The Fundamentals of Estate Planning (Maryland) · Carolina Academic Press, LLC 700 Kent Street...

The Fundamentals of Estate Planning (Maryland)

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The Fundamentals of Estate Planning (Maryland)

second edition

Angela VallarioProfessor of Law

University of Baltimore School of Law

Carolina Academic PressDurham, North Carolina

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Copyright © 2019Angela Vallario

All Rights Reserved

ISBN 978-1-5310-1159-8eISBN 978-1-5310-1160-4

LCCN 2018952160

Carolina Academic Press, LLC700 Kent Street

Durham, North Carolina 27701Telephone (919) 489-7486

Fax (919) 493-5668www.cap-press.com

Printed in the United States of America

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This book is dedicated to my parents, Joseph F. Vallario, Jr. and Mary Elise Vallario,

whose support and encouragement gave me the strength to make this possible.

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Contents

Table of Statutes xxviiPreface and Acknowledgments xxix

Chapter 1 · Overview 3Overview 4I. The Documents 4

A. The Will 4B. Trusts 6C. Power of Attorney 8

1. Agent or Agents 92. Effective Date 103. Durable Power of Attorney 114. Gift Giving Power 115. Revocable Trust Power 126. Digital Assets 137. Enforceability 148. Advantages and Disadvantages 149. Sample Form 14

D. Advance Medical Directive 151. Appointment of Agent 162. Nutrition and Hydration 163. Organ Donation 174. Pregnancy 185. HIPAA Provision 196. Sample Form 20

II. Will Substitutes 20A. Life Insurance 20

1. Policy Ownership 212. Insurance Products 233. Liquidity 24

B. Joint Accounts 26C. Retirement Arrangements 28D. Gifts 29

1. Annual Exclusion, Educational, and/or Medical Gifts 302. Gift Basis 313. Implementing Gift Giving Program 32

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Chapter 2 · Ethical Issues in Estate Planning 35Ethical Issues in Estate Planning 36I. Ethical Rules Relevant to Estate Planning 36

A. Rule 1.1 361. Estate Planner’s Level of Skill 362. Reliance on Client-Provided Information 373. Execution of Estate Planning Documents 38

B. Rule 1.2(a) 381. Educating the Client 382. Limiting Scope of Representation 39

C. Rule 1.3 391. Timetable 392. Avoiding Misunderstandings as to Scope of Representation 40

D. Rule 1.4 401. Means of Communication 40

E. Rule 1.5(a) 411. Communication of Fee 412. Contingency Fee in Estate Planning 41

F. Rule 1.6 (a) and (b) (in pertinent part) 421. Legal Assistants, Secretaries, and Office Staff 422. Consultants and Associated Counsel 423. Obligations after Death of Client 43

G. Rule 1.7 431. Existing Client Asks Attorney to Prepare Will or Trust for

Another Person 43H. Rule 1.8(c) and (f) 44

1. Gifts to Attorney 44a. Attorney Grievance Comm’n of Md. v. Hodes 45

I. Rule 1.14 (a) and (b) 511. Discussing Options in the Event of Diminished Capacity 52

J. Rule 1.18(b)–(d) 521. Conflicts Check 52

II. Identifying the Client 53A. The Elderly Client 53B. Multiple Clients 54

1. The Married Couple 552. The Family Attorney 58

III. Liability to Third Parties 59A. Strict Privity 60

1. Strict Privity in Maryland 61a. Noble v. Bruce 61b. Ferguson v. Cramer 62

B. Balancing of Factors 63

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C. Third Party Beneficiary 64D. Foreseeable Reliance 65

Chapter 3 · Establishing the Attorney-Client Relationship 67Establishing the Attorney-Client Relationship 68I. The Role of an Estates and Trusts Attorney 68

A. Estate Planner 68B. Estate Administration 69C. Estate Litigation 70

II. The Plan 71A. The Client 71B. Assets and Liabilities 72C. Valuation 72D. Family 73E. Existing Plan 73

III. The Client Interview 73A. Initial Meeting 74B. Fee and Engagement Letter 75C. Mock Interview 76

IV. Intestacy 84A. Heirs and Survival Requirements 84

1. Survival Requirements 85a. Maryland 85b. Uniform Probate Code 85

2. Spouse 85a. Maryland 86b. Uniform Probate Code 87

3. Issue (Descendants) 88a. Maryland 88b. Uniform Probate Code 89

4. Parents 91a. Maryland 91b. Uniform Probate Code 92

5. Collaterals (Issue of Parents) 92a. Maryland 93b. Uniform Probate Code 93

6. Grandparents and Issue 95a. Maryland 95b. Uniform Probate Code 96

7. Great-Grandparents and Issue 98a. Maryland 98b. Uniform Probate Code 98

CONTENTS ix

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8. Stepchildren 98a. Maryland 99b. Uniform Probate Code 99

