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.

Your Estate Planning Checklist: 5 Steps to Get Started

woman writing on notebook with laptop
Your Estate Planning Checklist |

It’s never too early to start creating an estate plan. Estate planning allows you to dictate what happens to your assets in the event of your death or incapacity. Planning ahead will ensure a smooth probate process for your loved ones and beneficiaries, or help them avoid probate altogether. Early estate planning will also give you peace of mind knowing your wishes are clearly documented if something were to happen unexpectedly.

To get started with your estate plan, follow these five 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. 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.

2. Choose your agents

When estate planning, choose both a healthcare and financial agent to carry out your wishes once you cannot. These agents are typically named in a Power of Attorney (POA) document.

Appoint a healthcare agent — also known as a proxy or attorney-in-fact — in the power of attorney portion of your Durable Medical Power of Attorney or Advanced Medical Directive. Should you become incapacitated, your health proxy will make medical decisions on your behalf.

You can also select a separate financial agent who will oversee your mail, bills, property management, filing of tax returns, investments, safe deposit boxes, insurance, and more by creating a Durable General Power of Attorney (a.k.a “financial POA”). The person you choose will be required by law to act within your expectations to the best of their knowledge when you no longer can do so yourself.

Keep in mind that you can choose one agent to serve in both roles or appoint different people as your medical and financial proxies. Someone with a power of attorney is different from a conservator, who requires a public proceeding and the incapacitation of the estate owner to be appointed. Additionally, an executor is responsible for the estate once the owner has passed away, whereas someone with a power of attorney is no longer responsible for the estate once the owner dies.

3. Protect your loved ones and name your beneficiaries

If you are a parent with minor children, you’ll want to name a legal guardian who can take care of them in the event that you and your child’s other parent pass away simultaneously. You may also wish to set up a trust plan to provide for your children financially until they reach adulthood.

Next, consider what assets you want to pass on to your family and friends. Go down your list of assets one by one and decide on the beneficiaries of each item. Some individuals choose to leave their entire estate to one person while others divide their estate and leave assets to different heirs.

Lastly, learn how to avoid probate of your assets, which can best facilitate your long-term planning goals and avoid needless probate taxes and administrative paperwork burdens for your family.

4. Review local and federal estate tax laws

Virginia does not currently have an estate or inheritance tax for estates of any size, keeping in mind that inheritance taxes are imposed upon your beneficiaries (not your estate) and are entirely dependent on whether your beneficiaries reside in Virginia or elsewhere.  If your beneficiaries do not reside in Virginia, it’s important to know whether the State in which they reside has an inheritance tax.

If you do have a particularly large estate, your executor may be responsible for paying federal estate taxes. To help ease the burden of these expenses, you or your attorney should review current federal estate tax laws to determine your estate’s liability. Generally, the estate tax is applied to estates larger than $12.92M per person as of January 1, 2023; or $25.84M per couple. The amount of inheritance tax pays depends on each estate and how much its value exceeds that upper limit.

5. 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. and schedule a free consultation. Our firm has over 20 years of experience helping Virginia families with creating and updating their estate plans.

How to Talk to Your Aging Parents About Estate Planning

talking about estate planning with aging parentsEstate planning can be a heavy, complex topic for everyone involved, especially if the discussion is focused on your aging parents. Nevertheless, it is important to bring this topic up to ensure your parents’ wishes are honored after their passing or if they become incapacitated during their lifetime.

Here are five ways to approach estate planning with your elderly parents and encourage them to get their affairs in order, regardless of their current circumstances or health.

1. Understand what they need

To help your parents throughout the estate planning process, it’s important to familiarize yourself with what goes into estate planning. A comprehensive estate plan should cover your financial plans, indicate who will make medical decisions, and outline asset division or trusts for inheritors. Encourage your parents to make a Will and power of attorney (financial POA and medical POA) as soon as possible.

Along with educating yourself, consider your parents’ current capacity to navigate estate planning. If they need assistance with drafting a Will or understanding specific terms and rules, seek professional help from a legal expert to guide them through the process.

2. Ask what they’ve already done

Check in with your parents to see what steps in the process they may have already taken. Are they working with an estate planner? Have they already set up a Will? Do they have powers of attorney in place?

