vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page i

The Fundamentals of (Maryland) vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page ii vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page iii

The Fundamentals of Estate Planning (Maryland)

second edition

Angela Vallario Professor of University of Baltimore School of Law

Carolina Academic Press Durham, North Carolina vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page iv

Copyright © 2019 Angela Vallario All Rights Reserved

ISBN 978-1-5310-1159-8 eISBN 978-1-5310-1160-4 LCCN 2018952160

Carolina Academic Press, LLC 700 Kent Street Durham, North Carolina 27701 Telephone (919) 489-7486 Fax (919) 493-5668 www.cap-press.com

Printed in the United States of America vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page v

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. vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page vi vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page vii

Contents

Table of Statutes xxv ii Preface and Acknowledgments xxix

Chapter 1 · Overview 3 Overview 4 I. The Documents 4 A. The Will 4 B. Trusts 6 C. Power of Attorney 8 1. Agent or Agents 9 2. Effective Date 10 3. Durable Power of Attorney 11 4. Gift Giving Power 11 5. Revocable Trust Power 12 6. Digital Assets 13 7. Enforceability 14 8. Advantages and Disadvantages 14 9. Sample Form 14 D. Advance Medical Directive 15 1. Appointment of Agent 16 2. Nutrition and Hydration 16 3. Organ Donation 17 4. Pregnancy 18 5. HIPAA Provision 19 6. Sample Form 20 II. Will Substitutes 20 A. 20 1. Policy Ownership 21 2. Insurance Products 23 3. Liquidity 24 B. Joint Accounts 26 C. Retirement Arrangements 28 D. Gifts 29 1. Annual Exclusion, Educational, and/or Medical Gifts 30 2. Gift Basis 31 3. Implementing Gift Giving Program 32

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Chapter 2 · Ethical Issues in Estate Planning 35 Ethical Issues in Estate Planning 36 I. Ethical Rules Relevant to Estate Planning 36 A. Rule 1.1 36 1. Estate Planner’s Level of Skill 36 2. Reliance on Client-Provided Information 37 3. Execution of Estate Planning Documents 38 B. Rule 1.2(a) 38 1. Educating the Client 38 2. Limiting Scope of Representation 39 C. Rule 1.3 39 1. Timetable 39 2. Avoiding Misunderstandings as to Scope of Representation 40 D. Rule 1.4 40 1. Means of Communication 40 E. Rule 1.5(a) 41 1. Communication of Fee 41 2. Contingency Fee in Estate Planning 41 F. Rule 1.6 (a) and (b) (in pertinent part) 42 1. Legal Assistants, Secretaries, and Office Staff 42 2. Consultants and Associated Counsel 42 3. Obligations after Death of Client 43 G. Rule 1.7 43 1. Existing Client Asks Attorney to Prepare Will or Trust for Another Person 43 H. Rule 1.8(c) and (f) 44 1. Gifts to Attorney 44 a. Attorney Grievance Comm’n of Md. v. Hodes 45 I. Rule 1.14 (a) and (b) 51 1. Discussing Options in the Event of Diminished Capacity 52 J. Rule 1.18(b)–(d) 52 1. Conflicts Check 52 II. Identifying the Client 53 A. The Elderly Client 53 B. Multiple Clients 54 1. The Married Couple 55 2. The Family Attorney 58 III. Liability to Third Parties 59 A. Strict Privity 60 1. Strict Privity in Maryland 61 a. Noble v. Bruce 61 b. Ferguson v. Cramer 62 B. Balancing of Factors 63 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page ix

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C. Third Party Beneficiary 64 D. Foreseeable Reliance 65

Chapter 3 · Establishing the Attorney-Client Relationship 67 Establishing the Attorney-Client Relationship 68 I. The Role of an Estates and Trusts Attorney 68 A. Estate Planner 68 B. Estate Administration 69 C. Estate Litigation 70 II. The Plan 71 A. The Client 71 B. Assets and Liabilities 72 C. Valuation 72 D. Family 73 E. Existing Plan 73 III. The Client Interview 73 A. Initial Meeting 74 B. Fee and Engagement Letter 75 C. Mock Interview 76 IV. 84 A. Heirs and Survival Requirements 84 1. Survival Requirements 85 a. Maryland 85 b. Uniform Code 85 2. Spouse 85 a. Maryland 86 b. 87 3. Issue (Descendants) 88 a. Maryland 88 b. Uniform Probate Code 89 4. Parents 91 a. Maryland 91 b. Uniform Probate Code 92 5. Collaterals (Issue of Parents) 92 a. Maryland 93 b. Uniform Probate Code 93 6. Grandparents and Issue 95 a. Maryland 95 b. Uniform Probate Code 96 7. Great-Grandparents and Issue 98 a. Maryland 98 b. Uniform Probate Code 98 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page x

