Author Archives: Nova Estate Lawyers

Your Estate Planning Checklist: 6 Steps to Get Started

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Your Estate Planning Checklist | NOVAEstateLawyers.com

Estate planning is an important process that allows you to dictate what happens to your assets in the event of your death or incapacity. While it may seem morbid to think about, especially if you’re young, it’s never too early to start creating an estate plan. Planning ahead will ensure a smooth probate (or probate avoidance) process for your loved ones and beneficiaries, and it may give you peace of mind knowing your wishes are clearly documented if something were to happen. To get started with your estate plan, follow these six steps.

1. Identify and record all your assets.

Your assets include tangible and intangible items. Tangible assets are assets that can be measured physically, such as any furniture or furnishings or other items in your home, your car, or any work tools or equipment you own. Intangible assets are not physical and may include any business licenses, trademarks, digital (social media) assets, or intellectual property you have.

2. Consider risks to assets. 

Certain assets come with risks. For example, if you own a home and you have overdue mortgage payments and property taxes at the time of your death, your estate will need to have sufficient funds to settle those debts. Take a look at your asset list and consider what you can do to mitigate risks that could come from them.

3. Protect your loved ones and name your beneficiaries. 

There are several estate planning arrangements you can put into place to ensure your family and loved ones are provided for in the event of your death. If you are a single parent of minor children, you’ll want to appoint a legal guardian and set up a trust plan (as part of a Will or separately, depending on your goals) in order to provide financial security for them until they reach adulthood. Even if you are married to your child’s other parent, it’s a good idea to name a successor legal guardian to your spouse in the unlikely event that both you and your spouse die before your children have turned 18 years of age.

This is also a good time to think about what assets you want to be passed on to your family and friends. Go down your list of assets one by one and decide on your beneficiaries. Some individuals choose to leave their entire estate to their spouse and children, while others divide up their estate and leave certain assets to specific heirs.

4. Choose your power(s) of attorney. 

Choosing an agent or attorney-in-fact to administer your financial and medical powers of attorney (POAs) is one of the most important parts of the estate planning process. Your agent should be someone you trust to make the best decisions on your behalf, as they will be responsible for your financial and medical decisions should you become incapacitated or are otherwise no longer able to make these important choices for yourself. You can use the same person (your spouse, for instance) or different people to serve in these roles, or perhaps name co-agents depending on your goals.

5. Review local and federal estate tax laws.

If you have a particularly large estate, your executor may be responsible for paying federal estate taxes. To help ease the burden of these expenses, your estate plan should include a review of current federal estate tax laws to determine your estate’s liability. Depending on where our beneficiaries reside at the time of your death, you may also want to brush up on the state inheritance tax laws where your beneficiaries reside.  While Virginia does not impose inheritance taxes on residents who live in Virginia when they inherit, a handful of other states do.

6. Hire an estate planning attorney to help. 

Due to the complexity of estate planning, it’s always wise to contact a professional for help. To get started with your estate plan or update your current plan, contact the Law Office of Patricia E. Tichenor, P.L.L.C. Our firm has nearly 20 years of experience helping Virginia families with creating and updating their estate plans.

DIY Estate Planning: Good or Bad Idea?

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DIY Estate Planning: Good or Bad Idea? | NOVAEstateLawyers.com

With the emergence of DIY estate planning software and online tools, you might think you have access to everything you need to easily and affordably prepare your own estate planning documents.

While you can certainly do this, it may not be the best idea to skip the attorney’s office if you want to ensure that your documents are legally binding and properly crafted. Estate planning is a complex process, and mistakes are bound to happen — but many are financially taxing or difficult to fix, especially if they’re not spotted until after your death.  In addition, estate planning often requires knowledge of how the probate process will work after you die and knowledge of how to use particular estate planning documents and tools to avoid or limit the impact of probate on your estate.

While a DIY estate planning approach is often better than not having an estate plan at all, it’s certainly not risk-free. Before you download any forms from a DIY website or purchase a DIY package at a local retail store, here are a few important considerations.

What is DIY estate planning?

DIY estate planning is essentially just drafting your key estate planning documents — your will, your powers of attorney, your advance medical directives, etc. — using templatized forms available online or from a retail store for a fee. While these forms may be a good starting place for listing and organizing your assets, they do not always include the precise language that must be included in a will to make them admissible/valid in the eyes of a probate court.

What can go wrong when you draft your own estate planning documents?

There are many risks of tackling estate planning without legal guidance. Here are few common errors you might encounter:

1. Failure to meet signature requirements

A valid Virginia will must be signed by the testator and at least two witnesses who are not beneficiaries. These witnesses must sign in the presence of the testator, at their direction. Failure to meet these requirements will render your will invalid — and a DIY estate planning tool might not remind you of this requirement the way an attorney would.  In some instances, if one of the witnesses you used is not qualified to serve in that role, this might also render the Will invalid, which is why it is best to use a notary public in addition to the two witnesses.

