Leesburg VA Estate Planning Attorney Blog

Is a living trust necessary for proper estate planning?

2013-05-22T08:38:03Z

Many Loudoun County residents have concerns about estate planning. They may be led to believe that a living trust is absolutely essential and without one, their estate will end up going through probate and turn into one huge mess. This is not always the case. In fact, many people don't need a trust for their estate planning needs.

Trusts are more expensive than wills. A typical will can cost a few hundred dollars, while a trust can set a person back several thousand dollars. Despite this price discrepancy, many people are led to believe that they need a trust if their goal is to avoid probate. For small estates, however, many states make the process easier and even allow the beneficiaries to avoid probate altogether by structuring assets throuhg a simple will rather than a trust.

]]> Many people also like the idea of a trust because it offers some form of asset protection. However, many assets don't even have to go through probate. A valuable item can be given to a beneficiary outside of the probate process, such as through a beneficiary designation. Bank accounts can be set up to pay to a beneficiary upon death. Life insurance policies, IRAs, pensions and other accounts will go to the beneficiary. Homes and other property with joint ownership will automatically go to the other party upon death.

With a trust, property must be transferred to it. This is an important step in the process. If a person fails to do this, the trust is essentially worthless. Trusts also require constant updates and maintenance, which can be time-consuming, expensive, and frustrating. A will may be a better option for those who are young and have a relatively small estate.

Source: Richmond Times-Dispatch, "Kiplinger's: Why you don't need a living trust

," May 12, 2013

Guardianship: When it's not used as an estate planning strategy

2013-05-15T09:40:30Z

When many Loudoun County residents think of a guardianship or conservatorship, they may think of it in the context of an elderly person or someone who is mentally incapacitated. But more and more, this legal process - which is an important part of estate planning - is also being used for young celebrities who have spiraled out of control and need help with day-to-day functioning.

Remember Britney Spears? A conservatorship helped her turn her life around and make a comeback. Now another child star has been in the public eye lately due to her erratic behavior. Former Nickelodeon star Amanda Bynes could use some help from a court appointed guardian who would manage her finances and protect her from harm and irresponsible behavior, such as her alleged drug use and recent DUI charges. But does she qualify for a guardianship?

]]> A guardianship serves to provide food, clothing and other personal needs to a person, and helps them manage their assets and finances. Bynes was given access to millions of dollars several months ago, and in light of her alleged recent behavior she would likely need help managing her finances. Another requirement for guardianship is that the person must be likely to harm themselves due to their inability to manage their daily life. Because Bynes has drug and alcohol problems, she would probably meet this requirement as well.

Although a guardianship is often used for children or the elderly, anyone of any age can have a guardian appointed if he or she has a mental illness or substance abuse problems. A guardian controls a person's finances, assets and becomes responsible for the person's overall health and safety. A guardianship might prove beneficial in Bynes' case.

Source: Forbes, "Amanda Bynes' Comeback Could Begin With A Guardianship

," Danielle and Andy Mayoras, May 2, 2013

Estate planning should be a consideration for everyone

2013-05-08T09:31:06Z

With the minimum value for estates now at more than $5 million before the estate tax kicks in, many Loudoun County residents may think they're in the clear and therefore have no need to create an estate plan. However, it is important that people of all income levels go through the estate planning process and help out their families as much as possible.

Many people gauge whether or not they need an estate plan based on estate tax guidelines. However, people from all walks of life - especially those who are married with young children - need to have an estate plan to protect their families in the event of an untimely death. This is typically done through life insurance and the appointment of guardians.

]]> Contrary to what many may believe, a will is usually not enough. Many states require that assets be held in a living trust. This is a good idea whether or not it is required. . With a living trust, the much-dreaded probate process can often be avoided. In addition, a living trust is more private. A will is public, which means that anyone can view its contents.

For those who do have an estate exceeding $5.25 million or are concerned about estate tax laws, there are many things to be aware of. Estate law can be very complex and difficult to understand. Some states have their own estate tax regulations to consider as well. Virginia currently does not have one. Many people use trusts in order to reduce the value of their estate. This may or may not work, so it's important to have things done right by a professional.

