Estate Planning

In Virginia married persons have certain rights to the property of a deceased spouse. Even if the spouse was disinherited by a Will, Trust or gifts during lifetime, the spouse may be entitled to numerous spousal inheritance rights. Such rights include an (i) elective share, (ii) possession of the family residence, (iii) family allowance, (iv) exempt property allowance, and (v) homestead allowance. The following discussion concerns the aforementioned text discussed the forgoing spousal rights.  

Estate planning is a dynamic process. Each person has their own circumstances that make the outline and structure of estate planning unique to them. 

For parents with minor children, the focal point of estate planning generally is preparation for the contingency of simultaneous death or both parents dying while the children are young. The estate planning focus is the care and preservation of their children during the stages of life from infancy to post college adulthood.

Pre-Nuptial or Post-Nuptial Agreements are really important Estate Planning Tools for many people. Unfortunately, because Nuptial agreements are frequently and unfairly viewed negatively, and with more than a hint of skepticism, they are rarely utilized in the Estate Planning context. Notwithstanding, Nuptial agreements become more frequent when the parties are older and otherwise previously married. 

Some of the most important reasons to speak with an estate planning attorney concerns divorce. Divorcees have complicated family and asset protection issues that many families don't have. The following are two common issues involving estate planning for Divorcees or Divorced Couples.

Issue #1: Divorcee wants to leave their assets to their minor children while insuring that the other parent doesn't control or receive any assets.  

Common Estate Planning Solution: A living trust for minors designed to insure that the mother cannot serve as Trustee or alter the Trust as Guardian of the estate of the minor. 

Issue #2: Divorcee may be required by a separation or property settlement agreement to provide for the other Divorcee in some capacity.

Common Estate Planning Solution: Incorporation by Reference of the relevant separation or property settlement agreements terms in the estate planning trust documents. Its important to consider the implications of the surviving spouse's elective share and other inheritance rights when creating the plan. 

Estate Planning for Divorcees or Divorced Couples is very important. Frequently Trusts (living trusts as opposed to testamentary trusts) are used to create the estate plan. In the end, the client should feel that their estate planning concerns have been satisfied and their asset protection related goals achieved. If you have any questions, please feel welcome to contact the office and we can discuss any Divorce related estate planning issues with you.

Sadly, many clients walk into an estate planning attorney's office and are never asked about the clients' outlook for the future. What world do they expect to hand down to their children? What opportunities will their children have? What opportunities will not otherwise be available? Will they live in a free society?  

The reality is that many people, myself included, believe that future will be characterized by severe and ever increasing economic strife, government regulation, corruption, tyranny and societal decay. 

These particular clients' heartfelt and valid concerns shouldn't just be taken into consideration, they should be the foundation for which their plans are built. 

Below I have listed some provisions that could be implemented in almost any Trust plan

Estate Planning Trust Provisions for the Economic Collapse

1. provisions requiring the Trustee to have a certain some of non-perishable food and salt on hand

2. provisions designed to better insulate the Trust assets from rising interest rates and a Treasury Bond Bubble Implosion 

3.  provisions requiring the trustee to purchase necessaries in case of an economic collapse

4. provisions requiring the trustee to educate and instruct the beneficiaries on independence, self reliance and preparedness (maybe even requiring the beneficiary to obtain a classical education that includes learning history, chemistry, biology, anthropology, mythology, philosophy, legal jurisprudence, constitutional law and how to reason on an advanced level) 

5. provisions requiring the beneficiary to learn how to shoot, fish, hunt, farm, or prepare their own food. 

6. provisions for home schooling children

7. distribution provisions deigned to promote and influence positive conduct

8.  distribution provisions designed to inhibit negative conduct 

Ultimately, unless it is illegal or against public policy, clients can have almost any provisions inserted into their trust plan. They can tweak it anyway they like. That begs the question, than why are clients sold cookie-cutter one size fits all documents? 

House Passes H.R. 8 With a Vote of 257-167; Modifies Estate Tax, Generation Skipping Tax & Gift Tax (1/2/2012)

I. Makes the 2012 Estate, Gift & GSST Law Permanent (except as amended)

H.R. 8, after being signed by the President, will make the 2012 estate tax law permanent (including the existing 5 million credit that is indexed for inflation) by repealing the sunset provisions of the 2001 and 2010 Tax Acts.

