Preparing for the Unpredictable and the Inevitable

Estate
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The Need for Estate Planning

Estate planning is the process of determining how you want your affairs handled if you become incapacitated, what gifts you want to make during your lifetime, how you want your assets distributed after your death, and the persons you want to designate to carry out your intentions. The need for estate planning is similar regardless of the size of the estate, but the particular details of individual estate plans can be quite different. Important factors to consider in estate planning include:

  • Marital status, spousal citizenship, children from prior marriage
  • Estate size, types and forms of ownership of assets, location of property
  • Use of individual retirement account (IRA)
  • Special needs of disabled person, supplement Medicaid, SSI
  • Lifetime gifting objectives, charitable gifting
  • Disposition/continuity of owned business
  • Health care decisions and long-term care planning
  • Protecting assets from creditors, Virginia's new self-settled spendthrift trust provisions
  • Methods of distributions, outright, continuing trusts, conditions, spendthrift provisions, disinheritance
  • Guardian for minor children in the event of simultaneous death of spouses
  • Reduce income and transfer taxes during life and after death
  • Potential changes in personal circumstances and tax laws

Documentation

Your estate plan should be documented and have the force of law to ensure that your wishes are carried out, and to dispel potential conflicts and disagreements in the future over your intentions. The basic estate documents for an individual are a last will and testament, durable power of attorney, advanced medical directive, and in many cases, a revocable living trust(RLT). For a married couple, a separate RLT for each married person, or a joint RLT can provide substantial benefits in estate planning. Other documents should be considered for the special needs of disabled persons, long-term care planning for you and your spouse, early gifting, and asset protection. Please review summaries of these and other documents by linking on Estate Documents on the left side of the page, or directly to specific documents on the right side. We are pleased to provide additional information on these and any other estate documents of interest to you.

Tax Considerations

The federal individual lifetime estate and gift tax exclusion for 2015 is $5.43 million with indexing, and portability for married couples. Portability allows under certain conditions for the unused estate tax exclusion of the first spouse to die to be available to the estate of the second spouse. The top federal gift and estate tax rate is 40%. Also, state estate tax considerations can be more important to a lot more persons than the federal estate tax. About a third of states have some form of estate tax; presently, Virginia has no estate tax and the District of Columbia taxes estates above $1 million, with a top rate of 16%. In addition, more important for married couples can be the tradeoff between using the estate tax exclusion versus the unlimited marital deduction after the first to die. The property excluded after the first to die is not available for basis step-up after the second to die, with the potential for higher capital gains tax on inherited property when sold by the beneficiaries. For persons wanting to make gifts while living, the gift tax annual exclusion of $14,000 per recipient in 2015 is not charged against the lifetime gift tax exclusion.

The Need for Early Planning

You can only establish an estate plan when you have the legal capacity to do so. No estate document signed by a person that does not have the requisite capacity is valid. Without a documented estate plan, state statutes and the courts will determine who gets what, and how your affairs will be managed after you are no longer able to do so yourself.