DIY Estate Planning: Good or Bad Idea?

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DIY Estate Planning: Good or Bad Idea? | NOVAEstateLawyers.com

With the emergence of DIY estate planning software and online tools, you might think you have access to everything you need to easily and affordably prepare your own estate planning documents.

While you can certainly do this, it may not be the best idea to skip the attorney’s office if you want to ensure that your documents are legally binding and properly crafted. Estate planning is a complex process, and mistakes are bound to happen — but many are financially taxing or difficult to fix, especially if they’re not spotted until after your death.  In addition, estate planning often requires knowledge of how the probate process will work after you die and knowledge of how to use particular estate planning documents and tools to avoid or limit the impact of probate on your estate.

While a DIY estate planning approach is often better than not having an estate plan at all, it’s certainly not risk-free. Before you download any forms from a DIY website or purchase a DIY package at a local retail store, here are a few important considerations.

What is DIY estate planning?

DIY estate planning is essentially just drafting your key estate planning documents — your will, your powers of attorney, your advance medical directives, etc. — using templatized forms available online or from a retail store for a fee. While these forms may be a good starting place for listing and organizing your assets, they do not always include the precise language that must be included in a will to make them admissible/valid in the eyes of a probate court.

What can go wrong when you draft your own estate planning documents?

There are many risks of tackling estate planning without legal guidance. Here are few common errors you might encounter:

1. Failure to meet signature requirements

A valid Virginia will must be signed by the testator and at least two witnesses who are not beneficiaries. These witnesses must sign in the presence of the testator, at their direction. Failure to meet these requirements will render your will invalid — and a DIY estate planning tool might not remind you of this requirement the way an attorney would.  In some instances, if one of the witnesses you used is not qualified to serve in that role, this might also render the Will invalid, which is why it is best to use a notary public in addition to the two witnesses.

2. Improperly funded trusts

When forming a revocable living trust, you’ll need to fund it for the trust to be valid. In other words, depending on the purpose of the trust and the types of assets you own, you may need to re-title certain of your assets from your personal name into the name of the trust. If you don’t, your heirs may end up going through probate court and incurring probate taxes that could otherwise have been avoided. An estate planning attorney can offer specific, personalized guidance when creating and funding your trust, in a way that a DIY tool may not.

3. Not accounting for state-specific laws

Every state has different estate planning laws, and it’s crucial you follow them to the letter if you want a probate court to deem your will as valid. Some DIY tools provide generic forms that do not account for certain specific Virginia provisions. Without legal guidance from an experienced local attorney, you might not be complying with the right regulations in your area.

4. Unique situations unfit for DIY

Many situations are too unique for basic DIY estate planning forms. For instance, maybe you have assets in multiple states, or perhaps you have children from a previous marriage, or perhaps you want your home to be preserved as a place for your children to still live with a legal guardian after your death.  Whatever the case, unique situations require unique solutions, not a one-size-fits-all approach and often a will alone is not sufficient to meet your needs.

Why hire an estate planning attorney?

If you choose to handle your own estate planning needs, you may be setting yourself up for unnecessary complications that could impact not only you, but also your executor and your beneficiaries. It doesn’t matter how much time you spend drafting your own estate plan, or how detailed you are — one simple mistake can invalidate your entire will, trust or other legal document.

An attorney can help you avoid the above mistakes and provide guidance for your specific circumstances. No matter how simple you think your circumstances are, a templatized form is unlikely to thoroughly and properly address every person’s exact wishes for their estate.

Bottom line? An attorney can help you craft wills, trusts, powers of attorney, and other estate planning documents that are appropriate for your situation and include the proper language to ensure their validity after you pass away.

Get help with your estate plans

The Law Office of Patricia E. Tichenor, P.L.L.C. has nearly 20 years of experience serving the needs of Virginia families. Contact us today for help with creating or updating your estate plans.

How Do Estate Taxes Work?

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How Do Estate Taxes Work? | NOVAEstateLawyers.com

Tax Day is rapidly approaching, and as you prepare to file your tax return this year, it’s a good idea to also review the current legislation on estate and gift taxes.