9. Absence of Heirs 100a. Maryland 100b. Uniform Probate Code 100

B. Special Categories 1011. Half Blood 1012. Adopted Child 1013. Non-Marital Child 1014. Genetic Material 101

C. Advancements 102

Chapter 4 · The Last Will and Testament 103The Last Will and Testament 106I. Basic Principles of Wills 106

A. Contingencies 107B. Statutory Defaults 108

1. Survival 108a. Maryland 108b. Uniform Probate Code 109

2. Lapse 109a. Maryland 109b. Uniform Probate Code 110

3. Simultaneous Death Act 1114. Abatement 111

a. Maryland 111b. Uniform Probate 112

C. Domicile 112D. Integration 112

II. Will Formalities and Procedures 113A. Legal and Testamentary Capacity and Intent 113B. Statutory Formalities 114

1. Strict Compliance 114a. Maryland 114

i. Writing 114ii. Signed by the Testator or Proxy 115iii. Attested and Signed by Two or More Credible Witnesses in

the Presence of the Testator 116b. Uniform Probate Code 118

i. Substantial Compliance 118ii. Self-Proving 119

C. Savings Statutes 1191. Will Prepared in Other Jurisdictions 119

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a. Maryland 119b. Uniform Probate Code 120

D. Will Execution Ceremony 121E. Safekeeping 122

1. Testator Retains Will 1222. Attorney Retains Will 1223. Will in Safe Deposit Box 1234. Will on Deposit with Register of Wills 124


F. Communication 125G. Holographic Will 126

1. Validity 126a. Maryland 126b. Uniform Probate Code 127

III. Basic Structure of a Valid Will 127A. Dispositive Provisions Section of a Will 127

1. General Organization of a Dispositive Section 1272. Beneficiaries or Legatees 1283. Multiple Takers 1284. By Representation 129


5. Survival Condition Imposed on Beneficiary 1326. Charitable Bequest 134

B. Details of Dispositive Section 1351. Specific Bequest 1352. Tangible Personal Property — Specific Bequest General in Nature 1373. Demonstrative Bequest 1394. General Bequest 1405. Residuary Bequest 141


C. Non-Dispositive Provisions Section of a Will 1421. Opening Statement 1422. Identification of Family Members 1433. Funeral Provision 1454. Debts, Exoneration, and Administrative Expenses 146


5. Tax Payment Provision 149a. Maryland 150b. Uniform Probate Code 150

6. Definitional Provision 151

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7. Simultaneous Death Provisions 1528. In Terrorem Provision 155

a. Maryland 156i. Ryan v. Wachovia Bank & Trust Co. 156ii. Cross v. French 156

b. Uniform Probate Code 1569. Disinheritance Provision 157

D. Fiduciary Provisions Section of a Will 1571. Fiduciary Powers Provision 1592. Appointment of Personal Representative 160


3. Compensation of Personal Representative 163a. Maryland 163b. Uniform Probate Code 164

4. Appointment of Guardian 1645. Minors Provision 166

IV. Revocation and Revival of Previously Revoked Wills 168A. Methods of Revocation 168

1. Physical Act, Express Revocation by Subsequent Instrument, or Operation of Law 168a. Maryland 168b. Uniform Probate Code 169

2. Implied Revocation 170B. Revival and Doctrine of Dependent Relative Revocation 170

1. Revival of a Prior Will 170a. Maryland 171b. Uniform Probate Code 171

2. Dependent Relative Revocation 171V. Limitations Imposed on Testamentary Freedom 171

A. Elective Share 1721. Waiver 172


2. Spouse 173a. Maryland 173

i. Knell v. Price 174ii. Karsenty v. Schoukroun 178

b. Uniform Probate Code 185B. Other Statutory Protections 187

1. Pretermitted Child 187a. Maryland 188b. Uniform Probate Code 189

2. Limitation on Beneficiary 190

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Chapter 5 · Trusts 191Trusts 193I. Trust Requirements 194

A. Ascertainable Beneficiary 194B. Trust Intent 196C. Trust Property 197D. Lawful Purpose 197E. Formalities 198

II. Parties to a Trust 198A. Settlor 198B. Beneficiaries 199C. Trustee 200

1. Trustee Fiduciary Duties 2012. Selection of Trustee 202

a. Individual Trustee 202b. Professional Trustee 204c. Comparison of the Individual and Professional Trustees 204

III. Testamentary Trusts 205A. Creation 206B. Funding 206

1. Specific Bequest Held in Trust 2062. General Bequest Held in Trust 2063. Residuary Estate Held in Trust 207

C. Advantages and Disadvantages 207D. Drafting the Testamentary Trust 207

1. Trust Terms 2072. Terms Unique to Testamentary Trust 2083. Dispositive Provisions 208

a. Division of Principal 208b. Distributions of Income and Principal 210

4. Spendthrift Provision 212a. Duvall v. McGee 213

5. Rule Against Perpetuities 2166. Trustee Appointment and Resignation 2177. Trustee Powers 2188. Trustee Compensation 222

a. Estates and Trusts §14.5-708 2239. Trustee Bond 22310. Premature Termination 224

