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.

Secrets of Establishing a Revocable Living Trust and Avoiding Probate

Many individuals devising an estate plan are motivated to avoid probate in Virginia for good reason. The probate process can be long and tedious, holding up funds needlessly from your beneficiaries. A revocable living trust can help avoid this process by transferring your assets to a trust to be privately administered outside the supervision of the court.

Elements of a Revocable Living Trust

A revocable living trust is established by creating a trust agreement in which the grantor transfers the assets named in the trust to be managed by an appointed trustee for the benefit of his or her beneficiaries. The assets are legally owned by the trust and not by the individual. Therefore, when the grantor passes away, he or she does not own the assets and they are not part of the probate estate. This process helps grantors avoid probate in Virginia.

Funding a Revocable Living Trust

At Golightly, Mulligan & Morgan, our trusts and estates attorneys often see clients come in with formal trust documents that are well organized and thorough. However, Mr. Golightly has encountered many such trusts that contain a blank schedule of assets. The schedule of assets should include all property owned by the trust. While another trusts and estates attorney may have established the trust to hold property, without assets being added to the schedule, the trust fails to serve its purpose.

To successfully avoid probate, the trust must own the assets. If you own assets individually at the time of your passing, these assets will most likely go through the probate process, defeating the purpose of the trust in the first place.

You can work with our estate planning attorneys to properly fund your trust by having proper deeds drawn up, transferring ownership and changing the beneficiary designations on retirement accounts, annuities or life insurance.

Contact an Experienced Estate Planning Lawyer

If you are considering establishing a living revocable trust, it is important to contact an experienced lawyer for trusts and estates. Our lawyers at Golightly Mulligan & Morgan for trusts and estates take pride in our ability to provide comprehensive family estate planning strategies that protect our clients’ interests and their loved ones. Our trusts and estates lawyers can talk to you about your final wishes and come up with an approachable plan that is tailored for your needs.

Call us today at 804.658.3873.

Two Types of Testamentary Trusts for Estate Planning

When drafting your will, you may be thinking about how you would like to leave an inheritance for your children. Because minor children are unable to inherit gifts of a considerable size, you are able to use estate planning trusts that hold onto your assets until your child is old enough to inherit them.

While there are several types of trusts for estate planning, testamentary trusts are particularly useful for assets that you would like to leave to your children.

No matter which type of trust you choose, it may be a good idea to run it by a professional. Using the services of a capable trust and estate attorney ensures that your trust will be legally sound and your family will not have to worry after you are gone.

Planning that Ensures Your Loved Ones and Property Are Protected

It is never too early to begin trust and estate planning and drafting. Setting up a trust is a good way to be certain that your family has everything they need.

In a testamentary trust, your assets are transferred into the trust only upon your death. These trusts both allow you to leave a substantial gift for your children and appoint a trustee to manage that gift for your children until your children reach an age that you choose.

Different Testamentary Trusts

There are two types of testamentary trusts:

These trust shares act independently of each other, and the respective share is distributed to each child once the child has reached the age that you have chosen for the child to be able to receive the assets outright.

A pot trust lets you dictate the spending based on each child’s needs. Your estate planning attorney can help you draw up specific instructions for the appointed trustee to ensure guidelines are established and understood. In a pot trust, all assets in the pot trust are managed and used for the benefit of all of your children. The pot is then split into separate but equal shares only after all of the children have reached the age that you have chosen.

Contact a Virginia Estate Planning Lawyer

At Golightly, Mulligan, & Morgan, our goal is to make estate planning understandable and approachable for our clients. As one of the premier estate planning firms in the Commonwealth of Virginia, we take the time to make each client a priority and ensure their needs are met. If you are looking for an attorney for wills and trusts, contact us today.

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.

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.