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Estate Planning

Thursday, May 11, 2017

Irrevocable Trusts in Virginia Explained


What is an irrevocable trust?

Trusts are a vital part of estate planning in Virginia.  Revocable, living trusts are the most common type of trust, but irrevocable trusts offer an alternative to this traditional estate planning tool.  An irrevocable trust is a trust that cannot be revoked or amended by the creator of the trust, with some limited exceptions.
Read more . . .


Sunday, May 7, 2017

Estate Planning Is Not Just for the Rich!


It is a common misconception that estate planning is only something that the extremely wealthy do. While the richer you are, the more you may have at stake, estate planning is really something that everyone should consider.

The process of determining how your assets will be divided and planning for tax implications after you pass is important for everyone, regardless of the overall value of your property. Read more . . .


Thursday, April 27, 2017

Top Five Estate Planning Mistakes

Top Five Estate Planning Mistakes

In spite of the vast amount of financial information that is currently available in the media and via the internet, many people either do not understand estate planning or underestimate its importance. Here's a look at the top five estate planning mistakes that need to be avoided.

1. Not Having an Estate Plan

The most common mistake is not having an estate plan, particularly not creating a will - as many as 64 percent of Americans don't have a will. This basic estate planning tool establishes how an individual's assets will be distributed upon death, and who will receive them. A will is especially important for parents with minor children in that it allows a guardian to be named to care for them if both parents were to die unexpectedly. Without a will, the courts will make decisions according to the state's probate laws, which may not agree with a person's wishes.

2. Failing to Update a Will

For those who have a will in place, a common mistake is to tuck it away in a drawer and be done with it. Creating a will is not a "once and done" matter as it needs to updated periodically, however. There are changes that occur during a person's lifetime, such as buying a home, getting married, having children, getting divorced - and remarried, that need to be accurately reflected in an updated will. Depending on the circumstances, a will should be reviewed every two years.

3. Not Planning for Disability

While no one likes to think about becoming ill or getting injured, an unexpected long-term disability can have devastating consequences on an individual's financial and personal affairs. It is essential to create a durable power of attorney to designate an individual to manage your finances if you are unable to do so. In addition, a power of attorney for healthcare  - or healthcare proxy, allows you to name a trusted relative or friend to make decisions about the type of care you prefer to receive when you cannot speak for yourself.

4. Naming Incapable Heirs

People often take for granted that their loved ones are capable of managing an inheritance. There are cases, however, when a beneficiary may not understand financial matters or be irresponsible with money. In these situations, a will can appoint an professional to supervise these assets, or in the alternative a "spendthrift trust" can be put in place.

5. Choosing the Wrong Executor

Many individuals designate a close relative or trusted friend to act as executor, but fail to consider whether he or she has the capacity and integrity to take on this role. By choosing the wrong executor, your will could be contested, leading to unnecessary delays, costs and lingering acrimony among surviving family members.

The Takeaway

In the end, estate planning is really about getting your affairs in order. By engaging the services of an experienced trusts and estates attorney, you can avoid these common mistakes, protect your assets and provide for your loved ones.

 


Sunday, April 9, 2017

Every Estate Fight Is “Ugly”


Whenever a celebrity dies, you can almost guarantee that there will soon be headlines about the “ugly” estate fight brewing between his or her relatives. Just in the last year we heard these sorts of stories about the pop icon Prince, blues legend B.B. King, and conservative culture warrior Phyllis Schlafly.

But here’s a little secret.
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Thursday, April 6, 2017

The Importance Of Finding An Estate Administrator You Can Trust


We all know “you can’t take it with you,” but that doesn’t mean that everyone does a good job putting together an estate plan, or ensuring that the plan they have put so much thought into will actually be carried out. It is this second aspect of the estate planning process, the selection of an estate administrator, that gives a lot of clients trouble.

What Is An Estate Administrator?

An estate administrator is the person tasked with carrying out the wishes of the deceased. They have to pass on items to family members, make sure the estate’s bills are paid, and handle big issues like property sales.

If the estate plan includes a will, or a dispute over a non-will-based estate plan arises, the estate administrator will have to go to court to sort things out.
Read more . . .


Sunday, March 19, 2017

Types of Elder Abuse


As baby boomers retire and get older, the number of older Americans are expected to skyrocket. There will be a serious uptick in the demands of the healthcare system, long-term care, and nursing home facilities.

As demand increases so does the potential for abuse and neglect of older Americans.
Read more . . .


