Alexandria, VA Estate Planning Blog

There are many reasons why soon-to-be married couples should consider entering into a Pre-Marital Agreement. Most people who enter into a Pre-Marital Agreement do so with the primary concern of Asset Protection.  

It’s important to recognize that a Pre-Marital Agreement is an estate planning device. Because each person is unique, their Pre-Marital Agreement should contain unique asset protection provisions narrowly tailored to their finances, expectations, desires, concerns and family dynamics. However there are common or typical asset protection reasons for entering into a Pre-Marital Agreement.

Asset protection driven Pre-Marital Agreements are generally drafted for the following Asset Protection Reasons:

• insulate and protect significant assets acquired before the marriage,
• insulate and protect the growth of separate assets during the marriage
• protect separate assets from being transmuted into marital property during the marriage,   
• protect a business,
• protect the inheritance of children born from a prior relationship or marriage (blended family),
• establish what assets are to be separate property and what assets are to be marital property,
• protect retirement benefits from the claims of a divorcing spouse,
• eliminate or fix surviving spouse’s survivorship or inheritance rights (e.g., elective share); and
• minimize or eliminate potential tax liabilities (e.g. estate tax & income tax);

 Entering into a Pre-Marital Agreement makes sense for asset protection purposes. It also makes sense for additional reasons not related to asset protection. Ultimately, it’s a big decision to enter into a Pre-Marital Agreement prior to marriage.

The process of negotiation and presentation to the other spouse needs to be thoughtfully and artfully conducted. Otherwise, you may risk unnecessarily hurting feelings and causing serious issues before the marriage. It’s important to select a competent attorney who is willing to thoughtfully allocate the necessary time and take the necessary action to address your asset protection issues.

If you have any questions about Pre-Marital Agreements and asset protection, feel welcome to contact the law firm.

Sincerely,

Luke Lenzi, Esq.       

Mortgage note beneficiaries should strongly consider creating a revocable living trust and funding that note into the trust for estate planning purposes. However, no action should be taken without proper legal counsel.

Definition: A mortgage note is a written promise of one party to pay money to another party (Black's Law Dictionary)

Probate Problems

If a decedent's probate property includes a note than that person’s estate may receive numerous payments spanning multiple years. The decedent's personal representative (e.g. executor or administrator) may face numerous difficulties and increased exposure to liability because of the potential probate issues. The estate administration process may likely be significantly delayed (potentially for the life of the note or longer). Consequently, the estate administration expenses, costs and delays can be very substantial.

Funding

As beneficiary of the mortgage note, the beneficiary may be able to assign that note into their revocable living trust. By funding the note into a trust, the above referenced probate issues may be avoided. Notwithstanding, the trust should have provisions instructing the Trustee as it relates to extending the note and foreclosure. Before funding any note into a trust, the beneficiary should ensure that the assignment is allowable and prudent.

CAUTION: When funding mortgage notes, it’s critical to consult an attorney with regard to the tax and enforcement provisions of the note

Multi-Jurisdictional Issues

Determining what law applies can be complicated. The relevant law includes the jurisdictional law governing the enforcement and construction of the note, the jurisdictional law governing whether the transfer was completed and the jurisdictional law governing the administrative provisions of the trust beneficiary. There is a variety of rules that apply when determining jurisdiction and multiple states may claim jurisdiction.

If you have questions, feel welcome to contact our firm. We strongly advise you consult an attorney before taking any action.

Don't be fooled, you may not have documents in place, but you have an estate plan. The only difference is that the plan wasn't prudent, part was created by accident & part was created by the government. Sound like a smart idea? 

The Sturgis Journal has posted an article, by John P. Napolitano, on the need for people to remember their estate planning documents. The article notes how famous people receive attention when their lousy estate plans blow up in their faces. However, their estate planning needs are not much different than yours. They have the same desires, problems and concerns. They just have more money and more fame.  

Marginalization is the problem. People think that estate plans are only for the rich and famous. They have marginalized the need to plan and thereby marginalized their and their family's needs. 

Estate administration tragedies happen each day. However you won't hear about it because TMZ, Fox & CNN aren't interested in covering it.  

http://www.sturgisjournal.com/news/business/x643482854/Making-Cents-Dont-forget-about-estate-planning

Recently I reviewed and article on US news titled The Dangers of DIY Estate Planning. In response, I have posted the following:

The title is more than a little misleading. I was expecting the article to rip into the Legal Zooms of the world. I have to say, I was disappointed. 