IV. Inter Vivos Revocable Trust 224A. Creation 226B. Funding 227

1. Additions to Trust 227C. Advantages and Disadvantages 228

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D. Drafting the Revocable Trust 2281. Purpose of the Trust 2282. Terms Unique to the Revocable Trust 230

a. Payments to Settlor during Settlor’s Life 230b. Payments upon Incapacity of Settlor 230c. Payments upon Death of Settlor 231

3. Dispositive Provisions on Death of Settlor 232a. Division of Principal 232b. Distributions of Income and Principal 233

4. Spendthrift Provision 2365. Rule Against Perpetuities 2376. Trustee Appointment and Resignation 2387. Trustee Powers 2398. Trustee Compensation 2419. Trustee Bond 24210. Premature Termination 242

a. Termination by Beneficiaries 24311. Acceptance by Trustee 24412. Selection of Forum 244

V. Irrevocable Trust Agreement 244A. Creation 245B. Funding 245

1. Additions to Trust 245C. Advantages and Disadvantages 246D. Drafting the Irrevocable Trust Agreement 246

1. Purpose of the Trust 2462. Terms Unique to the Irrevocable Trust Agreement 247

a. Payments during Settlor’s Life 247b. Payments upon Death of Settlor 248c. CrummeyWithdrawal Powers 248

3. Dispositive Provisions 249a. Division of Principal 250b. Distributions of Income and Principal 251

4. Spendthrift Provision 2515. Rule Against Perpetuities 2526. Trustee Appointment and Resignation 2527. Trustee Powers 2538. Trustee Compensation 2569. Trustee Bond 25610. Premature Termination 25711. Acceptance by Trustee 25712. Selection of Forum 25813. Limitation of Powers 25814. Insurance Policies 258

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Chapter 6 · Transfer Taxes 261Transfer Taxes 262I. Overview of the Transfer Taxes 262

A. Gift Tax 263B. Federal Estate Tax 263C. Maryland Estate Tax 264D. Generation-Skipping Transfer Tax 264E. Historical Summary of the Transfer Taxes 264

II. The Federal Gross Estate 267A. Probate Property 267B. Property Transferred during Life 268C. Special Assets 270

III. Taxable Estate 274A. Marital Deduction 274

IV. Valuation 275A. Deviations from Willing Buyer/Willing Seller Standard 276B. Valuation Discounts 276C. Actuarial Tables 277D. Alternate Valuation 277

V. Basic Estate Tax Planning 278A. Goals 278

1. Avoid or Minimize Transfer Taxes 2782. Defer Transfer Taxes 278

B. Estate Planning Tools 2791. Non-Taxable Gifts 2792. Credit Shelter Trust 279

a. Gift Exemption Amount 280b. Death Exemption Amounts 282

i. Federal Exemption Amount (Option 1) 282ii. State Exemption Amount with Portability (Option 2) 283iii. Federal Exemption Amount and

Maryland-Only QTIP (Option 3) 285iv. Marital Deduction (Option 4) 287v. Irrevocable Life Insurance Trust (Option 5) 288

Chapter 7 · Non-Taxable Gifts 291Non-Taxable Gifts 291I. Taxable Gifts 292

A. Gifts in General 292B. Taxable Gift 293C. Filing Requirements 293

II. Income Tax Basis 294A. Asset Selection Considerations 296

III. Inter Vivos Transfers between Spouses 297

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IV. Gift Tax Exclusions 297A. Annual Exclusion 297

1. Present Interest Requirement 2982. Gift Splitting by Spouses 299

a. Requirements for Gift Splitting 299B. The Educational and Medical Gifts 300

V. Methods of Inter Vivos Gifting 302A. Outright Gifts 302

1. Gifts by Check 3032. Gifts to Minors 303

B. Gifts in Trust 3041. CrummeyWithdrawal Rights 305

a. Crummey v. Commissioner 3052. Hanging Power 3103. Multiple Beneficiaries 310

a. Estate of Cristofani v. Commissioner 3114. Minor’s Trust 313

a. Requirements of IRC §2503(c) Trust 313VI. Special Rules for Certain Gifts Made in Contemplation of Death 314

Chapter 8 · Credit Shelter Trust 315Credit Shelter Trust 315I. Exemption Amounts 316