While the Commonwealth of Virginia effectively repealed its state-level estate or inheritance tax in 2007, federal estate tax laws still apply to estates of a certain size. For this reason, it’s important to understand how the law may impact your beneficiaries and their future inheritance.

Here are some of the basic facts about estate taxes, including who is expected to pay what, and when.

What is the estate tax?

The estate tax is collected by the IRS from estates of a certain size before assets are distributed to any heirs and beneficiaries. Sometimes called the “death tax,” the estate tax is levied against estates larger than $11.58 million per individual, or $23.16 million per married couple (as of 2020) under a temporary change made to the laws under President Donald Trump’s tax reforms.  In 2021, unless Congress acts to extend these changes, the figure will be reduced to roughly $6 million, with a cost of living adjustment to apply on an annual basis.

The amount your estate will pay is determined by how much larger it is than the federal exemption. For instance, under the Trump tax reforms, an estate that is less than $10,000 above the federal limit will pay $0 in base taxes and a marginal tax rate of 18% on the overage amount, while an estate that is $100,000 above the limit will pay a $18,200 base tax plus 28% on the overage.

Who is responsible for paying estate taxes?

All U.S. estates are subject to federal estate tax law, although most are not large enough to be impacted by current regulations. On the state level, 18 states currently collect their own taxes on the estates of its decedents (as mentioned above, Virginia is not one of them). Several states have recently repealed their estate tax for deaths that occurred after a certain date.

What about inheritance taxes and gift taxes?

Inheritance taxes are paid by an individual who benefits from a decedent’s estate. They are not the same as estate taxes, which are paid by the estate itself.

It’s important to note that inheritance taxes are not imposed by the federal government, and only six states (Iowa, Kentucky, Maryland, Nebraska, New Jersey, New York, Pennsylvania) currently collect inheritance tax from its residents. That means if you leave money to a beneficiary residing in one of these states, they will have to pay inheritance taxes on that amount.

Gift taxes, on the other hand, are paid by someone who gifts assets above a certain amount to another person during their lifetime. Read on to learn more about gift tax exclusions and how lifetime gifting can work as an estate planning strategy.

How can I reduce the size of my taxable estate?

If your estate is approaching the federal exemption limit and you want to ensure it stays below that amount, there are a few different strategies for reducing the size of your taxable estate.

One of the most common methods for doing this is establishing an irrevocable trust.  Assets that are transferred through an irrevocable trust, if created five years prior to your death, may not count toward your taxable estate. As an added bonus, these assets are also not subject to the probate process, as they would be if they were passed through a decedent’s Will.

You may also wish to explore inter vivos gifting as an option for reducing your estate size during your lifetime. Gifting is when one person completely and irrevocably transfers assets to another, and the giver does not receive anything in return.

Gift amounts that fall within the current federally-allowed limits of $15,000 per person, per calendar year are completely tax-free. That means if you gift $15,000 to each of your children over the course of one year, they will not have to report it as income or pay taxes on it to the IRS. For spouses, this means you could give your children a combined gift of $30,000 in any calendar year, tax-free. Any amount over this is considered non-exempt, and you and your recipient will have to pay taxes on that amount.

As long as your non-exempt lifetime gifting – the combined amount that you give away prior to death and leave to others after death – does not exceed the current $11.58 million federal limit, you can effectively use this strategy to reduce your taxable estate over time, while still ensuring that your desired beneficiaries receive their inheritance money.

Still have questions? Ask an experienced estate planning attorney.

Estate planning can be confusing, and it’s not always clear how to best structure your plans to minimize the tax burden and maximize your beneficiaries’ inheritance. No matter how large or small your estate, the Law Office of Patricia E. Tichenor can help.

We’ve been assisting Virginia residents with wills, trusts, and other estate planning needs since 2001. We’ll work with you to review your assets and create the ideal plan for your needs. Contact us today and let’s start planning for your family’s future.

What Is a Special Needs Trust?

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What Is A Special Needs Trust? | NOVAEstateLawyers.com

If you are the parent of a child with special needs, you may need to set up some special protections in your estate plan to ensure he or she will be properly cared for when you pass away, especially when your child reaches adulthood. The most common way to do this is by establishing a special needs trust.