Under no circumstances is it prudent for any person to, with forethought and time, forgo planning with an estate planning professional. Yes, that expressly excludes general practitioners who can be just as dangerous.  

Certainly every person, regardless of wealth, needs competent advice for incapacity planning. The costs of these documents aren't unreasonable. If a client doesn't have much money, many attorneys will do it for little or no cost.

Further, poorer individuals still have the same personal and family problems. Consequently, because of their lack of financial means, their and their families’ need for planning may often be much greater. Additionally, because they don't have a lot of assets, inexpensive methods can be used to reduce costs & expenses related to the planning and the client's death.

The argument that individuals of lesser means likely don't have serious issues worthy of planning is ridiculous. Such an argument is frequently premised on ignorance. The unaware claim that a person's estate planning needs correlate with the amount of wealth they have acquired. Additionally, people claim that the costs of planning are too great, and as noted above, that frequently isn't the case. 

However, it certainly creates a great narrative for justifying companies like Legal Zoom. 

Link

http://money.usnews.com/money/personal-finance/articles/2010/06/29/the-dangers-of-diy-estate-planning?msg=1

The trust funding process is very important. Intervivos trusts need to be fully funded with the appropriate assets. If you fail to full fund your trust, or fund your trust incorrectly, your estate may incur significant problems. The following is general information. When funding a trust, always consult an attorney. If you have questions, give us a call.

For Medicaid purposes, and for certain Medicaid applicants, the home can be an excluded resource. As an excluded resource, the home will not be counted for Medicaid eligibility purposes.

A home may be an excluded resource if it serves as the person's principal place of residence.

To be a principal place of residence, the Medicaid applicant must consider the place to be their established or principal home. Additionally, if they are absent from the place they consider to be their established or principal home, they must intend to return to that place as their principal place of residence.

What land is excluded when the home is an excluded resource?

The home includes the lot it sits on and any contiguous property. However the the contingent property mayn't exceed $5000 in value

(FOR A MORE DETAILED ANALYSIS ON WHAT LAND IS EXCLUDED WITH THE HOME, CLICK HERE).

The Medicaid Manual at M1130.100(B) Expresses the following with regard to determining the extent of the boundaries for the lot for which the home sits:

The home exclusion applies to the plot of land on which the home is located.

The excluded home lot size may vary according to the locality's building

requirements.

For localities with set minimum building lot size use the lesser of:

• the plat;

• the survey; or

• the locality's minimum size for a building lot.

For localities with no minimum building lot requirements, use the lesser of:

• the plat;

• the survey; or

• one acre.

If you have any questions, please give us a call. We welcome questions and want to talk with you or your advisor.

What if you own property contiguous to the property that your home sits on (the lot for Medicaid purposes)?

The general rule is that you can exclude $5,000 worth of property contiguous to the lot for which your home sits on. However, if the contiguous property is essential to the operation of the home, then it may be excluded from the Medicaid analysis also.

The Virginia Medicaid Manual provides the following:

The home exclusion applies to land adjoining the home plot if not completely separated from it by land in which neither the individual nor his or her spouse has an ownership interest. Five thousand ($5,000) of assessed value of land contiguous to the home lot can be included in the home exclusion.

For the purposes of the home exclusion, easements and public rights of way (utility lines, roads, etc.) do not separate other land from the home plot.

Contiguous Property Essential to the Operation of the Home

The equity value of countable contiguous property may cause resources to

Exceed the maximum limit. In these cases, reevaluate the home property

Applying the definition of the home used in the State Plan for Medical

Assistance in Virginia in effect on January 1, 1972. At that time a home

means the house and lot used as the principal residence and all contiguous

property essential to the operation of the home regardless of value.

Property essential to the operation of the home means:

a. land used for regular production of any food/goods for the household's

consumption only, including:

• vegetable gardens;

• pastureland for livestock raised for milk or meat;

• land to raise chickens, pigs, etc;

• outbuildings used to process and/or store any of the above.

The amount of land necessary to support animals named above is

established by the local extension service. However, only actual land

being used to support the animals will be allowed.

b. driveways connecting the home site to public roadways.

c. land necessary to the home site to meet local zoning requirements (e.g.

building site, mobile home sites, road frontage, distance from road,

etc.).

d. land necessary for compliance with state local health requirements (e.g.,

distance between home and septic tank(s));

e. water supply for the household.

f. existing burial plots.

g. outbuildings used in connection with dwelling, such as garages or tool

sheds

CAUTION: PLEASE NOTE THAT YOUR HOME MUST BE A PRINCIPAL PLACE OF RESIDENCE FOR IT TO BE EXCLUDED.

