Estate Planning: Realities And Myths

Common Misconceptions Of Estate Planning

Over my years serving as an estate planning attorney, I have made several observations. Among them are the misconceptions that so many people communicate to me regarding estate planning. When individuals approach me to establish their estate plan, many express a belief that setting up a will or trust will guarantee they can completely sidestep the probate process. While this may be true in some states, it is not so in Virginia. Everyone, regardless of the size of their estate, goes through probate. Although having a trust doesn’t eliminate probate, it significantly streamlines the process and considerably reduces complexities you or your loved ones would otherwise have to tackle.

Probate, in essence, involves formally notifying the court of a person’s passing. For those who have diligently planned ahead with a will or trust, probate might entail a single appointment, where the will is recorded, marking the conclusion of the probate proceedings. Conversely, without a trust or a will in place, the executor faces a more involved probate process, including filing inventories, accounting for all estate assets, and ensuring distribution aligns with the will or the stipulations of the Code of Virginia.

A key to understanding estate planning matters in Virginia is recognizing that estate planning is an ongoing process, not a one-time event. As life unfolds, your circumstances will likely change along with it. Generally speaking, people who craft a will in their 20s might find the need to revisit their estate plan after getting married or having children in their 30s. Similarly, major life events like getting a divorce or your children becoming independent may mean it’s time to reassess your existing estate plan. This is made clear by the fact that the law treats an ex-spouse as having predeceased you, for example, underscoring the imperative of promptly reevaluating and updating the estate plan to reflect your new circumstances.

Approaches To Estate Planning

Estate planning isn’t a one-size-fits-all thing. As I mentioned earlier, each individual’s situation is unique, and this shapes how they can best achieve their goals. For some individuals, a single, comprehensive document might suffice and adequately address their needs. This might not be the case for many others. Regardless, life and the law are ever-changing.

In my practice, I refrain from calling clients, urging them to revisit their estate planning. I believe the decision to reassess one’s estate plan should come from them themselves, driven by their changing circumstances and needs. I’m very mindful of the potential skepticism that may arise if I were to encourage my clients to update their documents. Trust is paramount, and I want people to feel comfortable contacting me when life events trigger the need for a closer look at their estate plans. Pushing clients to do something can understandably come off as attempting to generate revenue out of them.

The goal is for clients to view my services as a resource, ready to assist when life takes unexpected turns. Rather than a routine call suggesting a new will, I prefer clients to trust me enough to initiate a conversation, such as, Hey Mark, I’ve gone through a divorce, and I’m not sure what to do about my estate plan. This approach allows for a more personalized and meaningful discussion, diving into the specific challenges and considerations arising from significant life changes.

The Ultimate Goals Of Estate Planning

Determining the ultimate goal of proper estate planning is, as always, contingent on your unique circumstances. Couples and individuals alike may seek estate planning to achieve various objectives, ranging from long-term financial goals to addressing specific considerations like Medicaid.

For couples, the focus might be on creating an estate plan that not only addresses immediate concerns but also strategically accounts for long-term goals related to taxes and inheritance. However, life is dynamic, and individual circumstances can (and do) change. For instance, getting married means a change in circumstances, and your estate plan most likely needs to change along with it.

Similarly, having children, especially ones with special needs, can significantly impact estate planning considerations. For example, your priorities will look dramatically different if you have a child who excels in school or sports as opposed to one with Down syndrome. Estate planning for families with special needs children requires meticulous attention to detail, addressing specific financial and care-related aspects to ensure the child’s well-being.

Another critical aspect is planning for minor children. Designating guardianship and managing financial affairs for a child may involve different individuals, each with unique talents and capabilities. While one family member might excel at childcare, another might be good with money. In such cases, the estate plan can be tailored to assign roles to each accordingly, appointing one as the guardian and the other as the conservator rather than having one hold both positions when they aren’t particularly good at one.

Some Considerations On Medicaid

Medicaid may concern you, particularly if you have a long-term illness. Why? There are income and asset limits in place that could affect your eligibility. If you possess substantial property or income, qualifying for Medicaid may, unfortunately, not be possible at all. If you are in this situation, you may find establishing an irrevocable trust as a strategic alternative. Note that recent changes in the law have influenced the operation of irrevocable trusts, impacting the ultimate heirs and the potential tax implications they may face, however.

One notable change involves the stepped-up basis of property within the trust. Understanding these adjustments is crucial when beginning Medicaid planning. However, the effectiveness of an irrevocable trust in Medicaid planning comes with a time caveat — assets must be transferred into the trust at least five years before needing Medicaid assistance. This timeline ensures that the assets do not count against eligibility criteria for income and growth assets.

Preparing for potential Medicaid needs requires foresight and careful planning. If there is a possibility of encountering challenges related to long-term care and Medicaid eligibility, proactive steps should be taken well in advance. This proactive approach is essential for dodging the minefield that is Medicaid regulations and ensuring the necessary structures are in place to address any potential healthcare and financial needs you may have down the road.

For more information on Understanding Estate Planning Matters In Virginia, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (703) 775-1678 today.