Source: The New York Times, "Estate Planning Remains a Moving Target Under the New Tax Law," Paul Sullivan, April 26, 2013

Figuring long term care into the estate planning process

2013-05-03T07:54:36Z

Many Loudoun County residents may be excited for retirement, but it can be a tough transition, especially for those who have not saved much money. With medical costs rising at a minimum of five percent per year, it may take hundreds of thousands of dollars just to pay for medical care during a person's retirement years. That's why proper estate planning can help people plan for long term care expenses and other medical needs.

Proper long term care planning incorporates several elements, such as when a person plans to retire, his or her current health, life expectancy, cost of medical care, inflation and any employer benefits. It helps to be honest, as it's always better to over budget rather than scramble to find money later.

]]> Other ways to plan for long term care include purchasing long term care insurance. This can be risky, however, as only half of all retired people are estimated to actually need it. Plus, it is expensive and premiums rise constantly. Health Savings Accounts can also help people save up for medical care. They are offered by some employers and the advantage is the people can contribute to them even during retirement.

When considering long term care insurance, it's a good idea to fully review the policy terms and coverage. Many plans have exclusions, waiting periods or strict requirements. It's not a good idea for everyone, so a person should take his or her current health into consideration and try to predict future health as much as possible.

Source: CNBC, "Don't Take Retirement Health-Care Costs Lying Down," Rodney Brooks, April 23, 2013

What vested rights mean during the estate planning process

2013-04-24T04:50:50Z

Many Loudoun County residents may have seen the term "vested" in connection to benefits they receive from an employer, such as a pension. For example, if an employee is required to work at a company for a certain period of time before receiving these benefits, the benefits will be "vested" -- or legally enforceable -- once the employee has met that length-of-employment requirement. Before that point, the employee is not guaranteed those benefits. Many people are unaware that this works the same way with a revocable living trust, a commonly-used estate planning document.

In a living trust, the person who created the trust can make changes to or completely revoke the trust while he or she is alive. This means that an heir's assets and rights are not always guaranteed, and are not vested while the trust creator is alive. The only way the heir's rights are vested is when the person dies. The trust then becomes irrevocable.

]]> However, to add another layer of complexity, not all beneficiaries are vested in an inheritance even after the person's death. For example, a trustee may be instructed not to distribute assets to those who need help handling them, such as minors or disabled adults.

In addition, the person who created the revocable trust may spend the money while he or she is alive. Also, a living trust does not protect the money from creditors, so heirs may be financially responsible for any unpaid debts. Therefore, there can be a huge difference between a person's vested rights and what he or she merely expects to receive as an inheritance. An heir who thinks he or she will be coming into a large payday after a person's death may be disappointed to find that the true value of the inheritance is much smaller than anticipated. Either way, an experienced estate planning attorney can usually help interpret trusts and what rights they leave to others.

Source: Lake County News, "Estate Planning: Vested rights versus mere expectancy," Dennis Fordham, April 13, 2013

Importance of making family aware of estate planning documents

2013-04-16T09:08:19Z

Many Loudoun County residents may not want to burden their families with discussions about death, or more specifically, estate planning. However, when family members-including a surviving spouse-are unaware of what to do when their loved one is seriously ill or dead, this leads to additional worry and grief. This is why it is important for families to make time to discuss estate planning with each other.

Even if a person has everything "taken care of"-including a valid will and estate plan-his or her final wishes still may not be carried out because the family may not know what estate planning documents exist. This is why having a family meeting is important. It is critical to have this meeting early on, since tragedy can strike at any time.

]]> Many parents may be embarrassed or uncomfortable discussing estate planning with their adult children. This may especially be true if there are controversial issues involved. However, having a family meeting is a good way to put everything out in the open. Plus, it makes everyone more comfortable, as they have a better idea of what to expect when their loved one is no longer able to make his or her final wishes known.

An estate plan should contain various elements. These include names and addresses of heirs, executors of the will and possible guardians for minor children. Any income, retirement benefits and financial accounts should also be listed. A list of assets and debts should also be included in the estate plan, as well as any important documents, such as deeds, tax returns and certificates of marriage or divorce.

Source: Gazettes, "Estate planning: Plan a family meeting," Curtis Kaiser, April 8, 2013

Will or trust: which one to use for estate planning needs?

2013-04-12T16:48:24Z

Many Loudoun County residents are probably confused about their estate planning needs. A primary question might be, "Should I create a will or would a trust be better?" There are several differences between these two, so the best one to use for estate planning would depend on a person's assets, as well as a variety of other factors.

