Winter 2012 - WALSHLAW REPORT by Walsh & Company, P.A.

THE WALSHLAW REPORT Advisors in Estate Planning, Elder Law, Taxation, Business Law

Winter 2012

FEDERAL ESTATE TAX:

“Nothing is UnCertain but Death [...] Taxes” A necessary element of sound estate planning should be an analysis of potential federal estate tax, and planning for means to reduce or eliminate the tax. The well-know aphorism that “nothing is certain but death and taxes” is a reality that should be addressed. The tax rate could be so high (effectively, 40-55%) that, except for more modest estates (under $1,000,000), the tax at least should be considered. It is relatively common for a household to accumulate over $1,000,000 of net worth, taking into account typical values of homes, life insurance policies, and IRA or pension benefits. With the very broad definition of what is included in the estate for tax purposes, the tax could apply to many assets that may not ordinarily be considered, such as the following: • Half of the value of property owned jointly by husband and wife would be included in the estate of the first spouse to die, but if property is owned jointly with anyone other than a spouse, the entire amount is included in the estate of the first joint owner to die, unless it can be proven that a portion was contributed by the surviving joint owner. • The full death benefit payable on a life insurance policy on the decedent’s life is included in the decedent’s estate if the decedent has any incident of ownership in the policy (for instance, the power to change the beneficiary of the policy), and is included at the full face value, rather than the cash surrender value. • The current value of a life insurance policy owned by the decedent on the life of someone else may be includible in the decedent’s estate. In a typical estate plan, one attempts to anticipate possible long-term alternate scenarios involving the

client’s assets at the time of the eventual death, and to formulate an approach, and appropriate documents, to best meet the client’s expectations and goals in the various scenarios. Therefore, an ability to forecast the potential tax consequences of each scenario is necessary in order to be able to plan for the tax. In other words, some certainty of the likely estate tax consequences in a particular situation is necessary for the estate planner to be able to advise the client how to navigate the potentially costly waters of the federal estate tax. In previous newsletters, we have described the saga of estate tax legislation in the last decade, which only detracted from any long-term certainty of potential taxes. Before 2002, the threshold value at which the tax started, and the tax rates (both effective beginning rate and top rate) changed infrequently, and then only in relatively small increments. As the result of legislation in 2001, the estate tax became subject to almost yearly changes. Beginning in 2002, the

IN THIS ISSUE: • Federal Estate Tax • A History of Income Tax • Financial Power of Attorney • Walsh and Company in the Community

threshold increased every year or so from $1,000,000 to $3,500,000 by 2009, with a corresponding gradual reduction of the top tax rates from 55% to 45%. Then, for 2010, a scheduled “sunset” repealed

Winter 2012 — THE WALSHLAW REPORT the estate tax, followed further by a scheduled reinstatement of the tax in 2011 at the old $1,000,000 threshold and 55% top rate (41% effective starting rate). The threshold amount for gift tax remained at $1,000,000 throughout this period. Because the potential tax effects became such a “moving target”, with materially different tax consequences depending on when the client died, it became more difficult and impractical to craft a workable estate plan to cover all of the possible scenarios in a single document. Many estate planners switched to a more short-term approach, which would require more frequent reevaluations of the estate plan. So much for certainty.

predictable legislation to finally resolve the uncertainty of the estate tax law (and, at least, avoid the return to the “bad old days” with 2001 levels for the tax). We did end up with some changes, but we also got Round Two of “kick the can down the road.” The good news is that the tax threshold was pushed all the way up to $5,000,000 per estate, with both an effective starting rate and a top rate of just 35%, the lowest starting rate since 1987 and the lowest top rate since 1932. However, this law is scheduled to end after 2012 and the tax again is scheduled to revert to the 2001 levels, beginning 2013, unless Congress is able to adopt different legislation by then (after yet another Presidential and Congressional election). To quote Yogi Berra: “This is deja vu all over again”.

The underlying premise of the 2001 legislation was that the parties involved (the President and Congress, Democrats and Republicans) couldn’t reach any sort of lasting agreement on the tax, so they “kicked the can down the road” by putting in place a system of varying parameters and the unthinkable demise and resurrection of the estate tax. This seemed so unworkable that it was assumed that, with a number of elections and changing circumstances between 2002 and 2010, someone would do something at some time to bring some stability and predictability back into the estate tax system through some reasonable and long-lasting legislation.

