A Comprehensive Guide to Virginia Estate Planning

Estate plans are like personalities: everyone needs one, but no two are exactly alike. You may or may not need trusts or an elaborate investment and tax avoidance plan. However, everyone should have a will and understand their additional options, like powers of attorney and advance medical directives. Our Virginia estate planning attorneys assembled this guide to empower you to take control of your estate plan. Learn how you can start planning for the future today.

Key Components of a Comprehensive Estate Plan in Virginia

Estate planning can be complex and confusing, but you can and should learn the basic vocabulary to work intelligently with your advisors. The following are the key terms you are likely to need.

Estate: An estate is a person’s net assets (total assets minus debts) at death (i.e., the property subject to taxation and disposition upon death). A person’s estate includes:

• Real estate (homes, land, etc.)
• Vehicles
• Furniture
• Jewelry
• Stocks and bonds
• Bank accounts
• Partnership, LLC, and corporate interests
• Insurance proceeds
• Patents
• Pensions, 401(k)s, IRAs, and 403(b)s
• Annuities

These and other assets become a part of a decedent’s estate.

Estate Planning: Preparing documents to control the disposition of one’s estate and other affairs upon death. Components of estate planning include:

• Providing for the financial needs of surviving dependents
• Setting up guardianships for minors or incapacitated dependents
• Making charitable bequests
• Arranging for professional management of financial and other assets for survivors
• Asset protection and minimizing taxes (possibly avoiding probate)

Estate Settlement: The process of terminating a decedent’s worldly affairs, including:

• Probating the will
• Determining the decedent’s assets and liabilities
• Taking possession of estate assets and valuing them
• Paying debts
• Filing income and estate tax returns and paying any taxes that may be due
• Distributing net assets to beneficiaries

Intestate: Not having a valid will. In the absence of a valid will, the distribution of the estate, as directed by state law, may not necessarily conform to one’s wishes.

What is Probate?

Probate is the procedure of proving to the clerk of the local court that a particular will is genuine and valid and recording the Will in the local court. Probate creates a public record of the terms of the will and the decedent’s assets. Aside from disclosing one’s assets and intentions, the probate process can delay the distribution of estate assets to beneficiaries by months or even years.

How to Avoid Probate in Virginia

In Virginia, you can avoid probate by creating an estate plan that automatically transfers your assets to your chosen beneficiaries upon your death. This can be done through a living trust, beneficiary designations, or a transfer on death (TOD) designation.

What is the Difference Between an Executor and an Administrator in Estate Settlement?

The person selected to settle an estate is called an executor if named in a will and an administrator if there is no will or if selected by a court. Relatives are often chosen to serve in these roles. However, if an estate is complex, the technical nature of estate settlement makes it advisable to name a professional, such as an attorney or trust officer, as executor. An unwilling executor of a deceased person may petition a court to have another party named or can seek professional assistance.

What Role Does a Guardian Play in Estate Planning for Minor Children?

A will (or court) may name someone to serve as “guardian of the person” after a parent’s or caregiver’s death to provide for the personal care of minors or incapacitated or incompetent adults. This might well be a close relative or other person most able and willing to see to the personal needs of the children.

Often, a different person, usually a professional, is designated as “conservator of the estate” to manage the financial assets of the estate on behalf of the incapacitated or incompetent beneficiaries.

Can I Name Multiple Beneficiaries for Specific Assets in my Estate Plan?

The form of ownership of the estate property determines how property will be distributed to heirs (e.g., family members) and other beneficiaries.

• In the absence of any other estate documents, Virginia law determines how a decedent’s property is distributed.
• Provisions of a will override state law.
• Some types of property pass immediately to the beneficiary, avoiding probate (e.g., jointly-owned property, payable on death accounts, or some trust agreements).
• Insurance proceeds, pension death benefits, deferred compensation death benefits, and balances of Individual Retirement Accounts (IRAs) are paid directly upon death to beneficiaries named in each document/account.

