Estate Planning Dos and Don’ts

Is Loaning Your Adult Child Money a Good Idea?

          During the economic crisis of 2008, many young couples and recent college graduates sought financial assistance from their parents and grandparents.  With the tightening of credit, parents loaned their children money to pay student loans, buy a house or start a business.  These well intended loans can be explosive problems with estate planning and administering your estate. 

            We would advise you to avoid loaning money to your family for several reasons.  First, loans to children should more appropriately be treated as gifts.  Your child may promise to pay the money back but few parents see a full return of their investment.  Second, the loan may put your financial health in danger.  This is particularly true if you must enter a nursing home or need to pay for long term care.  Third, when the loan becomes a gift there is the potential for conflict among your children.  Finally, should you seek to enforce payment, your children may withhold access to your grandchildren unless you acquiesce.  

            If you choose to loan money to a child, treat your children in the same manner a bank or financial institution would treat you.  Make your child sign a promissory note and secure the debt with a deed of trust.  Next, charge interest and have an amortization schedule.  Third, make sure your child is making regular, timely payments.  If your child fails to make payments, take action to enforce the debt.  However, do not delay enforcement.  Your claim may be barred by the statute of limitations if you delay too long. 

            Loans to children often cause hard feelings between the child receiving the money and their siblings.  We would advise against the practice.  However, if you chose to loan money to your child, discuss the pros and cons with your estate planning or elder law attorney.  Your attorney can adjust your estate plan to account for the loan to help reduce family discord. 

            We regularly help clients with elder law and estate planning in Chesterfield, Colonial Heights, Dinwiddie, Hopewell, Petersburg, Prince George, or Sussex. Give us a call at (804) 668-5327 or email us at Contact@paulperduelaw.com to schedule a consultation. 

 

 

 

 

Purpose of Estate Planning – Part 1

Estate Planning is About Choice

My grocery store has over a dozen different peanut butter selections.  All have nearly the same ingredients peanuts, salt, and a few other things thrown in.  Why have so many different selections?  The answer is Choice.  Customers want the ability to choose between different brands, flavors or textures.

Estate planning is also about choice.  It is having the ability the ability to choose how to dispose of your life’s work.  Everyone has an estate plan, that plan is the Virginia Intestate Statute.  If you die without a will or trust, then the Virginia Intestate Statute will determine how your estate will be divided and distributed to your heirs.

Despite our desire for choice in the grocery aisle, only about 45% of adults have a will.  The majority of adults, therefore, have failed to exercise their right to choose.  Your failure to choose can cause serious problems including financial hardship for your surviving heirs and can strain relations among family members.

Over the next few weeks, we will focus on the estate planning process.  This is general information designed to educate you on the primary estate planning tools.  Every situation is different and this blog is not a substitute for a consultation with an estate planning attorney.  As you read our Estate Planning Blog series, please keep the following in mind:

A proper estate plan should:

  1. Allow you the ability to choose how to dispose of your assets;

  2. Minimize the risk of conflict among your surviving heirs; and

  3. Protect your estate from taxes or other government intrusions.

If you need help with an estate planning in Chesterfield, Colonial Heights, Dinwiddie, Hopewell, Petersburg, Prince George, or Sussex. Give us a call at (804) 668-5327 or email us at Contact@paulperduelaw.com to schedule a consultation.

Major Life Change? Review Your Retirement Account Beneficiaries

If you have recently experienced a major life change, you need to review your beneficiary designations and estate planning documents.

Who Should Review Their Beneficiary Designations?

Anyone who is recently divorced, remarried or any person who had children should review their beneficiary information.

What Documents Should You Review?

  • Retirement beneficiary information including pension, profit-sharing, 401(K), IRA, and/or Thrift Savings Plan beneficiary information.
  • Life Insurance policies
  • Annuities
  • Transfer on death bank and brokerage accounts

Why Should Review Your Beneficiary Information?

There are numerous cases where an account owner has divorced and failed to remove his or her ex-spouse as beneficiary of their account.  It can be frustrating to the surviving children that their former step-parent gets a windfall from their parent’s retirement account or life insurance policy.  Even though the account may be address in a Final Decree or a Separation Agreement, you must still make the change with your account or plan administrator.

Additionally, if a child is named as your beneficiary, make certain that any children born after the document was initially signed have been added as a beneficiary.  If you fail to add them, they may not receive any benefit from the account.

What Happens if You Fail to Review Your Beneficiaries?

If you fail to review your beneficiary information, federal or state law may decide who is the beneficiary of your account.