The Current Estate Tax Law There is a uniform system of transfer taxes involving three types of taxable transfers: gift tax (payable on transfers made during the donor’s lifetime), estate tax (payable on transfers made upon the person’s death), and generation-skipping tax (transfers made to recipients at least 2 generations removed from the donor/decedent). Under the Tax Relief Act of 2010, basic changes were made to raise the threshold of the amount subject to any of these transfer taxes, and to reduce the tax rate. The threshold (exclusion amount) was raised to an aggregate of $5,000,000, per donor or decedent, for any combination of these transfers. The gift and estate tax exclusion amounts are “integrated” for uniform application. For example, if a gift is made in the amount of $1,000,000, and then the donor dies and leaves an estate of $6,000,000, the total amount subject to tax (in excess of the exclusion) would be $2,000,000 (6,000,000 + 1,000,000 - 5,000,000).

In the end, Congress did not live up to its expectations. As the looming demise of the estate tax approached at the end of 2009, Congress was no closer to a more permanent solution to the estate tax conundrum. In fact, Congress was so distracted by other legislative battles (primarily health care), and still so divided by the different party stances on estate tax, that they failed even to avert the “unthinkable” 2010 repeal – while the House managed to pass a bill that at least extended the 2009 provisions to allow another year to accomplish something, the Senate did not follow suit.

The effective transfer tax used to be based on a progressive tax rate schedule. In 2001, the effective rates ranged from 37% to 55% on the value of the taxable estate. Today, the effective rate is a flat 35%. By way of comparison, the estate tax on a taxable estate of $6,000,000 would have been $2,595,000 in 2001, compared to just $350,000 today.

Following the 2010 mid-term Congressional elections, resulting in voting control being split between the Democrats and Republicans, Congress was set to come up with some more lasting and 2

Winter 2012 — THE WALSHLAW REPORT Another important feature of the new law is the introduction of “portability”. Each decedent’s estate is entitled to its own exclusion amount. Theoretically, that should mean that, with the current threshold amount, a total of $10,000,000 should be excluded from the combined estates of a husband and wife. However, under the old law, two aspects of estate tax and general law would come into play that could reduce this “safe haven” amount.

The second aspect follows from the practice of using a trust, established under the first spouse’s Will, for the benefit of the surviving spouse, that does not qualify for the marital deduction (a “bypass trust”). This would enable the estate of the first spouse to make more use of the exclusion and less of the marital deduction. However, this only would be effective for assets that are controlled by the Will (so that they can be directed by operation of the Will to the bypass trust). Two types of assets would not be controlled by the Will: (1) assets that pass by operation of law, such as jointly-owned assets that automatically pass to the surviving joint owner regardless of the Will, and (2) assets with a beneficiary designation, such as life insurance or retirement plan death benefits, that pass according to the designated beneficiary as a matter of contract law, regardless of any provision in the Will. If assets in these categories (which often comprise a significant portion of the total taxable estate) pass to the surviving spouse, then the marital deduction would apply, without the benefit of the exclusion.

The first is that there is a “marital deduction” for assets that pass to a surviving spouse, either directly by a bequest in the Will, or by virtue of jointlyheld assets that automatically pass to the surviving joint owner on the death of the first spouse. This deduction reduces the taxable estate of the first spouse to die, but then the tax law requires that the surviving spouse’s estate must include those assets that qualified for the marital deduction. This is so even to the extent that the first estate would not have owed tax anyway because of the exclusion. This means that if assets qualify for the marital deduction, that value will increase the surviving spouse’s estate, causing the tax to be paid by one of the estates. The marital deduction only enables the couple to defer that tax until the second spouse dies, but it can not be entirely avoided by both of the estates. If the first spouse’s estate can make maximum use of the exclusion amount available, before resorting to the marital deduction to reduce the taxable estate, that exclusion amount ordinarily would not be included in the surviving spouse’s estate either, and the corresponding tax would be eliminated for both estates. Therefore, the traditional estate planning approach was to avoid the use or qualification of assets for the marital deduction, to the extent they could fall within the amount of the exclusion.