A special needs trust (SNT) can be used to protect the assets you or your family wish to leave to your child. The SNT involves a donor, trustee, and beneficiary. The donor supplies the funds for the trust, while the trustee holds and administers the funds as the donor intends. An SNT when drafted properly allows the beneficiary (the individual receiving the benefits) receive supplemental support above and beyond (and totally separate from) the government benefits received by them – without those supplemental assets being counted against them for purposes of qualifying for or receiving federal benefits.

Here’s what you need to know about special needs trusts and the advantages of establishing one.

Types of special needs trusts

There are three main types of special needs trusts: first-party, third-party, and pooled. Each trust has its own terms and benefits.

1. First-party special needs trust

A first-party SNT is commonly used when a child with special needs who, unfortunately, directly and personally inherits money or property because there was no third-party SNT planning done by the individual from whom the child is now inheriting.  This type of SNT is also used when an individually receives a personal injury or other large settlement.  The use of the SNT is made in order to permit the individually the ability to still qualify for government aid, such as Medicaid.

With a first-party SNT, any portion of the assets which remain unused by the beneficiary will become the property of the government, reverting to Medicaid as a pay-back mechanism.

2. Third-party special needs trust

A third-party SNT is created by a parent, grandparent, or other third party who wishes to leave assets (commonly life insurance) for the benefit of a special needs child without fear that doing so will disqualify that child from qualifying for other federal government benefits such as Medicaid.   The Trustee of such an SNT (similar to the First-party SNT) has absolute discretion over the use of the assets in this Trust, and they must familiarize themselves with the applicable POMS rules to ensure that distributions they make for the benefit of the child (never directly to the child) do not disqualify the child from his or her federal benefits nor result in a reduction in the amount of such benefit.

With a third-party SNT, unlike a first-party SNT, any unused assets which remain in the SNT can be re-directed to another family member or even the descendants (if any) of the special needs child.

It is generally best to prepare an SNT as a separate, stand-alone document when preparing your estate plan, so that any third party family member, sibling of your special needs child, or other family friend can name that SNT as a beneficiary if they desire to benefit your child without risking your special needs child losing his or her government benefits and allowing other family members or friends to be named as alternate or successor beneficiaries should your special needs child fail to exhaust all of his or her SNT assets prior to his or her death.

3. Pooled special needs trust

Pooled SNTs are unique because they are established and administered by nonprofit associations, often subject to government oversight to prevent mishandling and abuse. This type of SNT is used when a child’s family or a child do not have sufficient personal assets to justify the creation and funding of a separate SNT solely for the child’s benefit.  Instead, whatever assets are there for the child are pooled with the assets of many hundreds or thousands of other similarly situated special needs children, and all are then able to draw from this pool of assets in order to supplement their needs where their government benefits are insufficient to support or pay all their needs.  At the death of a participating special needs child, any unused assets from that child’s original contribution is retained by the pool and used for other surviving, participating special needs children drawing from those pooled funds.

Is a special needs trust right for your family?

There are many reasons why you might consider establishing a special needs trust:

  • Protecting necessary assets: If you want to ensure your child’s inheritance is protected from unscrupulous individuals or creditors, naming a trusted individual or bank to serve as manager and gate-keeping during your child’s lifetime, an SNT is something you want to consider.
  • Preserving family wealth: When you establish a Third-Party SNT for your child, you can provide a mechanism that ensures any portion of the assets transferred to the SNT after your death that are not used by the death of your child pass onto other siblings or family members, or a charity designated as a “legacy gift” by you.
  • Ensuring government aid: Naming the special needs child as a direct beneficiary will hinder the amount of support (medical or otherwise) he or she may receive from the government. Using an SNT provides a mechanism by which a child’s needs can be supplemented by what you leave them while avoiding the risk of costing them valuable government assistance.
  • Appointing a trustee: Depending on the duration of the SNT, it may be prudent to select a corporate trustee (often a bank or a dedicated trust management organization) rather than just an individual trustee to provide ongoing management of the trust assets for your special needs child. An SNT can provide for a Trust Advisory Committee that includes siblings, a nurse, CPA, Certified Financial Planner, or others to serve as a kind-of Trust protector and as a hands-on caretaker to your child, even while having the assets of the SNT managed by a corporate trustee.