I Changed My Will.  Isn’t that Enough?

Simply changing your will to disinherit your ex-spouse is not enough.  The accounts we are referencing in this piece are non-probate assets.  Meaning they do not pass under the terms of a will.  The beneficiary designations supersede the terms of the will.  Therefore, you need to change your beneficiary designations in addition to executing a new will.

What Should I Do Now?

  • Check the default provisions of the documents governing your retirement account.
  • Check with your plan administrator to determine who your beneficiary is.
  • Consult your accountant to determine the tax implications of naming someone as your beneficiary
  • Make any changes in beneficiary with your plan or account administrator
  • Request a receipt from the administrator to ensure all changes were made correctly.
  • Please note you cannot change your designations to “cut out” your spouse some of your non-probate assets like pensions or profit sharing plans, while you are still married without your spouse’s consent.  Federal law prohibits removing your spouse from some types of accounts without your spouse’s consent.

We are experience family law and estate planning attorneys.  If you need help with a will, power of attorney or estate plan in Chesterfield, Colonial Heights, Dinwiddie, Hopewell, Petersburg, Prince George, or Sussex. Give us a call at (804) 668-5327 or email us at Contact@paulperduelaw.com to schedule a consultation.

Can I Leave My Minor Child To Someone In My Will?

Who will Take Care of My Children?

Who will take care of your minor child(ren) if both parents die?  I have been asked recently about what will happen to the children if they die prematurely.  Many people believe you can leave a child to someone in their will.  A child is not like your fine china; you can’t just give it anyone you choose.

However, you can appoint a guardian of your children in your will.  Virginia law allows every parent by will to appoint a guardian of his or her minor child and also appoint a guardian of any portion of the estate that was bequeathed to the child.  VA Code § 64.2-1701.  One point to consider when financial assets are involved is the appointed guardian of your child’s person may not be the best person to manage the financial affairs of the child.  In many situations, naming a separate person as trustee of your child’s financial assets is a more prudent decision (A complete discussion of the management of the financial assets left to your minor child is beyond the scope of this blog post).

A court will appoint the person named in the parent’s will unless the other parent is still alive and is fit to have custody or the appointment would not be in the best interests of the child.  A guardian may only be named in a valid will.  Therefore, you cannot name a guardian for your child’s person in a power or attorney, trust or other estate planning document.  No other document can be used to name a testamentary guardian for the minor child.

Things to Consider When Choosing a Guardian

  1. Does the person have the physical and financial ability to care for the child?
  2. Where does the person live?  Would the child have to move?
  3. Is the person going to follow your wishes of how to raise the child?
  4. Does your child currently have a relationship with that person?  How does your child interact with that person?
  5. What is the person’s relationship with the rest of your family?  Will they continue to see the child?

What happens if the Parents are Divorced or Separated? 

If the parents are separated or divorced and one parent dies, under Virginia law the surviving parent will normally receive full custody of the child.  Even if the deceased parent had primary custody of the child, the surviving parent will usually receive custody upon the death of the other parent.  However, if a court finds the surviving parent to be unfit, then a third party may be granted custody.

If you find yourself worrying about your ex’s ability to care for the child, you need to plan ahead.  You should speak to your family members and make sure they are willing and able to petition for custody in the event of your untimely death.  Additionally, if you fail to name a trustee or guardian of the property left to your child, then the surviving parent will often be appointed to manage and control the money left to your child.

Finally, if you are separated or divorced you need a will!  If you, die without a will, are remarried, and have children from a prior marriage, your untimely death could have a major financial impact on your surviving spouse.  Under Virginia law, your children from the prior marriage would take 2/3 of your estate and your surviving spouse would only receive 1/3. Without a will, you could unwilling set your spouse up for financial disaster.

Wills aren’t just for the elderly.  Everyone should have a will and you should review and update as circumstances change.  The attorneys at paul | perdue attorneys can help you with a will and estate planning needs in Chesterfield, Colonial Heights, Dinwiddie, Henrico, Hopewell, Petersburg, Prince George, Richmond or Sussex. Give us a call at (804) 668-5327 or email us at Contact@paulperduelaw.com to schedule a consultation.

**This material is for Information Purposes ONLY and should not be construed as legal advice and does NOT create a legal relationship with Paul Perdue Attorneys PLLC.

