What Can a Supplemental Needs Trust Be Used for in Virginia?

A supplemental needs trust can help preserve a beneficiary’s eligibility for government-based assistance programs while also allowing the beneficiary to receive gifts or an inheritance that can make a significant difference in his or her life.

At Golightly Mulligan & Morgan, we can provide customized legal solutions that allow you to help a disabled loved one without affecting his or her continued eligibility for public benefits.

Eligibility for Government-Based Assistance Programs

In the special needs context, the two most commonly discussed programs include Supplemental Security Income (SSI) and Medicaid. These are both needs-based programs.

SSI is a federal program that provides food and shelter for our country’s population in need. Medicaid is a federal/state partnership that is designed to provide certain medical services for those in need.

To be eligible for these types of benefits, recipients must be able to demonstrate a lack of basic financial resources and must meet certain income and resource thresholds.

Social security requires SSI recipients to have less than $2,000 in countable assets for a single person, and $3,000 for a married couple. In general, the income limit for SSI is the Federal Benefit Rate, which is $750 per month for an individual and $1,125 per month for a married couple.

In order to participate in Medicaid, federal law requires states to cover certain groups of individuals including low income families, qualified pregnant women and children, and individuals receiving SSI. Income requirements for Medicaid in Virginia are determined through use of the Modified Adjusted Gross Income (MAGI) calculator. If you are a pregnant woman, the income limit is set at 143 percent of the federal poverty level in Virginia. If you are blind, aged, or disabled, you can earn no more than 80 percent of the federal poverty level to qualify for Medicaid.

When You Might Need a Supplemental Needs Trust

We often see the need for the preservation of these benefits if a child has a disability or condition that may ultimately result in his or her need for these benefits down the road.

It is important when putting together an estate plan that you do not cause him or her to be disqualified for these important benefits.

You need to understand that if a recipient receives assets outright from a trust or estate, he or she will likely be disqualified from receiving these benefits under the very stringent income and resource guidelines.

However, with a carefully drafted supplement needs trust, parents and grandparents can ensure that any inheritance will not interfere with the beneficiary’s eligibility for these benefits.

How a Supplemental Needs Trust Can Be Used

The trust funds should be used on supplemental items that are not covered by the beneficiary’s public benefits.

For example, the trustee can spend money on behalf of the beneficiary for vacations and leisure activities but not for things like rent, groceries and similar necessities for which the benefits are provided.

A well-drafted supplemental needs trust will provide detailed instructions and will allow the trustee to amend the trust to ensure continued eligibility for these programs.

Requirements of Supplemental Needs Trusts

One of the key requirements of a special needs trust is that money from the trust must be used to supplement and cannot overlap with current benefits being provided to the recipient for programs such as SSI or Medicaid.

Additionally, a trustee must be appointed to administer supplemental needs trusts. He or she serves as an intermediary between the beneficiary and the trust assets. The trust instructs the trustee to make distribution of trust assets in a manner that does not affect the beneficiary’s eligibility for benefits.

Contact an Experienced Trust and Estate Planning Lawyer

If you would like to create a supplemental needs trust that protects your loved one’s continued eligibility for public benefits, a Virginia estate planning attorney at Golightly Mulligan & Morgan can help.

At Golightly Mulligan & Morgan, we pride ourselves on making estate planning approachable and understandable. We would be happy to discuss supplemental needs trusts further with you and to inform you whether this estate planning tool may be an effective part of your estate plan.

To learn more about these supplemental needs trusts, please give us a call at 804-658-3873 to set up a no-charge phone consultation.

Top 4 Reasons You Should Consider a Revocable Living Trust

A revocable living trust is an important estate planning tool that allows you to create clear instructions on how your property should be treated. We can explain estate planning basics, such as how this tool can be used as a part of your comprehensive estate plan.

Here are the reasons why you should consider a revocable living trust:

1. Avoid Probate in Virginia

Probate is a court-supervised process that formally qualifies a personal representative who helps wind up the estate of a person who is deceased.

There are many drawbacks of the probate process, including additional costs, taxes, fees, and delays. Many people are intimidated by this process. They also do not like the idea of their financial affairs being exposed to the public through a court administrative process that is triggered by the filing of a will with the probate court.

