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Frequently Asked Questions About Estate Planning in General
What is estate planning?
Estate planning is a process involving planning for the transfer of an individual’s property after death. It involves the counsel of professional advisors, who are familiar with your desires and concerns, your assets, and family structure.
It may involve a will and / or trust and the services of a variety of professionals: your attorney, accountant, financial planner, life insurance advisor, banker, and broker.
What is my estate?
An estate may contain real property (real estate, houses, or investment properties) or personal property (bank accounts, securities, jewelry and automobiles, etc.).
Do I need an estate planning attorney?
While it may be possible for individuals to draft some estate planning documents on their own, it is important to consult with legal professionals to ensure that your estate is administered as you would wish.
What is the estate planning attorney's role?
A lawyer’s role in estate planning involves advising clients as to the options available and recommendations to accomplish clients’ objectives and assisting clients with drafting and implementing legal documents, including trusts and wills.
While lawyers are not required in order to plan your estate, it may be best to work with an estate planning attorney in ensure that your wishes are carried out. This is especially true if your estate is large, complex, or contains unusual assets.
What are common terms in estate planning and their meanings?
- Beneficiary: The person or entity who receives property in accordance with a will, trust, insurance policy, retirement account, or other third-party beneficiary contract.
- Estate Tax: A tax on the transfer of property after death. This is levied by the state and/or federal government. An estate has the obligation to pay estate tax.
- Marital Deduction: An unlimited gift tax deduction or estate tax deduction. This type of tax law allows an individual to give assets to his or her spouse with reduced or no tax imposed upon the transfer.
- Power of Appointment: The power granted to a person allowing him or her to dispose or designate who is to receive certain property under the will.
- Probate: The judicial process which determines the validity of a will in a court of law and the martialing and distribution of the deceased’s estate.
- Trustee: The individual or entity that acts as the legal owner of the trust assets. They are responsible for handling any of the assets held in trust, tax filings, and distribution of the assets according to the instructions of the trust.
- Will: A legal document that identifies where your assets should be distributed after your death. This also gives you the ability to nominate guardians for dependent children. Without a will, the courts determine what happens to your assets and decides the legal responsibility for your kids.
What is an executor?
An executor is a fiduciary appointed by the courts to carry out the terms of the will. Typically, this person has been nominated in the will by the deceased person. There's no guarantee, however, that the nominated individual will end up being the qualified fiduciary to carry out the terms of the will.
How much does an executor get paid?
In a lot of cases, the executor doesn't get paid anything. Oftentimes, a family member will be appointed and the decedent will ask that the executor not be paid because they're doing a favor for their family, or siblings. Under the statutes, every executor is entitled to get paid if they demand payment. This is then based on a percentage of the overall estate, so the larger the estate, the more potential money for an executor to be paid. The person preparing the will can also state a fee to be paid directly to the executor, which could be different than statutory rate.
Does the spouse automatically inherit?
In most cases; yes, but not in all cases.
- Prenuptial Agreement: In the event that there is a prenuptial agreement or a waiver of spousal benefits, then a spouse may not inherit.
- Children from a prior marriage: In the event that there are children from a prior marriage (children of the deceased), then the new spouse may not receive a full inheritance or in some cases may receive nothing at all.
- Contractual Wills: If the couple has what are called contractual wills, they may not inherit as well. A contractual will is basically an agreement to not take anything from their spouse's estate.
- Divorce Proceedings: If the spouse is in the middle of a divorce proceeding and the divorce is not yet finalized, but it's clear that it would have been finalized, they may not inherit.
- Responsible for Death: If the spouse is responsible for the death of the other spouse; for example, a murder, they wouldn't inherit.
Can a spouse be disinherited?
There are certain statutory benefits that entitle a spouse to at least a minimum distribution from a spouse's estate. A spouse can be disinherited only to the extent that they're not entitled to these benefits. So, as long as they haven't waived that minimum benefit or signed some type of prenuptial agreement that would have waived it, then they can't be completely disinherited.
Frequently Asked Questions About Estate Planning in Virginia
Does Virginia have an inheritance tax?
