Wills, Trusts and Estates: Frequently Asked Questions By: Michael C. Hall, Esq., CowanGates PC Your retirement years can be some of the children, mother, father, brothers, and/or sisters, most fun and fulfilling of your entire life. Most peo- then one-half of the estate goes to the nearest liv- ple look forward to retirement with increasing antici- ing relative of the deceased’s mother and one-half pation as the years of hard work wind down. In to- goes to the nearest living relative of the deceased’s day’s society, people are retiring young and healthy father. enough to enjoy the fruits of their labor for years and If I own everything jointly with my spouse, do I still years. need a Will? Yes. Joint ownership only assures While thoughts of national or international that the property goes to the surviving spouse upon travel, golf, scuba diving, gardening and many other the death of the first spouse. When the second activities may fill your mind just prior to retiring, this spouse dies or if both should die simultaneously, is often the time many begin to seriously consider there is no protection for the surviving heirs. Also, retirement planning. But remember, it’s never too you need a Will to name an Executor, set up any early to start planning for your retirement years! trusts and name Trustees and Guardians if needed. As an attorney, I am often questioned about How do I change my Will? If you want to change issues concerning retirement. Over the years, I’ve your Will, you should have it changed (or amended) kept track of the most frequently asked questions using a “Codicil” (the legal term for an amendment and their answers. Below are the questions and to a Will) or by having a new Will prepared. You their answers. Although these questions are cer- should not make changes yourself. Trying to make tainly very pertinent to retirement planning, the an- changes yourself, without following the proper legal swers also contain good information for people in all form, can render the changes ineffective. phases of life. What is the best way to leave specific items of per- Do I need a Will? Having a Will, which is properly sonal property to specific individuals? If the list is drafted in accordance with Virginia’s laws, offers small, and unlikely to change, then specific items several assurances. They include: 1) Making sure (called bequests) can be written in your Will. Vir- your property goes to the person(s) you select. 2) ginia law also allows for a Will to refer to a written Allowing you to select the person(s) who will oversee statement or list of your personal property and who your assets for your children until they reach a given you want to receive it. This written statement or list age (your Trustee). 3) Allowing you to select the per- must describe the property and the individual with son(s) or institution that will handle your estate (your reasonable certainty and must be signed by the Executor). 4) Allowing you to select the person(s) person making the Will. It may be prepared before, that you want to serve as guardians for your children. or after, the execution of the Will and may be later What happens if I don’t have a Will? If you do not changed by you. have a Will when you die, the State of Virginia in ef- What does an Executor do and whom should I fect writes a Will for you. The state treats you as choose? The Executor is the person that settles having died “intestate” and designates the person(s) your estate. This person’s job is to determine the who will receive your property . Under current Vir- estate’s total assets and liabilities, how much will ginia law, when someone dies without a Will, his or be needed to pay off all debts, taxes and ordinary her property is distributed as follows: expenses, and then distribute the remainder to the 1) To the surviving spouse. However, if the de- beneficiaries named in your Will. Typically a mar- ceased is survived by children that are not the chil- ried couple will name each other as the primary dren of the surviving spouse, the deceased’s chil- executor. An alternate should also be chosen. The dren receive two-thirds of the property and the sur- alternate could be a family member, a close friend viving spouse receives one-third. 2) If there is no or a bank. You need to choose a person or entity surviving spouse, then the deceased’s children and that will oversee and protect the property and will descendants of the deceased children receive the be professional, reliable and fair. property. 3) If there is no surviving spouse, children What does a guardian do and whom should I or descendants of those children, the property goes choose? The guardian is/are the person(s) you to the mother and father of the deceased. 4) If there choose to raise your minor children. This is obvi- is no surviving spouse, children, descendants of ously one of the most important decisions you will those children, mother or father, then the brothers make. If you do not name a guardian, several prob- and sisters receive the property. 5) If there is no lems can arise, such as: 1) No one coming forward surviving spouse, children, descendants of those as a guardian. 2) Too many people fighting over Who would be the best guardian. 