Author Archives: Nova Estate Lawyers

Will the 2020 Presidential Election Impact Your Estate Plans?

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How the 2020 Election May Impact Estate Planning |

With the 2020 Presidential election fast approaching, many Americans are wondering about the potential legislative impact of either outcome.

One area people are watching closely is estate planning, which could be affected by changes to laws around estate taxes and capital gains. Here’s what you need to know about how your plans could be impacted, depending on whether Trump is re-elected or Biden wins the presidency.

What current laws impact estate planning?

Current laws regarding estate taxes and gift-giving can impact your estate planning. Understanding these laws and the exemption limits can help you more effectively plan your estate over your lifetime.

In 2007, the Commonwealth of Virginia repealed its state-level estate tax. However, estates of a certain size (larger than $11.58 million per individual, or $23.16 million per married couple) are still subject to federal estate tax laws. The exact amount your estate must pay will depend on how much larger it is than the federal exemption limit, with higher taxes being placed on bigger estates.

To reduce their taxable estate, many individuals choose to use gifting of assets throughout their lifetime. Gift taxes are paid by the individual who gives another person assets over a certain amount (currently $15,000 per individual per year, which will remain the same in 2021); gifts under this amount are tax-free and do not need to be reported as income. You would only need to monitor your non-exempt lifetime giving (the combined amount you give away prior to death and leave to others after death) falls under the current federal limit.

What might change based on the 2020 election?

Depending on whether President Trump or former Vice President Biden wins the election, the following aspects of estate planning could be affected:

1. Exclusion amount

The current exclusion amount is $11.58 million per individual ($23.16 million per married couple), and estates in excess of the exclusion are currently taxed at 40%. Under Trump, the current exclusion amount will be in effect until 2025. At that time, exemption amounts will be reduced to $5 million per individual ($10 million per married couple), indexed for inflation.

Conversely, Biden has suggested that he plans to return to a “historical norm” of a reduced exclusion amount. Though he has not provided specific dollar amounts, experts have interpreted the amount to be either $5 million or $3.5 million — a number that would significantly increase the number of estates that are subject to taxation.

2. Stepped-up basis

After an individual passes away and leaves an asset to another person, the basis (the original owner’s initial investment in the asset) rises to the current market value. The new owner inherits the asset at its “stepped-up basis,” and they are free to immediately sell the inherited asset with minimal to no income tax. Biden has proposed to repeal stepped-up basis, which has remained in effect during Trump’s presidency.

3. Capital gains

Biden’s proposed elimination of the stepped-up basis would increase capital gains taxes for those who inherit the assets. Capital gains refers to the profit made from receiving an asset at one value, and selling it at a higher value.  For most of the middle class, a home is the most valuable asset a family owns, and this repeal would be a serious setback to the ability to pass this part of a family’s built-up wealth to the next generation in the tax-free manner that has long been relied upon by families in the United States.

Have questions? Ask an experienced estate planning attorney.

Regardless of who wins the 2020 election, it’s a good time to look at your net assets and understand the size of your taxable estate. If you are close to the current threshold, you may wish to take action now to reduce your estate size in case the exclusion amount is lowered next year.

Have questions about your estate plans? The Law Office of Patricia E. Tichenor is here to help you. Schedule your free consultation today to discuss your circumstances and needs.

How Does the SECURE Act Impact My Estate Plans?

attorney and estate planning client

The SECURE Act and Your Estate Plans |

For many Americans, a retirement savings account becomes one of their largest and most important financial assets. 401(k) accounts and individual retirement accounts (IRAs) often come up during the estate planning process, as most plan providers require you to name a beneficiary in the event of your death.

If you have a retirement savings account or plan to open one, it’s important to understand the implications of the recent Setting Every Community Up for Retirement Enhancement Act (SECURE Act) on your estate plans, particularly its new rules about the payout of IRAs to beneficiaries. Here’s what you need to know, and how you should update your estate plans in light of these regulations.

What is the SECURE Act?

The SECURE Act is a bipartisan bill intended to assist Americans in their retirement planning. It was passed in December 2019 and has been in effect since January 1, 2020.