Wills and trusts can be different in that they become effective at different times. A will takes effect upon death, while a trust is often administered while the person is still alive. A will controls assets such as personal property and bank accounts. It can also require going through the probate process, which consists of gathering assets, notifying creditors and settling claims. This process can take six months or more to finalize.

]]> A trust, on the other hand, is a contract between the person who establishes the trust, known as the settlor, and the person who agrees to control the assets, known as the trustee. A trust is often funded while the settlor is alive and a trustee uses the assets according to the terms of the trust. A trust requires no probate upon death.

If a person has less than $150,000 in assets, a will is most likely preferable. Those with more than $150,000 in assets might want to consider the benefits of a trust. In addition, it is also a good idea to use a trust when a beneficiary is a minor, receiving SSI benefits or unable to manage money.

A trust can end when the money runs out or when an asset in question is destroyed, such as a house. It will also end when an end date is specified in the trust or when a condition has been met, such as a child turning a certain age or getting married.

Source: Lake County News, "Estate planning: What is the difference between a trust and a will?" Dennis Fordham, March 30, 2013

Predicting medical care an emotional process in estate planning

2013-04-04T20:22:12Z

As Loudon County residents can attest, there are so many types of insurance to consider. Life insurance, medical insurance, dental insurance, homeowner's insurance and auto insurance are just a few. A major question is often who requires long term care insurance. With this type of insurance relatively new, many people are debating whether or not they really need it. It's often not until they witness a family member suffer from declining health that they realize that they need to add long term care as part of their estate planning goals.

Deciding whether or not to buy long term care insurance is an emotional decision. Many people may see their loved one in a nursing home or assisted living facility and realize that they don't want to live like that themselves should something happen. On the flip side, people also want to believe that they will never have serious medical difficulties, so they put off buying it hopes that they are right - and then it's too late.

]]> Many people are motivated by cost as well. Like any type of insurance, a person may never need it, but it's there to provide financial compensation in the case of the worst. Long term care insurance policies are expensive - a 60-year-old couple who buys one now can expect to pay close to $4,000 per year - and they often come with many restrictions. Therefore, many low-income senior citizens forego the insurance and expect Medicare or Medicaid to pick up the cost.

However, things do not always happen as planned. Medicare or Medicaid cannot cover all medical expenses, so proper long term care planning involves having a backup plan. Unfortunately, good health does not last forever.

Source: The New York Times, "Expenses and Emotions in Preparing for Long Term Care," Ann Carrns, March 25, 2013

Facts about estate planning among wealthy investors

2013-03-27T15:45:13Z

Loudoun County residents may be familiar with the common fallacy that estate planning is only for the wealthy. However, a recent survey shows that even the wealthy are not putting much thought into their estate plans. Fewer than 20 percent have updated their estate plans in the past five years and another 23 percent have no estate plan at all. One reason for this may be that many are put off by the often morbid nature of estate planning.

Despite the statistics, most of those who do have an estate plan feel comfortable with it. Approximately 82 percent of wealthy investors feel "confident" or "very confident" that their estate plan will be executed in accordance with their wishes.

]]> No matter how wealthy a person is or how much personal property he or she has, many people feel uncomfortable creating an estate plan. In addition, many investors may feel that a valid will is not necessary, particularly if all family members are on good terms, and can effectively divide a person's assets among themselves equally upon that person's death.

However, nothing is certain when there is no valid will. The distribution of assets may not go as planned. The court will decide who gets what, and this may not be in line with the person's wishes. If the person has a surviving spouse, he or she will get a majority of the estate, if not all of it. If the person did not wish for this to happen, it can lead to nasty disputes down the road.

While it may seem morbid, having an estate plan in place before one passes is key to ensuring that those left behind are not left guessing. An estate plan will ensure less fighting and, hopefully, keep the court from dictating who gets what.

Source: Millionaire Corner, "Investors Confident in Their Estate Plans--Time for an Update?," Donald Liebenson, March 18, 2013.

How an annuity can cause issues with estate planning, estate tax

2013-03-21T16:40:41Z

Many Loudoun County residents may be in the dark about estate tax rules. The federal estate tax only applies to estates worth more than $5.25 million. However, when figuring in assets, it is easy for one to overlook annuities. Understanding when to include and not to include an annuity's value is important in the estate planning process.