A. Gift Exemption Amount 3171. Gift Exemption Amount Chart 317

B. Death Exemption Amounts 3181. Federal Exemption Amount 318

a. Federal Exemption Amount Chart 3182. Maryland Exemption Amount 319

a. Maryland Exemption Amount Chart 319II. Credit Shelter Trust 320

A. Purpose 320B. General Power of Appointment Exceptions 321

1. Ascertainable Standard 3212. Five-or-Five Limitation 3223. Substantial and Adverse Interest Exception 324

C. Inter Vivos Credit Shelter Trust 325D. Funding the Credit Shelter Trust with a Formula 326

1. Pecuniary Formula 3272. Fractional Formula 328

E. Disclaimer Funding 329F. Trust Terms 331

1. Income 331a. Mandatory Distributions of Income 331

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b. Discretionary Distributions of Income 3312. Principal Distributions 3323. Fiduciary Provisions 333

III. Planning with Portability 334

Chapter 9 · Marital Deduction 337Marital Deduction 338I. Marital Deduction 339II. I.R.C. §2056 340

A. I.R.C. §2056(a) Requirements 3401. Citizenship Requirement 3402. Surviving Spouse Requirement 3413. Gross Estate Requirement 3414. Passing Requirement 341

B. Terminable Interest Limitation 3411. Surviving Spouse’s Interest Terminates 3422. Interest Passes from Decedent to Someone Other Than the

Surviving Spouse 3423. Non-Spouse Receives Property 342

C. Exceptions to the Terminable Interest Rule 3421. Limited Survival Contingency 3432. Life Estate with General Power of Appointment in Surviving Spouse 3433. Qualified Terminable Interest Property 344

a. Passes from the Decedent 344b. Gives the Surviving Spouse a Qualifying Interest for Life 344c. Election 344

III. Outright Marital Deduction 345IV. Marital Trusts 347

A. Estate Trusts 3471. Requirements 348

a. Income to the Surviving Spouse for Life 348b. Income May Be Accumulated 348c. Non-Income Producing Trust Assets Are Permitted 348

B. Life Estate with Power of Appointment Trust 3481. Requirements 349

a. Income to Surviving Spouse for Life 349b. Surviving Spouse Alone Must Hold a General

Power of Appointment 349C. QTIP Trust 349D. Comparison of Marital Trusts 350

V. QTIP Trust 350A. Passing Requirement 351B. Qualifying Income Interest Requirement 352

1. Income to Surviving Spouse for Life 352

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2. No General Power of Appointment in Anyone during the Surviving Spouse’s Life 353

C. Election Requirement 3531. Clayton v. Commissioner 3542. QTIP Advantages and Disadvantages 356

VI. Maryland-Only QTIP 359

Chapter 10 · Irrevocable Life Insurance Trust 361Irrevocable Life Insurance Trust 362I. Federal and Maryland Statutes 362

A. I.R.C. §2042 Proceeds of Life Insurance 3631. Receivable by Executor 3632. Incidents of Ownership 364

B. I.R.C. §2035 Transfers in Contemplation of Death 365C. Maryland Statute and the Insurable Interest 366

1. Chawla v. TransAmerica Occidental Life Insurance Company 366II. Funding the ILIT 366

A. Initial Transfer of an Existing Policy 3671. Existing Policy 3672. New Policy 368

B. Subsequent Transfers to the ILIT 3681. Crummey Requirements 3682. Five-or-Five Limitation 3693. Hanging Power 369

III. The Irrevocable Life Insurance Trust (ILIT) 369A. Creation 369B. Funding 370C. Advantages and Disadvantages 371D. Drafting the ILIT 372

1. Purpose of Trust 3722. Terms Unique to an ILIT 372

a. CrummeyWithdrawal Powers 3723. Dispositive Provisions 374

a. Payments during Settlor’s Life 374b. Payments upon Death of Settlor 374c. After the Death of the Survivor of Settlor and Spouse,

Division of Principal 3744. Spendthrift Provision 3755. Rule against Perpetuities 3756. Trustee Appointment and Resignation 3757. Trustee Powers 3758. Trustee Compensation 3769. Trustee Bond 37610. Premature Termination 376

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11. Acceptance by Trustee 37612. Selection of Forum 376

Chapter 11 · Elder Law 377Elder Law 379I. Representing an Elderly Client 380II. Social Security 382

A. Retirement Benefits 3831. Calculating Benefit Amount 3832. Early or Late Retirement: Effect on Monthly Benefits 3833. Earning Penalties 3844. Taxation 384

B. Survivor’s Benefits: Eligibility 3851. Family Members 3852. Same-Sex Marriages and Non-Marital Legal Relationships 386

C. Social Security Disability Benefits: Eligibility 3861. Gateway Requirements 3872. Citizenship Requirements 3873. Medical and Vocational Qualifications 3874. Representative Payee 389

D. Supplemental Security Income 389III. Medicare 390

A. Part A—Hospitalization, Skilled Nursing and Rehab, and Hospice Care 3911. Eligibility 3912. Enrollment 3923. Coverage 392

a. Hospitalization Coverage 392b. Skilled Nursing Care Coverage 393c. Hospice Care Coverage 395

