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Estate Planning

Virginia Beach Estate Planning Attorneys

Who Needs Estate Planning?

Everyone!  Estate planning isn’t about how much money you have, it’s about protecting what you have during your lifetime for you, and protecting what you have for those you love after you’re gone.  It ensures that your “stuff” gets to the people you love, the way you want, when you want.

If you were to die today, are you confident that everything will be taken care of the way you wanted?  Estate planning is legally ensuring that things will be handled the way you want by providing sufficient instructions.

Estate Planning really is for everyone.  It doesn’t matter if you have $40,000 or $400,000.  It doesn’t matter if you’re 30 or 95.  You still have to plan for the future, whether it is to name a guardian for your minor children, to ensure that your children don’t blow through your assets if you unexpectedly die or become disabled, or to protect your children’s inheritance from unexpected creditors.

Estate planning can only be done by an attorney, and it can be as simple as a will, living will and power of attorney.  It can also include a revocable, probate-avoidance trust, asset protection trust, multi-generational tax-saving trust, tax-saving charitable trust, private family foundation – the list goes on based on your unique needs.

Once completed, your estate plan should be reviewed and kept current with life events such as the birth, death, marriage or divorce of anyone included in your plan.  In addition, you should review your plan if there is a significant increase or decrease in your finances or if the laws related to your estate plan change.

Do I Need A Will?

If you own assets in your name alone, they may pass from you to the people you love, as long as you leave a will.  Without a will, your assets pass according to the rules according to the Commonwealth of Virginia, also known as intestacy.

  1. Does a will bypass the courts and the probate process?

    No, actually, it is quite the opposite.  A will is a “ticket to probate,” meaning that upon your passing, your will is submitted to the Circuit Court where you resided before your death to be proved and recorded.  An executor or administrator will be named (typically the person you list in your will), and your assets and personal property will be distributed in accordance with your will.  It is important that your will is clear and up-to-date; otherwise, someone could contest the validity of the will, which can be extremely costly for your estate, and ultimately results in your loved ones getting much less than you intended.

  2. If I have a will, does everything pass through it to be distributed to my loved ones?

    No, not everything passes through a will.  In fact, many things pass outside of the will, including you payable on death (POD) or transfer on death (TOD) accounts, life insurance policies, and anything you own jointly with someone else where there is a right of survivorship or anything you own in a tenancy by the entirety.  For instance, if you and your spouse are both joint owners of a bank account, upon your death, your bank account will simply pass to your spouse, and never passes through your will.

  3. If I have a clearly written, up-to-date will, am I “all set”?

    Maybe…and maybe not.  It depends entirely upon your situation, but in most cases, a will by itself is not sufficient to completely protect your family from the unforeseen.  You should know that . . .

    • You can reduce your estate tax liability by using a trust in a will.
    • If you have a young child who may inherit from you, creating a trust in your will can significantly reduce the attorney’s fees, court costs, and time required to appoint a proper Conservator for your child’s inheritance.
    • Creating a trust in your will can protect your designees from creditors, divorce, or becoming disqualified from state and federal benefits (this includes college loans).
    • You can protect disabled beneficiaries by creating a supplemental needs trust for them, which preserves assets for the family, while keeping their eligibility for public benefits.

What is Probate?

Probate is the legal process of presenting your will to the Circuit Court after your death to authenticate it, get it recorded, and appoint your Executor (if you don’t have a will, the Circuit Court will appoint an Administrator of your estate).  The Circuit Court usually acts through the Clerk of the Court, and a court officer, called the Commissioner of Accounts, who will oversee the process of distributing your will, which includes making sure that the Executor or Administrator provides an accounting of your estate, pays all debts and taxes owed by your estate, and distributes the property in accordance with your will.

Your Executor or Administrator must be appointed by the Court in order to collect and distribute your assets as stated in your will.  However, because it is a legal process, there are many steps that must be followed before your Executor can be appointed.  If you have a will, a beneficiary can still challenge it by appealing the judgment to Circuit Court within 6 months of the Order of the Clerk admitting your will to probate.

If your estate is smaller than $50,000 (not including any real property or any accounts that pass outside of the will or outside intestacy), an Executor or Administrator is not required, but some accounting requirements still apply.

As you can probably tell, even if you have a will, there still many legal requirements that must be followed before your estate can be distributed.

If you do not have a will, your estate will still have to go through probate before your estate is distributed, but the process is much more unpredictable and can be very costly if someone challenges either the appointment of the Administrator, the designation of a beneficiary, or the distribution of an asset.  For these reasons, many people chose to avoid probate, but if all of your heirs agree and your assets are centralized, it can go smoothly, but why leave something so important to chance?