Many annuities are considered straight life annuities. This means that they last only until the person dies. There are no survivor benefits. In this case, because there is no value on the annuity after death, estate tax will not apply.

]]> However, some annuities offer survivor benefits. This is particularly the case in a joint annuity or refund life annuity. If this is the case, the amount of estate tax owed will depend on to whom the benefit is payable. If it is payable to a named beneficiary, the tax will be based on who paid for the contract.

If the annuity is payable to the estate of the deceased person, the value of the annuity payments paid after death may be subject to estate tax, as it will need to be included as part of the estate. If the annuity is paid to a beneficiary, the survivor benefit value must be included as part of the estate if the deceased person purchased the contract after March 3, 1931.

Not only are there federal estate tax laws to consider, but there are also state laws as well. Whether or not annuities apply will depend on specific state laws. Therefore, it is important to include annuities in the estate planning process in order to reduce tax liability.

Source: AdvisorOne, "Annuities and Taxes, Pt. 3: The Estate Tax," March 8, 2013

What to ask about estate planning, wills and probate

2013-03-11T18:01:07Z

Before Loudoun County residents visit an estate planner or other professional, they may want to spend some time thinking about the questions they may have. Estate planning can be a confusing process, and when it comes to someone's estate - his or her life's assets - it helps to know what he or she is getting into before signing any documents or making decisions that cannot be reversed.

It is important to ask about the limitations of wills, trusts and other documents. People may think they are covered because they have a will. However, wills are only valid once someone dies. If someone is still alive, but wants to allow for power of appointment or the distribution of assets, then a healthcare directive or trust will be needed as well.

]]> Another important thing to know about assets is that the title is crucial. The assets' titles must match the trust exactly or probate can occur. Probate has a bad reputation for being lengthy and costly. It makes everything public knowledge and ties up all the assets.

It is also important to keep the heirs in mind. Although many people strive for equality, the main goal should be fairness. For example, if one child is a millionaire and the other is poor and unemployed, does it really make sense to give both children the same amount of money? Wouldn't the money go to better use toward setting up the poor child with basic necessities?

Estate administration involves various tasks, including managing the estate, paying debts and taxes and distributing assets. If the will is contested or if there is a dispute, it may have to be settled through probate.

Source: Southeast Missourian, "9 smart questions estate planners wish you would ask," Taniesha Robinson, March 4, 2013

Estate planning: long-term care insurance based on gender

2013-03-07T04:37:08Z

Loudoun County residents who are considering purchasing long-term care insurance may want to keep this in mind: premiums are likely to be higher for women than men. To many women, this may seem like gender bias. In fact, federal law does ban insurance companies from charging higher premiums based on gender for medical insurance policies, but this law does not apply to plans that cover assistance with daily tasks, which long-term care insurance does. Therefore, women should keep this in mind when engaging in estate planning.

The Affordable Care Act largely prohibits this type of gender bias, but long-term care insurance does not fall under this law. Therefore, prices could begin changing to reflect differences in gender as early as this spring.

]]> Why are women being targeted? Statistics show that women receive two out of every three claim dollars; therefore, since more money is paid out for them, then they should be expected to pay more. Reportedly, this move will help stabilize pricing for all policyholders. In addition, the new pricing policy does not affect all women, but only single women who buy new policies, which comprises about 10 percent of those who purchase new long-term care insurance policies. Existing policyholders and married women will not be affected.

However, the pricing increase is not insignificant. Policy premiums could increase by as much as 40 percent. Some people are not surprised by these changes. Women live longer than men and often by the time they require long-term care, there is nobody around to offer it. Therefore, a nursing home may be a woman's only choice for medical care.

Long-term care insurance offers peace of mind to senior citizens who feel that they may need medical care in a nursing home or other long-term care. Policies cover expenses that programs such as Medicare and Medicaid do not cover. However, they can be pricey and they often have many exclusions.

Source: The Washington Post, "Long-term-care insurance plans call for some women to pay more than men," Michelle Andrews, Feb. 25, 2013

Benefits of estate planning through a revocable living trust

2013-02-25T20:34:43Z

Loudoun County residents may be thinking about estate planning, but may be unsure where to start. Between wills, trust, and estate plans, there are so many things to consider. Although not ideal for some people, a revocable trust can be a useful estate planning tool for many reasons.

