How to Identify Undue Influence in Estate Planning

person signing last will and testament

How to Identify Undue Influence | NOVAEstateLawyers.com

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.

What Is Estate Tax Portability?

estate tax return form

What Is Estate Tax Portability? | NOVAEstateLawyers.com

A couple can accumulate numerous assets over the course of their marriage, and when one spouse dies, the other will typically inherit those shared assets. Depending on the size of the estate, you may wish to take advantage of estate tax portability, which allows a spouse to assume the tax exemption of their deceased spouse on top of their own.

Estate tax portability can be a useful tool for couples who are creating estate plans and have a lot of assets between them, and is something to be mindful of when you’re estate planning. Here’s what you need to know about this important component of estate planning.

How does estate tax portability work?

The federal Estate Tax, commonly referred to as “the death tax,” is a tax on a person’s right to transfer property upon their death. Electing to use estate tax portability makes a significant difference in your federal estate tax liability.

Each year, the government sets a tax exemption limit, or exclusion amount, for estates under a certain size. Currently, the limit is set at $11.58 million in combined assets for a decedent who dies in 2020, and is expected to remain at this level until at least 2025. In other words, if you and your spouse’s total assets are worth $11.58 million or less at the time of the first spouse’s death, your estate will not have to file an estate tax return.

Upon the death of their spouse, the survivor can elect estate tax portability and use the deceased spousal unused exclusion, which would double the total tax exemption to roughly $23.16 million dollars. This means that once both spouses have passed, the surviving spouse’s estate won’t be federally taxed if its value is less than that combined exemptions.

Here is a simple example of how estate tax portability works and can benefit a surviving spouse: Sam and Diane are a married couple with jointly-titled assets worth $20 million. Sam dies in 2020, when the federal estate tax exemption is $11.58 million. If Diane elects to use Sam’s unused tax exemption, she’ll have an exemption of $23.16 million and can pass on what remains of their $20 million joint estate upon her death, without being subject to any federal estate taxes.

It’s important to note that estate tax portability only applies to married couples and cannot be transferred to next of kin or anyone else.

Deceased Spousal Unused Exclusion (DSUE) process

Any unused exclusion amount that is claimed by the surviving spouse is called the deceased spousal unused exclusion (DSUE). But portability of this unused amount doesn’t happen automatically when one spouse dies. The widowed spouse must file IRS Form 706 at the time of their spouse’s death to add to their unused exception.

The form must be submitted no more than nine months after the deceased’s death. If more time is required, the estate can file for an extension for up to six months. If the estate did not file a tax return form within the nine-month period or six-month extension period, the availability for a widowed spouse to elect portability of the DSUE amount depends on whether the estate has a filing requirement.

When should we elect portability?

If you don’t currently have a large net worth, you may not feel obligated to file for the DSUE. However, a surviving spouse should still apply for it just in case. The federal government is scheduled to revert the estate tax exclusion back to its pre-2017 amount of $5 million (adjusted for inflation) in 2026. If the surviving spouse dies after that time and has not applied for the DSUE, any combined assets over $10 million will be subject to federal estate taxes.

Another possibility is that the surviving spouse could receive a large inheritance from another family member or receive profits from business or investments, which would increase their net worth at the time of their death.

Get help from an experienced estate planning attorney.

Estate tax portability is a complicated matter, and many couples may not consider it when creating or updating their estate plans, or during the probate process after one spouse has died. If you think you and your spouse might be able to benefit from estate tax portability, or if you have recently lost a spouse, it may be a good idea to speak to an experienced Virginia estate planning attorney to learn more about estate tax portability and your overall estate planning needs, contact The Law Office of Patricia E. Tichenor for a free consultation.

How to Avoid Probate Court

The word probate on a stamp on a big folder of paperwork

How to Avoid Probate Court | NOVAEstateLawyers.com

When a person dies, their estate is typically administered through the probate process. The decedent’s estate executor works with the local probate court to ensure all assets are distributed to their designated beneficiaries and debts are properly handled.

However, probate can be an expensive, time-consuming procedure that can delay the transfer of assets to beneficiaries and shine an inadvertent spotlight on a grieving family. Fortunately, with the right estate planning strategies, you can help your loved ones avoid probate court, or at least significantly reduce the amount of time and money they spend there.

What is probate?

