“Estate Planning” generally refers to any or all of the following:
– the planning involved when an individual or a family wants to legally protect and maintain assets;
– The planning for specific terms and preferences related to health care, either when permanently disabled or, upon an “end of life” care situation.
– The distribution strategies to avoid specific taxes;
– The planning related to the distribution of property throughout one’s lifetime as well as after passing away.
– Planning related to the care of one’s child or children upon their passing (relating to legal custody and guardianship).
Estate Planning should be thought of as a way of achieving the family’s or individual’s planning objectives.
Estate planning may refer to a number of different planning objectives. Some objectives are not meant to save money, but rather to provide peace of mind (such as an advance medical directive). However, many objectives included in a larger estate plan may include ways to save money, avoid certain fees, and even make money if investment assets are involved. To fully understand how a plan can save you money, whether it can make money through investments, and the best way to dispose of your estate’s assets all depend upon your unique asset profile. Speak with your northern Virginia Estate Planning Lawyer today.
Every family should have an estate plan in place as a way of reducing the impact of future legal matters, lowering tax costs, and planning to deal with the estate tax (if applicable). It may help to think of an “estate plan,” as not just the strategies laid out below, but the combination of, and interrelatedness of these strategies and/or legal instruments.
An estate plan may include various strategies depending on the client’s assets, goals, and objectives. These include, but are not limited to:
– Last Will and Testament
– Trusts (Revocable Living Trusts)
– Trusts (Irrevocable Trusts – for some asset protection scenarios)
– Joint Ownership
– Gifting (Inter Vivos – “while alive)”
– Designations (selecting “beneficiaries carefully)”
– The “Life Estate”
Yes. Your family is never “too young” to have a broad and comprehensive estate plan in place. If the family has very few assets and already has a will or trust in place, then it is still important to many people to have a plan in place to legally determine who the legal guardian of one’s child will be if they are killed, as well as powers of attorney documents for adults still living at home, and finally, plans to plan for long-term care costs are important to some young families with disabled members. Unforeseeable events and tragedies happen, and even those life events that are predictable, planning far ahead can save money and prevent much stress down the road.
For families with young children, ask whether it is known by all members of the family where minors would go – and who would have custody of them – in the event of an unthinkable tragedy. If your children are left without a legal guardian, the court will appoint one. This may or may not be someone you would feel comfortable with. You can legally name your children’s guardian should a tragic situation occur.
In the same light, a tragic situation or dispute about end-of-life care can be avoided with a proper Power of Attorney in place or Advanced Medical Directive.
For families with new college-students or 18 -22 year olds, consider what would happen if your child – who is considered an adult – were injured while away at college? Would you be able to obtain the critical information from the hospital? If you have the proper Power of Attorney documents in place, this won’t be an issue.
Finally, having a plan to distribute your assets (regardless of the size of your estate or its’ value), is critical. Without a basic Will, the state will determine who receives your assets. There are laws providing the “default” rules. To change this and name the beneficiaries of your choosing, you must create at least a basic Will. You may also consider a Revocable Living Trust to avoid probate.
Problems sometimes have been experienced when a plan fails to streamline or otherwise coordinate the above-mentioned strategies (and others, if applicable) to effectively handle the disposition and/or transfer of an estate. For example, a joint account created by an adult child an elder parent for “their convenience” may lead to a dispute later on, when that person’s last will and testament purports to divide the assets among the living adult children. Should the money in the joint account count against the adult child?
Probate is the court-supervised public court proceeding with the main underlying purpose being that of “modification of ownership” of the property of the deceased. An important aspect relates to the debts of the decedent, and the way in which his/her creditors can collect the money they are due. Probate is also the court that will hear a “will contest,” or a claim by a person, challenging the will (such as the validity). Probate can be expensive and protracted.
Yes. Assets in a revocable living trust do not go through probate. Probate can be costly and it may take months (or more!) for the family members of the deceased to actually receive money.
No. Although a Will is an effective tool for designating the people you want to take your assets when you are gone…it will not allow your estate or the assets named in the Will to avoid the probate process.
First, a Will as a primary estate planning tool is rarely the best tool. That said, there is a device called a “pour-over” will, which is used along with a Trust and is very common.
A regular Will does not allow the assets it disposes of to avoid the Probate process. This is undesirable, since the Probate process is costly and time-consuming for many people. If a person has very few assets, however, a Will may be a better idea as opposed to a trust. If a person dies without a Will (See the next question)…
Thus, a Will is a great primary estate planning tool for an individual or family that does not have a large amount of assets or property, children of the Testator (person making the Will), if any, are of sound mind and not disabled mentally or physically. Many other facts come into the equation when determining whether a Will or a Trust is right for you. Speak with an experienced Northern Virginia Wills and Trusts Lawyer today.
When a person dies without an instrument to dispose of their assets, it is said that the person has died “intestate.” This means that the Commonwealth of Virginia’s statute covering intestacy governs who receives what.
Although it can get complicated depending on the size of the family, here is a very basic example:
– a single woman who dies intestate with assets of $100,000
– no debt,
– and two living children:
Result? The two living children will split the mother’s assets.
But what if one of the children is deceased when the mother (in the above example) passes away?
Assuming all of the same basic facts as the basic example above, now assume:
– When the single woman dies, there is one living child (A), and one deceased child (B).
– A has 3 children. B has 4 children.
The question becomes, does child A receive all of the money? Do the grandchildren (of either A or B) receive anything? Did child B lose their rights to the inheritance because they died before their parent?
The answer may surprise you. In Virginia, in the example above, child A would still receive half. The other half would normally go to child B, but since child B is dead, his children who are alive split equally child B’s share.
Do not use this example and use it try to determine what may happen in you our a loved one’s situation. Small details and facts can change results dramatically. Please speak with a Northern Virginia Estate Planning and Trusts Attorney if you need estate planning advice.
A Trust may refer to a number of different “types” of Trusts. The most commonly used “type” is the Revocable Living Trust, because it is a tool many Americans use to pass on assets and property upon an event (their death). At the same time, a Revocable Living Trust can be modified by the creator of the Trust (a very attractive feature). On the downside, a Revocable Living Trust offers no protection from creditors. This is because of the legal principle, which says if a debtor can reach his or her assets, so can his or her creditors. For answers to common questions regarding an irrevocable income only trust and its’ asset protection/creditor protection capabilities, see “What is an income-only Trust?” below.3
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