Estate Planning

Well over half of all Americans have not planned for incapacity or death. Estate planning allows us to exert some control over our affairs after we die. It also eases the process for our loved ones by getting many of the hard decisions, like who gets what, out of the way ahead of time. Estate planning, however, is not a do-it-yourself process. You need an experienced attorney to set up a comprehensive plan to ensure that all of your bases are covered. While there are some commonly used estate planning tools, every plan should be customized to a person’s specific situation. KVCF has years of experience in the areas of estate planning and elder law and brings that experience to bear with every client that we serve.

The purpose of estate planning is to ensure that all of your assets are preserved for your loved ones. Therefore, this process is for everyone — young, old, parent, adult-child and for those at various income levels. While estate planning can be especially helpful for those with assets worth approximately 11.2 million dollars or more (the current individual limit federal estate tax exemption), working with an estate planning attorney allows you to distribute your assets on your own terms. In the event that you die without a plan in place, it protects you from having your assets distributed as designated by the state. It is also important to remember that anyone can become incapacitated or die at any time. For this reason, no matter what your age, estate planning is something to be undertaken in the present since procrastination can endanger your loved ones.

Wills and Trusts

Two of the most common tools used in estate planning are wills and trusts. A will is a legal document that provides instructions as to how your assets should be distributed after you die. Wills must be probated, or validated, in a special state court. This process is often time-consuming and expensive. Also, this process is not private since any records filed with the court are available to the public. This transparency can cause problems among beneficiaries and even among those who are not included in the will but feel entitled to an inheritance. An additional complexity is that, if you own real property in more than one state, your loved ones may be subjected to more than one probate.

Living Trusts

Besides a will, another more popular, estate planning tool is the revocable living trust. Once a trust is created, all of your assets are transferred into it. Then, upon your passing, these assets are distributed according to the terms of the trust. Trusts are highly customizable and allow assets to pass automatically upon the death of the trustee so no probate process is necessary. Trusts, therefore, are less expensive and less time-consuming to administer and much more private. Trusts can also protect your hard earned assets from lawsuits, creditor claims, and even long-term care expenses. Even so, a will is usually drafted as well to cover any of the assets that were not transferred into the trust in time. KVCF regularly create trusts of all kinds on behalf of estate planning clients and even serve sometimes serves as trustees.

Probate and Estate Administration

KVCF is available to represent you in the probate or administration process. We are often appointed as executors of a clients’ estates and can assist if the appointed executor is unable to fulfill his or her duties. We can competently handle all related matters, making the process much more manageable for beneficiaries of the estate. Regardless of your assets, a durable power of attorney over person and property as well as a living will (also known as an advanced health care directive) should both be executed to cover you in the event that you become incapacitated. These documents will allow your agent to make important health care and financial decisions for you without the hassle of going through a guardianship or conservatorship proceeding.

Trusts and Estate Planning Strategies

In most instances, when a person is speaking about a trust they are usually referring to a “Revocable Living Trust.” Revocable trusts are typically the best way to allow someone to manage your assets if you become incapacitated. Moreover, the revocable trust avoids the associated costs, hassles and public record process that basic Wills often incur.

However, revocable living trusts provide no asset protection against lawsuits, creditor claims and Medicaid spend-downs. The reason that these types of trusts do not protect assets is because the creator (i.e. Grantor) of the trust can change, alter, revoke the trust whenever he or she wants. In addition, the Grantor maintains all control over trust-held assets and income. In sum, because the Grantor has full control, they own it, and, if they own it, then it is part of their estate and subject to creditors and the like.

Irrevocable Trusts are different. By its namesake, the term irrevocable means that there is some aspect of the trust that the Grantor cannot change. Perhaps it is a limitation on accessing the income or principal of the trust by the Grantor directly whenever they desire.

Irrevocable trusts have become very flexible and more user-friendly over the past few years in Virginia. These type of trusts come in a wide variety of flavors these days so it is important to seek legal counsel to determine which type of irrevocable trust would be the perfect fit for protecting and preserving your assets from estate taxes, lawsuits and the catastrophic expenses of long-term nursing home care.

Dynasty Trusts

A Dynasty Trust is a trust that continues for approximately 100 years or longer and provides payments to future generations without any additional estate or generation-skipping transfer taxes.

The Dynasty Trust strategy is different from the standard estate plan whereby the husband and wife usually leave all of their assets outright to their children equally upon their passing.

A Dynasty Trust continues for the children’s lifetimes with the children receiving income or principal from the trust each year. As each child dies, the trust then continues for the deceased child’s surviving children with income or principal available for the grandchildren during their respective lifetimes. Depending on a number of factors, the trust may continue for great-grandchildren and even longer if desired.