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8. Stepchildren 98 a. Maryland 99 b. Uniform Probate Code 99 9. Absence of Heirs 100 a. Maryland 100 b. Uniform Probate Code 100 B. Special Categories 101 1. Half Blood 101 2. Adopted Child 101 3. Non-Marital Child 101 4. Genetic Material 101 C. Advancements 102

Chapter 4 · The Last 103 The Last Will and Testament 106 I. Basic Principles of Wills 106 A. Contingencies 107 B. Statutory Defaults 108 1. Survival 108 a. Maryland 108 b. Uniform Probate Code 109 2. Lapse 109 a. Maryland 109 b. Uniform Probate Code 110 3. Act 111 4. Abatement 111 a. Maryland 111 b. Uniform Probate 112 C. Domicile 112 D. Integration 112 II. Will Formalities and Procedures 113 A. Legal and and Intent 113 B. Statutory Formalities 114 1. Strict Compliance 114 a. Maryland 114 i. Writing 114 ii. Signed by the or Proxy 115 iii. Attested and Signed by Two or More Credible Witnesses in the Presence of the Testator 116 b. Uniform Probate Code 118 i. Substantial Compliance 118 ii. Self-Proving 119 C. Savings Statutes 119 1. Will Prepared in Other Jurisdictions 119 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xi

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a. Maryland 119 b. Uniform Probate Code 120 D. Will Execution Ceremony 121 E. Safekeeping 122 1. Testator Retains Will 122 2. Attorney Retains Will 122 3. Will in Safe Deposit Box 123 4. Will on Deposit with Register of Wills 124 a. Maryland 124 b. Uniform Probate Code 124 F. Communication 125 G. 126 1. Validity 126 a. Maryland 126 b. Uniform Probate Code 127 III. Basic Structure of a Valid Will 127 A. Dispositive Provisions Section of a Will 127 1. General Organization of a Dispositive Section 127 2. Beneficiaries or 128 3. Multiple Takers 128 4. By Representation 129 a. Maryland 130 b. Uniform Probate Code 131 5. Survival Condition Imposed on Beneficiary 132 6. Charitable Bequest 134 B. Details of Dispositive Section 135 1. Specific Bequest 135 2. Tangible Personal Property — Specific Bequest General in Nature 137 3. Demonstrative Bequest 139 4. General Bequest 140 5. Residuary Bequest 141 a. Maryland 141 b. Uniform Probate Code 142 C. Non-Dispositive Provisions Section of a Will 142 1. Opening Statement 142 2. Identification of Family Members 143 3. Funeral Provision 145 4. Debts, Exoneration, and Administrative Expenses 146 a. Maryland 147 b. Uniform Probate Code 148 5. Tax Payment Provision 149 a. Maryland 150 b. Uniform Probate Code 150 6. Definitional Provision 151 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xii

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7. Simultaneous Death Provisions 152 8. In Terrorem Provision 155 a. Maryland 156 i. Ryan v. Wachovia Bank & Trust Co. 156 ii. Cross v. French 156 b. Uniform Probate Code 156 9. Disinheritance Provision 157 D. Fiduciary Provisions Section of a Will 157 1. Fiduciary Powers Provision 159 2. Appointment of 160 a. Maryland 161 b. Uniform Probate Code 162 3. Compensation of Personal Representative 163 a. Maryland 163 b. Uniform Probate Code 164 4. Appointment of Guardian 164 5. Minors Provision 166 IV. Revocation and Revival of Previously Revoked Wills 168 A. Methods of Revocation 168 1. Physical Act, Express Revocation by Subsequent Instrument, or Operation of Law 168 a. Maryland 168 b. Uniform Probate Code 169 2. Implied Revocation 170 B. Revival and Doctrine of Dependent Relative Revocation 170 1. Revival of a Prior Will 170 a. Maryland 171 b. Uniform Probate Code 171 2. Dependent Relative Revocation 171 V. Limitations Imposed on Testamentary Freedom 171 A. 172 1. Waiver 172 a. Maryland 172 b. Uniform Probate Code 172 2. Spouse 173 a. Maryland 173 i. Knell v. Price 174 ii. Karsenty v. Schoukroun 178 b. Uniform Probate Code 185 B. Other Statutory Protections 187 1. Pretermitted Child 187 a. Maryland 188 b. Uniform Probate Code 189 2. Limitation on Beneficiary 190 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xiii

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Chapter 5 · Trusts 191 Trusts 193 I. Trust Requirements 194 A. Ascertainable Beneficiary 194 B. Trust Intent 196 C. Trust Property 197 D. Lawful Purpose 197 E. Formalities 198 II. Parties to a Trust 198 A. 198 B. Beneficiaries 199 C. 200 1. Trustee Fiduciary Duties 201 2. Selection of Trustee 202 a. Individual Trustee 202 b. Professional Trustee 204 c. Comparison of the Individual and Professional 204 III. Testamentary Trusts 205 A. Creation 206 B. Funding 206 1. Specific Bequest Held in Trust 206 2. General Bequest Held in Trust 206 3. Held in Trust 207 C. Advantages and Disadvantages 207 D. Drafting the 207 1. Trust Terms 207 2. Terms Unique to Testamentary Trust 208 3. Dispositive Provisions 208 a. Division of Principal 208 b. Distributions of Income and Principal 210 4. Spendthrift Provision 212 a. Duvall v. McGee 213 5. Rule Against Perpetuities 216 6. Trustee Appointment and Resignation 217 7. Trustee Powers 218 8. Trustee Compensation 222 a. Estates and Trusts § 14.5-708 223 9. Trustee Bond 223 10. Premature Termination 224 IV. Inter Vivos Revocable Trust 224 A. Creation 226 B. Funding 227 1. Additions to Trust 227 C. Advantages and Disadvantages 228 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xiv

