Virginia Beach Estate Planning Lawyers
Estate planning is not something to be afraid of or be intimidated to discuss. While the circumstances surrounding it can seem morbid, it is a good idea to have one’s future mapped out to avoid any legal headaches. There are various reasons to contact a Virginia Beach estate planning lawyer long before any problems arise. Most importantly, a lawyer can help clients draw up legal documents that address two essential questions:
- Health care planning. What happens if I become incapacitated and cannot make my own decisions?
- Financial planning. How will I pay for long-term care?
Experienced legal professionals can help clients draw up documents that will ensure their wishes are carried out regarding their own medical treatment, even when they cannot speak for themselves. A lawyer can also explain the various government entitlement programs that may be available to cover the cost of long-term care, and how to create a financial plan to help ensure eligibility for assistance.
What is Estate Planning?
The central element of estate planning is a document known as a Last Will and Testament. Estate planning and drawing up a will represent just one piece of a larger picture. Quality of life has many aspects, including financial security, dignity, health, and the right of self-determination. To help senior citizens and their families avoid financial hardships and ensure quality of life, Anchor Legal Group, PLLC offers guidance in the following areas:
- Disability planning
- Fraud recovery
- Living wills
- Medicaid applications
- Nursing home abuse and patients’ rights
- Powers of attorney
If family members are over the age of 65, important health care decisions will need to be addressed that arise unexpectedly due to a sudden illness or injury. Seeking professional legal counsel before that time can help families reduce stress and anxiety. It is not unusual for family members to disagree on what an incapacitated loved one might have wanted regarding life support or other medical procedures. Drawing up legal documents in advance can help answer those questions and avoid unnecessary conflict at a time when the family is trying to cope with the suffering of a loved one.
Disability planning anticipates the possibility of a person becoming unable to make their own decisions. Planning ahead gives seniors the chance to specify what they want before they become disabled. Disability planning includes the following two areas of focus:
- Health care decisions, as specified in health care proxies and living wills
- Financial decisions, as outlined in durable powers of attorney
Health care proxies are statements that designate a specific family member to make medical decisions on a person’s behalf, should a physician determine that the patient cannot make those decisions on their own.
What is a Living Will?
A living will is sometimes called an advance directive because it clarifies, in advance, the types of medical treatment that a person would prefer should they become incapacitated and unable to communicate. Living wills typically focus on the use of mechanical ventilators, feeding tubes, cardiac resuscitation, and other means which, ideally, are used as a bridge to help ill patients until they can get better. Living wills are meant to answer the question regarding the use of these types of medical technologies when the prospect of getting better appears to be non-existent.
A living will reflects a person’s right of self-determination. It is a legal document that courts traditionally uphold, citing that the expressed wishes of a competent adult should be honored, even when that adult cannot communicate those wishes later. When a living will does not exist, personal end-of-life decisions may be left up to the courts if family members cannot agree.
What is a Power of Attorney?
A power of attorney (POA) gives a designated person the legal authority to make financial decisions for another person. It is known as a durable POA if that authority remains in place should the person become incapacitated. In the state of Virginia, powers of attorney are considered durable unless is it specifically stated in writing that they are not. There are different types of POAs, including the following:
- Limited. This document delegates financial decision-making only for a specific purpose, such as signing a real estate deed for someone else while they are out of town.
- General. A general POA covers all financial decisions going forward.
POAs can take effect immediately, or only go into effect when a person becomes incapacitated. It is advisable to seek the guidance of a lawyer when drawing up a POA to ensure that it has its intended legal effect.
What is a Guardianship?
When seniors become incapacitated and they do not have a POA, it may not be clear from a legal standpoint who has the authority to make financial decisions for them. The courts may then be called upon to designate an individual or entity to manage their financial affairs. In some cases, a court-appointed guardian may also be responsible for making sure the incapacitated person is properly cared for. Guardianship is sometimes referred to as conservatorship.
Obtaining a guardianship can be an expensive procedure, and there is no guarantee that the guardian will make decisions in accordance with what the incapacitated person would want. Seeking the help of a lawyer in advance, before a person is incapacitated, is the best way to avoid the process of guardianship.
How can I Ensure that My Business Survives?
Another important aspect to one’s legacy could be a business that is owned or partially owned. It is important that it continues to function even after the owner is gone. That business has employees and customers depending on it to continue. This is when a business succession plan is necessary to prepare for that inevitability.
The ideal situation is to coordinate an estate plan along with a succession plan. Both should be reviewed and coordinated to ensure that there are no problems with a company passing from one owner to a new owner. The succession plan should spell out who will assume ownership of a company and who will replace the sole owner of the company.
