Is one of your 2018 New Year’s resolutions to become more financially literate, protect the assets you have worked hard to earn and get your financial house in order? If so, keep reading. OutWire757 reached out to local attorney Rachel Anderson for her advice about how estate planning can help your loved ones at a difficult time. Ms. Anderson recommends the following:
Estate Planning 101
Estate planning is one area of law and life that no one wants to think about because it involves death and everything that happens after that point in time. Our eventual deaths are a universal reality for every human on this planet. We cannot avoid it but we can plan for it. By creating a comprehensive estate plan, you can ease the decision making process for those you love in the most stressful of life’s moments.
What does a comprehensive estate plan entail? It can include many items depending on your needs but it generally includes:
- Last Will and Testament
- Advance Medical Directive/Living Will
- Power of Attorney
The three ESSENTIAL documents that everyone over 18 years old need is a Last Will and Testament, Power of Attorney, and an Advance Medical Directive/Living Will. All of your assets, not in trust or passing to your heirs by operation of law (for example: life insurance and payable on death accounts), will have to go through probate and be a part of the court record.
Why should I create a comprehensive estate plan?
1. If you do not create a Will, your assets will pass via Intestate Succession. Intestate succession is set forth in the statutory code of Virginia and represents how your assets will be distributed to your surviving family members.
Potential pitfalls of Intestate Succession:
- If you and your life partner are not married:
- Your life partner does not inherit any of your assets that you solely own.
- Any children born to or adopted by only the surviving partner but not by you will not be entitled to inherit. This means that a child or children you raised but to who you are not the genetic or legal parent will not be inherit any of your assets.
- If you and your life partner are married:
- Your spouse will inherit your entire estate unless you have children that are not from your marriage.
- If you have children from a prior relationship, those children will receive two-thirds of your estate, leaving your spouse with only one-third of your total assets.
- If you are single:
- Your parents will inherit your entire estate.
- If your parents are not alive, your siblings will inherit.
- A Will allows you to control who receives all of your assets. You can also make specific bequests by stating that certain items or assets are to be given to certain people. It can allow you to set forth your wishes for any funeral arrangements, plan for your children and chose a guardian for them, and make any charitable contributions that reflect your passions and values. Don’t let the Commonwealth of Virginia make these decisions for you.
- An Advance Medical Directive or Living Will allows you to make your voice and wishes heard and followed during any injury or illness in which you are incapacitated. This is a very powerful tool and not one to be taken lightly. In this document, you can state your wishes for medical care and life saving measures, such as, what surgeries and treatments you want to be provided to you or withheld as part of your care. The document can also be used to appoint someone you trust to make health care decisions for you in the event of your incapacity. Health care providers are familiar with these documents and look to them when making decisions on your care if you are incapacitated. I highly recommend that everyone have this document because you never know when or if an accident will render you incapable of making your wishes known.
- A Power of Attorney gives a specific person or persons that you designate the power to act on your behalf. This person should be a person you trust with your life, since you are allowing them to make all decisions for you as if they are you, essentially they “step into your shoes”. There are several types of Powers of Attorney including; general, durable, springing, and healthcare. Depending on your needs and personal situation it is always a good decision to have a power of attorney, even if you are young and healthy.
- Trusts are a beautiful planning tool but not everyone necessarily needs one. The decision to create a trust should be made based on your individual needs and be thoroughly discussed with an estate planning attorney. Trusts are separate entities from an individual and have their own rules and regulations. Assets in trust do not go through the probate process but pass through the trust. Legal title is separated from beneficial ownership meaning that the trust has legal title and ownership of the assets but the beneficial owner is afforded the use of the assets. A Trustee, who can also be the beneficial owner, is the one in control of the trust and the assets. Most trusts are Revocable Living Trusts that allow the trust creator to be both Trustee and Beneficiary of the trust.
All estate plans should be regularly reviewed and updated. I always recommend a review every three years. This allows you to make sure that the plan is in compliance with current law and meets your unique individual circumstances. Additionally, every estate plan should be reviewed after any major life event. Major life events include marriage or divorce, birth or adoption of a child, start of a business, home purchase, or sizable inheritance.
A comprehensive estate plan is something every individual should have and should be done by a knowledgeable Estate Planning Attorney who can customize a plan to meet your specific needs and objectives. By creating a comprehensive estate plan you make your wishes known, help your loved ones make decisions, and can provide for the ones you love most. Please do not leave them in the dark.
Rachel Anderson, Esq. is an Estate Planning Attorney at Chesapeake Legal Group, PLLC who also specializes in contracts and business formation. Ms. Anderson represents clients throughout Hampton Roads and can be reached at Rachel@chesapeakelegalgroup.com or 757-410-7943.