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D. Drafting the Revocable Trust 228 1. Purpose of the Trust 228 2. Terms Unique to the Revocable Trust 230 a. Payments to Settlor during Settlor’s Life 230 b. Payments upon Incapacity of Settlor 230 c. Payments upon Death of Settlor 231 3. Dispositive Provisions on Death of Settlor 232 a. Division of Principal 232 b. Distributions of Income and Principal 233 4. Spendthrift Provision 236 5. Rule Against Perpetuities 237 6. Trustee Appointment and Resignation 238 7. Trustee Powers 239 8. Trustee Compensation 241 9. Trustee Bond 242 10. Premature Termination 242 a. Termination by Beneficiaries 243 11. Acceptance by Trustee 244 12. Selection of Forum 244 V. Irrevocable Trust Agreement 244 A. Creation 245 B. Funding 245 1. Additions to Trust 245 C. Advantages and Disadvantages 246 D. Drafting the Irrevocable Trust Agreement 246 1. Purpose of the Trust 246 2. Terms Unique to the Irrevocable Trust Agreement 247 a. Payments during Settlor’s Life 247 b. Payments upon Death of Settlor 248 c. Crummey Withdrawal Powers 248 3. Dispositive Provisions 249 a. Division of Principal 250 b. Distributions of Income and Principal 251 4. Spendthrift Provision 251 5. Rule Against Perpetuities 252 6. Trustee Appointment and Resignation 252 7. Trustee Powers 253 8. Trustee Compensation 256 9. Trustee Bond 256 10. Premature Termination 257 11. Acceptance by Trustee 257 12. Selection of Forum 258 13. Limitation of Powers 258 14. Insurance Policies 258 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xv

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Chapter 6 · Transfer Taxes 261 Transfer Taxes 262 I. Overview of the Transfer Taxes 262 A. Gift Tax 263 B. Federal Estate Tax 263 C. Maryland Estate Tax 264 D. Generation-Skipping Transfer Tax 264 E. Historical Summary of the Transfer Taxes 264 II. The Federal Gross Estate 267 A. Probate Property 267 B. Property Transferred during Life 268 C. Special Assets 270 III. Taxable Estate 274 A. Marital Deduction 274 IV. Valuation 275 A. Deviations from Willing Buyer/Willing Seller Standard 276 B. Valuation Discounts 276 C. Actuarial Tables 277 D. Alternate Valuation 277 V. Basic Estate Tax Planning 278 A. Goals 278 1. Avoid or Minimize Transfer Taxes 278 2. Defer Transfer Taxes 278 B. Estate Planning Tools 279 1. Non-Taxable Gifts 279 2. Credit Shelter Trust 279 a. Gift Exemption Amount 280 b. Death Exemption Amounts 282 i. Federal Exemption Amount (Option 1) 282 ii. State Exemption Amount with Portability (Option 2) 283 iii. Federal Exemption Amount and Maryland-Only QTIP (Option 3) 285 iv. Marital Deduction (Option 4) 287 v. Irrevocable (Option 5) 288

Chapter 7 · Non-Taxable Gifts 291 Non-Taxable Gifts 291 I. Taxable Gifts 292 A. Gifts in General 292 B. Taxable Gift 293 C. Filing Requirements 293 II. Income Tax Basis 294 A. Asset Selection Considerations 296 III. Inter Vivos Transfers between Spouses 297 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xvi

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IV. Gift Tax Exclusions 297 A. Annual Exclusion 297 1. Present Interest Requirement 298 2. Gift Splitting by Spouses 299 a. Requirements for Gift Splitting 299 B. The Educational and Medical Gifts 300 V. Methods of Inter Vivos Gifting 302 A. Outright Gifts 302 1. Gifts by Check 303 2. Gifts to Minors 303 B. Gifts in Trust 304 1. Crummey Withdrawal Rights 305 a. Crummey v. Commissioner 305 2. Hanging Power 310 3. Multiple Beneficiaries 310 a. Estate of Cristofani v. Commissioner 311 4. Minor’s Trust 313 a. Requirements of IRC § 2503(c) Trust 313 VI. Special Rules for Certain Gifts Made in Contemplation of Death 314