To the extent the exclusion amount remains unused in the first spouse’s estate, due to the marital deduction, that exclusion is effectively “lost” and the total amount shielded from estate tax is reduced, resulting in more combined tax for both estates. Now, the new law introduced “portability.” Basically, this provides that any portion of the exclusion amount that is not used by the first spouse’s estate, may be transferred to and become usable by the surviving spouse. This means that the problems noted above would no longer apply, so that even if the first spouse’s estate “loses” some (or even all) of the exclusion because of the marital deduction, the surviving spouse may add that exclusion to the surviving spouse’s own exclusion amount, so that the full amount of both exclusion amounts can be used by the couple. Moreover, since there is a uniform transfer tax system involving three different taxes (gift, estate, and generationskipping), this transferred, unused exclusion may be used by the surviving spouse during that spouse’s

Winter 2012 — THE WALSHLAW REPORT lifetime, to make gifts that otherwise would be taxable, but now would be shielded by the enhanced exclusion. Although this concept had been proposed and considered in the past, this is a striking change that should simplify the planning for couples with combined estates not in excess of $10,000,000.

alone or together with up to 2 other families) owned a certain controlling interest, then the decedent’s estate could deduct up to $675,000 of the value of that business interest. This deduction was eliminated for decedents dying after 2003. If the old law reverts after 2012, this deduction would be reinstated.

Unfortunately, portability, like the increased exclusion amount and reduced tax rate, is only effective until the end of 2012, and, unless Congress enacts new legislation, there will be no portability available after 2012.

Planning Today .... for Tomorrow? Traditionally, the hallmark of sound estate planning was long-range planning to predict and cover, as much as possible, all likely outcomes. This is no longer feasible. For the short term, the changes comprising the current law are a welcome easing of the tax restrictions on the transfer of assets to family and future generations. The estate planning for many families, particularly those who have a combined potential estate value not exceeding $10,000,000, could be simplified, enabling them to pass on their property directly, without having to take any additional steps due to estate tax considerations. But will this last? There is no way to tell what the law will be after 2012. It all could depend on numerous variables, such as election results, changes in the economy, and possible needs to raise additional tax receipts, as well as other issues that could come to the forefront, or even a Congressional deadlock.

There are other effects that would result from the scheduled reversion to the “old” law after 2012, including the following: Tax Credits: Until the change in law in 2001, there was a direct credit against the federal estate tax, dollar for dollar, for all state and local death taxes paid. This meant that the total amount of death taxes couldn’t be more than the federal tax, and the state and local taxes were just “carved out” as a portion of the total federal amount. However, under the 2001 law, beginning in 2004, the credit was replaced by a deduction, which meant that the state tax could be a separate amount in addition to the federal amount, even if there was no federal tax. This is particularly the case for a Maryland tax, where the threshold amount for the Maryland estate tax is kept at $1,000,000, regardless of the federal exclusion amount. The Maryland tax is the lower of either 16% of the excess value above the threshold, or the amount based on the progressive rates used to calculate the federal state tax credit (an effective rate starting at 6.4%). With the scheduled sunset of the changes after 2012, the former credit would be reinstated, which should result in the elimination of the additional state death tax.

Looking past 2012, until some certainty is reinstated, it would be prudent to assume the worst, that the limitations of the old law will end up being reinstated after 2012. This would mean that wills and other estate planning techniques should be based on an assumption that the federal exclusion amount will go down to $1,000,000, the rates will increase to the 55% maximum (beginning at 41% at the $1,000,000 asset level), and there would be no portability of any unused exclusion amount from the estate of the first spouse to die. Bypass trusts, gifts to irrevocable trusts, and a host of other methods to ameliorate the estate tax effect should still be kept in mind, just in case.