2. Improperly funded trusts

When forming a revocable living trust, you’ll need to fund it for the trust to be valid. In other words, depending on the purpose of the trust and the types of assets you own, you may need to re-title certain of your assets from your personal name into the name of the trust. If you don’t, your heirs may end up going through probate court and incurring probate taxes that could otherwise have been avoided. An estate planning attorney can offer specific, personalized guidance when creating and funding your trust, in a way that a DIY tool may not.

3. Not accounting for state-specific laws

Every state has different estate planning laws, and it’s crucial you follow them to the letter if you want a probate court to deem your will as valid. Some DIY tools provide generic forms that do not account for certain specific Virginia provisions. Without legal guidance from an experienced local attorney, you might not be complying with the right regulations in your area.

4. Unique situations unfit for DIY

Many situations are too unique for basic DIY estate planning forms. For instance, maybe you have assets in multiple states, or perhaps you have children from a previous marriage, or perhaps you want your home to be preserved as a place for your children to still live with a legal guardian after your death.  Whatever the case, unique situations require unique solutions, not a one-size-fits-all approach and often a will alone is not sufficient to meet your needs.

Why hire an estate planning attorney?

If you choose to handle your own estate planning needs, you may be setting yourself up for unnecessary complications that could impact not only you, but also your executor and your beneficiaries. It doesn’t matter how much time you spend drafting your own estate plan, or how detailed you are — one simple mistake can invalidate your entire will, trust or other legal document.

An attorney can help you avoid the above mistakes and provide guidance for your specific circumstances. No matter how simple you think your circumstances are, a templatized form is unlikely to thoroughly and properly address every person’s exact wishes for their estate.

Bottom line? An attorney can help you craft wills, trusts, powers of attorney, and other estate planning documents that are appropriate for your situation and include the proper language to ensure their validity after you pass away.

Get help with your estate plans

The Law Office of Patricia E. Tichenor, P.L.L.C. has nearly 20 years of experience serving the needs of Virginia families. Contact us today for help with creating or updating your estate plans.

How Do Estate Taxes Work?

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How Do Estate Taxes Work? | NOVAEstateLawyers.com

Tax Day is rapidly approaching, and as you prepare to file your tax return this year, it’s a good idea to also review the current legislation on estate and gift taxes.

While the Commonwealth of Virginia effectively repealed its state-level estate or inheritance tax in 2007, federal estate tax laws still apply to estates of a certain size. For this reason, it’s important to understand how the law may impact your beneficiaries and their future inheritance.

Here are some of the basic facts about estate taxes, including who is expected to pay what, and when.

What is the estate tax?

The estate tax is collected by the IRS from estates of a certain size before assets are distributed to any heirs and beneficiaries. Sometimes called the “death tax,” the estate tax is levied against estates larger than $11.58 million per individual, or $23.16 million per married couple (as of 2020) under a temporary change made to the laws under President Donald Trump’s tax reforms.  In 2021, unless Congress acts to extend these changes, the figure will be reduced to roughly $6 million, with a cost of living adjustment to apply on an annual basis.

The amount your estate will pay is determined by how much larger it is than the federal exemption. For instance, under the Trump tax reforms, an estate that is less than $10,000 above the federal limit will pay $0 in base taxes and a marginal tax rate of 18% on the overage amount, while an estate that is $100,000 above the limit will pay a $18,200 base tax plus 28% on the overage.

Who is responsible for paying estate taxes?

All U.S. estates are subject to federal estate tax law, although most are not large enough to be impacted by current regulations. On the state level, 18 states currently collect their own taxes on the estates of its decedents (as mentioned above, Virginia is not one of them). Several states have recently repealed their estate tax for deaths that occurred after a certain date.

What about inheritance taxes and gift taxes?

Inheritance taxes are paid by an individual who benefits from a decedent’s estate. They are not the same as estate taxes, which are paid by the estate itself.

It’s important to note that inheritance taxes are not imposed by the federal government, and only six states (Iowa, Kentucky, Maryland, Nebraska, New Jersey, New York, Pennsylvania) currently collect inheritance tax from its residents. That means if you leave money to a beneficiary residing in one of these states, they will have to pay inheritance taxes on that amount.

Gift taxes, on the other hand, are paid by someone who gifts assets above a certain amount to another person during their lifetime. Read on to learn more about gift tax exclusions and how lifetime gifting can work as an estate planning strategy.

How can I reduce the size of my taxable estate?

If your estate is approaching the federal exemption limit and you want to ensure it stays below that amount, there are a few different strategies for reducing the size of your taxable estate.