Under H.R.  8, section 101(a), except as amended, Congress made permanent the sunset tax laws in the Tax Relief Reconciliation Act of 2001 and the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

II. Increases the Tax rate on Taxable Estates

The act also modifies the Tax Rates on Taxable Estates, found in 26 USC 2001, as follows:

For decedent's dying after 12/31/2012, the maximum estate tax, gift tax, & generation skipping tax rate will be 40%. The rate progressively increases as follows: 

"Over $500,000 but not over $750,000 . . . . . $155,800, plus 37 percent of the excess of such amount over $500,000.

Over $750,000 but not over $1,000,000 . . . . $248,300, plus 39 percent of the excess of such amount over $750,000.

Over $1,000,000 . . . . $345,800, plus 40 percent of the excess of such amount over $1,000,000.’’ 

Under H.R.  8, section 101(c), as identified above, Congress modified the table contained in subsection (c) of section 2001, as amended by section 302(a)(2) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

III. What's Next

The bill, having been passed by the house and senate, goes to the President for signature. 

The text of H.R. 8, as published by House,gov on 1/2/2012, can be viewed by clicking here.  

Family Trust: A Family trust is a trust created to benefit persons who are related by blood, affinity or law. Generally they are created to protect a beneficiary from taxes, creditors, the government and themselves.

Family Trust: Living or Testamentary

Family Trusts may be created as living trusts or testamentary trusts. A living trust is a trust created by the grantor while the grantor is alive. A testamentary trust is a trust created by the grantor’s will when the grantor’s will is presented to the court for probate (upon the grantor’s death). 

Planning Option: Why choose a living family trust v. testamentary family trust? 

Because a properly funded family living trust can avoid probate and a testamentary family living trust is subject to probate. 

Family Trust: Revocable or Irrevocable

Family Trusts may be revocable or irrevocable. Grantors can create family trusts that are revocable when they are alive (known as revocable or intervivos family trusts). However, when the Grantor dies, that revocable living  family trust actually becomes irrevocable (because the Grantor is no longer alive and able to revoke the family trust).    

Planning Option: While most grantors want the ability to revoke or amend their family trust during life, sometimes a grantor must use a testamentary family trust for a specific planning purpose (e.g., Medicaid Trust Purposes). 

Family Trust: Why

Client’s create family trusts for many different estate planning reasons. Common estate planning reason for creating a family trust have been listed below;

1. Create a Minor Children’s Trust (trust for benefit of minor children)
2. Create a Trust to protect a special needs beneficiary
3. Avoid probate taxes upon death 
4. Asset Protection; beneficiary’s creditor’s  
5. Asset Protection; divorcing spouse 
6. Asset Protection; bankruptcy
7. Asset Protection; Medicaid 
8. Provide for a surviving spouse and children
9. Blended Family: avoid disinheritance
10. Tax Avoidance
11. Privacy

Family Trust: Cost & Estate Planning Fees

Family trusts are not terribly expensive. However they cost more than wills costs. For most people, the costs of not creating a family trust are so excessive that choosing a family trust is an easy decision. 

Family Trust: How to get Started

Give us a call. We are happy to discuss whether a family trust is right for you. We are happy to speak with you at no charge. 

Estate Planning Real Estate: 

Owners of real estate should consult an estate planning attorney about preventing duplicative probate proceedings and the forced sale of real estate by the court.

Estate Planning Real Estate: What is Estate Planning for Real Estate

Estate planning for real estate involves ensuring that real estate is distributed to the estate beneficiaries at the lowest financial cost and burden. Estate planning real estate transfer techniques include trusts, tenancy by the entireties, joint tenancy and business entities. Two estate planning issues for real estate have been discussed below.

1. Estate Planning Real Estate: Estate Planning Issues (Duplicative Probate)

Real estate is problematic for estate planning purposes. If you own real estate located in another state, then you may likely have to probate your Will in multiple jurisdictions (resulting in significant delays and costs). Because each state has jurisdiction over the real property located within its jurisdiction, the decedent’s Will may have to be probated in every jurisdiction where the decedent owns real property in their own name.

E.G., A is a resident of Virginia. A owns real estate in California, Florida and Texas. A’s Will will have to be submitted to probate in Virginia (home state), California & Texas. 

Estate Planning Real Estate Solution: A could create an estate planning living trust and title each parcel of real estate into that estate planning trust. Consequently, A’s Will may not have to be probated in any jurisdiction (not even Virginia).