New Planning Tool for Parents of Special Needs Children

There is a new tool to help children with special needs that is similar to the popular 529 College Savings Plans.  A challenge for many special needs parents is providing for their children but ensuring the child doesn’t lose their SSI and Medicaid benefits.  ABLE Accounts are a new tool to save for a special needs child’s future care without jeopardizing those benefits.  Generally, if a disabled person has more than $2,000 in savings or other assets, they lose Medicaid and SSI benefits.  One solution is a special needs trust but they are costly to set up and maintain.  ABLE accounts are designed to be cheaper, simpler option.

What is the ABLE Law?

ABLE, which stands for the Achieving a Better Life Experience Act, was the kitchen table idea of a group of parents in Northern Virginia.  The parents wanted a simpler cheaper way to save for their children with down syndrome’s future care.  As a result of their efforts, the ABLE Act was passed by Congress in 2014.  Under the federal law, people with disabilities can open special accounts, where they can save up to $100,000 without risking their SSI, Medicaid or other government programs.

The ABLE Act requires each state to enact legislation on how and when ABLE accounts will be available in that state.  Virginia enacted a law in March 2015 that authorized the Virginia College Savings Plan (Virginia 529) to create a savings plan for people with disabilities.  Virginia 529 estimates the accounts will be available at the earliest by the end of 2016.

What are the Key Features of an ABLE Account in Virginia?

  1. An eligible person is someone who is or becomes disabled before age 26 and receives Social Security Disability Income or files a disability certification under IRS rules.
  2. Earnings on contributions to ABLE accounts are exempt from federal income taxation.
  3. Earnings on contributions to ABLE accounts are exempt from Virginia State income taxation.
  4. Yearly contributions are capped at the annual gift-tax exclusion of $14,000.
  5. If the assets in the ABLE account reach $100,000 and the beneficiary is receiving SSI benefits then the SSI will be suspended until the assets drop below $100,000.  Once the assets in the ABLE drop below $100,000, the SSI benefits will resume.

What are the Disadvantages of an ABLE Account? 

The biggest disadvantage of ABLE accounts is repayment to Medicaid.  When the disabled individual dies, any assets remaining in the ABLE account are used to pay back Medicaid for the amounts expended by Medicaid for the care of the disabled individual after the creation of the ABLE account.  Typically, funds in a valid special needs trust do not have to be repaid to Medicaid following the death of the disabled individual.

ABLE accounts are a new tool and the government regulations of these accounts is still evolving.  They are miracle drug for the estate planning challenges of special needs children.  They do not replace the role of special needs trusts.  They are simply another tool for families to provide education, housing, training, assistive technology, or other expenses for their special needs child.

Read More in the New York Times: A Closer Look at 529 Able Accounts

If you need help with estate planning in Chesterfield, Colonial Heights, Dinwiddie, Hopewell, Petersburg, Prince George, or Sussex. Give us a call at (804) 668-5327 or email us at Contact@paulperduelaw.com to schedule a consultation.

**This material is for Information Purposes ONLY and should not be construed as legal advice and does NOT create a legal relationship with Paul Perdue Attorneys PLLC.

Powerless: Is a Bank or Financial Institution Required to Accept Your Power of Attorney

You heeded the omnipresent warnings to have an estate plan.  You have a will, advance medical directive and a power of attorney.  You sleep soundly, content that your family will not be ensnared in chaos or dispute as a result of your death or incapacity.  You’ve done everything right. Or so you think.

The Corporate Run Around

Sadly, doing everything “right” may not be enough.  A recent New York Times article, Finding Out Your Power of Attorney Is Powerless, by Paula Span, addressed a concerning trend of many banks and financial institutions refusing to honor a durable power of attorney.  The banks are insisting the account holder sign the bank’s own power of attorney form.  The bank’s rationale is they want to protect themselves from liability for fraud.  One large bank has been known to require an agent trying to act pursuant to a power of attorney to have letters from two doctors stating that the account holder is incapacitated.  Other banks reject documents that are more than 12 months old.

Can they do this?

A bank is required to accept a notarized Power of Attorney unless a statutory exception applies.  Virginia Code Section 64.2-1618 requires acceptance of a valid Power of Attorney within seven days of the presentation of the Power of Attorney for acceptance.  The same code section also prohibits the bank from requiring an additional or different power of attorney form.  There are several exceptions to this requirement.  One broad exception allows a bank to reject a Power of Attorney if the bank believes in good faith that the agent does not have the authority specified in the document or the agent has been relieved of his authority.  A bank or other entity that fails to comply with this law may be liable for attorney’s fees and costs for any lawsuit to enforce the validity of the Power of Attorney.

What Should you do?

Here are a few tips to increase the likelihood your Power of Attorney will be accepted by banks and other financial institutions.

