Yes.  There are three major exemptions from transfer taxes:

• All transfers to a spouse are completely exempt from tax, which is known as the Marital Deduction.
  
  
• Gifts by one person of up to $13,000 per year are excluded from the tax (known as the Annual Gift Tax Exclusion).  If the donor's spouse consents to the gift, this exclusion can be doubled to $26,000. (This amount is indexed for inflation.)
  
  
• In addition to the Marital Deduction and Annual Gift Exclusion, in 2009 each person has a Federal Estate Tax exemption   ($3,500,000*), a Federal Gift Tax emption ($1,000,000) and a Maryland Estate Tax Exemption ($1,000,000). Transfers that are not exempt from tax will be subject to Federal taxes at rates ranging from a minimum of 37% to a maximum of 45%.  The Maryland Estate tax rates range from a minimum of approximately 10% to a maximum 16%.

*In 2010, the Federal Estate Tax is repealed.  In 2011, it is reinstated with a $1,000,000 exemption that is indexed for inflation and a top rate of 55%.

Yes.  A Trust can have one or more Beneficiaries at the same time, and can have successive, or remainder, Beneficiaries.  For example, Dad creates a Trust during his lifetime to own a life insurance policy.  After Dad dies, the Trustee receives the life insurance proceeds to hold in the Trust for the benefit of Mom for her lifetime.  Mom receives the income from the Trust.  Mom and the children may receive principal from the Trust for their support.  After Mom dies, the Trust terminates and the remaining assets are distributed to the children.

No.  A will does not control the disposition of certain types of property:

• Property owned by two (or more) people jointly with right of survivorship will pass automatically to the survivor(s), regardless of what the will says.  Most types of property can be owned jointly with right of survivorship, including real estate, automobiles, bank accounts, stocks and bonds.

• Property controlled by a beneficiary designation passes to the named beneficiary regardless of what the will says.  The most common example of such property is life insurance.  However, there are other types of property for which beneficiary designations are made, including pension and profit-sharing plan accounts, IRAs and bank accounts.  The owner of such property can bring it within the control of his or her will by designating his or her estate as the beneficiary, but this may subject it to Maryland inheritance tax.

• Property owned by a revocable trust (sometimes called a "living" trust) will be disposed of in accordance with the trust provisions.  The main advantage of a revocable trust is the avoidance of the time and expense associated with probate proceedings in court.  Another important advantage of a revocable trust is that it allows for someone other than the creator of the trust to independently manage the property, which is often helpful in the case of the elderly or the disabled.  The main disadvantages are the expense of establishing the trust and the cost and inconvenience of transferring the property to the trust.  The advantages and disadvantages of a revocable trust should be carefully weighed before one is established.

Sometimes.  If the income is distributed to the Beneficiary, the Beneficiary pays the tax on the income.  If the income is retained in the Trust, the Trust pays the income taxes.  Capital gains are considered principal items of the Trust and the Trust typically pays the capital gains taxes.

There is a tax imposed by the Federal Government on the transfer of property to someone else, whether the transfer is made before death by gift, or upon death by will, joint ownership, or beneficiary designation.

The inheritance tax is imposed on the receipt of property from a decedent.  The tax rate on property received by spouse, descendants, and siblings is 0%.  The tax rate on property received by "collaterals" is 10%.

If you become seriously ill or disabled, you may not be able to adequately manage your financial affairs or express your wishes concerning your medical treatment.  To plan for disability you should first, and foremost, have a will.  if you become permanently disabled to the point where you are legally incompetent, you will no longer be able to make a will.  At your death, your property would then be distributed according to Marlyand law.  Second, you should have a durable power of attorney.  Third, you should have an advance medical directive.  If your circumstances warrant it, you may consider establishing a living trust (also known as a revocable trust).

