Wills are legal documents that provide direction on managing certain issues after one passes away. They can be a cost-effective choice for certain estates. However, property in a will goes through probate, which is a court-supervised procedure where a judge oversees the distribution of assets. Many people try to avoid probate because it can be time consuming, costly, and public. A person who makes a will is called a "testator." The person assigned by the testator in the will to carry out the testator's wishes is referred to as the "personal representative" or "executor."  

A trust is a legal arrangement where a person gives ownership of property to another person or entity referred to as the "trustee." The trustee holds property until it needs to be transferred to a trust's beneficiary. The trustee is often the same person or couple that forms the trust. Trusts are preferred by many because they avoid probate and can pass property quicker, cheaper, and more privately relative to a will. Trusts can be revocable or irrevocable depending on what the trust's creator (the "settlor" or "grantor") values. Revocable trusts are often preferred because they provide the settlor with flexibility and control to manage and distribute assets. Irrevocable trusts are beneficial for reducing potential estate tax liability and providing asset protection because they transfer control of assets away from the settlor. Trusts can also be created during one's lifetime ("living" or "inter vivos" trust) or at death ("testamentary" trust). A will and trust are not mutually exclusive.  A pour-over will is often used with a living trust and directs any assets remaining in one's name at the time of passing to be transferred into the living trust, and thus managed according to the trust's terms.  

A power of attorney is granted by someone to act on that person's behalf. The person who grants the power of attorney is the "principal" and the person receiving the power is the "agent" or "attorney in fact." Powers of attorney are often granted for financial or medical purposes and they can provide general or limited authority to the agent. A durable power of attorney allows for an agent to act on the principal's behalf notwithstanding the principal's subsequent disability or incapacity. In Maryland, when someone has designated an agent through a written power of attorney, it is presumed to be a durable power of attorney unless otherwise provided by the written terms. Powers of attorney for medical purposes are often referred to as advanced directives.  

Md. Health-General Code § 5-602 is part of the Health Care Decisions Act in Maryland and provides for Advanced Directives. This allows a person to make a written provision of health care for themself or withhold certain care. It can be used by individuals to decide how they want to be cared for so family members have clear direction about the that person's wishes. This is a common and useful tool in estate planning.

Establishing guardianship for minor children through a testamentary appointment (also known as testamentary guardianship) is an important reason that families initially pursue estate planning. Taking control over who will properly care for and raise your children is important so courts and other individuals don't exert more influence than you are comfortable with. Guardians can also be relevant for a disabled person. See Md. Estates and Trusts Code §§ 13-701 - 13-703.

Comprehensive estate planning should include updating beneficiary designation forms. Life insurance, retirement accounts, bank accounts, and brokerage accounts are examples of assets that may need to have revised designations. This is especially true if a trust will be a beneficiary of a particular asset/account.

Estate, Gift, and Generation-Skipping Transfer (GST) taxes are unique taxes that should be considered when estate planning. In 2017, the Tax Cuts and Jobs Act (TCJA) significantly raised the lifetime estate tax exemption amount, which is adjusted for inflation annually. The threshold is currently $13.99 million per individual and $27.98 million for a married couple (see portability below). However, the TCJA will sunset, or expire, at the end of 2025 unless Congress acts. If the TCJA sunsets without further action, the estate tax exemptions for individuals and married couples will be reduced by approximately half. The estate tax rate is progressive and ranges between 18% and 40%.

The annual gift tax exclusion amount in 2025 is $19,000 per individual and $38,000 per married couple. It can be given to an unlimited number of individuals each year. The gift tax rates are the same as the estate tax. The lifetime estate tax exemption and annual gift tax are often referred to as unified because annual gifts that exceed the maximum amount reduce the lifetime estate tax exclusion by such excess amount. Gifts that are less than the annual gift exclusion amount do not count towards the lifetime estate tax exemption.

The GST tax applies to transfers of assets to more than one generation below the transferor, such as from a grandparent to a grandchild or others who are at least 37.5 years younger. The GST is equal to the highest federal estate and gift tax rate at the time of the transfer, which is currently 40%.

In addition to federal taxes, Maryland imposes its own Estate, Inheritance, and Generation-Skipping Transfer (GST) taxes. Maryland's estate tax is not adjusted annually for inflation and is currently $5 million per individual and $10 million per married couple. The Governor proposed reducing those thresholds to $2 million per individual and $4 million per married couple although that was rejected. Maryland's estate tax rate ranges from 0.8% to 16%.

Maryland's inheritance tax is 10% although it applies to collateral heirs while direct or lineal heirs such as a spouse, child, and grandchild are exempt. The state's GST tax is the same as the federal amount and is discussed in Md. Tax-General Code §§ 7-401 - 7-406.

Portability allows a surviving spouse to assume the portion of the deceased spouse's lifetime estate tax exclusion that has not been used, which could effectively double the couple's exemption amount. The decedent's estate will need to allow this by how it is designed. Additionally, the surviving spouse needs to file a timely return and comply with other requirements or portability may not be permissible. In Maryland, portability is allowed for federal and state estate tax purposes.

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