Probate is the legal process through which a deceased person’s estate is divided and distributed among their beneficiaries. If a person dies intestate (without a valid Will), a decedent’s assets will be distributed to what are called their heirs-at-law which is controlled entirely by Virginia’s intestacy statute. If the decedent does have a Will, the court will supervise the Executor’s actions to ensure that he or she pays all required debts and then transfers all remaining assets hat the appointed executor transfers all property to the proper beneficiaries, any after debts are settled.

It’s in an individual’s (and family’s) best interest, especially those with minor children, to avoid probate due to the court expenses as well as the extended timeline (typically between six months and two years). However, the ability to avoid probate court depends on how the decedent prepared their estate plans during their lifetime.

Ways to avoid probate court

Here are some ways to help your loved ones avoid probate court after you pass away:

1. Make a Will

While assets passed down using a Will must still go through the probate process, documenting your final wishes can significantly reduce the time and cost of probate for your family, since a court will not have to make inheritance decisions on your behalf.  More importantly, your assets will go to the people, whether friends or family, that you select to inherit from you, not persons set forth in a Virginia statute based solely on the marital or blood relationship to you.

2. Create a living trust

If you feel strongly about avoiding the burdens of the probate process, regardless of whether you have a large or small estate, or several beneficiaries to provide for, or perhaps even the goal of providing for a beloved pet, the best option may be to create revocable living trust. As part of creating a trust, you will need to arrange to re-title assets into your Trust or you’re your Trust as the payable on death (POD) beneficiary for them, and, while you’re alive, you will serve as the trustee and appoint a trusted person, bank or trust management company to serve as your successor(s) in the event you cease to serve as trustee (i.e., incapacity or death).

3. Give away property as gifts

Another way to successfully avoid probate court is to give away some of your property during your lifetime as a gift to your loved ones or friends.  Lifetime gifting can be considered part of an overall estate plan, but note that gifts are subject to certain federal “gift tax rules” which limit how much can gift in one calendar year and require the filing of a “gift tax return” with the I.R.S. if you exceed those annual limits.  This “gift tax return” is merely a reporting event while you are still living, and, at your death, the I.R.S. will determine if, in fact, your estate owes any gift taxes for exceeding what’s called the “lifetime gifting limit” set by federal law.  The current lifetime gifting amount is unified to the estate tax limitations, which is $11.58M for individuals and $23.16M for couples, through 2025.

4. Choose the best approach to deal with real estate in Virginia.

In Virginia, real estate does not pass through probate. However, if you have minor children inheriting from you, this fact becomes rather complicated and costly to the surviving guardians for your children, who will have to file to become a named conservator of the net proceeds from the sale of the real estate and subject to annual, burdensome reporting requirements and distributions limitations that are surprisingly low for what a child might need to support them on a yearly basis.

Trust planning can become a critical part of estate planning to avoid this burden altogether and facilitate ongoing use of a child’s inheritance by a named trustee, without statutory limits, over the child’s lifetime until they reach an age (or set of ages) you believe are best for the child to receive outright what you leave to them.

Of course, for any real estate that is jointly owned with a survivorship right, the surviving owner on the deed to that property will immediately inherit the property and avoids probate entirely. However, if you want to both avoid probate and dealing with the “federal gifting limits” or the “gift tax” reporting requirements, so long as you have a beneficiary(ies) in mind who is age eighteen (18) or older, you can also have an attorney prepare and record something called a “Revocable Transfer on Death Deed” to direct that the property transfer immediately upon your death to that beneficiary(ies).

5. Appoint a pay-on-death beneficiary for financial accounts.

Payable-on-death (POD) is the process of appointing a beneficiary for all of your financial accounts, which can include naming your Trust for all of your non-retirement accounts.  You can do so by filling out the necessary forms, and upon your death, the funds will be paid to your named beneficiary or the successor Trustee of your Trust, and your account closed thereafter.

6. Use transfer-on-death for other assets.

Transfer on Death (TOD) is the process of naming a beneficiary for your other assets, including securities, real estate, and motor vehicles. Under the Uniform Transfer-on-Death Securities Registration Act, TOD ensures that all applicable asset titles are transferred to your designated beneficiaries.

The difference between POD and TOD is that the former is a liquid cash transfer, while the latter is the actual transfer of the asset itself, so the TOD beneficiary receives your shares of stock, for instance, that you owned and named them as TOD, and s/he does not have to liquidate them to cash if s/he does not want to.