One of the most common methods for doing this is establishing an irrevocable trust.  Assets that are transferred through an irrevocable trust, if created five years prior to your death, may not count toward your taxable estate. As an added bonus, these assets are also not subject to the probate process, as they would be if they were passed through a decedent’s Will.

You may also wish to explore inter vivos gifting as an option for reducing your estate size during your lifetime. Gifting is when one person completely and irrevocably transfers assets to another, and the giver does not receive anything in return.

Gift amounts that fall within the current federally-allowed limits of $15,000 per person, per calendar year are completely tax-free. That means if you gift $15,000 to each of your children over the course of one year, they will not have to report it as income or pay taxes on it to the IRS. For spouses, this means you could give your children a combined gift of $30,000 in any calendar year, tax-free. Any amount over this is considered non-exempt, and you and your recipient will have to pay taxes on that amount.

As long as your non-exempt lifetime gifting – the combined amount that you give away prior to death and leave to others after death – does not exceed the current $11.58 million federal limit, you can effectively use this strategy to reduce your taxable estate over time, while still ensuring that your desired beneficiaries receive their inheritance money.

Still have questions? Ask an experienced estate planning attorney.

Estate planning can be confusing, and it’s not always clear how to best structure your plans to minimize the tax burden and maximize your beneficiaries’ inheritance. No matter how large or small your estate, the Law Office of Patricia E. Tichenor can help.

We’ve been assisting Virginia residents with wills, trusts, and other estate planning needs since 2001. We’ll work with you to review your assets and create the ideal plan for your needs. Contact us today and let’s start planning for your family’s future.

What Is a Special Needs Trust?

special needs trust attorney

What Is A Special Needs Trust? | NOVAEstateLawyers.com

If you are the parent of a child with special needs, you may need to set up some special protections in your estate plan to ensure he or she will be properly cared for when you pass away, especially when your child reaches adulthood. The most common way to do this is by establishing a special needs trust.

A special needs trust (SNT) can be used to protect the assets you or your family wish to leave to your child. The SNT involves a donor, trustee, and beneficiary. The donor supplies the funds for the trust, while the trustee holds and administers the funds as the donor intends. An SNT when drafted properly allows the beneficiary (the individual receiving the benefits) receive supplemental support above and beyond (and totally separate from) the government benefits received by them – without those supplemental assets being counted against them for purposes of qualifying for or receiving federal benefits.

Here’s what you need to know about special needs trusts and the advantages of establishing one.

Types of special needs trusts

There are three main types of special needs trusts: first-party, third-party, and pooled. Each trust has its own terms and benefits.

1. First-party special needs trust

A first-party SNT is commonly used when a child with special needs who, unfortunately, directly and personally inherits money or property because there was no third-party SNT planning done by the individual from whom the child is now inheriting.  This type of SNT is also used when an individually receives a personal injury or other large settlement.  The use of the SNT is made in order to permit the individually the ability to still qualify for government aid, such as Medicaid.

With a first-party SNT, any portion of the assets which remain unused by the beneficiary will become the property of the government, reverting to Medicaid as a pay-back mechanism.

2. Third-party special needs trust

A third-party SNT is created by a parent, grandparent, or other third party who wishes to leave assets (commonly life insurance) for the benefit of a special needs child without fear that doing so will disqualify that child from qualifying for other federal government benefits such as Medicaid.   The Trustee of such an SNT (similar to the First-party SNT) has absolute discretion over the use of the assets in this Trust, and they must familiarize themselves with the applicable POMS rules to ensure that distributions they make for the benefit of the child (never directly to the child) do not disqualify the child from his or her federal benefits nor result in a reduction in the amount of such benefit.

With a third-party SNT, unlike a first-party SNT, any unused assets which remain in the SNT can be re-directed to another family member or even the descendants (if any) of the special needs child.

It is generally best to prepare an SNT as a separate, stand-alone document when preparing your estate plan, so that any third party family member, sibling of your special needs child, or other family friend can name that SNT as a beneficiary if they desire to benefit your child without risking your special needs child losing his or her government benefits and allowing other family members or friends to be named as alternate or successor beneficiaries should your special needs child fail to exhaust all of his or her SNT assets prior to his or her death.

3. Pooled special needs trust

Pooled SNTs are unique because they are established and administered by nonprofit associations, often subject to government oversight to prevent mishandling and abuse. This type of SNT is used when a child’s family or a child do not have sufficient personal assets to justify the creation and funding of a separate SNT solely for the child’s benefit.  Instead, whatever assets are there for the child are pooled with the assets of many hundreds or thousands of other similarly situated special needs children, and all are then able to draw from this pool of assets in order to supplement their needs where their government benefits are insufficient to support or pay all their needs.  At the death of a participating special needs child, any unused assets from that child’s original contribution is retained by the pool and used for other surviving, participating special needs children drawing from those pooled funds.

Is a special needs trust right for your family?