Chapter 8 · Credit Shelter Trust 315 Credit Shelter Trust 315 I. Exemption Amounts 316 A. Gift Exemption Amount 317 1. Gift Exemption Amount Chart 317 B. Death Exemption Amounts 318 1. Federal Exemption Amount 318 a. Federal Exemption Amount Chart 318 2. Maryland Exemption Amount 319 a. Maryland Exemption Amount Chart 319 II. Credit Shelter Trust 320 A. Purpose 320 B. General Exceptions 321 1. Ascertainable Standard 321 2. Five-or-Five Limitation 322 3. Substantial and Adverse Interest Exception 324 C. Inter Vivos Credit Shelter Trust 325 D. Funding the Credit Shelter Trust with a Formula 326 1. Pecuniary Formula 327 2. Fractional Formula 328 E. Disclaimer Funding 329 F. Trust Terms 331 1. Income 331 a. Mandatory Distributions of Income 331 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xvii

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b. Discretionary Distributions of Income 331 2. Principal Distributions 332 3. Fiduciary Provisions 333 III. Planning with Portability 334

Chapter 9 · Marital Deduction 337 Marital Deduction 338 I. Marital Deduction 339 II. I.R.C. § 2056 340 A. I.R.C. § 2056(a) Requirements 340 1. Citizenship Requirement 340 2. Surviving Spouse Requirement 341 3. Gross Estate Requirement 341 4. Passing Requirement 341 B. Terminable Interest Limitation 341 1. Surviving Spouse’s Interest Terminates 342 2. Interest Passes from Decedent to Someone Other Than the Surviving Spouse 342 3. Non-Spouse Receives Property 342 C. Exceptions to the Terminable Interest Rule 342 1. Limited Survival Contingency 343 2. Life Estate with General Power of Appointment in Surviving Spouse 343 3. Qualified Terminable Interest Property 344 a. Passes from the Decedent 344 b. Gives the Surviving Spouse a Qualifying Interest for Life 344 c. Election 344 III. Outright Marital Deduction 345 IV. Marital Trusts 347 A. Estate Trusts 347 1. Requirements 348 a. Income to the Surviving Spouse for Life 348 b. Income May Be Accumulated 348 c. Non-Income Producing Trust Assets Are Permitted 348 B. Life Estate with Power of Appointment Trust 348 1. Requirements 349 a. Income to Surviving Spouse for Life 349 b. Surviving Spouse Alone Must Hold a General Power of Appointment 349 C. QTIP Trust 349 D. Comparison of Marital Trusts 350 V. QTIP Trust 350 A. Passing Requirement 351 B. Qualifying Income Interest Requirement 352 1. Income to Surviving Spouse for Life 352 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xviii

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2. No General Power of Appointment in Anyone during the Surviving Spouse’s Life 353 C. Election Requirement 353 1. Clayton v. Commissioner 354 2. QTIP Advantages and Disadvantages 356 VI. Maryland-Only QTIP 359

Chapter 10 · Irrevocable Life Insurance Trust 361 Irrevocable Life Insurance Trust 362 I. Federal and Maryland Statutes 362 A. I.R.C. § 2042 Proceeds of Life Insurance 363 1. Receivable by Executor 363 2. Incidents of Ownership 364 B. I.R.C. § 2035 Transfers in Contemplation of Death 365 C. Maryland Statute and the Insurable Interest 366 1. Chawla v. TransAmerica Occidental Life Insurance Company 366 II. Funding the ILIT 366 A. Initial Transfer of an Existing Policy 367 1. Existing Policy 367 2. New Policy 368 B. Subsequent Transfers to the ILIT 368 1. Crummey Requirements 368 2. Five-or-Five Limitation 369 3. Hanging Power 369 III. The Irrevocable Life Insurance Trust (ILIT) 369 A. Creation 369 B. Funding 370 C. Advantages and Disadvantages 371 D. Drafting the ILIT 372 1. Purpose of Trust 372 2. Terms Unique to an ILIT 372 a. Crummey Withdrawal Powers 372 3. Dispositive Provisions 374 a. Payments during Settlor’s Life 374 b. Payments upon Death of Settlor 374 c. After the Death of the Survivor of Settlor and Spouse, Division of Principal 374 4. Spendthrift Provision 375 5. Rule against Perpetuities 375 6. Trustee Appointment and Resignation 375 7. Trustee Powers 375 8. Trustee Compensation 376 9. Trustee Bond 376 10. Premature Termination 376 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xix

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11. Acceptance by Trustee 376 12. Selection of Forum 376