7. Contact an experienced estate planning lawyer for help.

If you need help navigating the best approach to an estate plan in order to avoid probate or to understand how Virginia’s probate laws will impact your particular estate under your current estate plan, it is extremely worthwhile to spend time (and a little money) now on a consultation with an experienced estate planning and probate attorney.

The Law Office of Patricia E. Tichenor has assisted Northern Virginia families with their estate planning, probate avoidance planning, and probate needs for more than 15 years. Contact us today to learn how we can help you create the best plan for your family’s future, and potentially reduce or avoid the burdens of probate, or even conservatorship for inheritance by a minor child, in the future.

What’s the Difference Between a Revocable and Irrevocable Trust?

close up of revocable trust document

Revocable vs. Irrevocable Trust | NOVAEstateLawyers.com

In estate planning, a trust is a legal entity that allows a third party, or trustee, to hold and manage an individual’s (grantor’s) assets. They ensure that assets are handled in accordance with the grantor’s wishes. Depending on the assets you have, trusts can be used instead of a Will to pass property to a beneficiary after the grantor dies.

Two types of trusts are revocable and irrevocable. The difference lies in whether the terms and conditions of the trusts can be changed. If you’re considering creating a trust as part of your estate plan, here are the basic differences between these two types, and how to decide which is right for you.

Revocable trust 

With a revocable trust, the terms and conditions can be changed or terminated at any time. This trust holds assets for the grantor while they are alive and the grantor is often the first-named trustee for their Trust. After the grantor’s death, the trust assets are managed by a successor trustee named in the Trust, who will then manage and distribute those trust assets according to the conditions of the trust.  The successor Trustee may also receive additional assets after the grantor’s death where the grantor had named their Trust as a payable on death or transfer on death beneficiary.

Pros:

  • Flexibility: Since revocable trusts can be changed throughout your lifetime, this allows grantors and trustees the freedom to modify how or what assets are distributed. You can also add or remove beneficiaries at any time. Trusts also are useful tools to hold assets for the benefit of children or to even provide for your family home to be maintained for their benefit to live in with a guardian appointed to care for them after your death.
  • Avoid probate: The probate process, which is how assets are distributed through a Will, involves quite a lot of paperwork and fees. This can be a long and strenuous process for most families. Instead of going through the court, assets placed in a trust are automatically passed on to beneficiaries, which can save both time and money.
  • Protects you if you become incapacitated: If there comes a point where you are physically or mentally unable to manage your trust, you can pre-appoint your named successor Trustee to take over some or all of your trustee duties for you.

Cons:

  • No tax benefits: Unless the grantor is married, once the grantor dies, all of the assets covered by the trust are subject to federal estate taxes (depending on the value of the assets). The current federal tax laws for 2020 allow you to have assets of $11.58 million per individual before any federal estate tax would apply.
  • No asset protection: Revocable trusts treat assets as your personal belongings, but when those assets pass to your beneficiaries, they are protected from creditors.
  • Time-consuming: Though you can avoid probate, you need to take extra steps after you sign your Trust document to either re-title your assets into the name of your trust or name your trust as the beneficiary for such things as life insurance, banking or investment accounts.

Irrevocable trust

An irrevocable trust is created with fixed terms and conditions. Once the terms are signed and agreed to, your rights of ownership are removed from the assets. There are only a few cases in which terms can be changed, but they are extremely rare.

Pros:

  • Tax benefits: All assets placed in an irrevocable trust for at least 5 years prior to your death are removed from any estate that is taxable.
  • Legal protection: If there were ever a lawsuit against you, the irrevocable trust protects your assets and they will not be subject to judgment.
  • Medicaid planning: If you believe that you may require Medicaid in the future, this type of trust may be needed in order to qualify for Medicaid, with the caveat that such planning needs to occur at least 5 years prior to the time when you might need Medicaid.

Cons:

  • Rigid terms: Even if you’re the grantor, you cannot change the terms of the trust. You essentially lose the ability to control anything outside of the original agreed-upon terms. Trust protector provisions can be added to allow a third-party to make certain limited administrative updates to the trust if needed, but the grantor has no control over those changes personally.
  • No ownership of assets: You lose control over your assets once the trust is created, which can be a disadvantage if you needed to sell the assets for any reason or wanted to change up their distribution.

Which is right for you? 

Both trusts are living trusts and are created in conjunction with a special kind of Will called a “pour-over Will,” that serves a very limited purpose of adding assets to the trust that pass through probate because the grantor did not name their trust as a payable/transfer on death beneficiary of the assets or did not re-title the assets into the name of the trust. These trusts provide the opportunity for grantors to secure their assets and ensure they are distributed according to their wishes. Trusts can be a great way to pass on wealth to children or grandchildren and provide for other family members after death.