(FOR MORE ON THE HOME/ PRINCIPAL PLACE OF RESIDENCE EXCLUSION CLICK HERE)

(FOR MORE ON THE MOBILE HOME RULE CLICK HERE) 

If you have any questions, please give us a call. We welcome questions and want to talk with you or your advisor.

What if you own the lot or land your home sits on, but you don't own the home?

It isn't necessary for you to own the home for you to exclude the lot for which the home sits. You still may be able to exclude the lot and contiguous property for your home.

What is a home? How may it be defined for Medicaid purposes? It’s the particular place where you live and rest. In a romanticized ideal, it should be your place of refuge or sanctuary. However you describe it, being a title owner is not a requirement.

The important distinction is between owning and possession. While you may need to have title to a home (house/ mobile home/ or boat) to be the owner, you don't need be the owner to possess (or have) a home.

Consider the following example:

I.e., you live in a mobile home that is located on a lot that you own. If the mobile home meets the definition of your home, then the lot and continuous property should be excluded.

CAUTION: PLEASE NOTE THAT YOUR HOME MUST BE A PRINCIPAL PLACE OF RESIDENCE FOR IT TO BE EXCLUDED.

(FOR MORE ON THE HOME/ PRINCIPAL PLACE OF RESIDENCE EXCLUSION CLICK HERE; FOR MORE ON THE CONTIGUOUS PROPERTY EXCLUSION CLICK HERE) 

If you have any questions, please give us a call. We welcome questions and want to talk with you or your advisor.

Generally a Simple Will is a document that expresses a person’s desires with regard to who shall inherit their probate property. Additionally parents’ frequently nominates persons to serve as a guardian or conservator for their child when they die.

Generally a Simple Trust is a document that expresses a person’s desires with regard to who will inherit their properly funded trust property. The document nominates a person to carry out the creator’s intent (a trustee). While a trust could provide for the outright distribution of the trust property to a beneficiary, they frequently create and attach strings to the distribution of trust property in an attempt to insulate assets from creditor’s, divorcing spouses, and immature beneficiaries.

Trusts can be created as living-trusts (intervivos trust) and by Will (testamentary-trust). A living-trust is duly executed and valid while the client is alive. An testamentary-trust is created when a decedent’s Will is probated after their death.

Please contact the firm if you would like to learn more. We are happy to discuss the matter with you.

Sincerely,

Luke Lenzi, Esq.   

Frequently I receive telephone calls where the first thing that the prospective client asks is what the Firm fees are for a simple-will. I courteously inform them that we don’t create simple-wills. 

We provide complete and multigenerational estate planning services so that you can have the peace of mind to know that you have adequately provided for your loved ones and protected your assets.

It isn’t a meaningless advertising slogan. It’s a fact. 

We don’t sell our clients simple-wills and other cookie-cutter estate forms. As an attorney, my job is to protect my client, my client’s family and my client’s property. I can’t do that by blindly printing a one-size fits all document.

We will never sell you a cookie-cutter document that doesn't work and we will never recommend a service that we don't believe in. If a "will" happens to be all you need, then we will recommend it.

Estate planning fees and costs are determined on a case-by-case basis. Every client starts with the essential documents (listed below). Whether or not the client needs or desires further services depends on numerous factors, including the client’s financial and personal circumstances, health, family dynamics and personal choice.

During the free initial conference, the attorney and the prospective client will review the aformentioned factors in relation to the prospective client’s concerns and desires. The attorney will discuss the available options, there purpose, there practicality to the prospective client and make reccomendations.

We don't nickel and dime our clients. Generally all fees are transactional (not hourly). The prospected client will be presented with an engagement agreement with a quoted flat-rate fixed-fee price for the work suggested during the intial conference.

The quoted fees are all inclusive with the chosen plan. Client's will not receive invoices for phone calls, copying, research, trust funding, document execution, witnesses, ect. We typically request half of the quoted fee up-front with the remaining half due at the document execution ceremony.

Essential Docs

Will
Financial Power of Attroney
Living Will
Healthcare Power of Attorney
HIPPA Authorizations
Memorial Instructions

Typical Additional Documents

Revocable Living Trusts
Testamentary Trusts
Medicaid Trusts
Irrevocable Living Trusts
Business Entities
Marital Agreements

Documents Included w/ additional Trusts

Trust Summary
Deeds
Assignment of Tangible Personal Property
Certificate of Trust
Funding Checklists
Funding Instructions