B. Part B—Supplemental Medical Insurance 3961. Eligibility 3962. Enrollment 3973. Covered Services 3974. Observation Status 3975. Medicare Secondary Payer Program 3996. Medigap Insurance 399

C. Medicare Advantage 400D. Part D—Medicare Prescription Drug Benefit 400

1. Eligibility 4002. Costs 401

IV. Veterans Benefits 401A. Eligibility 402B. Benefit Programs 402

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C. Health Care Benefits 4041. Nursing Home Care 4042. Non-Service Connected Benefits (Improved Pension Program) 4043. New Regulations for VA Needs-Based Programs 405

D. Death Pension 406E. TRICARE and CHAMPVA 406

V. The Public Aging Network in Maryland 407A. The Older Americans Act 408

1. Programs under the Older Americans Act 409a. Mandatory Programs 409b. Community Services 409

B. State Programs Outside the Older Americans Act 4101. Senior Care 4112. Senior Center Plus 4113. Congregate Housing Services Program 4114. Senior Assisted Living Group Home Subsidy 4125. Medicaid Home and Community Based Services 412

VI. Elder Abuse 412A. Types of Elder Abuse 412B. Federal Civil and Criminal Elderly Abuse Laws and Regulations 413C. Maryland Civil and Criminal Elder Abuse Laws and Regulations 414D. Reporting Elder Abuse 415E. Agency Responsibilities 415F. Remedies for Neglect and Abuse in Long-Term Care Facilities 418

VII. Elder Rights 418A. Rights of Long-Term Care Recipients 418B. Housing: Limited Liability for Breaking a Lease for Medical Reasons 421C. Driving 421

VIII. Asset Management 422A. Power of Attorneys 423B. Trusts 424

1. Social Security Special Needs Trusts 424a. 442 U.S.C. §1396p(d)(4)(A) Trust 424b. 442 U.S.C. §1396p(d)(4)(C) Trust 425

2. Maryland Special Needs Trusts 4263. Medicaid (Dis)Qualifying Trusts Post-OBRA ’93 4264. ABLE Accounts 427

IX. Probate 428A. Intestacy 428B. Probate of a Will 429C. Undue Influence in a Will 429D. The Maryland and Federal Estate Tax 430

X. Medical Decision-Making in Maryland 430A. Health Care Decision-Making in Maryland 430

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B. Surrogate Decision-Making 431C. Medical Orders for Life-Sustaining Treatment 432

XI. Guardianship 433A. Overview 433B. The Guardianship Process 433

1. Guardian of Property 4342. Guardian of Person 435

C. Alternatives to Guardianship 435D. Payment of Guardianship Commissions 436E. Uniform Adult Guardianship and Protective Proceeding

Jurisdiction Act 436XII. Housing 438

A. State Administered Senior Housing Programs 438B. Continuing Care Retirement Communities 438C. Assisted Living Facilities 439

XIII. Medical Assistance 440XIV. Community-Based Supports and Services 441

A. Long-Term Care Services in the Community 441B. Overview of Long-Term Care Insurance 443C. Medicare 444

1. State Buy-In for Qualified Medicare Beneficiaries (QMB) 4442. Special Low-Income Medicare Beneficiaries (SLMB) 444

D. Medicaid 4451. Community First Choice 4452. Home and Community-Based Options Waiver 4453. Community Personal Assistance Services and Medicaid Personal

Care Program 4464. Standards for All Home and Community Based Settings 447

Chapter 12 · Medicaid 449Medicaid 449I. Initial Meeting with Applicant 450II. Medicaid Eligibility 451

A. Residency 451B. Citizenship 452C. Aged, Blind, or Disabled 452D. Medical Eligibility 452

1. Level of Care 453E. Financial Eligibility 454

1. Income Eligibility 4542. Asset Eligibility (Resource Eligibility) 454

F. Exempt Transfers 457III. Application Process 459

A. Application and Documentation 459

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B. Filing the Application 460IV. Appeal 460V. Post-Eligibility Issues 462

A. Cost of Care Contribution 462B. Community Spouse Maintenance and Shelter Allowance 462C. Annual Recertification 462D. Reporting Requirements 463

Chapter 13 · Guardianship 465Guardianship 466I. Overview 466II. Guardianship of the Person and/or Property 469

A. Who Can Petition for Guardianship 469B. Where to File the Guardianship 470C. What Steps Are Required for Guardianship 471

1. Good Faith Basis of Need 4712. Certificate of Incapacity 4723. Petition 4734. Representation 4735. Service of Process 474

III. Petition for Guardianship of the Person 475A. Burden of Proof and Trial 475B. Grounds for Appointment 475C. Contents of the Petition for Guardianship of the Person 475

IV. Petition for Guardianship of the Property 476A. Burden of Proof and Trial 476B. Grounds for Appointment 476C. Contents of Petition for Guardianship of the Property 476