2. Plan for Incapacity

One of the most critical distinctions of a revocable trust vs will is that a will’s powers only exist if the person who prepared it passes away. It has no relevance if the person who writes it becomes incapacitated.

However, a trust allows for the immediate management of a person’s trust estate. The person who drafts the trust can manage his or her own trust assets anyway he or she wishes so long as this language is included in the trust.

If the person later becomes incapacitated, the successor trustee is authorized to take over the management of the trust assets and follow the instructions included in the trust in case the person passes away or becomes incapacitated. This provides for a seamless transition of trustee authority if the person who created the trust becomes incapacitated and needs someone to take over management of the trust assets.

3. Manage Out-of-State Property

If a Virginia resident owns real property somewhere outside of Virginia, the personal representative appointed to handle the Virginia probate case does not have legal authority with respect to that out-of-state property.

Instead, the personal representative is required to open an additional probate case in the state where the property is located. This ancillary probate proceeding adds additional costs, fees, and taxes.

4. Treat Your Provisions Like a Contract

A revocable living trust is a contract and governed by contract laws. A will is not a contract and is subject to the probate laws of the state where the person happened to be living at the time of his or her death. The probate laws of that other state may be significantly different than the state where the will was originally created.

For mobile clients who are considering moving to another state, a revocable living trust is usually a better bet because you can take it with you and be confident that your wishes will be carried out.

Contact an Experienced Trust and Estate Planning Lawyer

If you would like to create a trust that protects your family and your legacy, an attorney for wills and trusts at Golightly Mulligan & Morgan can help.

At Golightly Mulligan & Morgan, we listen carefully to our clients’ wishes and guide them through the laws that might impact these wishes. We take the information that we learn during confidential consultations to develop a customized estate plan geared to meet their needs.

In addition to preparing trusts, we also prepare wills and powers of attorney. We assist with all aspects of trust and estate planning and assist personal representatives with the probate process. If necessary, we can help clients have a guardian or conservator appointed if a loved one has become incapacitated.

If you would like more information on how to set up a living revocable trust, give us a call. We pride ourselves on making family estate planning approachable and understandable. We would love to have the opportunity to be of service to you and your family.

The Top 4 Estate Planning Documents that Everyone Needs

A comprehensive estate plan can help protect you, your family, and your assets.

Estate planning does not have to be difficult – especially when you have a trained legal advocate who can help guide you through the process and explain the purpose and advantages of different must-have estate planning documents.

Below, we will go over the four essential estate planning documents everyone should have in order to rest easy at night, knowing that your loved ones will be taken care of.

 

The Four Essential Documents for Estate Planning:

Last Will and Testament

The cornerstone of a good estate plan is a last will and testament. This document directs how you want to dispose of your property. It also gives you the opportunity to hand pick an executor who will carry out the final wishes detailed in your will.

This is also considered one of the must have estate planning documents for parents because they can name a guardian who will be responsible for taking care of their children in case they are still minors at the time of their passing.

Durable Power of Attorney

A durable power of attorney allows you, the principal, to appoint an agent to act on your behalf regarding financial transactions, especially if you become incapacitated.

The agent you name should be someone you trust because he or she will be able to conduct important financial business on your behalf, such as:

This is a business agency relationship in which you give your agent access to your money to get things done that you are unable to do for yourself.

Healthcare Power of Attorney or Healthcare Proxy

This document appoints an agent who can make medical decisions for you if you are unable to make these decisions for yourself. This person can make treatment decisions regarding your healthcare as well as end-of-life care.

Living Will Advance Directive

A living will advance directive is a document that details the type of medical treatment that you do or do not want to receive in the event of end-of-life decisions.

For example – if you are in a persistent vegetative state with no brain function, and machines and medications are only keeping your body functional, you can state that you want them to be removed so you can die naturally.

 

Seek Legal Assistance for the Preparation of Essential Estate Planning Documents

The estate planning attorneys at Golightly, Mulligan & Morgan PLC make the estate planning process understandable and approachable.

We can discuss your individual needs and preferences and ensure that they are integrated into your estate planning documents correctly to protect you, your family, and your future.