A Trust can be created during the lifetime of the Grantor by a written agreement with the Trustee.  The Grantor can retain the power to modify or revoke the Trust.  These Trusts are known as Revocable Trusts or Living Trusts.  When the Grantor has no power to modify or revoke the Trust, the Trust is known as an Irrevocable Trust.  All Trusts created during the Grantor's lifetime are known as Inter vivos Trusts.  A Trust can also be created by the Grantor at death under the Grantor's Last Will and Testament.  These Trusts do not come into existence until the Grantor's death, and are known as Testamentary Trusts.

 In Maryland, Trusts created after 1998 can go on in perpetuity.  A Trust created before 1999 must terminate after a certain time, typically 21 years after the death of the first Beneficiary of the Trust.  A Trust for charities can go on in perpetuity, regardless of the date it was created.

There are several Estate and Gift Tax advantages to making lifetime gifts rather than making gifts at death.  First, after the gift is made, any income from and appreciation on the assets is not subject to Federal and State death taxes in the estate of the person making the gift (the "donor").  Second, any Gift Tax the donor pays on a lifetime gift further reduces the donor's taxable estate, provided he lives at least three years after the gift is made.  Third, there is no state gift tax in Maryland while there are Maryland inheritance and estate taxes.  Lastly, transfers made during life are Tax exclusive while transfers made at death are Tax inclusive.

• For example, assume a donor has used his $1,000,000 Gift Tax Exemption.  The Gift Tax on a $2,000,000 gift is $885,000.  Stated differently, the donor needs $2,885,000 to transfer $2,000,000 to his beneficiaries by lifetime gift because the Gift Tax is applied only to the amount the beneficiaries receive.  Conversely, the donor would need $3,1000,000 to transfer $2,000,000 to his beneficiaries at death because the death taxes are applied on the entire estate, not only on the portion the beneficiaries receive.  In this example, $215,000 is saved by making a lifetime gift rather than by making the gift at death.

• For a married person with one or more children or descendants over 18 years old, the surviving spouse would get the first $15,000 and one-half of the remainder.  The surviving child gets the other one-half.  If there is more than one child, the children all equally share the remaining one-half. (Grandchildren take their deceased parent's share).   For a married person with one or more children or descendants under 18 years old, the surviving spouse gets one-half.  The surviving child gets the other half.  If there is more than one child, the children all equally share the one-half. (Grandchildren take their deceased parent's share).
  
  
• For an unmarried person with one or more children or descendants, the surviving child gets 100%.  If there is more than one child, the children all equally share the 100%. (Grandchildren take their deceased parent's share).
  
  
• For a married person without child, children, or other descendants, the surviving spouse gets the first $15,000.  If the decedent has surviving parents, one-half of the remainder goes to the surviving spouse, with the other half goes to the surviving parents.  If the decedent does not have surviving parents, all goes to the surviving spouse.
  
  
• For an unmarried person without child, children, or other descendants, all goes to the surviving parents, if applicable.  If there are no surviving parents, all goes to surviving brothers and/or sisters (Descendant of a deceased brother or sister take their deceased parent's share).  If there are no surviving parents, and no brothers and/or sisters, then all is distributed equally to collateral relatives within an equal degree of relationship (e.g. aunts and uncles).  If there are no persons entitled to take as mentioned above, the estate passes to the Board of Education in the County where the Letters of Administration were granted. 

Usually not if the couple is worth more than $1,000,000.  Although there would be no estate taxes imposed on the death of the first spouse because of the unlimited marital deduction, on the death of the survivor everything over $1,000,000 would be subject to tax.  For example, Husband and Wife have $300,000 in home equity, $500,000 each in life insurance coverage, $600,000 in retirement plans, and $100,000 in other assets (totaling $2,000,000).  Husband dies and leaves Wife everything, free of Estate Tax.  Wife dies the next year, still owning the entire $2,000,000.  Wife's estate gets a $1,000,000 tax exemption, but the remaining $1,000,000 is taxed.  The Maryland Estate Tax bill will be approximately $100,000, and the kids are left with $1,900,000.  If the value of the assets were doubled ($4,000,000) the total tax bill would be approximately $1,055,000, leaving the kids with $2,945,000.

A living trust is not always advantageous for every person.  A living trust will not save any more taxes than a properly drafted will and will not put the grantor's assets out of the reach of his or her creditors.