V. Role of the Court-Appointed Attorney 478A. In Re Sonny Lee 479

VI. Going to Court 482A. Burden of Proof 482B. Uncontested Cases 482C. Contested Cases 482D. Representing an Interested Person 483

VII. Costs and Fees 484A. Costs and Fees for Guardianship 484B. Fees for the ADP’s Attorney 485C. Fees for the Guardian of Property 486D. Fees for the Petitioner 486

Chapter 14 · Estate Administration 489Estate Administration 490I. Overview 490

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A. Administrative Probate/Judicial Probate 491II. The Personal Representative 492

A. Identifying the Personal Representative 493B. Representing the Personal Representative 494C. Personal Representative Commissions 494D. Duties of the Personal Representative 495

III. Types of Estates for Administration 496A. Small Estate 496B. Modified Administration 497C. Regular Estate 498

IV. Estate Administration Process 499A. Opening the Estate 499

1. Last Will and Testament 5012. Death Certificate 5023. Petition for Probate 5024. Notice of Appointment 5035. Bond of Personal Representative 5056. List of Interested Persons 506

B. Inventory and Information Report 5061. Inventory 5072. Information Report 5093. Appraisals 510

C. Accounts 5121. Final Account 5132. Assets Previously Reported 5143. Disbursements and Payments 5144. Distributions 5165. Reconciling the Account 5166. Administrative Accounting for Small Estates 5167. Administrative Accounting for Modified Administration 5178. Notice of Filing of Account for Regular and Modified

Administration 5179. Closing the Estate 518

D. Distributions 5191. Probate Assets 5202. Distributions to Minors 5213. Distributions to Trusts 522

E. Personal Representative Commissions and Counsel Fees 522

Chapter 15 · Will Caveats 525Will Caveats 526I. Preliminary Procedural Issues 527

A. Proper Parties 527B. Jurisdiction and Venue 527

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C. Standing 528D. Limitations 530E. Procedural Aspects and Effect of Filing Petition 531

II. Grounds to Caveat a Will 534A. Lack of Formalities — Improper Execution 534

1. In Writing 5342. Signed by Testator 5353. Attested by Two Credible Witnesses 536

B. Revocation of Will 537C. Capacity 538

1. Mental Capacity — Of Sound Mind 5382. Presumption of Mental Capacity 5383. Insane Delusion 5394. Evidentiary Issues 540

a. Documentary Evidence 542b. Testimonial Evidence 542

D. Undue Influence 5451. In General 5452. Factors 548

a. The Benefactor and Beneficiary Are Involved in a Relationship of Confidence and Trust 548

b. The Will Contains Substantial Benefit to the Beneficiary 550c. The Beneficiary Caused or Assisted in Effecting

Execution of Will 550d. There Was an Opportunity to Exert Influence 551e. The Will Contains an Unnatural Disposition 551f. The Bequests Constitute a Change from a Former Will 552g. The Testator Was Highly Susceptible to the Undue Influence 552

E. Fraud 554III. Additional Matters for Consideration 556

A. Discovery 556B. Trial 557

1. Procedural Issues 5572. Burden of Proof 5583. Evidentiary Issues 5584. Dead Man’s Statute 5595. Hearsay 559

C. Settlement 560D. Appeal 560

Appendix 561Chapter 1 · Overview

Form 1-1: Maryland Statutory General Power of Attorney 563Form 1-2: Supplemental Power of Attorney 571

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Form 1-3: Statutory Limited Power of Attorney 577Form 1-4: Advance Medical Directive 593

Chapter 2 · Ethical Issues in Estate PlanningForm 2-1: Joint Retainer Agreement 597

Chapter 3 · Establishing the Attorney-Client RelationshipForm 3-1: Estate Planning Data Form 600Table 3-1: Table of Consanguinity 608

Chapter 4 · The Last Will and TestamentForm 4-1: Last Will and Testament 609Form 4-2: Codicil 614

Chapter 5 · TrustsForm 5-1: Will with a Testamentary Trust 615Form 5-2: Inter Vivos Revocable Trust 628Form 5-3: Irrevocable Trust Agreement 637Table 5-1: Present and Future Interests 646

Chapter 6 · Transfer TaxesTable 6-1: Exemption Amounts 647Table 6-2: Gift Tax Table 648Table 6-3: Determination of Taxable Estate 650

Chapter 7 · Non-Taxable GiftsForm 7-1: Minor’s Trust — I.R.C. 2503(c) 651

Chapter 8 · Credit Shelter TrustForm 8-1: Will with Credit Shelter Trust 660

Chapter 9 · Marital DeductionForm 9-1: Will with QTIP Trust 674

Chapter 10 · ILITForm: 10-1: Irrevocable Assignment 688

Chapter 11 · Elder LawForm 11-1: VA Form 10-10EZ Application for Health Benefits 690Form 11-2: Nursing Home Transmittal No. 237 693Form 11-3: Medical Assistance Eligibility Review Form 3871B 696Form 11-4: MOLST Form 700