Family-owned business deductions: Also under the old law, there was a limited deduction for a “qualified family-owned business”, with a value of up to $675,000. If the decedent owned an interest in a USbased business in which the decedent’s family (either

In the meantime, some aspects of the current law, such as the higher exclusion amount for gift tax 4

Winter 2012 — THE WALSHLAW REPORT and generation-skipping tax (GST), present estate planning opportunities. Regarding gift tax, the applicable exclusion amount dictates the amount that can be transferred without having to pay gift tax at the time of the gift (although this would have an effect on the amount taxable in the donor’s ultimate estate), or the amount of tax payable on transfers in excess of the exclusion amount (because of the lower tax rate). In the appropriate case, it may make sense to make transfers taking advantage of this increased exclusion now, while the higher exclusion remains in effect. There could be no immediate tax payable, and, at the worst, if the exclusion amount is reduced, that would only take effect when the donor dies, in the form of additional estate tax, which would have been payable anyway once the exclusion was decreased. Also, if the particular asset is likely to appreciate in value, it is better to transfer the asset now, so that any increase in value would take place in the hands of the recipient, thereby preventing that increased value from being included in, and taxed on, the donor’s estate.

• Dynasty Trusts, lifetime trusts established for the benefit of multiple generations. The increased gift and GST exclusion amounts allow an increased amount to be made available for later generations without generating GST tax (which always is a limiting factor). Conclusion The latest round of transfer tax legislation appears to have been advantageous for a large portion of the population, and presents short-term opportunities to save substantial amounts of tax down the road. This may be a good time to examine your estate plan to determine if any of those opportunities would be beneficial; if so, there is just a relatively short period of time during which they can be acted on. Nevertheless, the long-term estate planning picture remains uncertain, and it would be prudent to keep your estate plan flexible to accommodate the wider range of possible tax laws and effects. — Jonathan E. Greenstein, Esq.

Transfers other than outright gifts may also be advantageous under the new law. There are a number of types of trusts that have evolved over the years, based on a low exclusion amount, that could be adapted to the current tax situation, including the following:

Walsh and Company, P.A. Suiting Your Needs In The Following Areas:

• Grantor Trusts, where the donor pays the income tax on the income generated by the trust assets, but any appreciation in value should avoid federal estate tax and all assets should avoid state estate tax. Also, the tax paid by the donor reduces the amount of assets that would remain to be included in the donor’s estate. • Lifetime Bypass Trusts, in which a trust is established during the donor’s lifetime (instead of in a Will) for the benefit of the donor’s spouse and descendants. This takes advantage of the increased exclusion amount, the gift either avoids or at least defers state estate tax, appreciation in value escapes estate tax, and the trust protects those assets against the donor’s creditors.

Estate Planning: Wills & Trusts Probate & Trust Administration Executor & Trustee Services Senior Services & Elder Assistance Medical Assistance Planning Elder Law IRS Tax Disputes Tax Preparation Business Planning & Organization Real Estate

Winter 2012 — THE WALSHLAW REPORT

A History of Income Tax

Court declared it unconstitutional, and Congress repealed the act in 1895.

Benjamin Franklin once wrote, “In this world nothing can be said to be certain, except death and taxes” — something all taxpayers can attest to, particularly around April. Income tax, though, was not always quite so certain — in fact, for most of our nation’s history, income tax did not even exist. Congress did not enact income tax in the United States until 1862, as a means to support the cost of the Civil War. Prior to that, the government had merely taxed imported goods to sustain itself.

The Supreme Court’s decision was unpopular, though, and in 1913, Congress and 42 states circumvented the Court’s decision by ratifying the 16th Amendment to the Constitution, which unequivocally granted Congress the power to collect income tax “from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” When the income tax was created in 1913, the highest tax rate for married couples filing jointly was 7%, applicable to those making over $500,000 a year (over $1 million today). However, when the United States entered World War I in 1917, income tax rates rocketed up to 54% for those making over $500,000 a year; for those making the average income of $750 per year, though, the tax rate was only two percent. Tax rates shot up again at the start of World War II, up to 77% for those making over $500,000 in 1941 and peaked at 94% for all making over $200,000 (about $2.4 million today) in 1945. Thankfully, the income tax has since lowered, with the highest tax bracket currently sitting at 35%. — Anna Walsh