Partnership agreements, corporate by-laws, and buy-sell agreements can all play a role in the value of a corporation and should be evaluated before putting together a succession plan. As part of any plan, the owner should highlight the people that will be taking over the position to ensure that they can do it. They should be informed about their role and verify that they have the training and confidence of management to assume the new role. The situation can become complicated when it comes to a family business. Multiple family members might believe that they are in line to take over the company. If there is no clear line of ownership established, it can cause strife within the family structure. Establishing a succession plan that explains who will take over and what everyone else’s role will be should alleviate any uncertainty and ensure that the business will continue.
Utilizing a Buy-Sell Agreement
The most efficient and cleanest way to address the transfer of ownership of a company from one person to another is through a buy-sell agreement (BSA). They are lifetime contracts that executes the transfer of ownership interest in a company from one person to another. They are triggered by the death, retirement, or disability of the previous owner. They are binding contracts to all third parties, including anyone else who might have ownership claims in the company. These contracts have four basic formats, which are:
- Entity BSA: The business entity itself will agree to buy the interest of the business owner.
- Cross-Purchase BSA: The business owners agree to purchase each other’s shares.
- Wait-And-See BSA: Under this version, the entity has the initial option to purchase the interest before the remaining business owner(s).
- One-way BSA: This is when there is one business owner who is settling ownership to a third-party.
Selecting the proper BSA has a wide variety of tax implications and must also fit the goals of the company. It is also important to put together a sold funding plan for the BSA to ensure its success.
What is a Trust?
A trust is a fiduciary relationship between three parties: the trustor or settlor, the trustee, and the beneficiary. The trustor will provide assets or property to the trustee to distribute to the beneficiary in a manner that is in accordance with the trustor’s wishes. Under Virginia law, a beneficiary can be a person, animal, or charity.
Trusts can save time and reduce paperwork. In some cases, they can help the beneficiary avoid having to pay inheritance or estate taxes on the assets. There are five different types of trusts, each with a unique beneficiary structure. Those trusts are:
- Revocable Living Trusts: These trusts can be modified or revoked at anytime during the trustor’s life. One of the advantages of using this type of trust is that it can help avoid the probate process. Under Virginia law, if an individual dies having sole ownership of property in their name, that business will be subjected to the probate process. These trusts are also good for those with young children as the trustor can establish the age in which a child can claim the contents of the trust.
- Irrevocable Trusts: These trusts cannot be altered and are permanent, but they can be a vehicle to avoid paying certain federal estate taxes. Virginia does not charge an estate tax and the federal estate tax exemption is $5.49 million per individual as of 2017.
- Testamentary Trusts: Most trusts are their own separate document. These types of trusts are included as part of a person’s will, which means they can become subject to a court review. They take effect, like the will, upon the death of the trustor.
- Pet Trusts: Many see pets as a member of their families and want their beloved animal to be taken care of when they are gone. With a pet trust, a person can name a caretaker and set aside money for that person to use to care for the animal for the rest of its life.
- Charitable Trusts: Many have a particular cause or charitable organization that they wish to support. By establishing a charitable trust, one can guarantee that the money they set aside will go to the charity that they want.
Why Should I Consider a Lifetime Gifting Strategy?
Lifetime gifting strategies are away to bestow assets from one’s estate to certain beneficiaries without subjecting them to any estate tax. However, as of 2020, the estate tax threshold was as high as it has ever been at $11.58 million, meaning that most estates are no longer taxable. That does not mean that will always remain the case.
Assuming one’s estate did exceed the tax threshold; regular lifetime gifts will significantly reduce one’s estate tax. The annual gift tax exclusion grants an individual the right to gift $15,000 per recipient annually tax-free without using gift and estate tax exemption. Other tax-free payments also include direct payments of both tuition and medical expenses.
There are some taxable gifts that will reduce the estate tax liability by removing any appreciation from one’s taxable estate. Many consider taxable gifts to mean those that go beyond the annual exclusion amount and cannot be considered either a medical or tuition expense.
Something else that taxpayers need to consider when giving appreciable assets as a gift are the income tax consequences of those actions. When a property is transferred because of the death of an individual, it receives a stepped-up basis equal to its date-of-death fair market value. In other words, the person who receives that property can turn around and sell it without having to worry about paying any capital gains taxes. However, when property is transferred during a person’s lifetime, it retains that person’s tax basis. So, before transferring any assets, it is important to compare the estate tax savings against the potential income tax costs.
There are also certain non-tax reasons to gift assets to someone. It could be as simple as congratulating someone if they achieved a certain accomplishment. It can also service as motivation for someone or a way to inspire someone to act a certain way. As an example, a gift can be contingent upon a person finishing college or accomplishing a certain task.