Chapter 11 · Elder Law 377 Elder Law 379 I. Representing an Elderly Client 380 II. Social Security 382 A. Retirement Benefits 383 1. Calculating Benefit Amount 383 2. Early or Late Retirement: Effect on Monthly Benefits 383 3. Earning Penalties 384 4. Taxation 384 B. Survivor’s Benefits: Eligibility 385 1. Family Members 385 2. Same-Sex Marriages and Non-Marital Legal Relationships 386 C. Social Security Disability Benefits: Eligibility 386 1. Gateway Requirements 387 2. Citizenship Requirements 387 3. Medical and Vocational Qualifications 387 4. Representative Payee 389 D. Supplemental Security Income 389 III. Medicare 390 A. Part A —Hospitalization, Skilled Nursing and Rehab, and Hospice Care 391 1. Eligibility 391 2. Enrollment 392 3. Coverage 392 a. Hospitalization Coverage 392 b. Skilled Nursing Care Coverage 393 c. Hospice Care Coverage 395 B. Part B —Supplemental Medical Insurance 396 1. Eligibility 396 2. Enrollment 397 3. Covered Services 397 4. Observation Status 397 5. Medicare Secondary Payer Program 399 6. Medigap Insurance 399 C. Medicare Advantage 400 D. Part D —Medicare Prescription Drug Benefit 400 1. Eligibility 400 2. Costs 401 IV. Veterans Benefits 401 A. Eligibility 402 B. Benefit Programs 402 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xx

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C. Health Care Benefits 404 1. Nursing Home Care 404 2. Non-Service Connected Benefits (Improved Pension Program) 404 3. New Regulations for VA Needs-Based Programs 405 D. Death Pension 406 E. TRICARE and CHAMPVA 406 V. The Public Aging Network in Maryland 407 A. The Older Americans Act 408 1. Programs under the Older Americans Act 409 a. Mandatory Programs 409 b. Community Services 409 B. State Programs Outside the Older Americans Act 410 1. Senior Care 411 2. Senior Center Plus 411 3. Congregate Housing Services Program 411 4. Senior Assisted Living Group Home Subsidy 412 5. Medicaid Home and Community Based Services 412 VI. Elder Abuse 412 A. Types of Elder Abuse 412 B. Federal Civil and Criminal Elderly Abuse and Regulations 413 C. Maryland Civil and Criminal Elder Abuse Laws and Regulations 414 D. Reporting Elder Abuse 415 E. Agency Responsibilities 415 F. Remedies for Neglect and Abuse in Long-Term Care Facilities 418 VII. Elder Rights 418 A. Rights of Long-Term Care Recipients 418 B. Housing: Limited Liability for Breaking a Lease for Medical Reasons 421 C. Driving 421 VIII. Asset Management 422 A. Power of Attorneys 423 B. Trusts 424 1. Social Security Special Needs Trusts 424 a. 442 U.S.C. § 1396p(d)(4)(A) Trust 424 b. 442 U.S.C. § 1396p(d)(4)(C) Trust 425 2. Maryland Special Needs Trusts 426 3. Medicaid (Dis)Qualifying Trusts Post-OBRA ’93 426 4. ABLE Accounts 427 IX. Probate 428 A. Intestacy 428 B. Probate of a Will 429 C. Undue Influence in a Will 429 D. The Maryland and Federal Estate Tax 430 X. Medical Decision-Making in Maryland 430 A. Health Care Decision-Making in Maryland 430 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xxi

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B. Surrogate Decision-Making 431 C. Medical Orders for Life-Sustaining Treatment 432 XI. Guardianship 433 A. Overview 433 B. The Guardianship Process 433 1. Guardian of Property 434 2. Guardian of Person 435 C. Alternatives to Guardianship 435 D. Payment of Guardianship Commissions 436 E. Uniform Adult Guardianship and Protective Proceeding Jurisdiction Act 436 XII. Housing 438 A. State Administered Senior Housing Programs 438 B. Continuing Care Retirement Communities 438 C. Assisted Living Facilities 439 XIII. Medical Assistance 440 XIV. Community-Based Supports and Services 441 A. Long-Term Care Services in the Community 441 B. Overview of Long-Term Care Insurance 443 C. Medicare 444 1. State Buy-In for Qualified Medicare Beneficiaries (QMB) 444 2. Special Low-Income Medicare Beneficiaries (SLMB) 444 D. Medicaid 445 1. Community First Choice 445 2. Home and Community-Based Options Waiver 445 3. Community Personal Assistance Services and Medicaid Personal Care Program 446 4. Standards for All Home and Community Based Settings 447

Chapter 12 · Medicaid 449 Medicaid 449 I. Initial Meeting with Applicant 450 II. Medicaid Eligibility 451 A. Residency 451 B. Citizenship 452 C. Aged, Blind, or Disabled 452 D. Medical Eligibility 452 1. Level of Care 453 E. Financial Eligibility 454 1. Income Eligibility 454 2. Asset Eligibility (Resource Eligibility) 454 F. Exempt Transfers 457 III. Application Process 459 A. Application and Documentation 459 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xxii

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B. Filing the Application 460 IV. Appeal 460 V. Post-Eligibility Issues 462 A. Cost of Care Contribution 462 B. Community Spouse Maintenance and Shelter Allowance 462 C. Annual Recertification 462 D. Reporting Requirements 463