What Happens When a Blended Family Doesn't Have an Estate Plan?

With divorce rates approaching 50%, many families consist of second or subsequent marriages and blended families. When blended families are involved, there are special estate planning considerations that must be addressed.

It is important for blended families to understand the impact of failing to have an estate plan.

Blended Families with No Estate Plan

Under Virginia law, if your spouse has children from a previous relationship and he or she dies without a will, you receive one-third of the estate and his or her children receive two-thirds of the estate.

This is often a surprise to Virginia families who may believe that the current spouse should receive everything that his or her spouse leaves behind.

Blended Families and Wills

To avoid the default rule mentioned above, wills for blended families can be drafted. Typical wills for blended families may give all of the property to the surviving spouse. Another option is to designate certain property to the spouse and other property to the children.

However, once one spouse dies, the surviving spouse is free to then go and change his or her will, and can effectively cut out the decedent spouse’s children from a prior relationship. Therefore, you may want to consider other options than leaving everything to your spouse and then expecting him or her to subsequently divide property with your children.

We, at Golightly Mulligan & Morgan, can provide clients with an estate planning agreement, to lock in the estate plan and to prevent the surviving spouse from changing the plan after the first spouse passes.

Trusts for Blended Families

An alternative to wills for blended families is a trust. A trust is a legal document that sets out specific instructions regarding how you want your property managed.

You can choose to manage the property that you deposit into the trust during your lifetime and name someone whom you want to manage the property after your passing. This way, you can ensure that your surviving spouse can benefit from all assets in the estate for the rest of their lifetime, and also that at your surviving spouse’s death, the remainder will pass to who you want.

A trust provides greater flexibility for individuals because trust funds or property can be used as the trustee sees fit, such as for the beneficiary’s health, education, maintenance, and support. It will also give the grantor (spouse that made the trust) peace of mind to know that after their death, their spouse will be taken care of, and that their spouse will not be able to cut out their children from a prior relationship.

Beneficiary Designations

Blended families may benefit from beneficiary designations. If a spouse, with a child or children from a prior relationship wants to leave everything to their current spouse, but also wants to ensure that their child(ren) from the prior relationship are taken care of, they can choose to name the child(ren) as the beneficiaries on a life insurance policy or a qualified retirement account, and leave everything else to their current spouse.

Contact an Estate Planning Lawyer

At Golightly Mulligan & Morgan, we carefully listen to our clients’ wishes and guide them through the relevant state laws that may impact them. We build a customized estate plan that clearly communicates their wishes and achieves their objectives.

Estate Planning for Blended Families

Today’s typical family consists of some version of a blended family. Due to divorce or loss of a spouse, many individuals have children from a prior marriage that they consider as part of their estate plan. Estate planning for blended families requires a thoughtful approach that includes the needs of all members of the family.

Blended Families and Wills

Couples may be surprised when they think through what may happen when they pass. Many spouses provide an “I love you” will to their spouse in which they give everything they own to their spouse.

However, if they do this, the surviving spouse will get everything. He or she will be the legal owner of the property. The surviving spouse has no obligation to provide for the deceased spouse’s children from a previous relationship without some additional planning. This means those children can wind up disinherited. If you want your children to receive something upon your passing, you need more than an “I love you” will.

Typical wills for blended families may include specific provisions regarding what type of property will pass to the children of a previous marriage. These specific designations can help avoid confusion.

Wills for blended families often contain a no-contest clause. This clause is designed to prevent beneficiaries from arguing over the share left in the will and from expensive litigation. It declares that if a child or spouse challenges the provisions of the will, that person will forfeit his or her share.

Blended Families and Trusts

One effective blended family estate planning tool is to incorporate a trust. Trusts are legal documents in which one can designate how certain property will be treated during their lifetime and after their death. You may specify that trust funds be used to pay for your health and welfare during your life, then the same for your spouse, and then the same for your children.

Alternatively, you may provide for periodic distributions to your children or for distributions at certain ages.

Trusts provide greater flexibility because they allow you to manage assets and income that generates from them, according to your specific instructions. Some types of trusts that you may discuss with your estate planning attorney include:

Golightly Mulligan & Morgan makes estate planning understandable and approachable. We can work with you to ensure your loved ones and property are protected.