Chapter 12 · MedicaidForm 12-1: Checklist for Medicaid Applicant 702Form 12-2: Medicaid Application 703

Chapter 13 · GuardianshipForm 13-1: Petition for Guardianship of Alleged Disabled Person 721Form 13-2a: Physician’s Certificate 727Form 13-2b: Psychologist’s Certificate 732Form 13-2c: Licensed Certified Social Worker-Clinical Certificate 737Form 13-3: Order to Show Cause 742Form 13-4: Advice of Rights 743Form 13-5: Notice to Interested Persons 745

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Chapter 14 · Estate AdministrationForm 14-1: Probate Timeline 746Form 14-2: Fee Petition 747

Chapter 15 · Will ContestsForm 15-1: Petition to Caveat 751Form 15-2: Petition to Transmit Issues 754Form 15-3: Consent Order 757Form 15-4: Settlement Agreement and Limited General Release 759Form 15-5: Petition for Ratification of Agreement 763Form 15-6: Joint Stipulation of Dismissal of Caveat 767

Index 769

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xxvii

Table of Statutes

United States Statutes and Regulations

I.R.C. §1014, 296I.R.C. §1014 (a), 31I.R.C. §1015, 31, 295I.R.C. §2010(c), 334I.R.C. §2035, 26, 268, 365I.R.C. §2036, 269I.R.C. §2037, 269I.R.C. §2038, 270I.R.C. §2039, 270I.R.C. §2040, 271I.R.C. §2041, 272I.R.C. §2042, 21, 273, 363I.R.C. §2044, 273

I.R.C. §2056, 275, 340I.R.C. §2056(b)(7), 340I.R.C. §2503(b), 298I.R.C. §2503(b)(1), 30I.R.C. §2503(c), 313I.R.C. §2503(e), 30, 292, 300I.R.C. §2513(b)(2), 299I.R.C. §2514(e), 309I.R.C. §2518(b), 329Treas. Reg. §20.2042-1(c)(2), 273Treas. Reg. §25.2503-6(b)(2), 300Treas. Reg. §25.2503-6(b)(3), 301

Maryland Statutes and Regulations

Md. Crim. Law §3-606, 415Md. Est. & Trusts §1-101(i), 506Md. Est. & Trusts §1-210(b)(c), 88, 93,

95, 98Md. Est. & Trusts §1.210.1, 130Md. Est. & Trusts §3-102, 86Md. Est. & Trusts §3-103, 88Md. Est. & Trusts §3-104(b), 91, 93, 94,

98, 99Md. Est. & Trusts §3-110, 85Md. Est. & Trusts §3-203, 173Md. Est. & Trusts §3-205, 172Md. Est. & Trusts §3-301, 188Md. Est. & Trusts §3-302, 188Md. Est. & Trusts §4-101, 108Md. Est. & Trusts §4-102, 114Md. Est. & Trusts §4-103, 109Md. Est. & Trusts §4-104, 119

Md. Est. & Trusts §4-105, 168Md. Est. & Trusts §4-106, 171Md. Est. & Trusts §4-201, 124Md. Est. & Trusts §4-202, 501Md. Est. & Trusts §4-401, 108Md. Est. & Trusts §4-403(a), 109Md. Est. & Trusts §4-406, 147Md. Est. & Trusts §4-407, 141Md. Est. & Trusts §4-413, 156Md. Est. & Trusts §5-103, 109, 500Md. Est. & Trusts §5-104, 493Md. Est. & Trusts §5-105, 493Md. Est. & Trusts §5-105(b), 162Md. Est. & Trusts §5-207, 530Md. Est. & Trusts §5-701, 543Md. Est. & Trusts §5-702, 543Md. Est. & Trusts §5-708, 498Md. Est. & Trusts §5-801, 502

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Md. Est. & Trusts §5-802, 502Md. Est. & Trusts §6-101, 494Md. Est. & Trusts §6-203, 161Md. Est. & Trusts §6-403, 533Md. Est. & Trusts §6-431(c), 531Md. Est. & Trusts §7-103.1, 504Md. Est. & Trusts §7-201, 508Md. Est. & Trusts §7-202, 510Md. Est. & Trusts §7-601, 163Md. Est. & Trusts §8-103, 515Md. Est. & Trusts §8-103(a), 149Md. Est. & Trusts §9-103(b), 111Md. Est. & Trusts §11-102(b)(5), 217

Md. Est. & Trusts §13-218, 486Md. Est. & Trusts §13-704(c), 486Md. Est. & Trusts §13-705(c)(2), 472Md. Est. & Trusts §14.5-402, 198Md. Est. & Trusts §14.5-708, 223Md. Est. & Trusts §15-102, 218Md. Est. & Trusts §17-105(a)(b)(c), 11Md. Est. & Trusts §19-301.14(a)(b), 467Md. Fin. Inst. §1-204, 27, 28, 519Md. Health-Gen. §5-601, 15Md. Tax-Gen. §7-202, 21Md. Tax-Gen. §7-203, 22Md. Tax-Gen. §7-308, 150

