The articles from The Law Office of Patricia E. Tichenor, P.L.L.C. are focusing on
the areas of Family Law and Estate Law, and range of other legal areas.
With all the complexities involved in writing your Will, it can be difficult to know why, when, and how to tackle such an important task. While you should always consider consulting and working together with an experienced estate planning attorney to guide you through the process, it’s often a good idea to educate yourself before you get started. Here’s some useful information about why and how to write a Last Will and Testament (or a Will, for short) in 2022.
Why write a Will?
Having a Last Will and Testament is incredibly important, as it details what you want done with your estate, possessions, and assets after your death. Despite its value and purpose, the majority of adults in the U.S. — 54 percent, according to a recent Gallup poll — do not have a Will. This can create numerous problems for their loved ones, as it complicates the legal process surrounding their estate after their death.
Dying without a Will in Virginia, for example, means your estate possessions will go through the state’s intestacy laws. If this occurs, your assets may get distributed against your wishes and your loved ones may not get what they are entitled to.
A Will legally protects your loved ones and your assets by clearly stating how you would like your possessions distributed after your death. Even if you think you don’t have many assets, you should still create a Will so that the proceedings after your death are not complicated and your wishes are fulfilled.
When to write a Will
As the saying goes, there is no time like the present. A person should write their Will once they’ve accumulated any amount of assets. Essentially, if you have a particular preference as to where, or to whom, your accumulated assets should be given once you die, you should write a Will.
It’s also important to remember that once you have created a Will, it should be regularly reviewed and updated. This is especially true during major life changes, such as getting married, having children, buying a house, or starting a business. Some experts even recommend that a Will should be updated or reviewed every five years.
What type of Will is best?
There are four main types of Wills — simple, testamentary trust, joint, and living — a person can write, depending on their situation:
A so-called Simple Will is the most common type, as it dictates who will receive your assets and names a guardian for your minor children in the event of your passing.
A Will with testamentary trust provisions places your assets in a trust, which is controlled and managed by a designated trustee. This type of Will is used for beneficiaries who may be minors or if you elect to place specific conditions on inheritances and how they are distributed. It is important to understand that funding a trust for named beneficiary through a Will is not often ideal, and it may be prudent to discuss whether another document, called a Revocable Living Trust, may be better suited to protecting your assets and the beneficiaries you wish to leave them to.
A Joint Will is written by two or more people and acts as a separate Will for each party. These are typically created for spouses or domestic partners who have the same terms in their Will. Joint Wills, however, are highly disfavored and no longer commonly used, because the survivor spouse or domestic partner cannot change the terms of a joint will after the death of one of the writers.
A Living Will is not a Will in the sense of death; rather, this document is used during your lifetime to clearly identifies the end-of-life medical treatments you want — or do not want — to receive in the event you become incapacitated and cannot make autonomous decisions about your final medical care needs if you become terminally ill or are in an irreversible coma. The Living Will names someone to make decisions on your behalf under those circumstances.
How to write a Will
When deciding the terms you want written into a Will, there are certain steps you should take with an experienced estate planning attorney in order to ensure that it is done properly. This is not the time to “DIY” — with a document as important as a Will, it’s essential to have an attorney familiar with federal and state tax law as well as local estate planning statutes review your planned provisions with you and make sure the document is properly drafted.
Once you’ve found the right attorney, you will work through the following stages of drafting your Will with them:
- Taking stock of all your assets and debts
- Deciding on beneficiaries for each of your assets that will pass through the Will
- Choosing an executor for your Will
- Naming a guardian for your minor children in your Will (if applicable)
- Signing the Will in the presence of two competent witnesses and a notary public
- Reviewing and updating your Will every five years
Life is never stagnant, and the circumstances under which you wrote your original Will may have shifted over the years. Whether you’ve recently gone through a divorce, had a child, or simply had a change of heart, you have options to alter your Will at any time to suit your current wishes.
If you want to make a change to your current estate plans, here’s how to revoke or change your existing Will in the Commonwealth of Virginia
Why revoke or change a Will?
Life changes, especially larger ones, may trigger the desire to make updates to your Will. It’s crucial to periodically review your estate plan, including your powers of attorney, to ensure that your current circumstances, familial relationships, and goals are properly addressed. Reasons to change or revoke your Will may include (but are not limited to):
- New or changed relationships as a result of a divorce or re-marriage
- Death of a spouse or child
- Children are no longer minors
- Birth or adoption of a child
- Emancipation of a special needs child
- Disability of yourself or a beneficiary of your existing documents
- A newly-acquired asset including money and real estate
- Appointing a new executor
How to change a Will
Prepare a codicil
A codicil is a legal document that can be added as a supplementation to a Last Will and Testament. It can be used to change a particular part of a Will, without the need to rewrite and validate the entire document.