Revocable Trusts vs. Irrevocable Trusts

One of the most common questions we receive in our estate planning practice is, "What is the difference between a revocable trust and an irrevocable trust?" In this blog, we will provide a brief overview of the key differences between these types of trusts and give a few examples on why estate planners use them.

 

A revocable trust is often also referred to as a "living trust." Estate planning lawyers use revocable living trusts to avoid court supervised probate, which often allows for the efficient and expedient distribution of a decedent's property. As its name implies, a revocable living trust is easy to amend or revoke. Indeed, for all intents and purposes, assets owned by revocable living trust are handled much in the same way as assets owned by an individual. For example, while the creator of the trust is still alive, these types of trusts do not file their own tax returns because income flows directly to the person who created the trust, often called the "grantor."

 

On the other hand, an irrevocable trust is often used by estate planning attorneys to allow clients to either remove assets from the client's estate for estate tax purposes, or to provide added asset protection features. The primary concept behind an irrevocable trust is the fact that the person who set up a trust no longer has ownership and control over the assets placed inside the trust. Because such a trust may only be changed under very limited circumstances, the person who created the trust may avoid or mitigate estate taxes otherwise due on those assets when he or she dies. With the proper planning, a client may also be able to use an irrevocable asset protection trust to exempt trust assets from a tort creditor or in a bankruptcy proceeding.

 

Although irrevocable trusts have somewhat limited application these days due to the high estate tax exclusion (currently, estate taxes only hit individuals with more than $11,200,000), we do use these trusts for asset protection purposes. Conversely, we use revocable living trusts in our practice quite a bit to allow clients to avoid the probate process. You may read more about the probate process in our "what is probate" blog here on our website.

 

Thanks for taking the time to read this. Let us know if there's anything we can do to assist you with your planning. Email: info@golightlylaw.com or call at 804-658-3873.

What is a Stepped Up Basis?

From an income tax perspective, we are often concerned with a person’s “basis” (or “cost basis”) in property. In basic terms, a person’s “basis” in property is the original cost of the property. When property is sold, income tax may be imposed on the difference between a person’s basis and the amount he or she received in the sale. This difference results in a gain (often called a “capital gain”) that may be subject to income tax. Therefore, generally speaking, the higher one’s cost basis in certain property, the lower one’s taxable gain will be, resulting in a lower income tax bill. So, high basis = good; low basis = bad.

When someone dies, the property that person leaves as a gift to others receives a “step up” in basis to the property’s fair market value on the date of death. For example, your favorite aunt just left you a house valued at $250,000 in her will. You learn that your aunt purchased this house in 1975 for $30,000. So, your aunt’s original cost basis in this house is $30,000. Well, because you received this property in your aunt’s will, you inherited the house, but (thankfully) you did not inherit her low basis. Your basis is “stepped up” to $250,000, which was the house’s fair market value at her death. Therefore, when you ultimately sell this house, you get to use your fresh, new basis of $250,000 to calculate your gain for income tax purposes, which can save a bundle on taxes. In fact, if you were to immediately sell this house for $250,000 to an eager buyer, your taxable gain would be a grand total of $0.00.

To really point up the significance of this “step up” in basis rule, imagine your favorite aunt had instead gifted this house to you one day before she died. Under this scenario, you would be forced to use your aunt’s original basis of $30,000 (called a “carry over” basis) when calculating gain on the sale. That same transaction above with our eager buyer has now resulted in a taxable gain of $220,000, all of which may be subject to income taxes. That’s a good day for the IRS, but not so much for you.

By definition, good planning requires that you plan. We can help. Let’s get started today – info@golightlylaw.com.

My Top Four Ways to Avoid Probate in Virginia

As far as probate goes, Virginia is not a bad place to die. Virginia probate is relatively inexpensive and simple. However, probate requires publication of the will (and, therefore, a lack of privacy), and it can cause significant delays in getting assets to your beneficiaries. Read more to learn about my top four ways to avoid probate.

For starters, if you want to learn more about probate in Virginia, please see my probate blog here. If you understand probate and know you want to avoid it, below are some ways to do so.