You can learn more about trust funds and how to establish them in our blog post.

Contact an experienced estate planning attorney for help

If you need help establishing a special needs trust for your child, the Law Office of Patricia E. Tichenor can help. We’ll work with you on your estate plans to ensure your child’s rights and needs are protected for throughout their lifetime.

Estate Planning in the Digital Age: What You Need to Know

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Estate Planning in the Digital Age | NOVAEstateLawyers.com

Estate planning is usually focused on designating who will inherit your personal physical assets and belongings when you die. However, in the modern age, digital estate planning has become an important consideration for many individuals.

If you currently have digital assets, including social media accounts, email accounts, online financial accounts, apps, websites and blogs, and software subscriptions, you may want to include these in your estate plans. By doing so, you can designate who will be responsible for managing, distributing, and/or deactivating those digital assets after you’re gone.

Below is an overview of what to consider when creating a digital estate plan.

Why does digital estate planning matter?

Today, it’s extremely common for people to manage the majority of their finances, business and personal lives online, but few people have their digital accounts organized or centralized for easy access in the event of their death. 

With a proper plan for the post-mortem management of your digital assets, you can make it easier for your future executor to settle your affairs. For instance, if your executor receives the login credentials for all of your financial accounts and creditors when you die, that person can instantly get an idea of what you might owe and how much money you have to distribute to your beneficiaries – without having to call up each bank and submit a death certificate to receive copies of your final statements.

From a more personal perspective, your executor would also be able to log in to your email and social media accounts to inform your digital connections of your passing. From there, they can take action to either “memorialize” your profile (as Facebook allows you to do), or deactivate your account to protect your digital memories.

Steps for creating a digital estate plan

Like traditional estate planning, digital estate planning is the process of cataloging, organizing, and planning for the disposition of your digital assets after you pass.

There are several steps you can take to prepare your digital assets to be properly transferred before your death.

1. Record all digital assets, their respective passwords, and storage locations.

The first thing to do to prepare your digital estate plan is to keep a complete list of your digital assets. If your digital assets include social media accounts, such as Facebook or Instagram, or email accounts, be sure to review the terms of service for instructions for any asset transfer restrictions.

2. Decide what you want to happen to your accounts when you die.

Do you want everything on your computer deleted when you die? Would you want certain files to be saved and distributed among your loved ones? Whatever your desire, leave specific instructions in your will for what should happen to each of your digital assets. Typically, this becomes the responsibility of your executor, but if you wish to have someone else handle the digital portion of your estate, you should spell this out as well.

3. Save files on your computer(s) to an external drive.

Once you have your accounts in order, save all assets stored on your computer onto something tangible, such as an external hard drive, and store the hard drive in a safe place. You may also wish to back up your files to a cloud-based storage solution, in case the hard drive is lost or damaged. This is a good practice to follow throughout your lifetime to ensure you never lose access to your most important files.

4. Update your list of digital assets whenever necessary.

While compiling your initial list is a good first step, keeping your list of digital assets up-to-date is also important. Be sure to let your closest family members know what’s on your list of assets, so they can be as prepared as possible when they review your estate plans after your death.

5. Have an attorney prepare an updated Power of Attorney, Will, or Trust.

Lastly, many states, including Virginia, have adopted official statutes addressing digital assets. Make sure to have an attorney update your existing estate planning documents to empower your attorney-in-fact, executor, or trustee to act on your behalf  and on behalf of your estate during a period of disability or after your death.

Contact an experienced estate planning attorney for help

If you need some guidance, an experienced attorney can help you create or update your will, powers of attorney, trusts, and other appropriate estate planning documents.

The Law Office of Patricia E. Tichenor has been serving the estate planning needs of Virginia residents for nearly 20 years. Contact us to discuss your circumstances and how we might be able to help you plan for your family’s future.

How to Identify and Prevent Estate Planning Fraud

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How to Identify Estate Planning Fraud | NOVAEstateLawyers.com

When you make estate plans during your lifetime, your goal is to make the probate process as stress-free as possible for your surviving loved ones when you die. Usually, a valid will and other estate planning documents mitigate a lot of potential questions and controversy in probate court. However, estate planning fraud and probate fraud do happen, and they can leave your family devastated.