The primary disadvantages of a living trust are:  

• The expense of having a trust document drafted.
• The inconvenience and cost of transferring assets to the trust.

The primary advantages of a living trust are:

• Can avoid the delay of probate.
• Provides for management of your assets if you become disabled or incompetent.
• Relieves you of the burden of managing your investments.  
• Avoids the interruption of the flow of income on your death, disability or incapacity.                                                    
• Possibly avoids ancillary estate administration in differing states when you own property in two or more states
• Can protect your privacy because probate filings are a matter of public record and living trust assets normally are not.

Although a living trust and a durable power of attorney accomplish much of the same purposes, a durable power of attorney has several shortcomings which a living trust does not.

• There is no legal requirement that a third party accept the agent's authority to act under a durable power of attorney.                       
• If the durable power of attorney was signed many years in the past, third parties may reject the agent's authority.                              
• It is generally not advisable to place conditions in the durable power of attorney which state when the agent may act on behalf of the principal.
• The durable power of attorney terminates at the death of the principal.

The Trustee, who can be an individual or an entity, such as a bank or trust company, legally owns property in the Trust (known as principal or corpus).  Because the Trustee holds the assets of the Trust for the benefit of the Beneficiaries, the Trustee has certain responsibilities and owes certain duties (both of which are knows as "fiduciary duties") to the Beneficiaries.  A Trustee's fiduciary duties are mainly governed by the Trust Agreement or the Will.  The law governing the Trust also imposes fiduciary duties on the Trustee, which are briefly stated in the next few paragraphs.

• A Trustee is responsible for the preservation and protection of the assets of the Trust and the promotion of the best interests of the Beneficiaries.  A Trustee owns a duty of loyalty to the Beneficiaries of the Trust and must not act in his own interests or in the interests of third persons at the expense of the Beneficiaries.  A Trustee owes the same duty to all Beneficiaries of the Trust and may not act with Partiality or favoritism to some Beneficiaries at the expense of the other Beneficiaries unless the Trust Agreement or Will indicates otherwise.
  
  
• A co-Trustee generally cannot shift his legal responsibility to perform his duties to another by delegating those duties.  A Trustee must be careful and diligent in the exercises of his duties and powers and is required to use the care, diligence and prudence in the administration of the Trust as an ordinarily careful person would use under like circumstances with respect to that person's own affairs.
  
  
• A Trustee is not necessarily required to maximize the return on Trust investments but must secure a just or reasonable return while avoiding undue risk of loss of the principal.  The law with respect to the investments made by a Trustee is complex and a special election may be available to have a different type of legal standard govern the Trustee's investment decisions.

The benefits of Trusts are numerous.  The main benefit is the protection of the assets held in the Trust.  A properly established Trust can save estate taxes at death, thereby preserving more of the assets for the family.  A Trust can preserve the assets for a Beneficiary who has a creditor problem or a failed marriage.  In such a case, the creditor or ex-spouse cannot reach the assets of the Trust as they could if the Beneficiary owned them in his or her own name.  Also, a Trust can preserve the assets for a Beneficiary who has diminished capacity to manage his or her own financial affairs or who has spendthrift tendencies.  In the case of a Revocable Trust (aka a Living Trust), the administration of a decedent's estate can be streamlined, particularly when real property is owned in two or more states, and the privacy of the decedent can be preserved.

A will allows you to appoint a guardian to have custody of any minor children who may become orphaned.  The guardian should be the person who you would most like to take your place as parent to raise your children.  Most testators with minor children also provide for a trust to own the property inherited by those children until the children reach a responsible age.  A trustee must be named to handle the trust.  If you die intestate leaving orphans under age 18, guardians must be appointed by the court to raise the children and handle their property.  These court procedures can be lengthy and costly, and a court-appointed guardian will be required to report back to the court periodically.  Guardians and trustees appointed in a will operate free of court supervision, but are legally required to act in a responsible manner.