Now, as you read this blog, keep in mind this basic rule: the only assets that must be probated are those assets owned solely by you when you die – that is, assets titled in your name alone. So, you may avoid having to probate an asset if someone else has an ownership interest in that asset at your death. Well, how do you do that?

Beneficiary Designations. For assets like life insurance and retirement accounts, you may often fill out a simple form with the applicable company holding the asset that states whom you’d like to receive the proceeds when you die. Simply call the customer service number and explain you’d like to review and possibly change your beneficiary designation. Many companies offer lots of flexibility in doing this. You can name primary and contingent beneficiaries, and can usually establish different percentages for different people if you’d like.

Transfer on Death (“TOD”) or Pay on Death (“POD”). Similar to making a beneficiary designation on insurance and retirement accounts, you can set up bank accounts to be transferred to another person at death (“TOD”). Likewise, you can set up brokerage accounts to be paid in the same manner (“POD”). In my experience, the terms “TOD” and “POD” are often used interchangeably. So, when you die, this type of asset is paid to your chosen person automatically without need for probate.

Joint Ownership. If you own an asset “jointly” with another person, that asset becomes the property of your joint owner at your death without having to go through probate. We usually see joint ownership on real estate deeds and checking accounts, usually, but not always, between married couples.

Living Revocable Trusts. To learn more about living revocable trusts, read my blog here. Basically, you create the living revocable trust during your lifetime, naming a trustee to manage the trust and selecting your beneficiaries who will receive the trust assets at your death. Once you transfer (or re-title) an asset in the name of your trust, you no longer legally own the asset – your trustee does. Remember, the only assets that get probated are assets you owned alone at death. Your living trust effectively removed assets from your probate estate, and your trustee can distribute those assets without having to go through the probate process.

Using these techniques can help you avoid probate and provide for a quick and effective method of transferring assets at death. Keep in mind, however, that probate avoidance should be part of your overall estate plan. There are potential pitfalls to this type of planning if you’re not careful. Call us today at 804-658-3873 or email us at info@golightlylaw.com and let us help you get your planning in order. Thanks for reading!

Will or Living Revocable Trust. Which One is Better for Me and My Family?

You may read a lot about living revocable trusts but still be unsure how those are different from a last will and testament. Well, let's discuss that and start with some definitions.

What is a Last Will and Testament?

A Will provides for passing property to one’s chosen beneficiaries and names a guardian for any minor children. It is executed with formalities according to state law. Upon the death of the “testator” (person who drafted the Will), the Will needs to go through a process called “probate.”

What are trusts?

In general, a “trust” is simply a legal arrangement where the trust itself owns property that is managed by a “trustee” for the benefit of one or more “beneficiaries.” Trusts can come in many flavors, often with funny sounding acronyms -- Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Qualified Terminable Interest Property Trust (QTIP), etc., etc.

What is a Living Revocable Trust?

Living Revocable Trusts are often used as a “will substitute” and pitched by some lawyers (and many non-lawyers) as a probate avoidance tool. The “settlor” (the creator of the trust) often serves as the initial trustee, using the trust property on which to live. If the settlor/trustee becomes incapacitated, a successor trustee takes over management duties. When the settlor/trustee dies, the successor trustee ensures that the trust property passes to the beneficiaries outside of probate.

Benefits to Using a Living Trust Plan.

Using a living trust plan can avoid probate and the cost of estate administration. The trust can also streamline handling real estate in more than the home state; that is, you do not have to hire an out-of-state lawyer to probate real estate owned in that other state or states. The living trust plan can increase privacy. Unlike the Will, the living trust is not recorded among the courthouse records because there is no probate of the living trust. The living trust can also appoint a successor trustee to take over if the settlor becomes incapacitated. Lastly, although the trust can still be attacked by a disgruntled beneficiary (or someone who thinks he or she should have been a beneficiary), the Will may be more susceptible to attack, primarily because the Will is recorded at the courthouse and requires more formalities when executing it than the trust.

Are there Downsides to Using a Living Trust Plan?