Chapter 13 · Guardianship 465 Guardianship 466 I. Overview 466 II. Guardianship of the Person and/or Property 469 A. Who Can Petition for Guardianship 469 B. Where to File the Guardianship 470 C. What Steps Are Required for Guardianship 471 1. Good Faith Basis of Need 471 2. Certificate of Incapacity 472 3. Petition 473 4. Representation 473 5. Service of Process 474 III. Petition for Guardianship of the Person 475 A. Burden of Proof and Trial 475 B. Grounds for Appointment 475 C. Contents of the Petition for Guardianship of the Person 475 IV. Petition for Guardianship of the Property 476 A. Burden of Proof and Trial 476 B. Grounds for Appointment 476 C. Contents of Petition for Guardianship of the Property 476 V. Role of the Court-Appointed Attorney 478 A. In Re Sonny Lee 479 VI. Going to Court 482 A. Burden of Proof 482 B. Uncontested Cases 482 C. Contested Cases 482 D. Representing an Interested Person 483 VII. Costs and Fees 484 A. Costs and Fees for Guardianship 484 B. Fees for the ADP’s Attorney 485 C. Fees for the Guardian of Property 486 D. Fees for the Petitioner 486

Chapter 14 · Estate Administration 489 Estate Administration 490 I. Overview 490 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xxiii

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A. Administrative Probate/Judicial Probate 491 II. The Personal Representative 492 A. Identifying the Personal Representative 493 B. Representing the Personal Representative 494 C. Personal Representative Commissions 494 D. Duties of the Personal Representative 495 III. Types of Estates for Administration 496 A. Small Estate 496 B. Modified Administration 497 C. Regular Estate 498 IV. Estate Administration Process 499 A. Opening the Estate 499 1. Last Will and Testament 501 2. Death Certificate 502 3. Petition for Probate 502 4. Notice of Appointment 503 5. Bond of Personal Representative 505 6. List of Interested Persons 506 B. Inventory and Information Report 506 1. Inventory 507 2. Information Report 509 3. Appraisals 510 C. Accounts 512 1. Final Account 513 2. Assets Previously Reported 514 3. Disbursements and Payments 514 4. Distributions 516 5. Reconciling the Account 516 6. Administrative Accounting for Small Estates 516 7. Administrative Accounting for Modified Administration 517 8. Notice of Filing of Account for Regular and Modified Administration 517 9. Closing the Estate 518 D. Distributions 519 1. Probate Assets 520 2. Distributions to Minors 521 3. Distributions to Trusts 522 E. Personal Representative Commissions and Counsel Fees 522

Chapter 15 · Will Caveats 525 Will Caveats 526 I. Preliminary Procedural Issues 527 A. Proper Parties 527 B. Jurisdiction and Venue 527 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xxiv

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C. Standing 528 D. Limitations 530 E. Procedural Aspects and Effect of Filing Petition 531 II. Grounds to Caveat a Will 534 A. Lack of Formalities — Improper Execution 534 1. In Writing 534 2. Signed by Testator 535 3. Attested by Two Credible Witnesses 536 B. Revocation of Will 537 C. Capacity 538 1. Mental Capacity — Of Sound Mind 538 2. Presumption of Mental Capacity 538 3. 539 4. Evidentiary Issues 540 a. Documentary 542 b. Testimonial Evidence 542 D. Undue Influence 545 1. In General 545 2. 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 550 c. The Beneficiary Caused or Assisted in Effecting Execution of Will 550 d. There Was an Opportunity to Exert Influence 551 e. The Will Contains an Unnatural Disposition 551 f. The Bequests Constitute a Change from a Former Will 552 g. The Testator Was Highly Susceptible to the Undue Influence 552 E. 554 III. Additional Matters for Consideration 556 A. Discovery 556 B. Trial 557 1. Procedural Issues 557 2. Burden of Proof 558 3. Evidentiary Issues 558 4. Dead Man’s Statute 559 5. Hearsay 559 C. Settlement 560 D. Appeal 560

Appendix 561 Chapter 1 · Overview Form 1-1: Maryland Statutory General Power of Attorney 563 Form 1-2: Supplemental Power of Attorney 571 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xxv