The Act contains a number of provisions that make it easier for Americans to save for retirement, including raising the age at which they must start taking a required minimum distribution (RMD) from the account and eliminating the age cap for making contributions to an IRA. It also incentivizes employers to sponsor retirement savings plans for employees.

How does the SECURE Act affect estate planning?

The SECURE Act could impact your estate planning strategy, depending on your relationship to your retirement account beneficiary.

Prior to the SECURE Act, a non-spouse beneficiary (e.g. a child, grandchild, or trust) could opt to stretch out the disbursement of a decedent’s retirement savings account funds over the course of their expected lifetime. By only taking the required minimum distributions (RMDs) from the account, beneficiaries could pay the minimum possible income tax on their payouts, while still earning tax-deferred investment returns on the account’s remaining balance.

Now, this “stretch IRA” strategy is no longer allowed for any beneficiary that is not the decedent’s spouse. Instead, the account must be paid out in full within 10 years of the account holder’s death. In most cases, this means beneficiaries will be receiving larger amounts of money at a time and will owe a larger amount of income tax in a shorter period of time.

There are a few notable exceptions to this policy to be aware of as you consider your estate plans:

  • Retirement accounts that name a conduit trust or accumulation trust as the beneficiary are subject to the 10-year payout rule, which means a spouse that benefits from the trust will not be able to take advantage of the lifetime distributions.
  • The 10-year payout rule does not apply to minor children who inherit an IRA until they reach the age of majority.
  • Beneficiaries who are chronically ill, have special needs, or are within 10 years of age of the IRA owner are not subject to the 10-year payout rule.

If you haven’t yet reviewed the beneficiaries on your retirement accounts and your trust setup (if applicable) in 2020, now is the time to do so. Understanding whether your beneficiary will be subject to the accelerated 10-year payout schedule can help you ensure they are prepared for their potential income tax liability when they inherit your account. An estate planning attorney can advise you on whether you can structure a trust in such a way that your chosen beneficiaries can still receive the tax benefits of stretched-out IRA disbursements.

Have questions about your estate plans? Contact The Law Office of Patricia E. Tichenor.

Estate planning can be complex enough on its own, and it becomes even trickier when you have to factor in new and changing regulations that impact your overall estate. A trusted estate planning attorney can guide you through these regulations and determine how you can best plan for your future beneficiaries to inherit your retirement accounts.

The Law Office of Patricia E. Tichenor has nearly two decades of experience helping Northern Virginia residents with Wills, trusts, and other estate planning needs. Schedule your free virtual consultation to discuss your circumstances.

What is a Personal Property Memorandum?

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What Is a Personal Property Memorandum? |

In making a Will or Trust Plan, you’ve probably given some thought to your larger assets, such as your home or vehicle. However, as with many aspects of estate planning, the little details can make a big difference.

Smaller assets, such as sentimental items or family heirlooms that hold emotional importance to you, should also be considered as you’re drafting your Will or Trust Plan. To protect these assets or provide for their transfer to specific family and friends, you’ll want to use a Personal Property Memorandum.

What is a Personal Property Memorandum?

A Personal Property Memorandum is a flexible and easy to use document that permits you to freely put together a List of your smaller, tangible items – including clothing, jewelry or pieces of art – to be given to your intended beneficiary. It is a separate document from your Will or Trust, and it is one that you will be able to prepare on your own and amend as many times as you wish – without need of witnesses or a notary public.  As long as your Will or Trust state that you may leave such a List or Memorandum, and cite to the Virginia Code authorizing you to do so, then whatever List or Memorandum you leave with your Will or Trust is recognized as legally binding in Virginia.

Of course, you can also include a list of items inside your Will or Trust document; however, if you cease to own such an item or acquire new items of property, then you will find putting this into the actual Will or Trust will also mean having to incur attorney’s fees to amend and re-sign a Will, Codicil, Trust, or Trust Amendment – and, with the burden of needing witnesses and a notary. This can be a drawn out and more costly process, especially if you have multiple smaller gifts to distribute or you acquire more personal property after writing your Will.