Creating living trusts can be expensive — costing as much as twice the cost of drafting the Will Plan. All trust assets need to be formally transferred into the trust, meaning preparation of real estate deeds, renaming and retitling bank accounts, etc. Contrary to popular belief, living trusts by themselves do not provide tax benefits; for tax purposes, more extensive planning is needed. Unlike the Will Plan, living trusts do not allow the settlor to pick a guardian for minor children. Lastly, in Virginia, the probate process is really nothing to be feared, and the increased costs, etc. of the living trust may not justify simply “avoiding probate."

Benefits to Using a Will Plan.

A Will is the only document in which one can pick a guardian for minor children. It also has low ongoing maintenance and oversight, and a relatively low cost to create. Lastly, using a Will Plan can shorten time periods for creditors’ claims against the estate.

Are there Downsides to Using a Will Plan?

A Will Plan is not a great way to handle estates including out-of-state property because your executor may have to hire a lawyer to deal with such property. For folks with privacy concerns, they should note that the Will is recorded in the courthouse, so it's there for the public to see. Also, standing alone, Will Plans have no effect if the testator becomes incapacitated (may need power of attorney too). Lastly, as mentioned briefly above, wills are generally easier to attack by an upset beneficiary (or someone cut out of the will) in the form of Will contests.

So, Which Plan is Better for Me and My Family?

How is this for a lawyer answer — “It depends.” As a general rule, for relatively simple Virginia estates with no real property outside of Virginia, a Will Plan will almost always be more cost-effective and efficient than a living trust plan. If one owns real property in several states, has serious privacy concerns about the will being recorded, and/or does not want court oversight and associated delays in administering the estate through probate, perhaps the living trust would work better. Do your research, get good advice, and avoid “putting the tool before the task.” Outline your goals and choose a plan that helps you achieve them most effectively.

Virginia Uniform Power of Attorney Act

Due to medical advances, people are living longer than ever. In fact, the fastest growing segment of the U.S. population are folks over the age of 65. With increased age often comes the increased likelihood that someone will suffer some sort of disability or incapacity. It is important to plan for this possibility, and a good tool is the durable power of attorney. Fortunately, Virginia has recently taken an important step in passing into law the Virginia Uniform Power of Attorney Act (UPOAA). So, what does the UPOAA do and why is it important to me?

Let’s start with a basic overview. The person creating the power of attorney (called the “principal”) appoints an “agent” who will have legal authority to act with third parties on the principal’s behalf. These third parties often include banks, financial institutions, creditors, the IRS, etc. In the event that the principal is unable to act with respect to these types of third-party relationships, the appointed agent “steps in the shoes” of the principal and can get things done on his or her behalf. This type of principal/agent relationship is particularly helpful if the principal has become incapacitated and lacks the legal competence to handle legal transactions on his or her own.

In July of 2010, the Virginia General Assembly enacted Virginia’s version of the Uniform Power of Attorney Act. Why did we need this? Prior to the UPOAA’s enactment, the laws governing the creation and enforceability of powers of attorney were spread out among dozens of statutes in various titles of the Virginia code and in case opinions written by judges. These various laws and opinions were not always consistent with one another, nor did they provide answers to all of the legal questions surrounding powers of attorney. The UPOAA consolidates all of the laws relating to powers of attorney into one section of the Virginia Code, and it does a good job at codifying prior case law and lawyers’ best practices over the years.

One of the best things about the UPOAA is a principal’s ability to incorporate by reference specific statutes granting the agent powers. These statutes include:

So, with the UPOAA, your power of attorney document does not need to run on for dozens of pages. You may simply incorporate some or all of the statutes above by reference. Perhaps even better, you may simply say, “I grant my agent authority to do all acts that I could do as set forth and defined by the Uniform Power of Attorney Act” (or words to that effect). Saying just this will legally authorize your agent to act on your behalf with respect to all of the transactions above.

It is important to note, however, that there are certain powers that a principal must expressly grant to his or her agent for them to be effective. These so-called “hot powers” include:

In conclusion, the UPOAA has done a nice job at consolidating these laws into one place and providing a streamlined way for people to create powers of attorney. Hopefully, with this new act, we will see an increase in the number of powers of attorney being created. If you would like help putting together a power of attorney, or would like to learn more, please give us a call at 804-658-3873 or email us at info@golightlylaw.com. Thanks for reading!