2. Estate Planning Real Estate: Estate Planning Issues (Partition)

Real estate may be subject to partition in the hands of your beneficiaries. Partition is the process of dividing and selling real estate in accordance with the respective owners’ interests. Consequently, if you leave real estate outright to multiple beneficiaries, than any beneficiary can bring a partition proceeding to force the other beneficiaries to sell the property. Additionally, that beneficiaries creditors may also stand in the shoes of a debtor beneficiary and force a sale of the land to collect on a debt. 

Estate Planning Issues with Real Estate Partition

• Forced sale of real estate during bad market (loss of gains)
• Land broken up and no longer owned by the family
• Tax consequences on forced sale of real estate
• Real Estate subject to creditors, bankruptcy, divorcing spouses & Medicaid

Estate Planning Real Estate Solution: Create an estate planning living trust and title the real estate into that estate planning trust. Include provisions to prevent sale and creditors ability to get to property. Consequently, real estate could be protected from judicial sale by partition.

Have Questions? Contact our Firm via phone (703.349.2742) or email (contact@oldtownattorney.com)  

Estate Planning Fees: Generally

Estate Planning Fees vary depending on the complexity of your plan. Estate planning fees are determined relative to the amount of estate work involved. If a person's estate is Will Based (doesn't include a trust plan), the estate planning fees can be very inexpensive. If a person estate includes a basic trust than the estate planning fees may also be relatively inexpensive.

Estate planning fees increase when we incorporate advanced asset protection or draft great detail into an estate planning document. If you want to restrict a beneficiary's access to the estate inheritance, or protect the estate inheritance from divorcing spouses, Medicaid, Bankruptcy or creditors, your estate planning fees begin to increase. 

The following Spring 2012 Promotion outlines our estimated estate planning fees and costs for two of our basic estate plans. The estate planning fee promotion is limited in scope and duration.  

Simple Trusts: What is a Simple trust?

A simple trust does’t have any specific meaning. When I refer to simple trusts, I often am referring to a trust that doesn’t have complex or detailed provisions. A simple trust is appealing to many people because they want to avoid perceived expensive estate planning fees and costs.

Simple trusts: What does a Simple trust do?

Simple trusts are better understood as probate avoidance trusts. Simple trusts pass all assets outright to a beneficiary as soon as practically possible (after decedent’s death). Simple trusts have little to no asset protection. Because simple trusts are probate avoidance tools, than there is no reason to create it after your dead (via WILL). 

Simple Trusts: The problems?

Simple trusts are problematic because they have to be funded correctly. Funding is the process of titling assets into the name of the trust (or making the trust a beneficiary upon death). If they are not funded correctly, probate may likely result and the purpose of the trust would have been defeated. Simple trusts also should generally not hold tax deferred assets because they lack the necessary provisions to avoid a tax disaster. 

Have questions about simple trusts, call our office. 

Will: What is a wIll?

A will is document by which a person directs his or her probate estate to be distributed upon death. Will governs probate assets. Will doesn’t direct your non-probate assets. Will probate assets are those assets that pass by beneficiary or operation of law upon death. 

Will: Execution

Will must comply with certain rules regarding execution for every jurisdiction it must be probated in. A non-holographic will must be signed, witnessed & notarized in accordance with the applicable jurisdictional law. Will must be probated in the jurisdiction where the decedent died for personal property and probated in the jurisdiction where the decedent owned real property (situs or located physically). If the decedent owns a business entity that owns real property, than the Will should govern that asset because under Will law the decedent owns the business entity not the land.

Will: Costs

Will costs and Fees very. However, we have a current spring promotion indicating flat fee fixed prices. Click below for more information. 

Except when it would be inconsistent with the manifest intent of the legislature, the word "will" shall extend to a testament, and to a codicil, and to an appointment by will, or by writing in the nature of a will, in exercise of a power; and also to any other testamentary disposition.

Every person not prohibited by §64.1-47 may, by will, dispose of any estate to which he shall be entitled, at his death, and which, if not so disposed of, would devolve upon his heirs, personal representative or next of kin. The power hereby given shall extend to any estate, right or interest to which the testator may be entitled at his death, notwithstanding he may become so entitled subsequently to the execution of the will.

No will shall be valid unless it be in writing and signed by the testator, or by some other person in his presence and by his direction, in such manner as to make it manifest that the name is intended as a signature; and moreover, unless it be wholly in the handwriting of the testator, the signature shall be made or the will acknowledged by him in the presence of at least two competent witnesses, present at the same time; and such witnesses shall subscribe the will in the presence of the testator, but no form of attestation shall be necessary. If the will be wholly in the handwriting of the testator that fact shall be proved by at least two disinterested witnesses.