Estate Planning by Ages and Stages

The Greek philosophers considered the meaning of life more than 2,500 years ago, and concluded that death follows life. Ben Franklin said "but in the world nothing can be said to be certain except death and taxes." (I'm probably losing a quarter of the readers at this point with "way too morbid for me".)

Estate Planning is the process of preparing for the inevitable, which we hope will be pushed as far into the future as possible. Debilitating illness or incapacity are possible, and death is inevitable, so it is essential to plan. It should be noted that the state has a default plan, known as the laws of intestacy (no Will). The statutory plan may not distribute your worldly goods as you would, whether to your choice of beneficiaries or in the proportion that you want.

The following highlight some of the special situations that we may face on the path through life.

  • Upon reaching 18, our children remain our children, but we have no legal right to make medical decisions or handle their finances. Everyone over 18 needs a power of attorney and an advance medical directive
  • As young parents, we need to designate a guardian for minor children should something happen to both parents. A Will is the logical document to name a guardian.
  • Service members who are single parents frequently name their minor children as beneficiaries on insurance policies. A court will have to name a guardian to manage the insurance proceeds until the children are 18. The best way to avoid court involvement is to create an insurance trust, and name it, not the children, as the beneficiary.

  • A child of any age with special needs requires special planning to ensure an inheritance does not result in ineligibility for needs-based government benefits.
  • A diagnosis of a serious illness or impending surgery should encourage the patient to ensure the advance medical directive and HIPAA privacy authorization are up to date
  • A single, divorced or widowed person needs to take steps to have affairs in order to minimize probate (legal transfer) of solely owned assets. Likewise, a person who has an out-of-state friend or relative named as executor should take steps to minimize the surety bond that must be paid in a Virginia probate. In many cases, establishing and funding a revocable living trust avoids probate. The state of residence of a sucessor trustee has no adverse impact.
  • A non-married couple, whether same sex or heterosexual, do not enjoy the legal protections that state law provides to those whose marriages it recognizes. It is possible to create similar rights through contractual agreements.
  • "Blended Family" refers to those in second (or more) marriage where one or both spouse has children from a prior marriage. Each spouse wants to provide for the current spouse, and for the children of the first marriage. It is not usually a good idea to leave everything to the spouse with expectations that the newer spouse will dole out shares to the children.
  • Finally, death may be inevitable, but it is possible to exert control over our assets from the grave. Dynasty trusts hold assets in perpetuity for benefit of the grantor's descendants. A dynasty trusts is designed to avoid or minimize estate taxes owed as family wealth is transferred to succeeding generations. Dynasty trusts became popular with the very wealthy after the generation-skipping transfer tax was created in 1986 to impose taxes on trusts that bypassed children by transferring assets to grandchildren. Twenty-three jurisdictions, including Virginia, Maryland and the District of Columbia allow dynasty trusts.

Law Office of Eileen Guerin Swicker 20 W. Market St. Suite E, Leesburg, VA 20176 Tel: 571-918-0616 Fax: 703-459-9620