According to Virginia Code Section 64.2-403, a codicil, much like an original Will, is legally valid in Virginia if it is written and signed by the testator (or written by another person in front of the testator, at the testator’s direction) in the presence of two witnesses. A codicil can also be considered valid if it is written entirely in the testator’s own handwriting without any other requirements, as long as the handwriting is verified by at least two “disinterested witnesses” (i.e., individuals who will not benefit from the testator’s Will).
Codicils should be used with caution as they are often misplaced or lost by the time of death. It is best used when there is not enough time to prepare and sign an entire new Will, as long as very small or simple changes are to be made.
Make a new Will
In many cases, it’s easier and legally safer to make a new Will rather than try to make piece-meal changes to parts of your existing Will a codicil. If you have multiple codicils, it may become confusing and cause outdated wishes to be carried out upon your death, or conflict with other existing estate plans, which will cause headaches for your loved ones during the probate process.
How to revoke a previous Will or codicil
All codicils and Wills can be revoked at any time before death, per Virginia Code Section 64.2-410, but the proper processes must be followed. A full revocation of an existing Will can occur by destroying your older Will by shredding it or burning it up. Or writing VOID on every page of your Will. A partial revocation can be accomplished using a written Codicil or a new Will, so long as those documents indicate the intention to revoke (partially or fully) the prior Will. Any written Codicil or Will should be signed before at least two witnesses and, where possible, a notary public.
Get help changing or revoking your Will
Need to update your estate plans? Contact the Law Office of Patricia E. Tichenor to schedule a complimentary consultation. We have over 20 years of experience helping Northern Virginia residents prepare Wills, trusts, and other legal documents to secure their families’ futures.
As a part of his Build Back Better agenda, President Biden has proposed The American Families Plan. In this plan, changes have been proposed to the current stepped-up basis provision, which would affect some key estate planning laws that have been in place for the last five years.
If your estate totals over $1 million, this proposal may impact your plans if it’s approved. Here’s what you need to know.
What is the stepped-up basis?
As described by the Tax Foundation, the stepped-up basis, or “step-up in basis” provision adjusts the value of an inherited asset, such as an investment, bond, or real estate, that was passed down after death. The value of the asset is reset at the time of the inheritance, without incurring capital gains. An asset’s original purchase price or value is referred to as the “basis.” Capital gains and losses are the difference between an asset’s basis and its value at the time of sale.
Currently, when an heir inherits an asset after death, they do not pay taxes on the asset’s basis, even if its tax basis had increased due to capital improvements. It’s not until a person sells an asset for a profit that capital gains taxes are due, as they only apply to the appreciation of an asset after the date when it has been inherited. However, this is not the case if a recipient is gifted the asset during the gift-giver’s lifetime.
With step-up in basis, it’s easy to sell assets after death with little to no income tax incurred by the recipient. The cost basis receives a “step-up” to its fair market value, reducing the capital gains the recipient of the asset will owe if they were to sell. In doing so, the capital gain that occurred between the original purchase and the heir’s acquisition is eliminated and never paid by any party.
How the Biden administration is proposing to change the stepped-up basis
In an effort to make the tax code more progressive and less advantageous towards the wealthy, President Biden is proposing a couple of changes to the longstanding step-up in basis rule.
Firstly, President Biden has proposed a raise in the top capital gains rate to 39.6%, from the current rate of 20%. As for the step-up in basis provision, there are some changes that would affect taxpayers with $1 million or more in annual income. After death, that amount can be passed on to a surviving spouse, increasing the survivor’s exemption to $2 million. When it comes to estate planning, the changes to the stepped-up basis would increase compliance burdens from taxpayers and increase the tax burden on capital.
Under the American Families Plan, if a beneficiary were to inherit a $500,000 stock which was purchased by the original owner for $100,000, it would maintain the $500,000 basis as long as the estate’s unrealized capital gains do not exceed $1 million, or up to $2 million if the original owner was predeceased by a spouse and received their exemption amount.
However, that could change for those whose assets have unrealized gains above the exemption amount. In this instance, a beneficiary would instead inherit the asset at the original owner’s basis of $100,000, rather than the basis getting “stepped-up.” If the heir were to sell the asset, they would then be responsible for paying all of the capital gains taxes on the original basis.
How will Biden’s proposal impact my estate?
At this stage, the change is just a proposal. However, changing the stepped-up basis rule would have the top income groups pay more relative to current tax values, rather than the value at the time of the original purchase.
If you’re wondering how the proposed changes to the step-up in basis rule could impact you and your Virginia estate plans, The Law Office of Patricia E. Tichenor can help answer your questions. Schedule a free consultation to discuss your circumstances and learn how these changes could affect your estate.