Maryland Rules of Professional Conduct

Rule 1.1, 36Rule 1.2(a), 38Rule 1.3, 39Rule 1.4, 40Rule 1.5(a), 41Rule 1.6(a)(b), 41Rule 1.7, 43Rule 1.8(c)(f), 44Rule 1.14, 381

Rule 1.14(a)(b), 51Rule 1.18(b)–(d), 52Rule 5-701, 543Rule 5-702, 543Rule 6-431(c), 531Rule 10-106(a)(b), 485Rule 10-106(c), 485Rule 10-107(a), 484

Uniform Probate Code

Unif. Probate Code §2-104, 85Unif. Probate Code §2-102, 87Unif. Probate Code §2-103, 89, 93, 96, 99Unif. Probate Code §2-106, 89, 93, 96Unif. Probate Code §2-103, 92Unif. Probate Code §2-105, 100Unif. Probate Code §2-202, 185Unif. Probate Code §2-203, 185Unif. Probate Code §2-213, 172Unif. Probate Code §2-302, 189Unif. Probate Code §2-502, 118, 127Unif. Probate Code §2-503, 118Unif. Probate Code §2-504, 119

Unif. Probate Code §2-506, 120Unif. Probate Code §2-507, 169Unif. Probate Code §2-509, 171Unif. Probate Code §2-515, 124Unif. Probate Code §2-517, 156Unif. Probate Code §2-603, 110Unif. Probate Code §2-607, 148Unif. Probate Code §2-608, 142Unif. Probate Code §2-702, 109Unif. Probate Code §2-709, 131Unif. Probate Code §3-717, 161, 162Unif. Probate Code §3-719, 164Unif. Probate Code §3-902, 112

xxviii TABLE OF STATUTES

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xxix

Preface and Acknowledgments

This second edition brings the practical aspect of wills, trusts, and estates into theclassroom for students, and also serves as a practitioner’s resource for estate planningin Maryland and for those studying for the Uniform Bar Exam. With the additionof the Uniform Probate Code Statutes and commentary, this edition is particularlysuitable for any jurisdiction where the Uniform Bar Exam is given. Additionally, thebook will be useful for estate-planning drafting courses, and, with a case supplement,for the basic course in wills, trusts, and estates.

This book is divided into three parts. Part 1 applies to all estate planning, and ad-dresses aspects of estate planning applicable to an estate of any size. The coverage inthis section deals with ethical issues, the client interview, and the drafting of estate-planning documents including the Will, the Will with a testamentary trust, intervivos trusts, powers of attorney, and advance medical directives.

Part II covers federal and Maryland estate transfer taxes, which apply when theclients’ net worth exceeds the federal exemption amount. This section provides anoverview of the transformation of transfer taxes, and a discussion of the applicableInternal Revenue Code provisions. The focus is on estate-planning tools that avoid,minimize, and defer transfer taxes. These include non-taxable gift giving in trust,the use of federal and state exemption amounts in a credit shelter trust, the un-limited marital deduction in a QTIP trust, and the irrevocable life insurance trust.A chapter is devoted to each estate-planning tool and provides a commentary alongwith charts articulating the advantages and disadvantages of the respective estate-planning tool.

Finally Part III represents a variety of topics ancillary to estate planning, includingelder law, Medicaid, guardianship, estate administration and Will caveats. The PartIII topics were contributed by practitioners who are experts in their respective fields.They provide a general overview of each topic and specific guidance in those areasof law for the estate-planning attorney.

The book provides sample provisions, intake forms, and checklists that can beused as educational tools or in the practice of law. There are complete forms in theAppendix that allow the student or lawyer to examine the relevant discussion in acomplete format. In addition, the book provides a series of problems intended toengage law students in their study of wills, trusts, and estates along with suggestedresponses.

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xxx PREFACE AND ACKNOWLEDGMENTS

Acknowledgments

I would like to acknowledge and thank Jason A. Frank and his law clerk FedericoSalas, Alisa Chernack, Ria P. Rochvarg, Victoria L. Grace and Adam Zimmerman,and Michaela Cavanaugh Muffoletto for contributing chapters on elder law, guardian-ship, Medicaid, estate administration, and Will caveats. Their expertise and willingnessto make such contributions made coverage of these topics possible.

Special thanks to my research assistants Austin Cohen, Nicholas Pycha, and AshleyNelson-Raut for their excellent research and citation. Thanks to my administrativeassistant Laurie Schnitzer for all her assistance.

I am grateful to my husband, Howard Lenzer, my daughter, Valarie, and my son,Brian, for their love, support, and the sacrifices they made to allow me the time towork on the second edition of the book.

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