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Form 1-3: Statutory Limited Power of Attorney 577 Form 1-4: Advance Medical Directive 593 Chapter 2 · Ethical Issues in Estate Planning Form 2-1: Joint Retainer Agreement 597 Chapter 3 · Establishing the Attorney-Client Relationship Form 3-1: Estate Planning Data Form 600 Table 3-1: Table of Consanguinity 608 Chapter 4 · The Last Will and Testament Form 4-1: Last Will and Testament 609 Form 4-2: 614 Chapter 5 · Trusts Form 5-1: Will with a Testamentary Trust 615 Form 5-2: Inter Vivos Revocable Trust 628 Form 5-3: Irrevocable Trust Agreement 637 Table 5-1: Present and Future Interests 646 Chapter 6 · Transfer Taxes Table 6-1: Exemption Amounts 647 Table 6-2: Gift Tax Table 648 Table 6-3: Determination of Taxable Estate 650 Chapter 7 · Non-Taxable Gifts Form 7-1: Minor’s Trust — I.R.C. 2503(c) 651 Chapter 8 · Credit Shelter Trust Form 8-1: Will with Credit Shelter Trust 660 Chapter 9 · Marital Deduction Form 9-1: Will with QTIP Trust 674 Chapter 10 · ILIT Form: 10-1: Irrevocable Assignment 688 Chapter 11 · Elder Law Form 11-1: VA Form 10-10EZ Application for Health Benefits 690 Form 11-2: Nursing Home Transmittal No. 237 693 Form 11-3: Medical Assistance Eligibility Review Form 3871B 696 Form 11-4: MOLST Form 700 Chapter 12 · Medicaid Form 12-1: Checklist for Medicaid Applicant 702 Form 12-2: Medicaid Application 703 Chapter 13 · Guardianship Form 13-1: Petition for Guardianship of Alleged Disabled Person 721 Form 13-2a: Physician’s Certificate 727 Form 13-2b: Psychologist’s Certificate 732 Form 13-2c: Licensed Certified Social Worker-Clinical Certificate 737 Form 13-3: Order to Show Cause 742 Form 13-4: Advice of Rights 743 Form 13-5: Notice to Interested Persons 745 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xxvi

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Chapter 14 · Estate Administration Form 14-1: Probate Timeline 746 Form 14-2: Fee Petition 747 Chapter 15 · Will Contests Form 15-1: Petition to Caveat 751 Form 15-2: Petition to Transmit Issues 754 Form 15-3: Consent Order 757 Form 15-4: Settlement Agreement and Limited General Release 759 Form 15-5: Petition for Ratification of Agreement 763 Form 15-6: Joint Stipulation of Dismissal of Caveat 767

Index 769 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xxvii

Table of Statutes

United States Statutes and Regulations

I.R.C. § 1014, 296 I.R.C. § 2056, 275, 340 I.R.C. § 1014 (a), 31 I.R.C. § 2056(b)(7), 340 I.R.C. § 1015, 31, 295 I.R.C. § 2503(b), 298 I.R.C. § 2010(c), 334 I.R.C. § 2503(b)(1), 30 I.R.C. § 2035, 26, 268, 365 I.R.C. § 2503(c), 313 I.R.C. § 2036, 269 I.R.C. § 2503(e), 30, 292, 300 I.R.C. § 2037, 269 I.R.C. § 2513(b)(2), 299 I.R.C. § 2038, 270 I.R.C. § 2514(e), 309 I.R.C. § 2039, 270 I.R.C. § 2518(b), 329 I.R.C. § 2040, 271 Treas. Reg. § 20.2042-1(c)(2), 273 I.R.C. § 2041, 272 Treas. Reg. § 25.2503-6(b)(2), 300 I.R.C. § 2042, 21, 273, 363 Treas. Reg. § 25.2503-6(b)(3), 301 I.R.C. § 2044, 273

Maryland Statutes and Regulations

Md. Crim. Law § 3-606, 415 Md. Est. & Trusts § 4-105, 168 Md. Est. & Trusts § 1-101(i), 506 Md. Est. & Trusts § 4-106, 171 Md. Est. & Trusts § 1-210(b)(c), 88, 93, Md. Est. & Trusts § 4-201, 124 95, 98 Md. Est. & Trusts § 4-202, 501 Md. Est. & Trusts § 1.210.1, 130 Md. Est. & Trusts § 4-401, 108 Md. Est. & Trusts § 3-102, 86 Md. Est. & Trusts § 4-403(a), 109 Md. Est. & Trusts § 3-103, 88 Md. Est. & Trusts § 4-406, 147 Md. Est. & Trusts § 3-104(b), 91, 93, 94, Md. Est. & Trusts § 4-407, 141 98, 99 Md. Est. & Trusts § 4-413, 156 Md. Est. & Trusts § 3-110, 85 Md. Est. & Trusts § 5-103, 109, 500 Md. Est. & Trusts § 3-203, 173 Md. Est. & Trusts § 5-104, 493 Md. Est. & Trusts § 3-205, 172 Md. Est. & Trusts § 5-105, 493 Md. Est. & Trusts § 3-301, 188 Md. Est. & Trusts § 5-105(b), 162 Md. Est. & Trusts § 3-302, 188 Md. Est. & Trusts § 5-207, 530 Md. Est. & Trusts § 4-101, 108 Md. Est. & Trusts § 5-701, 543 Md. Est. & Trusts § 4-102, 114 Md. Est. & Trusts § 5-702, 543 Md. Est. & Trusts § 4-103, 109 Md. Est. & Trusts § 5-708, 498 Md. Est. & Trusts § 4-104, 119 Md. Est. & Trusts § 5-801, 502