No, Virginia doesn't have an inheritance tax. Families of the deceased, however, pay fees which would equate to a tax when they file a will or go through the probate process. Avoiding probate saves a substantial amount of money, despite no inheritance tax.
How does divorce affect inheritance in Virginia?
- If the parents are divorced, one former spouse does not automatically receive anything from the other former spouse unless it's noted in the settlement agreement. Whether or not they would receive anything from the estate would be indicated in the divorce decree.
- If one of them gets remarried, the new spouse may only be entitled to a portion of the estate if the deceased spouse had children from the prior marriage.
- The children of the deceased may be entitled to a portion, and the new spouse may have some share in the estate as well, thereby reducing the amount given to each.
How can a beneficiary disclaim or give-up an inheritance in Virginia?
To disclaim an inheritance, the beneficiary must officially communicate and give notice that they do not want a particular portion or all of their inheritance from an estate. This notice must be in writing and recorded at the courthouse, describing the estate and what portion of the estate is being given up. The share of the disclaiming beneficiary will then pass through the will or probate onto the next person(s) entitled to inherit; this could be grandchildren, siblings, or a new spouse, etc.
What is probate in Virginia?
Probate is the process by which the court system determines how the assets of a deceased are passed on to the beneficiaries. It's either the filing of a will, which gives guidance to the court as to who is to receive the assets, or without a will, and the intestate statute will determine who the heirs / beneficiaries are. Then, it's the court's job to oversee a fiduciary, typically an executor or personal representative to ensure that a) the executor has mustered all of the assets of the deceased; b) all the creditors that are due or owing under the estate have been paid; and c) that the remaining assets have been distributed according to the terms of the will or according to the statute and closing out all of the assets of the deceased.
How long does probate take in Virginia?
On the short end, a quick probate can take up to four months. On the long end, it can take as long as a year or two, depending on the circumstances.
How can one avoid probate in Virginia?
- Not owning anything in your personal name at the time you pass away
- Putting assets into a trust
- Putting beneficiary designations on allowable assets
Someone can avoid probate by not owning anything at the time of their death. This means, either going ahead and gifting all assets to your beneficiaries during your life (so you don't own anything at the time of death) or putting them into a trust. With a trust, the legal title is in the name of the trust and not your name. So, when you pass away, there are no assets in your name at your death. By putting beneficiary designations on assets, you can avoid probate, so that those assets immediately are transferred to the beneficiary named on the beneficiary designation. These assets can be a life insurance designation, a 401K, pay on death deed, transfer on death, or bank account designation, etc.
What does probate cost in Virginia?
The cost of probate depends on the assets and the complexity of the estate, but it can typically range anywhere from $3,000 to upwards of $15,000 to $20,000. The cost of probate includes filing fees, paying the clerk, transaction costs (paying the executor to go through the process), as well as fees to pay the commissioner of accounts. Oftentimes you will need to pay a tax professional to file tax returns, pay an attorney to assist with filling out the documents properly and transferring assets properly. It can also entail costs like paying for realtors to sell property, or cleaners to clean out assets and auctioneers or appraisers to value and auction off personal property.
What's a small estate in Virginia?
Any estate that has assets of less than $50,000 is considered a small estate.
What's the Virginia Small Estate Act affidavit?
In the event that there is less than $50,000 of value in the estate, rather than going through the probate process, a beneficiary or a fiduciary can fill out an affidavit stating who the heirs or beneficiaries of the state are. They then send that affidavit to whoever's holding the asset or the property of the deceased person and have them turn over the asset to the person making the affidavit. The one who makes the affidavit is responsible for distributing the property to the appropriate beneficiaries. This ultimately serves as a substitute for people going through probate.
Are surviving spouses responsible for the deceased spouse’s medical bills?
Yes and no. To a certain extent, all spouses in Virginia are responsible for the care of their spouse. There's a presumption that they are responsible for it, but there are limits, at which point they don't have to pay any more than is required. So, there are statutory and common law limits to what a spouse would have to pay. By and large, however, you are responsible for your spouse's medical costs.