Wills_ Trusts and Estates - Frequently Asked Questions Page 1

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					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.