Estate planning fraud can be easy to spot and prevent if you know what to look for and take the steps to be more secure. Below we outline the different types of fraud and how you can avert it to save your family from a harrowing process.

What makes an estate planning document fraudulent? 

Your will is a legal document that states your plan for the distribution of any assets where you have not already named a beneficiary to receive them (e.g., you might name a spouse or adult child as a payable or transfer on death beneficiary on your retirement account or life insurance).  Assets where there is no named beneficiary or assets like your personal belongings which can’t be designated prior to your death to someone pass through your Will and under the supervision of a probate court. These decisions are yours and yours alone to make, and even if you ask others for their opinion, what is represented in the will should be a reflection of your true wishes.

Of course, it’s easy to see why a relative might be unhappy with a loved one’s estate planning decisions, especially if they feel they deserve a larger share of the estate. This is what often leads to fraud attempts, both during the estate planning process and during the probate process after someone has died.

A fraudulently-executed will is considered invalid during the probate process. These circumstances can lead to a lengthy litigation in order to determine the validity of the will.

There are a few things that can classify a will as fraudulent: 

  • Forged signatures – One way for a will to be fraudulently executed is if it was signed by anyone other than the person who writes the will, known as the testator. The testator can be assisted with making “their mark” or “signature” on the Will by someone else but only at the testator’s direction and in the presence of two witnesses and a notary. In Virginia and other states, wills are required to be signed in the presence of two witnesses. Ideally, a notary should also be present. If the will’s validity comes into question, the witnesses can be questioned and testify about its execution and determine any fraud.  If a testator cannot physical sign without assistance, it may also be prudent to consider making a video record of the signing to establish capacity and overcome later challenges to the Will’s validity. 
  • Undue influence – Undue influence is when the testator is persuaded by another person to change their will and their actions are no longer of their own of their free will. Often this happens within the elderly population and amongst the wealthy. Signs that a testator may be a victim of undue influence are sudden cut offs in communication to the family and spending quality time with a new person who is then added as a beneficiary to their will. 
  • Lack of capacity – When signing a will, the testator must be of sound mind. They need to have the mental capacity in order to sign and understand the purpose and implications of the document. If a person is not of sound mind when they sign the will, it can be considered invalid. The level of capacity to sign a will is relatively low, however, and it can be difficult to prove that there was a lack of capacity to the court.

After you’ve passed: Examples of probate fraud

While you may be able to prevent estate planning fraud during your lifetime, someone may still try to commit probate fraud after you’ve died. This is when someone tries to submit an improper, invalid, or forged estate planning document to the probate court for their own benefit.

Below are some examples:

  • Will contest: A party may try to challenge an entire will’s validity.
  • Executor fraud: The estate executor makes false claims about the content of the document or has overcharged the estate. A probate attorney can obtain the right to seek evidence to prove the crime.
  • Former will submission: Someone attempts to enter a previous version of a will to receive property that is not designated for them in the most up-to-date version.
  • False codicil: A codicil is a document that makes a change to an executed will. A false codicil may be brought forward to give someone a substantial inheritance that is not rightfully theirs, according the valid version of a will.

Can I prevent estate planning fraud? 

The best way to prevent probate and estate planning fraud – or at least reduce the likelihood of it occurring – is to have transparent, honest conversations about your wishes. While planning and writing your will, be sure to openly share your plans with your named executor, your family members, and anyone else who may be included in your will.

You should also update your loved ones every time a significant change is made. That way, everyone can be on the same page regarding your plans, and they’ll be better able to detect if someone is trying to commit fraud during the estate planning or probate process.  With the ability to create a digital image of your estate planning documents, it is easier than ever to share an updated Will or other estate planning document by means of a thumb drive or a secured link using an email.

Contact an experienced estate planning attorney for help.

The Law Office of Patricia E. Tichenor has helped Virginia residents for nearly two decades to understand how to avoid fraud issues and contests in addition to preparing wills, living trusts, powers of attorney, and other critical estate planning documents. Contact us if you need assistance with your estate planning needs.  We can meet you for a home consultation if needed, and all our initial phone consultations are free of charge.

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


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