Are There Estate Taxes or Inheritance Taxes in Virginia That Affect Estate Planning?

Federal estate tax law permits all of a decedent’s assets, regardless of value, to pass to a surviving spouse without being taxed. Such assets are then included in that spouse’s estate and taxed on their later death. Estate taxes may be deferred, but not necessarily reduced, by use of the marital deduction.

One planning technique to avoid or reduce such taxes is splitting property ownership between spouses (rather than jointly owning it) or transferring the property to a trust for the surviving spouse’s benefit.

What is a Trust?

A trust is any written contract or arrangement whereby one person (the grantor) delivers property to another person (the trustee), who exercises the ownership attributes of the property for the benefit of a third person (the beneficiary).

• The grantor, trustee, and beneficiary can all be the same person, or they can be separate individuals.
• People may put assets into a trust to avoid those assets becoming a matter of public record in probate.
• A trust becomes the owner of the allocated assets put into it.
• Trusts can include stipulations for:
  • Professional management of investments
  • Setting up guardianships
  • How heirs are treated and ages/conditions for distributions to them
  • Any other criteria the individual wants to establish
• Trusts often help avoid or reduce taxes or protect assets from creditors and predators

While trusts have criteria that must be met, they are still extremely flexible.

Understanding Irrevocable and Revocable Trusts: Key Differences and Benefits

Irrevocable Trusts

If the transfer of property to a trust is not reversible and the grantor relinquishes all power to control the property, it is “irrevocable.” An irrevocable trust is usually created to remove property permanently from one’s estate to reduce income and estate taxes while providing for a beneficiary.

Revocable Trusts

A trust is “revocable” if the grantor can amend, control, or terminate the trust. A revocable trust becomes irrevocable when the grantor dies. The benefits of creating revocable trusts include:

• You can continue to manage your property for your personal use.
• You avoid costly and lengthy probate scenarios.
• Your assets are immediately available at the time of your death to pay estate taxes, administrative expenses, and other debts.
• A trust simplifies the transfer of property upon your death.

Breaking Down The Different Types of Trusts

• A living trust (inter vivos trust) is a trust existing during the grantor’s lifetime. Tax benefits depend on whether the trust is revocable or irrevocable and whether the trust is funded. Living trusts are often used to avoid probate. You have the option of establishing a revocable living trust.
• A testamentary trust is established by the terms of a will. It comes into existence and is funded only upon the settlement of the deceased’s estate. This trust is required to make annual accountancy to local courts and, unlike other trusts, becomes public record.
• An insurance trust is funded by the proceeds of one or more insurance policies to help provide for investment and management of insurance distributions to a decedent’s survivors. If the trust is irrevocable, it can also prevent the payment of federal estate taxes on the insurance proceeds.

How Do You Fund a Trust?

Funding is the act of transferring property, money, or other assets into a trust. You may fund a trust during your lifetime or leave all assets to a trust in your will, commonly called a “pour-over” will. Funding can be critical to achieving estate tax savings and accomplishing the trust’s purposes.

Essential Documents For Virginia Estate Planning

The following are vital estate planning documents to help you establish a plan that adheres to your wishes for the distribution of your assets. By establishing these documents, you can have peace of mind knowing your affairs are in order.

Last Will and Testament

A last will and testament is a written document by which an individual expresses wishes for how obligations shall be settled after death and net assets distributed among heirs or for naming other beneficiary designations.

This document is vital because it empowers you to choose the persons you want to receive your assets upon your death. Without a will, the Commonwealth of Virginia will make this choice. This document also allows you to appoint whomever you wish to administer the estate after your death (the executor).Once you create a will, you can change it whenever you want to.

Powers of Attorney

A power of attorney is a writing by which one person gives specified powers to another person to handle their financial affairs or healthcare directives. There are several different types of powers of attorney that all perform different functions. This power can be broad or limited, depending upon the grantor’s preferences and intentions for each matter.