Irrevocable trusts cannot be changed, so you need to ensure you are absolutely set on the terms created and the trustee(s) designated. Additionally, you should consider the features of each trust. The advantages of the irrevocable trusts, typically related to taxes, can be complex and costly to arrange. Though these can be truly beneficial, you need to make sure you are all in when it comes to your decision.

When considering trusts, it’s important to have an experienced attorney to walk you through every step and help you make the best decisions. The Law Office of Patricia E. Tichenor, P.L.L.C will assist you, ensuring your assets are protected not only while you’re here, but also after you’re gone. Contact us today for a free virtual consultation.

Estate Planning During COVID-19: 4 Areas to Address

man talking on video conference

Estate Planning Considerations During COVID-19 | NOVAEstateLawyers.com

The COVID-19 pandemic has raised a lot of valid fears about health and mortality. Simple errands like going to the grocery store and visiting a doctor’s office have created a potential risk for picking up and transmitting a virus that has killed nearly 90,000 Americans so far.

As the coronavirus death toll increases across the country, getting sick – and thinking about what might happen to your loved ones if you pass away – may be weighing heavily on your mind. During quarantine, one productive thing families can do is be proactive about updating their estate plans.

If you do not already have an estate plan, or haven’t updated yours recently, now is the time to tackle this uncomfortable but important task. Here are some important areas to address as you work on estate planning during COVID-19.

1. Your wishes for medical decisions

If you become critically ill, with COVID-19 or any other condition, your loved ones may be faced with some difficult decisions about your healthcare. Medical estate planning documents like a Health Care Directive, a Durable Medical Power of Attorney (POA), and a HIPAA Authorization can make these decisions easier by documenting your wishes for medical treatment.

In the event you become physically or mentally incapacitated and cannot make decisions for yourself, your healthcare providers and your family can refer to these documents and make the choices you would have made if you were able.

2. Management of your finances

Having a Durable General (Financial) POA serves the same purpose as a Healthcare POA, but for decisions regarding your finances. The person(s) you name to serve as attorney-in-fact under your Financial POA (who can be the same person(s) as your Medical POA) will be responsible for making financial choices, ensuring your bills are paid, and managing any investments or business finances you may have in the event of your incapacitation or death.

3. How your assets will be distributed to your beneficiaries/heirs 

There are three primary ways to transfer property to beneficiaries:  Using payable or transferable on death designations (POD or TOD), having a trust plan to avoid probate, or relying upon a will, where your assets will pass to your named beneficiaries under the supervision (and expense) of the probate court. While you can designate that all your assets pass through your Will, it may be the most ideal way to do so – both because of cost, delay, and lack of flexibility.  It may, therefore, be in your family’s best interest that you set up a revocable or irrevocable trust plan depending on your overall estate planning goals and needs. When properly drafted, a trust allows your family to avoid probate, reduce your taxable estate in some instances, protect legacy gifts for the family like a vacation spot for use by multiple generations of the family, and expedite the inheritance of certain assets. This can ultimately save your loved ones time and money.

A revocable living trust in particular is ideal for individuals who want the flexibility to make changes to their estate plans as their life circumstances and wishes change. Additional benefits of using a trust include family privacy (probate court proceedings are part of the public record, while trust documents can only be accessed by your named beneficiaries) and easier, most customized management of assets being inherited by minor children.

4. What happens to your minor children

If you have minor children, your estate plan should include a legal guardianship designation to ensure they will be taken care of in the event that you become ill or pass away. If your child’s other parent survives you, they are typically first in line to assume guardianship. However, if you are a single parent, or if your spouse also becomes ill/passes away, guardianship decisions may be left up to the Court in the absence of a named guardian.

Even if you don’t have minor children, you should be sure your estate planning documents and beneficiary forms are updated so that only the people who you wish to inherit your assets at this point in time are included.

Get virtual estate planning assistance from the Law Office of Patricia E. Tichenor

If you need further assistance with your estate planning, visit our Calendly page to schedule a free Zoom consultation call with us. During your virtual consultation with the Law Office of Patricia E. Tichenor, we will discuss and review your estate planning concerns and needs, and create a tailored strategy for moving forward.

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

Contact

Social Media Auto Publish Powered By : XYZScripts.com