The Act of 1862 established the office of Commissioner of Internal Revenue, whose powers included the rights to assess, levy, and collect taxes, and to enforce the tax laws by seizing property or through prosecution, similar to the Internal Revenue Services’ powers today. At that time, a person earning between $600 and $10,000 per year (about $13,000 to $216,000 in today’s dollars) had to pay a 3% income tax, while those making more than $10,000 a year had to pay a higher rate. Once the Civil War ended, Congress decided to focus its taxation efforts on tobacco and alcohol, and in 1872 it eliminated the income tax. The income tax did not reappear until 1894, when the growing Populist movement and the growing lobby to tax the rich influenced Congress to pass the Wilson-Gorman Tariff Act of 1894, which created a flat 2% income tax on all income over $4,000 (about $100,000 today). Not everyone approved of this tax, however; a Massachusetts citizen named Charles Pollock, upon learning that the ten shares of stock he owned in the Farmers’ Loan & Trust Company made him liable to be taxed under the act, sued the company to prevent them from paying the tax. The Supreme Court agreed to hear the case, and decided that certain taxes in the Wilson-Gorman Tariff Act were direct taxes, which, according to the Constitution, needed to be imposed in proportion to a states’ population. Since the act did not impose those taxes proportionally, the Supreme

On the following page is a page from the 1864 income tax return. To see the rest of the tax return and to read additional articles written by our attorneys, please visit www.walshlaw. wordpress.com.

Revised proofs requested

FLAT SIZE: 81⁄2” x 11” PERFORATE: ON FOLD DO NOT PRINT — DO NOT PRINT — DO NOT PRINT — DO NOT PRINT

Date

, and State of

of the

of , whether derived from any

that the following is a true and faithful statement of the gains, profits, or income of

per cent.

Dated at

TOTAL

, 1864.

this

day

}

(Signed)

AMOUNT.

, 1864.

Sworn and subscribed before me, this

per cent.

Income exceeding

upon a portion of which a tax of 3 per cent has already been paid, subject to

per cent.

Income from property in the United States owned by a citizen thereof residing abroad, subject to

11⁄2 per cent.

De. subject to

Income derived from interest upon notes, bonds, or other securities of the United States, subject to

3 percent.

RATE.

Income subject to

Tax under the excise laws of the United States:

Assistant Assessor.

day

AMOUNT OF TAX.

source whatever, from the 1st day of January to the 31st day of December, 1863, both days inclusive, and subject to an Income

kind of property, rents, interest, dividends, salary, or from any profession, trade, employment, or vocation, or from any other

in the County of

I hereby certify

Winter 2012 — THE WALSHLAW REPORT

Our Lawyers JONATHAN E. GREENSTEIN, Esq. has been practicing law for over 30 years in Maryland, with emphasis on estate planning, estate and trust administration, tax planning and practice, and corporate and business planning. He also works in real estate developments and transations, with experience in planning, structuring and documenting real estate sales, purchases, development, and like-kind exchanges. A former CPA, Mr. Greenstein has both a juris doctorate degree and a masters degree of law in taxation, giving him a depth of knowledge in the taxation issues that may affect his clients. Mr. Greenstein is an adjunct professor at the University of Baltimore. He can be reached by email at jgreenstein@walshlaw.com.

JAMES D. WALSH, Esq. is an attorney and CPA, and a recognized authority throughout Maryland in the practice areas of Estate Planning, Elder Law, Estate and Trust Administration, Tax Planning, and Business Planning. Mr. Walsh also frequently represents clients in tax controversies before the IRS and state tax authorities. As both an attorney and CPA, Mr. Walsh brings a unique and beneficial combination of skills to his practice. Mr. Walsh is frequently in demand as a speaker on estate planning and tax issues before professional, legal, and accounting organizations, as well as community groups. Mr. Walsh is an AV rated lawyer on Martindale Hubbell’s national directory of lawyers, which publishes ratings of lawyers based upon the evaluations of other practicing lawyers. The AV rating is the highest rating a lawyer can receive, comprising only 10% of the lawyers in the United States. He can be reached by email at jimwalsh@ walshlaw.com.

Explaining Financial Power of Attorney

recognized authority to deal with the asset in the place of the owner. That is where a financial power of attorney is needed.

What is it?