A Personal Property Memorandum is much easier to change. It does not have to be witnessed in order to be legally binding, and can also be updated at any time without ever needing to amend or re-sign your Will or Trust, or an amendment to those documents.

Having a Personal Property Memorandum can also avoid conflict between family members. Rather than dividing everything equally amongst loved ones and forcing them to figure it out amongst themselves, giving specific directives as to who receives which item can eliminate any hard feelings or tension during the probate process.

What can I include in my Personal Property Memorandum?

Your personal property memorandum can include any tangible assets. These include furniture, household items such as silverware, artwork, jewelry, and any collections you might have. In certain states and circumstances, you can also include vehicles in the memorandum.

Real estate and intangible assets cannot be included in your personal property memorandum; these would instead need to be noted in your Will. Examples of intangible property include money and bank accounts, IOUs, stocks/bonds and copyrights.

Using a Personal Property Memorandum with your Will

To make your Personal Property Memorandum legally binding, you must also have a valid will in which you explicitly refer to the document. This can be as simple as a statement indicating that in addition to your will, you have included a personal property memorandum that indicates how your tangible assets should be distributed after your death.

The Personal Property Memorandum itself can be typed and printed, or it can be handwritten, so long as it contains your hand-written signature and a date on it. The document typically begins with the following statement (or similar): “I bequeath the following items of tangible personal property to the beneficiaries listed below.”

Then, list the assets along with the names of those who are to inherit them. Once you are finished writing, sign and date the memorandum. Keep the document with your Will, in a location where your executor can easily find it.

As you are writing your Memorandum, you should keep the following considerations in mind:

  • If you’ve specifically left an item in your Will, you should not also include it in your memorandum. At best, it is redundant; at worst, the two documents will contradict each other.
  • You should describe items as clearly as possible, especially if there is a chance they will be confused with similar items.
  • If your executor won’t know who a beneficiary is or how to get in touch with them, you should include contact information (such as an address or phone number) and their relationship to you.

If you’re looking for assistance with your Personal Property Memorandum for a Will or a Trust, or need help with another estate planning matter, you can schedule a free consultation with the Law Office of Patricia E. Tichenor, P.L.L.C. today.

5 Estate Planning Considerations for Business Owners

business owner reviewing estate planning documents

Estate Planning Considerations for Business Owners |

Writing a Will and making estate plans can be overwhelming and difficult for the average person. If you own a business, you have a few additional factors to consider, as your estate planning strategy should document what’s going to happen to your business after you die.

Why does estate planning matter for business owners?

If a business owner dies and there’s no estate plan in place, your surviving family and business partner(s) are left without direction for how to carry out your wishes for your business. Creating an estate plan ensures that your business matters are handled according to your wishes.

While it’s best to meet with an experienced attorney who can help execute your estate planning strategy, there are some things you can start considering before your meeting.

Estate planning for business owners: Questions to ask

Here are some important questions to ask yourself when deciding what happens to your business when you pass:

1. Who would take over my business if I died or became incapacitated tomorrow?

When it comes to deciding who you want to take over your business, you’ll want to create a succession plan. The purpose of this plan is to document your wishes for your business after you are no longer with the company.

While many business owners create a succession plan for their retirement, it can also help you in thinking about your estate plans – i.e., what happens to the business if you suddenly died or became incapacitated.

Your succession plan should include the following:

  • An outline of the financial state of the business, including profits, assets, and the current valuation.
  • The proposed organizational structure of the business.
  • Potential training opportunities, promotions, and compensation changes for key staff members.

2. Would I want the business to continue, or have my partners sell it?

This is especially important if your business has multiple owners. If that’s the case, then a buy-sell agreement — which specifies who can buy an owner’s share of the business, under what conditions, and at what price — should be a key component of your estate plan.

3. How can I minimize my business’s tax burden?

Depending on the value of your business at the time of your death, your estate may owe federal taxes. While most small businesses will not be subject to the “death tax,” it’s wise to discuss your business assets with a financial advisor and/or an attorney to determine the best ways to plan for tax efficiencies.