Thursday, March 16, 2017

Responsibilities of a Trustee


Every trust must have a trustee. When you create a trust, you allow the trustee to have certain rights and responsibilities regarding your property. In most circumstances, you will have lots of faith and confidence in your trustee because an unethical or irresponsible trustee can have detrimental effects on your trust and your beneficiaries.

Trustees have many responsibilities, so it is important to appoint a person that is willing to take on this role. Discuss the position with a potential trustee, and ensure that they are capable and receptive before incorporating the trust into your


Read more . . .


Monday, March 13, 2017

Estate Planning Matters

Common Estate Planning Mistakes Regarding Individual Retirement Accounts (IRAs)

For many people, retirement savings accounts are among the largest assets they have to bequeath to their children and grandchildren in their estate plans.  Sadly, without professional and personally tailored advice about how best to include IRAs in one’s estate plan, there may be a failure to take advantage of techniques that will maximize the amount of assets that will be available for future generations.

Failure to Update Contingent Beneficiaries

Assets in an IRA account usually transfer automatically to the named beneficiaries upon the death of the account holder, outside of the probate process.  If the account holder’s desired beneficiaries change, due to marriage, divorce, or other major life events, it is critically important to update the named beneficiaries as quickly as possible to prevent the asset from passing to an outdated beneficiary.  When updating beneficiaries, account holders should not neglect contingent beneficiaries – those individuals named to receive the asset if the primary named beneficiary is already deceased when the account holder dies.

Example:  Sarah’s IRA documents name her husband, Harold, as the primary beneficiary of her IRA.  The contingent beneficiary is Harold’s son, George, from Harold’s first marriage.  Sarah and Harold divorce.  Harold dies.  If Sarah dies before changing her IRA beneficiaries, George will receive the IRA.  This may no longer be the result Sarah would have wanted.

Failure to Consider a Trust as the Contingent Beneficiary of an IRA


There are three main advantages of naming a trust as the contingent beneficiary of your IRA: 

  1. It avoids the problem described above of having incorrect contingent beneficiaries named at death.
  2. It protects the IRA if the desired beneficiary is a minor, has debt or marital troubles, or is irresponsible with money.
  3. It protects the IRA from intentional or unintentional withdrawal.

Since 2005, the IRS has allowed a type of trust created specifically to be the beneficiary of an IRA.  The IRA Beneficiary Trust is also known as an IRA trust, an IRA stretch trust, an IRA protection trust, or a standalone IRA trust.

The main advantage of using an IRA Beneficiary Trust instead of a standard revocable living trust is that the IRA trust can restrict distributions to ensure compliance with tax rules and minimum distribution requirements – thus maximizing the amount of tax-free growth of the investments.

Another advantage is that the IRA stretch trust has a framework that allows it to be structured in a way that guarantees protection of the distributions from the IRA as well as protection of the principal of the IRA.  When you first establish the IRA protection trust, you structure the trust as either a conduit trust or an accumulation trust.  A conduit trust will pass the required minimum distributions directly to your named beneficiaries, maximizing the tax deferral benefits.  An accumulation trust passes the required minimum distributions into another trust over which a named trustee has discretion to accumulate the funds, resulting in greater asset protection for the benefit of the beneficiary.

During your lifetime, the IRS allows you to switch between the conduit trust and accumulation trust for each of your beneficiaries, as circumstances change.  Furthermore, you may name a “trust protector” who may change the type of trust one last time after your death.  This change may be made on a beneficiary-by-beneficiary basis, so that some of your intended heirs have accumulation trusts for their portion of the IRA and others have conduit trusts.

IRA Beneficiary Trusts are complicated legal documents with intricate IRS rules and tremendous implications for your family’s wealth accumulation for future generations.  It is wise to seek advice specific to your family’s unique circumstances when considering the establishment of this powerful type of trust.


 


Tuesday, February 28, 2017

3 Reasons Your Estate Plan May Need Updating


The start of the New Year means it is once again time to think about when certain yearly to-do’s will get done. When will you get your annual physical? How about your annual eye exam? Don’t forget to make two appointments for teeth cleaning! When is your car due for its next oil change? How long has it been since you got a haircut?

In all the hustle and bustle, it can be easy to forget that your estate plan also needs a regularly scheduled tune-up. Ideally you should check in with your estate planning attorney on a yearly basis to see if anything needs changed, but below is a list of the top 3 things your attorney will consider so you can decide on your own if you need to schedule an appointment.


Read more . . .