A revocable living trust is a great option for those who have a lot of assets and need help managing them. The person who creates the trust designates a trustee, who helps control the assets. The terms of the trust can be changed or revoked at any time before death, hence the name 'revocable trust.'

]]> One major benefit of a living trust is privacy. Wills become public record, whereas trusts never go through probate and therefore never become public, allowing for privacy and asset protection. However, creditors can gain access to the trust and demand that any outstanding debts be repaid.

Using a trust helps speed up the distribution process upon one's death. Because estate tax waivers are not needed, transferring property to a beneficiary takes just a few weeks with a trust, while probate can take months. In addition, settling a trust requires no court costs or lawyers fees, which saves money and leaves more assets for beneficiaries.

However, although establishing a revocable trust has many benefits, it is quite expensive compared to other forms of estate planning. Creating the trust document comes with a hefty price, as does transferring property to the trust. It can also be time-consuming to take all of one's assets and retitle them for the trust. In addition, using a living trust has no tax benefits. The assets are taxed. No matter which estate planning tool is ultimately most useful for a given situation, an experienced estate planning attorney can help assure assets are protected in the best way possible.

Source: nj.com, "Biz Brain: The benefits of a living trust," Karin Price Mueller, Feb. 18, 2013

What to know about Medicare and Medicaid in estate planning

2013-02-19T21:02:47Z

Many Loudoun County residents may be uninformed about long-term care planning. They may not understand that their nursing home care, if needed, will not be automatically paid for. Medicare and Medicaid do pay for some medical are, but only if the patient qualifies for these programs. Therefore, in order to protect assets, senior citizens should be aware of all their options during the estate planning process.

Many people get Medicare and Medicaid confused, but they are actually two different programs. Medicare is a federal program available to those people aged 65 and older, as well as some severely ill or disabled people. Nursing home and in-home health services are limited.

Medicaid is a program operated at both the state and federal levels. It provides medical services for low-income recipients. It does offer some long-term care services, but recipients typically must use up most of their income and assets first before Medicaid steps in. In addition, the state can recover the amount spent on a person from their estate after death.

]]> Unless a person has a long-term care policy, Medicaid is basically their only choice to pay for long-term care. However, Medicaid is only good for those who earn less than $50,000 per year and have limited assets. Therefore, a person with much more income and assets should account for long-term care planning in their estate plan.

Purchasing long-term care insurance is a risk. Not everyone will end up in a nursing home and the premium for such a policy can be expensive - at least several thousand dollars per year. However, having a policy can provide peace of mind in case medical care is needed.

Source: Redlands Daily Facts, "Medicare, Medicaid and long-term care," Carolyn Olson, Feb. 6, 2013

Feud over conservatorship shows importance of estate planning

2013-02-14T16:58:01Z

Many Loudoun County residents may be familiar with actress Zsa Zsa Gabor. The actress, who just turned 96, has been suffering from health problems for a while, and her husband, Frédéric Prinz von Anhalt, has been acting as conservator of her affairs. While it is normal for most spouses to take over the affairs of an incapacitated spouse, Gabor's daughter is trying to fight it. Proper estate planning can avoid such feuds.

Gabor's daughter recently contested von Anhalt's conservatorship. She claims that von Anhalt is not fit to serve as her mother's conservator because of his poor money management skills. She also claims that he does not properly care for her mother, who has suffered from pneumonia, a broken hip, an amputated leg and various infections and requires around-the-clock care. Von Anhalt also allegedly bars Gabor's daughter from seeing her mother. However, despite these claims, a judge allowed him to continue his duties as conservator at least until August.

]]> At that time, the case will be reviewed. Von Anhalt will be required to provide reports regarding Gabor's finances. He has admitted to using some of Gabor's money to pay for his own personal expenses, but has allegedly repaid it.

It is important for a conservator to manage a person's affairs, especially finances, appropriately. A conservator must be considered honest and have a good reputation. A dishonest person can easily take advantage of an incapacitated individual by squandering away his or her assets.

Ideally, a person should choose a conservator ahead of time, before he or she becomes incapacitated, to ensure his or her affairs are managed as desired. Many people choose close relatives, such as spouses, children or siblings as conservators, although sometimes very close friends can be chosen as well.

Source: San Francisco Examiner, "As Zsa Zsa Gabor turns 96, daughter Francesca Hilton still unhappy with stepdad Frédéric Prinz von Anhalt over finances," Katy St. Clair, Feb. 5, 2013