Basically, a financial power of attorney is a document that legally authorizes someone (called the “attorneyin-fact” or “agent”) to act on behalf of the owner (the “principal”). The form identifies who is to serve as the agent, any particular circumstances or assets involved, and gives the necessary authority for third parties to deal with the agent in the principal’s absence. Very often, a power of attorney gives broad authority covering all assets and financial transactions (this is referred to as a “general power of attorney”). A financial power of attorney can be useful in a variety of situations where the principal is either unavailable or unable to take care of his finances, such as:

If you were in an accident and left in a coma, how would your bills be paid? Who would be able to manage your investments? If your assets are owned jointly with someone else, such as a spouse, that would be easy – the joint owner would have full legal authority to deal with those accounts and assets. But what if there is no spouse, or if assets, such as bank accounts, are just in your name? Ordinarily, only the legal owner of an asset may deal with that asset. If the owner wants someone else to be able to do anything with an asset (such as making a withdrawal from a bank account), especially in an emergency, the other party involved (such as a bank) will not allow the transaction, or even provide information about the asset, unless that other person has some legally-

•

deposits and withdrawals of a bank account owned by one person

Winter 2012 — THE WALSHLAW REPORT • • • •

transactions or obtaining information of an investment account owned by one person managing the finances and assets of an elderly or incapacitated person dealing with government programs such as Social Security, Medicare, or Medicaid, or retirement plans, on behalf of the recipient filing tax returns on behalf of an incapacitated person

requiring periodic reports, and the court file often is a public record). The Traditional Power of Attorney and its Shortcomings Traditionally, a power of attorney had no particular form or wording, although certain language developed and became acceptable, as the result of court decisions. Each lawyer had his or her choice language and form, but this had some serious shortcomings.

Typically, the power of attorney is kept among the principal’s important papers, available if and when needed.

For example, the case law required that a power of attorney must spell out the authority in specific detail, but there was no definitive set of rules as to what language would be needed to “work”. Therefore, depending on the skill and experience of the attorney drafting the document, there often were powers of attorney that didn’t actually contain the precise language that a court would accept. This could lead to instances where a power of attorney later would be rejected, often at the point where the principal was no longer able to correct it.

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A financial power of attorney is a relatively simple and inexpensive way to ensure that someone is available to take over a person’s finances if the principal becomes incapacitated. An alternative would be to have a guardian of the property appointed by a court for the disabled person. This would give legal authority similar to a power of attorney (although a guardianship may be preferable in certain situations), but a guardianship would be much more expensive (there would be court hearings, attorney fees, and other costs associated with a civil lawsuit, which could cost thousands of dollars), time-consuming (unlike a power of attorney, the guardianship doesn’t come into effect until the entire process has concluded, which can take months), and intrusive (a guardianship is under court supervision

There was no assurance that third parties, such as financial institutions or government agencies, would accept the power of attorney and allow the agent to act on its authority. Since there was no officiallyrequired language to authorize an agent to act in

To stay up-to-date with information regarding estate planning, elder law, taxation, and business law, visit Walsh and Company’s blog at www.walshlaw. wordpress.com. To subscribe to the blog and receive email notifications of new posts by email, click “Sign me up!” at the bottom of the left-hand column on the blog’s website.

Winter 2012 — THE WALSHLAW REPORT a particular situation, it often was left to the legal department in the “back office” to decide whether a particular power of attorney would be accepted. If the institution’s lawyer didn’t like that particular language, or even if the lawyer just wanted to err on the side of caution, the power of attorney could be rejected, without any recourse to the principal to correct it.

accept that statutory language. If it is not accepted or other documentation is required, the power of attorney may be enforced in court and the institution will be liable for costs and attorney fees to enforce it. • The new law spells out the extent of the agent’s duties and responsibilities to the principal, and establishes the agent’s liability for failure to comply, which would be enforceable in court. • In addition to the “General Power of Attorney,” which consists of a specific set of powers and authorities, there also is a more extensive (but cumbersome) statutory “Limited Power of Attorney” form, which allows the principal to pick and choose from a long list of authorities in a variety of situations. It is intended to allow the principal to “custom make” a power of attorney to fit the principal’s particular needs and circumstances.

There was no established law designed to protect the principal’s interests and hold the agent accountable for his actions. If the agent misused the authority in the power of attorney, for instance, taking out funds for the agent’s personal use, there was no law that spelled out what the agent’s duties and responsibilities were, and no established procedure for holding the agent accountable. In one glaring case, an elderly woman in the early stage of dementia granted a power of attorney to a niece, in order to help her in financial matters. The niece took advantage of the aunt’s disability and looted the aunt’s assets for the niece’s personal benefit, based on the authority in the power of attorney, leaving the aunt penniless. It took protracted litigation, costing $30,000, to establish the niece’s duties to the aunt and accountability for her actions.