A will can be used to help minimize estate tax liability.  Generally, a married couple with a joint gross estate of over $1,000,000 should consider estate tax planning.

A durable power of attorney is a written instrument authorizing another person (called the attorney-in-fact or agent) to manage your financial affairs (you are called the principal).  The power of attorney grants the agent the authority to deal with your property on your behalf.  If you become disabled, your agent would be able to sign checks, make deposits and withdrawals from bank accounts, and sell or transfer your property.  This can be a very useful took to insure that your bills are paid and your checks deposited.  Generally, a power of attorney is effective immediately when signed, although there is an understanding that the power will not be used until you are unable to act for yourself.

A living trust is a revocable trust established by a person called a grantor.  The grantor retains full control over the assets transferred to the trust and retains the right to amend or revoke the trust during his or her lifetime.  If the grantor becomes disabled, a person designated by the grantor in the trust document will act on behalf of the grantor for assets held in trust.  All of the assets held in the trust are governed by the terms of the trust document, which can be drafted (within certain limitations) in any manor the grantor desires.  When the grantor dies, the trust becomes irrevocable and the trust controls the disposition of these assets.

A Trust is simply an agreement between two parties for one party, the Trustee, to hold and manage the property of the other party, the Grantor (aka Settlor) for the benefit of someone, the Beneficiary.  The Grantor is the creator of the Trust, and is the one who specifies the provisions of the Trust, which can be as broad or narrow as the Grantor likes.

Very simply, a will is a written document by which a person provides for the disposition of his or her property (the "estate") at death, names an individual to administer his or her estate, and appoints a guardian for minor children.

An advance medical directive authorizes another person to make decisions for you regarding your health care if you become incapable of making such decisions.  An advance medical directive also sets forth instructions to your health care providers regarding your wishes when you are terminally ill or in a coma or persistent vegetative state.  In this respect, an advance medical directive is similar to a living will; however, a living will cannot appoint a person to make health care decisions for you.

In general, everything you own is subject to tax, including:\

• One-half of jointly-owned property
• Face amount of life insurance policies
• Value of retirement plan accounts

They should have split up ownership of their assets equally and set up "credit shelter" (or "bypass") trusts in their wills.  Upon Husband's death, his $1,000,000 would go to the trust instead of to Wife outright.  Wife can have all the trust income and special access to the principal during her remaining life.  Husband's $1,000,000 estate is fully covered by the Maryland $1,000,000 exemption.  When Wife dies, the credit shelter trust is not counted in her estate for estate tax purposes.  The $1,000,000 she does own is covered by her $1,000,000 exemption.  The Maryland Estate Tax has been completely avoided, and the kids receive the entire $2,000,000.  The same planning technique works to minimize the Federal Estate Tax when a couple has assets greater than $2,000,000.

If the couple's net worth is less than $1,000,000, they need no transfer tax planning, but should consider other estate planning to protect their assets and families.  However, if their home equity, face value of life insurance, retirement accounts, and other assets total more than $1,000,000, they should take steps to minimize transfer taxes.

A will allows you to select the Executor or Personal Representative of your estate.  This person is subject to court supervision and has the basic duties of gathering and protecting your assets, paying creditors, filing tax returns, and making the distributions set forth in your will.  If you die intestate, the court will appoint someone to administer your estate who will be bound to distribute your property according to Maryland law.  The process by which all of this happens is generally called "probate."

Any person or entity can be the Beneficiary of the Trust, including the Grantor.  Typically, Trusts are created for individuals and charities.  Now, in Maryland, you can create a Trust to take care of a pet.

This depends on how your property is owned and whether you are married, have living children, or have living parents. Generally, in Maryland, if you die without a will ("intestate"), your spouse is a beneficiary by law; however, he or she will share your estate with your children, or, if you have no children, with your parents. (See Maryland Intestacy)

Every person who has minor children and/or who owns property should make a will.  Joint ownership of property is not always an effective method for insuring that your property will pass to the proper person after you die.  For example, if both joint owners were to die together in an accident without wills, their property would be distributed according to Maryland law, which may not be how they intended.