There are many reasons why you might consider establishing a special needs trust:

  • Protecting necessary assets: If you want to ensure your child’s inheritance is protected from unscrupulous individuals or creditors, naming a trusted individual or bank to serve as manager and gate-keeping during your child’s lifetime, an SNT is something you want to consider.
  • Preserving family wealth: When you establish a Third-Party SNT for your child, you can provide a mechanism that ensures any portion of the assets transferred to the SNT after your death that are not used by the death of your child pass onto other siblings or family members, or a charity designated as a “legacy gift” by you.
  • Ensuring government aid: Naming the special needs child as a direct beneficiary will hinder the amount of support (medical or otherwise) he or she may receive from the government. Using an SNT provides a mechanism by which a child’s needs can be supplemented by what you leave them while avoiding the risk of costing them valuable government assistance.
  • Appointing a trustee: Depending on the duration of the SNT, it may be prudent to select a corporate trustee (often a bank or a dedicated trust management organization) rather than just an individual trustee to provide ongoing management of the trust assets for your special needs child. An SNT can provide for a Trust Advisory Committee that includes siblings, a nurse, CPA, Certified Financial Planner, or others to serve as a kind-of Trust protector and as a hands-on caretaker to your child, even while having the assets of the SNT managed by a corporate trustee.

You can learn more about trust funds and how to establish them in our blog post.

Contact an experienced estate planning attorney for help

If you need help establishing a special needs trust for your child, the Law Office of Patricia E. Tichenor can help. We’ll work with you on your estate plans to ensure your child’s rights and needs are protected for throughout their lifetime.

Estate Planning Resolutions to Make for 2020

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2020 Estate Planning Resolutions | NOVAEstateLawyers.com

You may have already made some 2020 New Year’s resolutions about your health or your career. However, the start of the year (and in this case, the decade) is a great time to make some estate planning resolutions, too.

While estate planning can feel overwhelming at times, it’s essential to devote time to it if you want to secure your family’s future or ensure that the individuals you want to inherit from you do so in the most efficient, least costly way possible. Here are five important estate planning tasks to address this year.

1. Draft a will if you don’t already have one.

A valid will is a document that tells a probate court how to distribute your property and financial assets when you die. Without one, there is no legal way to ensure that your final wishes are carried out. In your will, you should name a trusted executor (such as an attorney, family member, or friend), who will be responsible for overseeing the management of your assets after your death.

2. Create a revocable living trust.

A revocable living trust is another estate planning tool that aids in the transfer of property. A revocable living trust can be adjusted at any time during your life and preserve certain assets for specific reasons important to you, such as keeping the family home for your children to continue to be raised in if both you and your spouse die. It’s especially important to create a revocable living trust together if you have children under the age of 18, so you can designate how their inheritance and finances will be managed until they reach an age or ages where you feel most comfortable having them control their inheritance.

3. Update your powers of attorney, executor, and/or beneficiaries if any family circumstances have changed.

Ideally, the person(s) you name as attorney-in-fact under your powers of attorney and executor in your will is someone you trust to keep your best interests at heart. Unfortunately, your initial choices for these roles may not always remain the same.

A designated attorney-in-fact or executor should be changed in your estate plans if the chosen individual passes away before you, or if other recent circumstances (divorce, bankruptcy, a falling out, etc.) make you feel that they should not be involved in carrying out your final wishes. Be mindful not to appoint someone who could abuse this privilege for selfish reasons.

Similarly, you may want to review your list of beneficiaries to ensure that your selections reflect your current circumstances. For instance, if you are recently divorced, you should review your will and change anything that may be associated with your ex-spouse and their family.

4. Make sure you’ve appointed a legal guardian for any minor children you may have.

No parent wants to think what would happen if they pass away while their child is still a minor. However, this is precisely why naming a legal guardian in your will is so important.

Typically, if you die before the child turns 18, your child’s other parent becomes the legal guardian and assumes responsibility for that child’s care and well-being. If you both pass away (or if the other parent is not involved in your child’s life), having an appointed legal guardian or guardians ensures that important decisions about your child’s future are not left to a court or Department of Social Services.

5. Review your entire estate plan and consider whether you need to make any changes.

Your life circumstances can change a lot in a few short years, so be sure to review your entire estate plan and consider whether you need to make any changes, especially if you have not done so recently. When making these updates, ensure that all your retirement accounts, joint properties, life insurance, and beneficiary designations are recent.

Get help keeping your estate planning resolutions.

The best way to keep your 2020 estate planning resolutions is to work with a knowledgeable estate planning attorney. The Law Office of Patricia E. Tichenor, P.L.L.C. has almost 20 years of experience serving the needs of Virginia families. Contact us today for help with creating or updating your estate plans.

The Law Office of Patricia E. Tichenor, P.L.L.C.
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