A Dynasty Trust ensures that your assets will stay in your generational line after you pass away. Although the beneficiary may eventually have investment control over the trust, he or she will not legally own the assets which means that the trust will not be subjected to claims of the beneficiary’s creditors, not subject to division upon a beneficiary’s divorce and not subject to a child leaving the assets to a second or third spouse outside your bloodline.

Special Needs Trusts

A Supplemental Needs Trust (sometimes called a Special Needs or Disability Trust) is a specialized legal document designed to benefit an individual who has a disability. A Supplemental Needs Trust is most often a “stand-alone” document, but it can form part of a Last Will and Testament or Living Trust after the parent of a special needs trust child passes away. Supplemental Needs Trusts have been in use for many years and were given an “official” legal status by the United States Congress in 1993.

A Supplemental Needs Trust enables a person under a physical or mental disability, or an individual with a chronic or acquired illness, to have, held in Trust for his or her benefit, an unlimited amount of assets. In a properly-drafted Supplemental Needs Trust, those assets are not considered countable assets for purposes of qualification for certain governmental benefits.

Governmental benefits which Supplemental Needs Trusts are designed to preserve may include Supplemental Security Income (SSI), Medicaid, vocational rehabilitation, subsidized housing, and other benefits based upon need.

A Supplemental Needs Trust provides for supplemental and extra care over and above that which the government provides. KVCF can assist you with your unique special needs trust issue.

Charitable Giving and Trusts

Charitable Remainder Trusts (CRTs), are lifetime gifts of assets which receive a charitable deduction for a portion of the transfer. In addition, you or a beneficiary receives income for the rest of your life or a fixed period of time. Therefore, both you and charities benefit from life income gifts such as these.

You can also set up a CRT in your Will, Revocable or Irrevocable Trust to be established upon your passing. Although you will not receive a charitable deduction during your lifetime, your estate will after your death.

Irrevocable Life Insurance Trusts

An Irrevocable Life Insurance Trust (ILIT) can effectively eliminate the death proceeds from your life insurance policy (along with any accumulated cash value) from being included for estate taxes due at your death. In addition, the accumulated cash value receives the comfort of asset protection. An ILIT can provide tax-free liquidity to your estate to pay debts and expenses but also can provide tax-free wealth to your beneficiaries.

Private Foundations

Private foundations maintain or aid charitable, educational, religious, or other activities serving the public good, primarily through the making of grants to other nonprofit organizations. Foundations can be established during your lifetime or after your death through your estate planning documents. The private foundation can have personal income and estate tax savings benefits. In addition, this unique structure can also be designed to allow family members and future children to work for the foundation which allows you to pass on the spirit of philanthropy from one generation to the next.

Deferring Capital Gains Penalties Through Trust Planning

Deferring Capital Gains through trust planning can provide a very powerful alternative to the typical 1031 exchange or real estate installment sale.

This powerful technique can provide owners of highly appreciated assets such as residential or commercial real estate the following benefits:

  • Capital Gains Tax Deferment
  • Lifetime Income Stream
  • Investment Flexibility
  • Disciplined Retirement Savings
  • Continued Family Control
  • Tax-Free Estate/Inheritance Transfer to one’s Heirs

Asset Protection

Asset protection is an important part of proper estate planning. Most of us have worked long and hard to acquire our assets and we want the peace of mind that results from knowing they will be distributed according to our instructions after death. The estate planning team at KVCF is experienced and skilled in all forms of asset protection and can assist in sheltering assets regardless of their character.

There are a number of threats which could destroy your personal estate during your lifetime. One major threat to assets is the possibility of long-term medical and nursing home care needed in the future. Long-term care is exceptionally expensive and, with the elderly population growing as people live longer, it becomes more and more likely that a person will need this type of care at some point in his or her life. The costs of care can easily diminish any nest egg in a matter of months or years, making it impossible for a person to leave these assets to loved ones. Proper asset protection planning can preserve your estate while also qualifying for various governmental programs and pensions so you can live a better quality of life.

We also regularly represent lawyers, doctors and other professionals and business owners who have increased liability as a result of their occupation. Liability can result from malpractice, the breach of fiduciary duties and negligence claims of all kinds. While a lawsuit can have devastating financial effects on anyone, being found liable can have a catastrophic effect on a professional or business owner. Therefore, we work with clients to separate personal and business assets so that personal assets are untouchable by creditors. We also incorporate the necessary items into the estate plan to limit a person’s liability before and after death. Whether your assets or business interests or entity is domestic or offshore, KVCF can help.