Power of Attorney

What if you become sick or disabled, either temporarily or permanently?  What if you get into a car wreck?  Who will make decisions for you?

  • A power of attorney (POA) allows you to appoint someone you trust to handle your affairs if you cannot do so.
  • If you cannot pay bills, get records, or make other decisions, your family will be prevented from helping you get treatment, pay doctors, or file for Medicare.
  • Without a POA, your family may have to file a Guardianship and/or Conservatorship proceeding.  This process involves the Court, several lawyers and usually at least $4,000 to $50,000 (this range is dependent upon whether the Guardianship and/or Conservatorship is challenged.  A POA might cost $200.
  • A business owner – regardless of age – should always have a POA in place to ensure that someone can still run the business, pay bills, taxes, and employees, and make day-to-day decisions if he or she is incapacitated.  In many cases, if a business owner is unable to run his or her business even for a very short time, the business may fail or suffer significant damage.

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Note:  Although you want to make sure that your POA gives your designee enough “powers” to act, giving your designee too many powers can be very risky.  It’s important that you discuss your specific needs with an attorney who is familiar with the implications of this document and who can assess any risks involved.  Otherwise, your POA could cause you more harm than help!

Revocable Living Trust

Having a revocable living trust (RLT) is a way to completely avoid probate and control exactly how your assets will be distributed when you die.  This type of trust is typically referred to as a RLT and is often used as a substitute to your will, or it is used to distribute a bulk of your assets when you pass, allowing the will to be used as a supplement for only minimal assets.  A RLT permits you to keep total control and access to all your assets during your lifetime, and provides for the distribution of your assets to your beneficiaries at your death.  We often refer to a RLT as your “book of instructions.” Everyone – both young and old – can benefit from a RLT.  Other advantages, when property drafted, can include:

  • Asset protection for your spouse after your death.
  • Special needs planning for disabled beneficiaries.
  • Asset management and protection for children who are not proficient with handling money.
  • Protection of assets from a spouse’s subsequent remarriage after your death.
  • Disability planning in the event you become disabled prior to death.
  • Asset protection for your child if his or her marriage should fail to ensure your assets are not part of a divorce settlement.
  • Keeping your affairs private (as opposed to open for public review in probate).
  • No court intervention required (handled entirely by the Trustee you name in accordance with your detailed instructions).
  • Plan for proper management of your business in your absence.

But Note:  Very few RLTs provide these benefits.  Only a qualified estate planning attorney will know how to incorporate these protections into your plan. While a RLT has many advantages, it does not protect your assets from a nursing home, lawsuits, divorce bankruptcy or other creditors.

Irrevocable Living Trust

Although a revocable living trust (RLT) is a great way to avoid the complexities and expense of probate, it does not protect you against creditors (including credit card companies or an unexpected lawsuit), nursing home long-term care costs, or even divorce.  An irrevocable living trust, otherwise known as an irrevocable pure grantor trust (we call it an iPug® trust) protects against all of these threats, and still provides you with a significant level of flexibility.

It is a common misconception that an irrevocable trust cannot be changed after it is created.  While this is true of many irrevocable trusts that are created to avoid taxes, irrevocable trusts like an iPug® that are used for asset protection do allow you to have much more control, and you get to decide to what extent you exercise such control.  Even though the iPug® is irrevocable, you can still choose to:

  • Be the trustee or change the trustee;
  • Receive all of the trust income;
  • Change the asset and/or investment within the trust;
  • Live in and use trust real estate;
  • Change beneficiaries;
  • Make distributions to beneficiaries during your lifetime (i.e., help children pay for education)

Debtor/Creditor law provides that whatever you can get, your creditors can get.  For instance, an iPug® that allows you to receive only the income generated by the assets in the trust means that you would give-up your rights to the principal, but you your creditors – including Medicaid – can never have access to the principal, either.  In an iPug®, you can retain the right to change who gets your assets during your life and after your death, and maintain 100% control of your assets until your mental disability or death.

An iPug® is a very effective way to protect you assets, but it is a highly technical type of trust.  Make sure that you work with an attorney who is knowledgeable about this particular type of trust.