Monday, February 27, 2017

Guardianships & Conservatorships

Guardianships & Conservatorships and How to Avoid Them

If a person becomes mentally or physically handicapped and can no longer make rational decisions about their person or their finances, his or her loved ones may consider a guardianship or a conservatorship whereby a guardian would make decisions concerning the physical person of the disabled individual, and conservators make decisions about the finances.

Typically, a loved one who is seeking a guardianship or a conservatorship will petition the appropriate court to be appointed guardian and/or conservator. The court will most likely require a medical doctor to make an examination of the disabled individual, also referred to as the ward, and appoint an attorney to represent the ward’s interests. The court will then typically hold a hearing to determine whether a guardianship and/or conservatorship should be established. If so, the ward would no longer have the ability to make his or her own medical or financial decisions.  The guardian and/or conservator usually must file annual reports on the status of the ward and his or her finances.

Guardianships and conservatorships can be an expensive legal process, and in many cases they are not necessary or could be avoided with a little advance planning. One way is with a financial power of attorney, and advance directives for healthcare such as living wills and durable powers of attorney for healthcare. With these documents, a mentally competent adult can appoint one or more individuals to handle his or her finances and healthcare decisions in the event that he or she can no longer do so. A living trust will also allow someone to handle your financial affairs – you can create the trust while you are alive, and if you become incompetent someone else can manage your property on your behalf.

In addition to establishing durable powers of attorney and advanced healthcare directives, it is often beneficial to apply for representative payee status for government benefits. If a person gets VA benefits, Social Security or Supplemental Security Income, the Social Security Administration or the Veterans’ Administration can appoint a representative payee for the benefits without requiring a conservatorship. This can be especially helpful in situations in which the ward owns no assets and the only income is from Social Security or the VA.

When a loved one becomes mentally or physically handicapped to the point of no longer being able to take care of his or her own affairs, it can be tough for loved ones to know what to do. Fortunately, the law provides many options for people in this situation.  
 


Monday, February 20, 2017

Estate Planning Matters: Special Needs Trusts

Self-Settled vs. Third-Party Special Needs Trusts

Special needs trusts allow individuals with disabilities to qualify for need-based government assistance while maintaining access to additional assets which can be used to pay for expenses not covered by such government benefits. If the trust is set up correctly, the beneficiary will not risk losing eligibility for government benefits such as Medicaid or Supplemental Security Income (SSI) because of income or asset levels which exceed their eligibility limits.

Special needs trusts generally fall within one of two categories: self-settled or third-party trusts. The difference is based on whose assets were used to fund the trust. A self-settled trust is one that is funded with the disabled person’s own assets, such as an inheritance, a personal injury settlement or accumulated wealth. If the disabled beneficiary ever had the legal right to use the money without restriction, the trust is most likely self-settled.

On the other hand, a third-party trust is established by and funded with assets belonging to someone other than the beneficiary.

Ideally, an inheritance for the benefit of a disabled individual should be left through a third-party special needs trust. Otherwise, if the inheritance is left outright to the disabled beneficiary, a trust can often be set up by a court at the request of a conservator or other family member to hold the assets and provide for the beneficiary without affecting his or her eligibility for government benefits.

The treatment and effect of a particular trust will differ according to which category the trust falls under.

A self-settled trust:

  • Must include a provision that, upon the beneficiary’s death, the state Medicaid agency will be reimbursed for the cost of benefits received by the beneficiary.
  • May significantly limit the kinds of payments the trustee can make, which can vary according to state law.
  • May require an annual accounting of trust expenditures to the state Medicaid agency.
  • May cause the beneficiary to be deemed to have access to trust income or assets, if rules are not followed exactly, thereby jeopardizing the beneficiary’s eligibility for SSI or Medicaid benefits.
  • Will be taxed as if its assets still belonged to the beneficiary.
  • May not be available as an option for disabled individuals over the age of 65.

A third-party settled special needs trust:

  • Can pay for shelter and food for the beneficiary, although these expenditures may reduce the beneficiary’s eligibility for SSI payments.
  • Can be distributed to charities or other family members upon the disabled beneficiary’s death.
  • Can be terminated if the beneficiary’s condition improves and he or she no longer requires the assistance of SSI or Medicaid, and the remaining balance will be distributed to the beneficiary.
     

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© J.S. Burton, P.L.C. | Disclaimer | Law Firm Website Design by Amicus Creative
575 Lynnhaven Parkway, Suite 301 , Virginia Beach, VA 23452 | Phone: 757-215-4051
5425 Discovery Park Blvd., Suite 101, Williamsburg, VA 23188 | Phone: 757-215-4051