Nobody enjoys thinking about the world without them in it, but the truth is that it will happen to us all someday, and it might very well be much sooner than we expect and hope. The good news is that you can live on well past your last breath through the legacy you leave behind and the people you care for.
This article explains the fundamentals of estate planning, that conversation you need to have with a trained lawyer to plan out what happens to the wealth you have accumulated and the people you love after you go. It explains:
- What estate planning is, and why you need to start thinking about it sooner rather than later.
- What documents, trusts, and healthcare provisions are used in Virginia and Tennessee estate planning and why.
- The situation, besides death, in which having your estate planning done is essential.
What Is Estate Planning And Why Do We Need It?
Estate planning begins with a conversation, and it ends with a set of documents, plans, structures and tools to ensure you and your legacy are cared for in a number of different eventualities. From your incapacitation to your death, estate planning ensures that your wishes for your own person and your belongings are respected.
What Happens When Someone Dies In Virginia Or Tennessee Without Estate Planning Documents?
If you are incapacitated, or worse, if you have passed on, you will not be able to transfer any property out of your name nor make any decisions for either yourself or your belongings. Estate planning is the art of making those decisions or setting up mechanisms to do so before you need them.
Property, for example, needs to be transferred out of your name after your death. Without estate planning, this happens through the intestate probate process. Even with a will, probate is costly, lengthy and stressful: without one, it is also entirely outside your control.
An estate planning attorney will help you find more efficient ways of transferring those titles while also protecting the property and the beneficiaries once they receive it. That is what truly comprehensive estate planning is about.
What Are The Most Common Types Of Trusts Used In Virginia And Tennessee Estate Planning?
Trusts work by having you transfer funds, property, or assets into them while providing very specific instructions for how they are to be used. Trusts are one of the most powerful and versatile tools for estate planning in Virginia and Tennessee because there are thousands of different trusts out there.
To most Virginia or Tennessee residents, the list of all available trusts is an incomprehensible alphabet soup of acronyms: ILITs, DPORs; often, these are very specific irrevocable trusts.
Even though there are thousands of specific types of trusts, they only come in two flavors: revocable and irrevocable. The difference between the two is primarily in their permanence. An irrevocable trust is a completed gift over which you lose all possession and control. In a revocable trust, on the other hand, you maintain possession and control and can amend it during your lifetime.
What Is Meant By “Funding A Trust”?
The difference between regular estate planning and estate planning built around trusts is who holds the titles to the assets.
In a will-based plan, the assets remain in your name, and maybe those of your spouse as well. In a trust-based plan, your trust is now the owner of the asset. This requires transferring ownership of those assets to the trust, which is what we call funding the trust.
If an asset is not titled in the name of the trust, then the trustee cannot get control of the asset. This adds additional steps and complications, reducing the efficiency of the estate plan and trust document. It is generally still possible to get all your instructions followed, even if you forget to transfer the title, but it won’t be as efficient, and you would still end up in probate.
While wills and trusts will take care of your belongings and assets when you pass on, estate planning can help you prepare for a much broader range of situations than just your death.
What Healthcare-Related Documents Do I Need In Virginia And Tennessee?
Healthcare planning requires thinking ahead to what can happen with different health scares and situations. This is done in Tennessee and Virginia with an advanced healthcare directive. When this is well built, it has three components, each with a different person you trust left in charge:
- Information: This determines who in your family or circle of friends gets to know about your current medical situation. For example, providing them with a HIPAA document allows each one to hear what the doctor has to say if they are suddenly rushed to the hospital.
- Control: You do not want all these family members fighting over life-altering decisions, however, so it is also important to give just one trusted person healthcare power of attorney. This gives them control over healthcare decisions when you are unable to do so, and you can even nominate a second or third person in life if the first is unavailable in an emergency.
- Terminal Instruction: Some decisions, however, are not easy for others to make. If you are facing a terminal condition, you may not want to force anyone to choose whether or when to pull the plug on you. Instead, you can leave specific instructions for physicians on what to do in any of a number of situations, giving you ultimate control over your life and death.
Can I Plan For Possible Incapacity During My Lifetime?
Incapacitation is a serious and very real danger each of us should plan for. However, it can be enormously difficult to plan for every eventuality, especially when it comes to caring for your assets and property.
Specific Vs. General Power Of Attorney
Assets in your own name can be handled with specific powers of attorney, but these are inflexible. For example, if you are hospitalized and give your neighbor power of attorney to go into your house and feed your cat, but they notice your plants are dying, they do not technically have the authority to water them or even adjust your thermostat.
Therefore a general power attorney is usually more effective. You want to grant to the person you trust with the ability to do everything. This way, if you are incapacitated, all eventualities are covered.
When Does Power Of Attorney Kick In?
The second aspect of powers of attorney to consider is when they become legally valid. “Springing” power of attorney kicks in after a specific triggering condition is fulfilled, whereas immediate power of attorney applies as soon as you sign it.
Such a condition can become problematic if you are traveling or in the hospital, which could add an extra hurdle to the person trying to take care of your assets. This is why the immediate power of attorney is generally preferable, especially for the primary decision maker whom you trust with your assets and property.
How Long Should The Power Of Attorney Last?
The third part of an estate planning power of attorney is deciding how long it should last. If you draft one up without paying attention to the duration, it could cause roadblocks later.
For example, if your wife calls your financial planner 14 years after you sign a power of attorney, saying you are in a coma in the nursing home and you need to sell some stocks. They will request proof of her authority to do so; if she sends them a 14-year-old document, some eyebrows might be raised.
You can, however, add a durability provision to it. This states that unless you revoke it, no passage of time or lack of capacity will invalidate the document without an affirmative revocation from you.
Are Trusts An Alternative To Powers Of Attorney?
Clearly, power of attorney can be a potent tool for estate planning for individually held assets. It is not, however, the strongest out there. A trust gives direct control rather than entrusting it to someone else.
While there is a successor trustee in charge of carrying out your wishes, those wishes are detailed and pre-determined in a well-built trust. A trust can even kick in during incapacitation with specific triggers written into the rules of the trust. However, rather than seeing it as an alternative, both are complementary parts of the essential estate planning tools you need in Virginia and Tennessee.
If We Live Out Of The State For Part Of The Year, Will Our Estate Planning Documents Transfer?
Most states in the USA follow the universal trust code, which means the individual trust code in Virginia will have the same structure and code numbers, etc. Therefore, trusts easily transfer between most states and are easy to administer outside Virginia.
However, you do ultimately have the choice of law when creating your estate planning documents, which means you can pick what law you want to govern the document. For example, if you look at your agreement with your credit card company, chances are it will specify South Dakota as the choice of law.
Just like they can pick something, you can pick something with your trust so it can go to whichever state you prefer. If there is an issue with the asset or with the trust in your other home state, the judge would just simply pick up the code sections from Virginia and follow those rules.
These are the kind of details, provisions, procedures and techniques that an experienced estate planning attorney will help you take advantage of.
For more information on Estate Planning In Virginia And Tennessee, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (571) 260-0827 today.
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