Tag Archives: Estate Planning

6 Questions to Ask Yourself as You Make Your First Estate Plan

first estate plan

First-Time Estate Planning Questions | NOVAEstateLawyers.com

An estate plan ensures your loved ones and assets are taken care of if you become incapacitated or pass away. While it’s not exactly an uplifting task, it’s important to plan ahead so your loved ones aren’t caught off-guard or left to sort through your affairs on their own.

However, thinking about your final wishes, especially at a young age, can be overwhelming. To help make the process of developing your first estate plan easier, here are six essential questions to ask yourself.

1. What assets do I have?

Assets come in two forms: tangible and intangible. Having a list of your assets is an imperative part of the estate plan execution process, and as you create your plan, will help you answer important questions. Your assets may include: checking accounts, savings accounts, a life insurance policy, 401(k) or other retirement accounts, a business you may own, copyright or trademark, real estate, vehicles (including boats, trailers, motorcycles, etc.), valuable heirlooms or antiques, and social media or digital assets.

2. Who do I want as my executor?

Your executor is the person responsible for carrying out your final wishes set forth in your Will after you die. The key consideration in selecting an executor is whether they are trustworthy and well-organized. While some people name a close family member, like a spouse or adult child, you can also choose a trusted friend or a professional (e.g., a lawyer, CPA, financial planner or even a bank) to serve as your executor. A person who will fulfill your intended wishes with respect to your estate plan would be a good choice.

3. Who should I designate as my attorney-in-fact under a POA?

As with an executor, the attorney-in-fact (commonly referred to as “your agent”) named in your power of attorney (POA) should be someone you know and trust. For each type of POA, one for your financial matters and another for your medical matters, the person you choose will be responsible for properly managing all of your financial affairs or potentially making life-changing medical decisions for you if you lose the capacity to handle those matters on your own due to severe illness or injury.

Serving as an attorney-in-fact under a financial POA is a big responsibility, so choosing someone who is financially sophisticated and well-organized is key. Choose carefully a trusted friend or family member for this role who will not feel overwhelmed by handling your affairs, or consider naming more than one friend and family member to serve as co attorneys-in-fact so that they can share the various duties that will fall upon them under you POA.

4. Would it be better to transfer my assets using a Revocable Trust rather than using solely a Will?

The decision to pass your assets to beneficiaries through a trust or a Will depends on which assets you own and their nature. It also depends on your overall planning goals.  Trusts offer a lot more flexibility and options for planning than a traditional Will, such as holding title to your residence so that, after your death (and your spouse’s if applicable), the home can be maintained for the benefit of your children who might need or want to continue to reside in the home after your death with your named guardian, or having the children’s inheritance managed over a longer period of time with specific ages for when a child will receive outright distributions of his/her inheritance.

Depending on what property is held in the trust, your family may be able to avoid probate administration for these assets upon your death.  Trusts also help you maintain a certain degree of privacy, whereas what passes through your Will and probate of that Will is a matter of public record.

5. What are my healthcare wishes?

In the event you become too ill to make your own healthcare decisions, listing your healthcare wishes in an estate plan will ensure you get the care you desire. To begin listing your healthcare wishes, make a note of the type of facility you’d like to live in, such as your home or a hospice and palliative care center.  Investigate pros/cons of purchasing a long-term care insurance plan depending on any history of dementia, Alzheimer’s disease or another degenerative neurological disease.

6. Should I discuss my plans with my family/loved ones?

Depending on your age and medical condition, it may be best to share your estate plan with your family/loved ones rather than simply placing somewhere secure in your home or in a safe-deposit box. At the very least, even if you are not comfortable sharing copies of your signed documents with them, consider giving them a heads-up if they have been appointed to the role of attorney-in-fact or executor, and where to locate your documents should something occur with your health or should you die. Ask them if they are comfortable with the arrangements you want to make, and have discussions outlining their potential responsibilities.

The Law Office of Patricia E. Tichenor specializes in all aspects of estate planning, including providing clients with invaluable free legal guidance on how to avoid probate using trusts, POAs, deeds, as well as key guidance on issues involving special needs trust planning, guardianship and conservatorship for Virginia residents.  For assistance with creating your first estate plan or updating an existing one, contact us today.

Can I Disclaim My Inheritance?

beneficiary meeting with attorney about inheritance

How to Disclaim Your Inheritance | NOVAEstateLawyers.com

In most cases, when a loved one leaves you something in their Will or Trust, it’s an honor. However, that doesn’t always mean you’d like to inherit the property or assets passed down to you.

There are plenty of valid reasons to disclaim your inheritance, and with the proper legal documentation, you may refuse assets left to you by a loved one who died with a valid Will or Trust, or even if you are an heir-at-law when someone has died without a Will or Trust. Here’s what you need to know about using a qualified disclaimer.

 

Why would you want to disclaim your inheritance?