4. Do I have a life insurance policy?

It’s common business practice for each business partner to take out a life insurance policy that names the other owner(s) as the beneficiaries. Doing so gives the surviving business owners tax-free proceeds to buy the deceased partner’s portion of the business.

5. Are all my business records organized and accessible to my chosen successor?

While creating an estate plan for your business is important, it’s also critical that your business records — including your estate plan, business plan, succession plan, and applicable insurance policies — are organized and accessible to your business partner(s) and your family.

Drafting a Will as a business owner? Contact an experienced estate planning lawyer for help.

Once you’ve answered these questions, an experienced estate planning attorney can help you document and communicate your wishes for your business. The Law Office of Patricia E. Tichenor, P.L.L.C. has assisted Northern Virginia business owners and families with their estate planning needs for more than 15 years. Schedule your free consultation with us today.

How to Identify Undue Influence in Estate Planning

person signing last will and testament

How to Identify Undue Influence |

When an individual creates their estate plan, it is assumed that the Will, trust, and other estate planning documents reflect the sincere wishes of their creator. However, there are some cases in which an outside party attempts to override a person’s judgment during the estate planning process. This is known as undue influence, and it’s the root cause of many estate planning fraud cases.

In cases of undue influence, the “influencer” aims to manipulate a testator (the person creating an estate plan) to act against their own wishes and arrange their estate plans in a way that benefits the influencer. In many cases, the influencer is taking advantage of the testator’s weakened mental or physical state to persuade them to make certain changes to their Will, trust, and other estate planning documents.

What does undue influence look like?

Undue influence can occur in any type of relationship, with testators of any age or health condition, but the most common cases involve the manipulation of an elderly individual who may be in a compromised state of health. The influencer is often someone close with the testator with intimate knowledge of their health and/or financial standing, such as:

  • A new romantic partner who becomes deeply involved with the testator’s finances.
  • A caregiver, such as a nurse or home health aide, who works closely with the testator.
  • A family member who begins spending an unusual amount of time with an aging parent or relative.

While these types of relationships are often healthy and free of ill intent, it is possible for them to evolve into a case of undue influence if someone spots an opportunity to persuade the testator into leaving them assets or property.

Often, undue influence is not discovered until the probate process, when family members who seem like the logical beneficiaries learn their recently-deceased loved one has left parts or all of their estate to someone other than them. The court then examines the conditions under which the testator created their most recent estate plans before their death to determine whether undue influence has occurred.

How to identify undue influence

It can be difficult to spot undue influence, especially when on the outside it could look like a romantic interest, friendship, or a professional relationship. It could even happen to you as you’re creating your estate plans, even if you are of sound mind and body.

There are a few key things to watch out for if you suspect someone may be trying to exert undue influence over you.

  • They’re closely involved in your estate planning (and shouldn’t be). It’s normal for families to discuss their estate plans and communicate their final wishes, even long before their death. In these discussions, watch out for a child, relative, or other person in your life who begins making specific suggestions about how to divide up your estate (especially in a way that benefits them).
  • They’re attempting to isolate you from loved ones. An influencer will try to separate the testator from their family and friends, particularly those who would have been the testator’s named beneficiaries. They may try to turn you against them by speaking negatively about your loved ones or convincing you that your chosen heirs would not manage your estate responsibly – and that they would be the better choice.
  • They ask you to add them to financial accounts. While most joint financial accounts belong to spouses or partners, it’s not unusual for a parent and child, or two close relatives to share an account. However, if someone who was not previously involved in your finances asks to be added to your financial accounts (and there’s no logical reason for them to do so), they could be lining themselves up to automatically inherit the account after your death.

One of the best ways to avoid undue influence is to create your estate plans independently, with the help of an experienced estate planning attorney. If you’re worried about undue influence from family and friends, or simply need help drafting your estate plans, contact the Law Office of Patricia E. Tichenor. Schedule a free half-hour consultation to discuss your needs.

The Law Office of Patricia E. Tichenor, P.L.L.C.
Professional Legal Services or Legal Representation
(703) 669-6700


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