Ask your parents to share any important documents or information with you to minimize any mystery or confusion in the case of an emergency. For instance, if something happens to your parents and you don’t know where their documents are, this could cause a major headache for you.

Your parents may have completed or thought about their estate plan, net-worth statement, powers of attorney, or their need for a trust. Bring these topics up with them periodically so you’re up-to-date on their estate planning progress and understand where they may need more support.

3. Discuss their care preferences

Estate planning isn’t just about who gets what when a loved one passes away; it’s also an opportunity for your parents to make decisions in writing. Estate planning allows for your parents to preemptively decide how or where they want to be cared for as they age or if their health fails. Having those choices detailed in a properly drafted medical power of attorney protects their wishes while minimizing conflict among surviving loved ones.

4. Work through contested assets together

If you have siblings or multiple inheritors, bring everyone into the discussion so it’s easier for the family to see and understand your parents’ wishes, which minimizes arguments later. If one person is making all the decisions and everyone else is left in the dark, conflict can easily escalate.

Working with an estate planning lawyer is a great way for all family members to remain on equal footing while ensuring that all the necessary tasks and paperwork are completed. An estate planning lawyer can also guide you through the whole process as well as help you and your parents understand any confusing jargon along the way.

5. Balance empathy and responsibility

As you work through estate planning with your parents, you want them to feel as in control and comfortable as possible. Schedule estate planning discussions ahead of time so they won’t be caught off guard by the topic, and don’t force the conversation when they need a break or get upset. 

Handling estate planning for a parent can be difficult or uncomfortable, but taking these steps can help you help them complete this important task before they become incapacitated or pass away. If your Virginia-based family is in need of estate planning assistance, schedule your free consultation with the Law Office of Patricia E. Tichenor.

Gifting as an Estate Planning Tool: What You Need to Know

lifetime gifting for estate planning
Gifting as an Estate Planning Tool
NOVA Estate Lawyers – Leesburg, VA

Many people plan to pass on money and property to their loved ones after they die. However, if you have a sizable estate, you need to consider using a combination of lifetime gifting and gifts at your death to ensure your heirs receive all you have spent a lifetime saving and not risk your estate being hit with federal estate taxes (often called “death taxes”) at your death.  Read on to learn about estate taxes and how to plan your estate gift.

What is an estate tax?

There are five different types of taxes you and your heirs should be aware of when it comes to inheriting assets from your estate:

  • An estate tax, sometimes called the “death tax,” is levied against your estate after you pass and before your assets are transferred to your heirs.
  • An inheritance tax is State tax that applies to an heir who resides in a State that has inheritance taxes, where the State taxes your heir or beneficiary for the value of the assets left to them at your death. Virginia doesn’t have an inheritance tax, but if one of your heirs lives in a State that does levy inheritance taxes, such as Maryland, those rules may apply to your estate.
  • A gift tax is reporting mechanism while you’re living, by which you report to the IRS any gifts you make to any person in a single calendar year that exceed $16,000 per year; then, at your death, the IRS totals all your lifetime gifting that exceeding the $16,000, plus all the assets you have left through your estate when you die, and if it exceeds the lifetime gifting limits (discussed below), your estate will owe taxes to the IRS for exceeding these limits. Special rules also apply to gifts made to grandchildren, called generation-skipping transfer taxes.
  • State estate taxes vary based on how they typically tax property transferred from your estate to your heirs. Virginia does not impose gift, inheritance, or estate taxes.
  • The federal estate tax is the tax the federal government levies against your estate at your death if your estate exceeds a certain exempt amount (called the “allowable amount”). Even though Virginia doesn’t impose an estate tax, you may still have to pay the federal estate tax. 

Under the current federal law, the federal tax exemption in 2022 is $12.06 million — increased from $11.70 million in 2021 — and it applies to both spouses. This means that with the help of an estate planning attorney, a married couple can protect up to $24.12 million after they pass. An estate that exceeds these allowable amounts will incur a 40% tax on every dollar which exceeds the $12.06 million allowable amount for individuals or $24.12 million for couples after the last of them dies.

The increased exemption amounts, established in 2018, will expire at the end of 2025. In 2026, the exemption amounts will revert back to $5.49 million per person and $10.98 million per married couple (indexed annually for inflation). Strategic lifetime or inter vivos gifting can reduce the size of your taxable estate before your death, and help your beneficiaries avoid this hefty financial burden.

