plan to your unique situation and help keep it updated as your life changes.
At our firm, we pride ourselves on providing clear, compassionate guidance through the estate planning process. We take the time to explain your options and craft a plan that instills confidence. If you're in Maryland and ready to create or update your estate plan, contact our office for a free consultation. We're happy to answer your questions and help you protect what matters most – for yourself and your family.
Frequently Asked Questions about Estate Planning
Do I need an estate plan if I'm not wealthy?
Yes. Estate planning is not just for millionaires or older people – everyone can benefit from having a plan in place. Even if you have a modest estate or just a few key assets, a will ensures those belongings go to the people or causes you care about (rather than following a generic formula set by the state). Moreover, estate planning includes naming who would handle your affairs if you become incapacitated, which can save your family from complicated legal proceedings. In short, if you own anything or have people who depend on you, you should put basic estate planning documents in place for their protection and your peace of mind. Don’t forget that these documents should be reviewed periodically—here’s when and why it’s necessary to update your estate plan.
What happens if I die without a will in Maryland?
Dying without a will is called dying intestate, and in this situation Maryland law will dictate how your assets are distributed. The state’s intestate succession rules typically give your property to your closest relatives in certain shares. However, these rules might not reflect what you would have wanted. For example, if you are married with no children, your spouse does not automatically get everything – they must share a portion of your estate with your parents under Maryland law. If you have children from a different relationship, your current spouse will have to share the estate with those children. Unmarried partners, step-children, friends, or favorite charities would receive nothing, since they aren't considered legal heirs by default. Also, without a will, you can't name a guardian for minor kids, so a court will appoint one without your input. Overall, dying without a will often leads to outcomes that families find problematic – which is why making a will is so important.
What's the difference between a will and a trust?
Both wills and trusts are tools to transfer your assets, but they work in different ways. A will is a legal document that takes effect upon your death; it spells out who should inherit your property and can name guardians for children. A will must go through probate (a court-supervised process) before assets are distributed. A living trust, on the other hand, is effective during your lifetime and after. You transfer assets into the trust while you're alive, and the trust holds them for your benefit (and later your beneficiaries). When you die, the assets in the trust can be distributed by your chosen successor trustee without going through probate. Trusts can also provide more control over timing (for example, giving assets to beneficiaries when they reach a certain age) and can help manage your assets if you become incapacitated (since your trustee can step in). Many people use a will and a trust together – for instance, a will can cover anything not in the trust (this is sometimes called a "pour-over will"). The best approach depends on your circumstances; an estate planning attorney can advise if a trust would be beneficial in addition to a will.
When should I update my estate plan?
You should review and consider updating your estate plan whenever you have a significant life change, or at least every few years as a matter of good practice. Key events that warrant an update include: marriage or divorce, the birth of a child (or grandchild), if a family member who is a beneficiary or fiduciary (like an executor or guardian) passes away, or if your financial situation changes substantially (buying a home, receiving an inheritance, starting a business, etc.). Also, if you move to a new state (like moving into or out of Maryland), you should have your documents reviewed for compliance with that state's laws. Even without major events, laws do change over time – for example, estate tax thresholds or power of attorney laws – so keeping your plan current with the help of an attorney ensures it will still carry out your wishes properly. Think of your estate plan as a living set of instructions that should adapt as your life evolves. For insight on navigating these legal and tax shifts, explore The Estate Tax Playbook: Strategies to Secure.
Can I do estate planning myself, or do I need a lawyer?
It's possible to write a simple will or download power of attorney forms on your own, but proceed with caution. Estate planning involves crucial legal details, and mistakes or omissions can cause your documents to fail when they're needed most. If you attempt a DIY estate plan, you might unknowingly violate a requirement of Maryland law (for example, improper witnessing of a will) or use unclear language that leads to disputes. Working with an estate planning attorney is highly recommended – especially for Maryland residents – because an attorney will ensure your documents are correctly drafted, executed, and aligned with current law. They can also advise you on strategies you might not be aware of (like setting up a trust to save taxes or avoid probate). In short, while you can create basic documents yourself, having an experienced lawyer involved provides peace of mind that your plan will actually work as intended. Schedule a consultation with our Maryland estate planning lawyer to get started.