You can disclaim a gift or inheritance for any reason, but here are a few of the most common:

  • Inability to maintain the assets left to you. If a loved one left you a sizable asset, such as real estate or a vehicle, you may not be in a position to maintain or manage that asset, even if you planned to sell it. In this case, you may wish to disclaim that asset, so it goes to other named beneficiaries or heirs who are more equipped to handle the situation.
  • Reducing your taxable estate. This is not a likely scenario for most individuals, but in some cases, inheriting assets from a loved one can put you over the federal thresholds for estate tax if you die after inheriting from someone and the inheritance is counted as part of your estate, or trigger hefty inheritance taxes by the local State taxing authorities where you reside. Note – not all States have an inheritance tax, so it is helpful to determine whether you do or do not live in a state that imposes inheritance taxes.
  • Debt/bankruptcy. When a beneficiary is deep in debt or bankruptcy, any inheritance received may be claimed by creditors to cover those debts. If this is the case for you, you may wish to disclaim your inheritance so the assets or property can stay in the family.
  • Honoring the decedent’s true wishes. Perhaps you knew the decedent well and know they did not have a chance to update their Will before they died. If you are receiving an inheritance that would be more appropriate to give to someone else who was in their life, you may consider disclaiming it.
  • You believe you are too old or have an illness where you can’t truly benefit. Perhaps you feel that, at your age or in your medical condition, it is not ideal for you to be the one to inherit from a loved one’s Will or Trust, and you prefer to disclaim the inheritance in favor of other beneficiaries who need it or can make a longer-term use of the inheritance than you may be able to do during your lifetime.

This is not an exhaustive list of all possible reasons for disclaiming your inheritance. You might refuse to accept your inheritance for a variety of other reasons, or even for no reason at all. The choice is entirely up to the beneficiary.

How to decline an inherited asset using a qualified disclaimer

If any of the situations listed above (or another) apply to you, you might consider having an attorney prepare a formal Disclaimer for you and ensuring that it gets filed with the proper court and taxing authority by not later than nine (9) months after the death of the person from whom you are inheriting.  Disclaimers can be partial or full disclaimers.  However, once a disclaimer is completed, you may not benefit from that particular item of the estate (e.g., disclaiming inheritance of a piece of real estate) and you cannot change your mind after the fact. So, if you’re sure you want to disclaim your inheritance, here are the steps you’ll need to follow:

  1. Work with an attorney to have them prepare a proper, formal disclaimer/refusal to accept inheritance in writing, and be sure to sign and notarize it.
  2. Deliver your disclaimer document to the estate’s executor or trustee within nine months of the decedent leaving you the inherited assets or property.
  3. File a copy of the Disclaimer with the local county courthouse where the deceased person resided when he or she died, as well as the Internal Revenue Service (in consultation with a CPA).
  4. Once your disclaimer has been filed, do not accept, directly or indirectly, any benefits or assets from the estate you’re disclaiming. Otherwise, your disclaimer may be rendered invalid and you will be subject to any tax or legal obligations associated with inheriting.

Important nuance: Minor children can have inheritance disclaimed as well on their behalf by a legal guardian or parent; however, these disclaimers may not be legally binding in the eyes of a court unless and until the child reaffirms the disclaimer when they attain eighteen (18) years of age.

If you have any questions about how to prepare a Disclaimer or pros and cons for using disclaimers, consider hiring a local estate planning attorney to guide you through the process. The Law Office of Patricia E. Tichenor, P.L.L.C. has nearly 20 years of experience helping Virginia families with probate/inheritance matters.

Contact us today to discuss your circumstances, or schedule a virtual consultation.

How to Get Help with Estate Plans During COVID-19

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Virtual Estate Planning During COVID-19 | NOVAEstateLawyers.com

On March 30, Governor Ralph Northam joined other state governors in signing a temporary stay-at-home order for the Commonwealth of Virginia, through June 10, to fight the spread of COVID-19. Under the order, Virginia residents are not permitted to leave their homes for non-essential purposes, which would include meeting in-person at an attorney’s office to draft or update your estate plans.

Due to the rapid spread of coronavirus, the somber reality is that many people are probably thinking about their will, trusts, powers of attorney, etc. in case they contract COVID-19. However, you don’t have to take the DIY approach. My Legal Case Coach is here to provide legal support for your estate planning needs, all from the comfort of your own home.

How we are supporting clients remotely with their estate plans

During this time you can still get help with your estate planning questions or needs by scheduling a free, live video call with us. We are helping clients by Zoom to get the support they need to get their estate plan created or updated – and can very effectively do so, thanks to today’s technology.

During your free, 30-minute call, we will discuss your estate planning needs and what you’d like to update. This may include:

  • Wills – Your Will is an essential estate planning document that details how your executor should distribute your property after death. There are several different types of Wills, and we can help you determine which is the correct one for your estate to ensure a smooth probate process for your loved ones. We can also update your existing Will in the case of a significant life change.
  • Trust planning – A trust is an arrangement where one or more people, known as a fiduciary, are assigned to hold property or assets for someone else. We can help you create a testamentary trust (established through your Will) or living trust (established through a signed agreement and funded during your lifetime) to make sure your estate is handled properly.
  • Guardianship planning – Guardianship or conservatorship planning is intended to ensure the continued care of your dependents, including young children and older children or adults with special needs. In this case, your estate plan may include signing a Designation of Standby Guardian (think power of attorney for a minor child), seeking to appoint a guardian or conservator, and/or establishing a special needs trust.
  • Power of attorney – A power of attorney gives another person the legal authority to make important medical and/or financial decisions if you become incapacitated and are no longer able to provide informed consent. Without these documents, these decisions could be made by a doctor or a court-appointed agent. We can help with your power of attorney documents to ensure that these important decisions are made by someone who will act in the best interest of you and your family, including signing a Designation of Standby Guardian (think power of attorney for a minor child) to protect your children if you become incapacitated.

What if I need more help?

We are committed to serving our clients throughout this pandemic and beyond. During your consultation call, we can discuss scheduling further video meetings with principal attorney Patricia E. Tichenor to ensure that you are satisfied with your updated estate plans and to provide additional guidance on any new issues you might be confronted with as they arise.

Visit our Calendly page to get started and schedule your free Zoom call.

How Do Estate Taxes Work?

two people with laptops and financial worksheets

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?

special needs trust attorney

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.

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

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