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.

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.

Who Else Can Be My Estate Executor Besides Family?

third party estate executor

Estate planning involves choosing a person to carry out your final wishes in your Last Will and Testament (Will). Many people choose family members, such as a spouse or adult child, as their executors, but relatives are not the only option.

For individuals who don’t have or want a family member to handle their estate, here are some alternative third-party options to explore, like a trusted friend, attorney, CPA, or financial institution.

Who can serve as an executor?

To become an executor of an estate in the Commonwealth of Virginia, a person must meet the following criteria:

  • Must be over 18 years of age.
  • Must not have been convicted of a felony.
  • Must be a resident of the United States.
  • Must have not been determined as incapacitated by a court of law.

Why look for third-party options?

There are a few common reasons an individual may look for an executor outside of their family. Sometimes, they have outlived their family members during their lifetime, or the remaining family members are incapacitated and do not meet the requirement to serve as executors. Some individuals may have estranged relatives or dependents. Though they may be a named family member or beneficiary in the Will, an individual may not want them in charge of carrying out their wishes.

If all of your family members live outside of Virginia, they may struggle to serve as executors because they’ll need to travel or find someone else local to fulfill duties such as preparing and selling your home or securing valuable assets after death.

Yet another reason to look for alternative executors occurs when there are concerns that multiple family members may fight amongst one another if named as co-executors or be unable to reach compromise on important decisions regarding the administration of the probate estate. In these situations, an individual should consider appointing a third-party, non-family member to serve as executor in order to keep things as civil as possible during the probate of the estate.

Lastly, if you named a family member to serve as an executor but they’re found to be incapacitated upon your death, the court will appoint the next or alternate person named in the Will (which could be a third-party representative).

Alternative options for an executor

  • Certified Public Accountant (CPA): Appointing your CPA or a Certified Financial Planner as your executor may be an optimal choice as they are already familiar with your financial situation including your assets, debts, and the value of your estate. An experienced financial advisor may also have knowledge of the probate process and be able to keep everything on track as your estate runs through probate courts.
  • Public administrator: A public administrator, including an experienced lawyer, could make the probate process easier on loved ones as they are impartial and have experience supporting Wills through the probate process.
  • Financial institutions or corporate fiduciaries: A financial institution is another impartial choice to serve as the executor of your estate. A corporate fiduciary is a financial institution, trust company, or other corporation that has been given permission to carry out an estate, act as a trustee, or settle estates. In Virginia, trust corporations and companies can administer estates; however, the corporate executor must have the ability to do business in Virginia to be appointed as an executor.
  • A friend: Trust goes a long way when appointing an executor. If you have a long-time friend you trust who has qualities such as great organizational skills, comprehension, and responsibility, you may want to appoint them as the executor of your estate. 

No matter who you select as your executor, it’s important to discuss the arrangement with that individual or entity before you name them in your Will. Once you’ve spoken with your chosen executor, continue to update them with any changes to your estate plans so they can stay up to date on your final wishes. 

Looking for help with estate planning in Northern Virginia? The Law Office of Patricia E. Tichenor has helped Virginia families plan ahead and address their unique estate planning needs for over 20 years. Schedule your free consultation with us today.