Durable General Power of Attorney

Durable general power of attorney allows for the administration of one’s financial affairs, either in effect as soon as signed or only if you are incapacitated. Spouses usually give reciprocal powers to each other.

Medical (or Health Care) Power of Attorney

This document, sometimes called an advance medical directive, allows another person to make medical decisions on your behalf when you cannot. In cases of extreme illness or incapacity, it is a good idea to show this document early on to the doctors. That way, your medical power of attorney has authority when healthcare decisions eventually need to be made.

Living Will

A living will specifies what medical treatments are to be given or not given when an individual is terminal or close to death. This document guides your loved ones as they make difficult decisions about your end-of-life care. It defines the conditions under which life support systems may be withdrawn and usually requires only that adequate pain medication be administered to make one’s final moments as comfortable as possible.

Trust Agreement

This is a legal document governing the operation of a trust arrangement. Unlike a will, it provides confidentiality concerning its assets and the provisions for their disposition. It must identify:

• A grantor (you, the person establishing the trust)
• A trustee (an individual or company with trust powers)
• A beneficiary (who may be the grantor as well as heirs or others)
• Property to be owned by the trust and subject to its provisions

Well-drafted trust agreements allow for flexibility in the administration of the trust and spell out the powers of the trustee, the purposes for which the trustee may invest or disburse money to the beneficiaries, and provisions for eventually terminating the trust and making a final distribution of the assets.

Safe Deposit Box Contents

Some states require banks to seal safety deposit boxes when they learn the safety deposit box customer has died. It can be opened once the tax authority can examine its contents. To avoid this delay, estate documents and insurance policies should not be kept in safe deposit boxes. Instead, keep them in a fireproof safe at home or filed with an attorney or trust officer.

In Virginia, the estate’s executor may open the safe deposit box for the limited purpose of retrieving the will for probate.

Getting Started: Estate Planning Checklist

When you are ready to speak with an attorney about starting your estate planning process, you should prepare a financial statement of your estate before your meeting.

List Your Assets

• All property you (or you and your spouse) own
• Place approximate values on the assets and indicate ownership of each one
• List the face value of life insurance policies and note the beneficiaries of each
• List pension or deferred compensation benefits to which you and your spouse are entitled

List Your Liabilities

• Mortgage loans
• Vehicle loans
• Any other debts

Assemble Current Estate Documents

• Wills for you and your spouse
• Trusts
• Power of attorney

With this information in hand, you are ready to approach your estate planning with your advisors as an informed consumer.

A final note of caution: The laws of estate taxation and administration vary from state to state and are subject to modification. Always rely on the current advice of a knowledgeable Virginia estate planning attorney before making decisions.

Why Work With Midgett Preti Olansen

Founded in 1999, Midgett Preti Olansen is committed to helping Virginians develop a comprehensive estate plan based on their needs and preferences. Clients know when they contact our law firm, they will receive personalized legal services and establish a plan to protect and provide for the efficient transfer of family wealth from one generation to the next. We do more than draft your will; we develop long-term relationships with you to keep your estate plan up-to-date as your assets and goals change.

With more than 100 years of combined experience, the knowledgeable estate planning attorneys at Midgett Preti Olansen can provide the legal framework for transferring your generational wealth. We will deliver with integrity, honesty, and professionalism.

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Manage Your Virginia Estate Plan with Midgett Preti Olansen

Estate planning is often challenging, but this legal process can be streamlined and easier to manage with guidance. The estate attorneys at Midgett Preti Olansen have extensive experience in estate planning and administration for large estates. We can help you proactively plan with your and your loved ones’ best interests in mind.

We proudly serve Virginia Beach and the entirety of the Hampton Roads area. Our attorneys pride themselves on providing each of our clients with complete, competent, and accurate service. Contact Midgett Preti Olansen today at 757-687-8888 or fill out our online contact form to schedule your consultation and start planning your estate with confidence.