Medicaid Planning

  • Applying for Medicaid assistance so that you or a loved one may move into a long-term care facility can be an arduous process governed by a highly detailed body of law.  Many things that you have heard about qualifying for Medicaid may not be true, or may not apply to your particular situation.  A nursing home or hospital that offers to file a Medicaid application for you has no obligation and lacks the expertise to advise you on how to protect your assets.  Some things to consider:
  • Assets in a revocable living trust are not protected and must be used to pay for the costs of long-term care.
  • If you are married, your home is exempt and cannot be taken when applying for Medicaid.  If you are single or widowed, your home is exempt up to $750,000.  If you transfer your home to your children, not only will it result in immediate ineligibility for Medicaid, but it could also:
    • Trigger a gift tax;
    • Result in the loss of any property tax exemption;
    • Result in your child’s spouse (the in-laws) inheriting your home.
  • Giving your assets away means losing control. It’s not safe even if you wholly “trust” the recipient.  If that person divorces, goes bankrupt, or is sued, all of the money you transferred is at risk.  There are asset protection trusts that permit you to keep 100% control of your assets without the risk of losing them if long-term care is needed.
  • You do not have to wait 60 months to qualify for Medicaid.  Eligibility is calculated on a case-by-case basis.  It is possible to have over $250,000 in cash and qualify immediately.
  • It is never too late to protect your assets, even if you are already in a nursing home.  In many cases, you can qualify for Medicaid sooner if you are already in a nursing home.
  • Applying for Medicaid prior to qualification could result in being disqualified for a longer period of time than you otherwise would have been.
  • Medicaid also covers home-based services that allow you to stay in your home and have a loved-one care for you.
  • Consider long-term care insurance.  An annual premium for a couple is usually less expensive than one month of nursing home care, and insurance premiums significantly increase as you get older.  Statistically, there is a 60-70% likelihood that you will enter into a long-term care facility for any period of time.  The earlier you plan, the better!

MEDICARE v. MEDICAID

It probably comes as no surprise that people often confuse the benefits offered by Medicare with those offered by Medicaid.  Below are a few distinguishing characteristics about each program.

Who and what is covered:

Medicare is a health-care benefit provided by the federal government to individuals over age 65, or under age 65 and disabled.  Medicare covers doctor visits, tests and care provided in a hospital setting, and limited benefits in a nursing home.  In most instances, Medicare will only pay for 20 days in a nursing home.

Medicaid is a public assistance program that provides health care insurance for the needy.  To qualify, you must not exceed certain income and asset limits.  Medicaid will cover all of your nursing home costs if you qualify.

How to qualify:

To qualify for Medicare, you must be over 65, and eligible for Social Security benefits.  You may also qualify if you are under age 65 and have been disabled for two years.  An application at the Social Security office will get your benefits started.

To qualify for Medicaid, you must submit a multiple-page application and provide detailed proof of all of your financial transactions (banking, CDs, stocks, bonds, income, expenses, annuities, etc.) for the previous 60 months.

Planning For A Child With Special Needs

For a child with special needs (minor or adult), it is especially important to make sure that he or she does not become disqualified from any state or federal benefits because of a direct inheritance of a sum of money through a will, via intestacy, or a life insurance payout.  Allowing funds to pass to a special needs trust for the benefit of the special needs child ensures that the child will continue to receive benefits such as Supplemental Security Income (SSI) and Medicaid (benefits related to the beneficiary’s disability and personal income level), and Medicare and Social Security Disability Income (employment-based benefits typically derived from the beneficiary’s retired, deceased, or disabled parent).  Even if the child does not rely on Medicaid for medical coverage, there are many community-based programs for which a child must be “Medicaid qualified” to receive.

In addition to creating a special needs trust itself, all IRAs, 401k plans, payable on death (POD)/transfer on death (TOD) accounts, and jointly-held accounts should also list the special needs trust as the recipient instead of the special needs child.

There are many different types of special needs trusts.  For instance, a special needs trust can be established by a third party who funds the trust with his or her own assets, and as of December 13, 2016, a special needs individual may personally establish his or her own special needs trust without court approval, although there are more restrictions.

Adult Guardianship and Conservatorship

A guardian or conservator can only be appointed through a Virginia Circuit Court.  A guardian handles an incapacitated person’s personal and medical affairs and a conservator handles an incapacitated person’s finances.  Depending on the circumstances, the court may appoint one and not the other, or limit the authority of the guardian or conservator.

Guardianship of an Adult Child:  Ensuring that your child is financially protected is only the first step to a successful estate plan.  For those adult children who require it, a parent or other family member may want to petition the court for guardianship and/or conservatorship.  If a guardian or conservator is named, a successor testamentary guardian or conservator should also be named to ensure that an adult child is adequately protected.

Guardianship of an Elder:  We create a comprehensive estate plan to fit the unique needs of each client, which includes a durable power of attorney and medical directive to ensure that a trusted agent – often a child or other family member – is able to handle the individual’s medical and financial affairs in the event of incapacitation.  Unfortunately, when a plan is not in place, a person’s loved one will have to petition a Virginia Circuit Court for guardianship and/or conservatorship.

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