3) A person with Executor to enter your safe deposit box to locate good intentions coming forward that is not the best your Will. In any case, your Executor and/or benefi- person for the responsibility. When selecting the ciaries should know where your Will is located and person to serve as guardian, great thought should your Executor should have access to your safe de- be given to the person’s values, temperament, posit box. character and religious beliefs. What is a Power of Attorney and do I need one? A What does a Trustee do and whom should I Power of Attorney is a document that authorizes choose? The Trustee is the person that manages someone else to act on your behalf regarding busi- the money for your young or incapacitated benefici- ness affairs. It can be limited to specific subjects or aries. He or she has the job of saying yes or no to be general in nature. A general power of attorney requests for money by the beneficiaries. You allows the person you appoint to do all the things should select a Trustee that will closely oversee and you would do for yourself concerning banks and protect the Trust assets and deal with beneficiaries contracts, among other things. A power of attorney in a fair and consistent manner. While a back- is an extremely powerful document and should not ground in money management would obviously be be given to anyone without a great deal of thought. helpful, it is important that you pick someone who What is an Advance Medical Directive and do I need will give personal attention to the beneficiaries’ one? This is a document which states that if you needs and requests. If, like most people, the Trus- are ever in a medical situation where there is no tee is not a professional money manager, hope for recovery, you do not want to be kept alive he or she needs to have the sense to get profes- by artificial means. Typically, the document names sional help with investing the assets. a person as your medical Power of Attorney for What is a Living Revocable Trust? A Living Revoca- making this decision. This will allow the person you ble Trust can be used in estate planning to mini- appoint to make health care decisions on your be- mize or eliminate estate taxes and/or avoid pro- half concerning withholding or withdrawing medical bate. With regard to the probate issue, a properly treatment if you are incapable of making decisions drafted revocable living trust along with the proper yourself. titling of assets can allow you to pass your property What is a Health Care Power of Attorney and do I to the person(s) you select while avoiding the ex- need one? A Health Care Power of Attorney is a pense and hassle of probate. This is another area document that authorizes someone else to act on where a good estate planning attorney can make your behalf regarding medical and health related the transfer of property from one generation to an- decisions. This is an extremely useful document to other a smooth one. have in the event you are incapacitated or other- When do I need to start worrying about estate wise incapable of making your own decisions. taxes? The first thing you need to do is determine In Summary: Although this is not an exhaustive list your net worth. Net worth includes life insurance of the questions I have received, it does cover some proceeds and retirement assets along with savings of the most frequently asked points. It can seem accounts, investments and real and personal prop- quite confusing and even overwhelming when you erty. If your total net worth, at death, is more than begin considering all of these issues. But with $2,000,000.00 (for the tax year 2006), then you some investigating, soul searching and the counsel have a potential estate tax problem. However, with of a good estate planning attorney, you can develop proper planning and document preparation, a mar- an estate plan that will offer protection and give you ried couple can double this figure to peace of mind. $4,000,000.00. Here’s an example: A married cou- ple has a net worth of $2,800,000.00. If there is no estate planning or improper planning they could About the Author: Mike Hall is a partner and leader end up paying estate taxes of approximately of CowanGates PC’s Estate Planning, Business & $320,000.00 when the second spouse dies. How- ever, with proper estate tax planning and document Corporate Law Team. He practices primarily in the preparation, both spouses could potentially use areas of estate planning and administration, general their $2,000,000.00 exemption resulting in a tax of business law, corporations, limited liability $0.This can be done using a Trust, with the surviv- companies, partnerships, tax planning and commercial ing spouse maintaining control of the assets and and residential real estate law. using the assets for support, health, maintenance Mike provides comprehensive estate planning and tax and education of themselves and their descen- advice to individuals and businesses. He also handles dants. The exemption amount is: complex real estate matters * $2,000,000.00 for 2006-2008 including contract negotiation * $3,500,000.00 for 2009 and construction and permanent * No estate tax for 2010, and financing. After receiving a * $1,000,000.00 for 2011 and beyond. B.S. in accounting from Vir- This is the law as it currently stands. It will almost ginia Tech, he attended the T.C. certainly be changed before 2011. Williams School of Law of the Where should I keep my Will? A safe deposit box is University of Richmond, where the safest place to keep your Will. There is a stat- he received his Juris Doctor ute in Virginia that allows your next of kin and/or degree in 1982.