ARE YOU FINANCIALLY FIT?

Tips & Tricks for National Estate Planning Awareness Week!

October 20-26 is National Estate Planning Awareness Week.  With this in mind, Birchstone Moore has partnered with the YMCA of Metropolitan DC to promote the following tips for a healthy estate plan:

  • Could my life insurance proceeds be subject to estate tax at my death?

Yes! If you are the owner of a life insurance policy at the time of your death, the value of the insurance proceeds will be included in your estate for estate tax purposes. If you live in Maryland or DC and have a life insurance policy with a death benefit of $1M or more, you currently have a taxable estate simply because of your life insurance policy.

  • True or False: My Will controls the distribution of my entire estate at my death.

False! The portion of your estate that passes under your Will is called your “probate estate.” Retirement benefits, life insurance proceeds and property owned jointly with your spouse, as a general rule, are not part of your probate estate and will not pass under your Will. Retirement benefits and life insurance proceeds pass in accordance with beneficiary designations that you complete for those items. Property that you own as tenants by the entirety or as joint tenants with rights of survivorship will pass to the surviving joint owner by operation of law.

  • True or False: If I pass away without a Will, my spouse will inherit my entire estate under all circumstances.

False! If you are a Maryland or DC resident and you pass away without a Will, your spouse will receive only part of your probate estate if one or more of your descendants or your parents survives you. Your parents and/or children will also be beneficiaries of your probate estate. For Virginia residents dying without a Will, your spouse will receive your entire probate estate unless you are survived by one or more children from a prior marriage who are not also children of your surviving spouse.

  • I want to leave a portion of my estate to charity. Is it best to make a bequest under my Will or designate the charity as a beneficiary of my retirement account?


It is generally preferred to leave your retirement assets to charity, and let your other assets pass to your family. If you leave a tax-deferred retirement account to an individual beneficiary, the individual must pay ordinary income tax on any withdrawal from the account, just as you would have if you had taken withdrawals from the account in retirement. Charities pay no income tax on a bequest of tax-deferred retirement assets because charities are tax-exempt. By sending the taxable retirement account to charity, and other assets to your family, you free up the more income tax-advantaged assets for your family, at no cost to the charity.

  • Do I need to address my digital assets (my email account, my Facebook page, etc.) as part of my estate plan?

Absolutely! As part of your estate plan, you will want to ensure that your fiduciaries are able to access your digital assets. You should create a list of such assets and their corresponding usernames and passwords. You should then store such list in a secure place (e.g., with an online storage service, on a home computer with a password that you provide to your fiduciaries, etc.). You should also include in your estate planning documents language authorizing your fiduciaries to access your digital assets. This will give your fiduciaries not only the means, but also the right, to manage your online accounts.

Advertisements