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xxviii TABLE OF STATUTES

Md. Est. & Trusts § 5-802, 502 Md. Est. & Trusts § 13-218, 486 Md. Est. & Trusts § 6-101, 494 Md. Est. & Trusts § 13-704(c), 486 Md. Est. & Trusts § 6-203, 161 Md. Est. & Trusts § 13-705(c)(2), 472 Md. Est. & Trusts § 6-403, 533 Md. Est. & Trusts § 14.5-402, 198 Md. Est. & Trusts § 6-431(c), 531 Md. Est. & Trusts § 14.5-708, 223 Md. Est. & Trusts § 7-103.1, 504 Md. Est. & Trusts § 15-102, 218 Md. Est. & Trusts § 7-201, 508 Md. Est. & Trusts § 17-105(a)(b)(c), 11 Md. Est. & Trusts § 7-202, 510 Md. Est. & Trusts § 19-301.14(a)(b), 467 Md. Est. & Trusts § 7-601, 163 Md. Fin. Inst. § 1-204, 27, 28, 519 Md. Est. & Trusts § 8-103, 515 Md. Health-Gen. § 5-601, 15 Md. Est. & Trusts § 8-103(a), 149 Md. Tax-Gen. § 7-202, 21 Md. Est. & Trusts § 9-103(b), 111 Md. Tax-Gen. § 7-203, 22 Md. Est. & Trusts § 11-102(b)(5), 217 Md. Tax-Gen. § 7-308, 150

Maryland Rules of Professional Conduct

Rule 1.1, 36 Rule 1.14(a)(b), 51 Rule 1.2(a), 38 Rule 1.18(b)–(d), 52 Rule 1.3, 39 Rule 5-701, 543 Rule 1.4, 40 Rule 5-702, 543 Rule 1.5(a), 41 Rule 6-431(c), 531 Rule 1.6(a)(b), 41 Rule 10-106(a)(b), 485 Rule 1.7, 43 Rule 10-106(c), 485 Rule 1.8(c)(f), 44 Rule 10-107(a), 484 Rule 1.14, 381

Uniform Probate Code

Unif. Probate Code § 2-104, 85 Unif. Probate Code § 2-506, 120 Unif. Probate Code § 2-102, 87 Unif. Probate Code § 2-507, 169 Unif. Probate Code § 2-103, 89, 93, 96, 99 Unif. Probate Code § 2-509, 171 Unif. Probate Code § 2-106, 89, 93, 96 Unif. Probate Code § 2-515, 124 Unif. Probate Code § 2-103, 92 Unif. Probate Code § 2-517, 156 Unif. Probate Code § 2-105, 100 Unif. Probate Code § 2-603, 110 Unif. Probate Code § 2-202, 185 Unif. Probate Code § 2-607, 148 Unif. Probate Code § 2-203, 185 Unif. Probate Code § 2-608, 142 Unif. Probate Code § 2-213, 172 Unif. Probate Code § 2-702, 109 Unif. Probate Code § 2-302, 189 Unif. Probate Code § 2-709, 131 Unif. Probate Code § 2-502, 118, 127 Unif. Probate Code § 3-717, 161, 162 Unif. Probate Code § 2-503, 118 Unif. Probate Code § 3-719, 164 Unif. Probate Code § 2-504, 119 Unif. Probate Code § 3-902, 112 vallario 2e 00 fmt.qxp 11/14/18 8:02 AM Page xxix

Preface and Acknowledgments

This second edition brings the practical aspect of wills, trusts, and estates into the classroom for students, and also serves as a practitioner’s resource for estate planning in Maryland and for those studying for the Uniform Bar Exam. With the addition of the Uniform Probate Code Statutes and commentary, this edition is particularly suitable for any jurisdiction where the Uniform Bar Exam is given. Additionally, the book 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 in this section deals with ethical issues, the client interview, and the drafting of estate- planning documents including the Will, the Will with a testamentary trust, inter vivos trusts, powers of attorney, and advance medical directives. Part II covers federal and Maryland estate transfer taxes, which apply when the clients’ net worth exceeds the federal exemption amount. This section provides an overview of the transformation of transfer taxes, and a discussion of the applicable Internal 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 along with charts articulating the advantages and disadvantages of the respective estate- planning tool. Finally Part III represents a variety of topics ancillary to estate planning, including elder law, Medicaid, guardianship, estate administration and Will caveats. The Part III 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 areas of law for the estate-planning attorney. The book provides sample provisions, intake forms, and checklists that can be used as educational tools or in the practice of law. There are complete forms in the Appendix that allow the student or lawyer to examine the relevant discussion in a complete format. In addition, the book provides a series of problems intended to engage law students in their study of wills, trusts, and estates along with suggested responses.

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xxx PREFACE AND ACKNOWLEDGMENTS

Acknowledgments I would like to acknowledge and thank Jason A. Frank and his law clerk Federico Salas, 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 willingness to make such contributions made coverage of these topics possible. Special thanks to my research assistants Austin Cohen, Nicholas Pycha, and Ashley Nelson-Raut for their excellent research and citation. Thanks to my administrative assistant 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 to work on the second edition of the book.