Qualified gifting is the complete and irrevocable transfer of assets from one person to another, where the giver does not receive anything in return. Certain IRS exemptions allow you to make these gifts tax-free, provided their values fall within federal limits (currently $16,000 per person per year for 2022). Going above these allowable amounts means that you, as the giver, are obligated to report the gift to the IRS and pay a federal gift tax.

If you want to use gifting as an estate planning tool, you’ll need to plan out your giving and time it properly, so you and your loved ones can avoid as much estate-related taxation as possible. Here is a basic overview of annual and lifetime gifting exemptions, and how you can make the most of them.

Annual gift tax exclusion

For the tax year 2022, the annual gift tax exclusion allows you to give any single individual up to $16,000 per calendar year, tax-free — an increase from $15,000 in 2021. So, for example, if you have two children and give each of them $16,000 this year (or $32,000 if you are married and you and your spouse “split” the gift), you do not need to pay the gift tax. However, if you give one child $17,000 in a single year, $1,000 is considered taxable and counts against your allowable lifetime gift amount.

If you exceed the $16,000 limit, then, as the giver of the gift, you must report this to the IRS when you file your regular income tax return on April 15 of the following year.

Lifetime gift tax exemption

The lifetime gift tax exemption is connected to the estate tax exemption: The $12.06 million limit is the combined amount you can give away before your death and leave to others after you pass without being subject to federal taxes. This means that if you give away $6.03 million in non-exempt gifts while you’re alive, only $6.03 million of your remaining estate is tax-exempt, and your estate must pay taxes on anything beyond that amount.

Suppose you are married at the time of your death. In that case, your surviving spouse is entitled to their individual exemption plus any of your unused exemption if you properly invoke portability in your estate plans. You must also consider that the estate tax exemption or “allowable amount” will return to its previous $5.49 million individual limit in 2026 subject to a cost-of-living adjustment, which likely means that the total allowable amount will be around $7 million. If you are young and unlikely to pass away before then, you’ll want to adjust your gifting plans accordingly.

If your estate is more than $12.06 million, the simplest way to avoid gift and estate taxes is to bequeath your money and property to your loved ones while you’re alive rather than waiting until you pass. There are two distinct advantages to giving away your estate to your loved ones while you’re alive:

  1. It allows your heirs to grow your estate through strategic investments, which can decrease your total taxable estate and allow your heirs to receive their inheritance tax-free.
  2. You’ll be around to see your loved ones enjoy your gift and benefit from your generosity.

If you’re concerned about your heirs responsibly managing their inheritance, create an irrevocable trust and name your loved one as the beneficiary. As the owner of the estate, you can establish the stipulations of the irrevocable trust, including how your heirs should invest or distribute the assets they inherit. Meet with an experienced estate planning attorney to discuss your options.

Exceptions to the rules

There are a few gifting scenarios that do not count toward the above limits:

  • Marital gifts. If both spouses are U.S. citizens, they can make unlimited lifetime gifts to each other without paying taxes on those gifts.
  • Medical and educational gifts. Payments made directly toward a dependent/beneficiary’s medical services or education (e.g. tuition expenses) are not included in your lifetime gifting amount. For example, if you settle your family member’s hospital bill directly with the hospital, you can still gift your loved one up to $16,000 annually tax-free. Making gifts from your estate in this manner also reduces the total of your taxable estate.
  • Charitable gifts. You do not have to pay gift tax on gifts given to qualifying organizations like charities, religious or educational institutions, government agencies, and 501(c)(3) tax-exempt organizations.

Take a look at our blog post to learn more about gifting, including specific information about Virginia’s state laws.

Talk to an estate planning attorney about gifting

If you’re considering making gifts to reduce your taxable estate, connect with an experienced attorney who can educate you on federal gift tax laws and other implications of lifetime giving. You can also work with your estate planning lawyer to create a strategic gifting plan that reduces your taxable estate while leaving you enough to support yourself.

The Law Office of Patricia E. Tichenor, P.L.L.C. has been assisting Northern Virginia individuals with their estate plans since 2001, and we’d love to help you create the best strategy for your family’s future. Schedule your free consultation today to talk about your unique estate planning needs.