Features of the Financial Power of Attorney The actual document begins with the appointment of the agent, giving basic information (name, address, telephone number) of both principal and agent. There is an option to designate more than one agent, either acting together or as successors to the originally designated agent. The document generally authorizes the agent act on behalf of the principal, such as entering into contracts, receiving or disbursing cash or other property, executing documents, receiving information, and suing or making a claim.

The New Statutory Financial Power of Attorney In recognition of the above shortcomings, a uniform financial power of attorney law was prepared about 5 years ago, which was adopted by a number of states. Maryland enacted a similar law in 2010. Some of the features of the Maryland law are:

The document grants detailed authority for all aspects of various subjects, including real estate, stocks and bonds, banking, insurance, litigation, government benefits, retirement plans, and taxes. It also includes administrative provisions, such as whether the power of attorney is effective immediately or only if the principal becomes disabled; the fact that the document is a “durable” power of attorney that continues to be effective when the principal is incapacitated (a legal requirement); and that a photocopy of the executed document is as effective as the original, so that the agent won’t be forced to provide the only original to each financial institution.

• The law sets out actual language covering the most common types of transactions covered by a power of attorney, such as real estate transactions, dealing with stocks and bonds, banking, government benefits, and taxes. There also is a provision allowing the principal to add additional authorities not included in the statutory language. This ensures that proper language is used. • A third party may not require additional or different language for a power of attorney, and must 10

Winter 2012 — THE WALSHLAW REPORT The document also may include additional authority for subjects that are not covered by the statute but may be useful for estate or financial planning. We have developed additional provisions that can be helpful in a variety of situations, such as: • • • •

In short, the new statutory financial power of attorney can be an easily-used and cost-efficient means of ensuring that a person’s finances can be managed even if the person later becomes unavailable or unable to deal with them, and should be a part of any estate plan. It should be noted, though, that even the statutory form may not be appropriate to use as it appears in the law. We suggest that you get in touch with one of our experienced attorneys to make sure that the proper form and language is used to meet your particular needs and goals. — Jonathan E. Greenstein, Esq.

Using assets for the benefit of other family members Carrying on a business Lending or borrowing money Making charitable or family gifts, especially as part of an estate plan to reduce potential estate taxes

Community Action

the Howard County Board of Appeals. The Board of Appeals is a five member citizen panel that hears appeals from decisions of various Howard County government agencies. Jim served as chair of the Board for two of his first five years on the Board. At the first Board meeting of 2012, Jim was re-elected as chair by his fellow Board members.

In addition to their commitments to their clients, the members of Walsh and Company commit themselves to the needs of the community through charitable events and services. In October 2011, Walsh and Company was a sponsor of the Gilchrist Hospice Care’s 2011 Taste and Auction of Howard County. The event raised $216,000 to benefit their new Gilchrist Center Howard County, which opened in May 2011.

This March, Walsh and Company will be a sponsor of the 15th Annual Chocolate Ball, the main fundraiser for the Arc of Howard County. The Arc is the largest and oldest non-profit organization in Howard County that serves individuals with intellectual and developmental disabilities and helps nearly 2,000 individuals a year. This is Walsh and Company’s third year sponsoring the Chocolate Ball.

Jim Walsh was asked by the Court of Appeals of Maryland, the state’s highest court, to help instruct the Professionalism Course for New Inductees. For four days in November 2011, Jim conducted a twohour segment dealing with ethical and professional responsibility issues in the elder law, estate planning, and estate and trust administration fields. The course educates recently admitted attorneys as to ethical and professional responsibility issues that they may encounter in their practices of law. Jim, who volunteered his time to teach, also taught the course in May 2011.

Office Location: 9841 Broken Land Parkway, Suite 206 Columbia, MD 21046 410-312-5690 • 800-480-6365

Jim Walsh was recently re-appointed by the Howard County Council to serve a second five-year term on 11

Walsh & Company, P.A. 9841 Broken Land Pkwy Ste 206 Columbia, MD 21046

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