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.

What Happens if You Die Without a Will?

There are many benefits to having a will put in place, such as designating to whom your property will go and naming a guardian for your children. However, there are no benefits to leaving your estate unattended. At Golightly Mulligan & Morgan, an experienced estate planning lawyer can make estate planning understandable and approachable while protecting your loved ones and property.

Consequences of Dying Without a Will

A will dictates how your property will be distributed upon your passing. If you die without a will, Virginia’s default rules will be followed rather than you being able to determine what happens to your property. If a married person dies without a will and has children from a prior relationship, the surviving spouse is only entitled to one-third of the decedent’s estate and the decedent’s children will receive the other two-thirds. If the person has no children, or only has joint children with the current spouse, the surviving spouse will receive the entire estate. If the person has children and no spouse, the children will inherit the entire estate.

If the decedent was not married and had no children or grandchildren, the laws of intestacy in Virginia give the estate to the following family members in this order:

If you have no living family members, your estate goes to the Commonwealth of Virginia. As you can see from these default rules, there may be unintended consequences of not having a will, such as your property going to a family member with whom you are not close.

Drafting of Your Last Will and Testament

The easiest way to avoid these consequences is to draft a last will and testament that establishes how you want your property distributed. An estate planning attorney can draft this document for you to ensure that it has full legal effect.

Estate Planning Trusts

An alternative or supplement to your last will and testament is to use an estate planning trust. There are several different types of trusts for estate planning that our trust and estate attorney may recommend, depending on your individual circumstances. Some trust options may include:

Our estate planning attorney can discuss the options that are available to you and which type of trust makes sense for you.

Contact an Experienced Attorney for Wills and Trusts

At Golightly Mulligan & Morgan, we are committed to providing effective trust and estate planning strategies that are designed to protect your interests. We listen compassionately to our clients’ wishes and guide them through the laws and obstacles that may affect those wishes. We know that you have your choice of estate planning firms and would like you to consider our trust and estate attorney to provide you with a customized estate plan. We prepare wills, trusts, powers of attorney and other estate planning documents. We also provide assistance in estate tax planning and throughout the probate process for surviving family members. If necessary, we can also assist with the appointment of guardians and conservators for incapacitated individuals.

Five Reasons You Need a Last Will and Testament

It may feel uncomfortable to think about writing a will, but it’s a necessary document. Having a last will and testament allows you to be in control of your assets and determine how they will be divided.

Whether your estate is modest or massive, you need a will. Talk to an estate planning attorney near you to help draft your last will and testament.

Five Reasons to Draft a Will

Consider these five important factors when drafting a will:

  1. You pick your executor. In your will, you can handpick the “executor,” who will be handling your affairs after you’ve passed away. If you don’t have a will, anyone with an “interest” in your estate can ask the court to appoint them as “administrator.” Administrators don’t have the same authority as executors, and an administrator could even be a creditor!
  2. You decide how your estate will be distributed. When people die intestate, or without a will, their estate is divided among their next of kin. But what if you want to have more control over who inherits what, or how much? You can use your will to designate how your property is divided. For example, if you have children, you can set up trusts for them so they don’t inherit everything as soon as they turn 18. If you are single and don’t want your assets to go to family, you can leave everything to a close friend or companion.
  3. You choose a guardian for your children. Those who have children assume they will be raised by their surviving spouse. But what if your spouse dies before you, or you both die at the same time? You would want to have a say in where your children live. It’s good to be prepared for these scenarios, and electing a guardian you trust to care for your kids gives you peace of mind.
  4. You can provide for charities. A last will and testament can dictate philanthropic decisions, too. If you have a charity you admire, or perhaps you love going to the theater or the orchestra, you can use your will to donate assets to these institutions as well.
  5. You will save time and money (and avoid further heartache). When you pass on, your friends and family are going to want a proper amount of time to mourn your loss. If you die intestate, they will be forced to go through probate and determine how to divide your assets, which can add salt to their wounds. If you have your wishes clearly laid out in a last will and testament, your family can spend their time together grieving their loss and celebrating the time they got to spend with you.

How an Estate Planning Attorney Can Help

At Golightly, Mulligan and Morgan, we make estate planning understandable and approachable. Our experienced estate planning lawyers have helped many clients dictate the terms of their estate through a last will and testament. We’re happy to go over your assets and assist you with drafting a plan that works best for you and your family. Call 804-658-3873 or email us at info@golightlylaw.com.

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.

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.