Make sure you draft your Power of Attorney early, so there is no question of your competency.

  1. Choose someone you trust and are comfortable with to serve as your agent.
  2. Avoid having co-agents because requiring two signatures on a document may complicate matters and may cause the bank to reject the double signature requirement.
  3. Update your document – Make sure your Power of Attorney is current and complies with current law.  If your Power of Attorney was drafted prior to 2010 it may need to be updated.
  4. Have a competent and experienced attorney draft your document.  Using an internet form may result in an invalid power of attorney and your document being rejected by a bank.
  5. Be careful of signing the bank’s Power of Attorney form.  They often contain indemnification provisions very favorable to the bank.

If all else fails, hire an attorney to fight the banks for enforcement of your valid power of attorney.

If you need help with estate planning in Chesterfield, Colonial Heights, Dinwiddie, Hopewell, Petersburg, Prince George, or Sussex. Give us a call at (804) 668-5327 or email us at contact@paulperduelaw.com to schedule a consultation.

**This material is for Information Purposes ONLY and should not be construed as legal advice and does NOT create a legal relationship with Paul Perdue Attorneys PLLC

Attorneys are expensive. Get your money’s worth!

Hiring an attorney is about more than knowledge and experience. There are a lot of lawyers to choose from in the marketplace today. Truth is there are probably too many lawyers. While your lawyer’s experience and knowledge are important, other qualities should also be considered. Most lawyers have the basic level of knowledge to get the job done. We all have to pass an exam simply to have the right to do the job.

Hiring an attorney is much like hiring a contractor to build your new house. It is unlikely that you would hire a contractor before reviewing a set of blueprints, discussing a budget and developing a timeline for completion of your new home. Your attorney should sit down with you and develop a plan. The first step in developing a plan is a discussion of your goal or desired result. Second, the attorney should discuss with you the strengths and weaknesses of your case. If your attorney tells you, your case doesn’t have any weaknesses, that you don’t have anything to worry about, or that he never loses, you need to grab your wallet and run out of his office. Every case has both strengths and weakness.

Next, your attorney should discuss a budget or an estimate of the total cost of representation. An attorney will ask you to pay a retainer for his or her services. This is typically only a down payment and not the total costs of services. Early on you and your attorney need to discuss both best and worst case scenarios for the total cost of your case. An attorney’s services are billed by the hour. That means you can be in the hole for thousands of dollars before you even know it.

Finally, your attorney should be solution oriented. When you build a house, you may have to forgo the sun porch or upgraded counter-top because its too expensive. With litigation, a win at all cost may not be the best solution for you. There may be alternative ways of resolving a dispute. Your attorney should be open to and discuss alternatives. Your goal should be a solution to your problem, not just winning on principle.

Does your Legal Advisor Reside in Cyber Space?

It’s on the Internet – it must be true and accurate!

There are many sources of legal information on the internet for individuals to review and gain knowledge. There is so much information that it can be difficult for the person with no legal training to separate trash from treasure.

Here are our suggestions as you troll through cyberspace looking for legal information or advice:

1) Don’t fall for fool’s gold. Any site that makes outlandish promises is probably too good to be true.

2) Read the tone of the information. If it tells you must act immediately then you may want to be a little more skeptical. You certainly do not want to sit on your legal rights and let a legal claim be lost, but very few legal claims have a deadline that is immediately due unless you’ve sat on your legal rights for some time.

3) Separate the sales pitch from the information. Evaluate the information and determine if it is trying to inform you or sell you something. This can be difficult because most firms, including ours, provide you information with the hope that you’ll see a need and believe that that firm is the appropriate place to help you with your legal need. There’s a balancing point – if it seems to be more of a sales pitch than useful information, you may want to be skeptical of the information.

4) The Information on the Internet doesn’t come with a warranty. There are many reasons that most, if not all legal web sites have disclaimers. Laws can change without website being updated and the reader may misinterpret or misunderstand what is written.

5) Making the best use of information that is on the internet. Much of the legal information on the internet can be used to give you background on a legal topic. Getting a general overview of how your legal problem is addressed prior to visiting an attorney can help you prepare for the visit and will allow you and attorney to accomplish more during the visit.

Saving your family from the heartbreak of deciding to pull the plug

“What is an Advance Medical Directive”

An Advance Medical Directive allows you to state your wishes in writing about medical treatment and care. An Advance Medical Directive is aimed at preventing the legal fight that ensnared Terry Schiavo’s family as a result of her husband’s decision to remove her feeding tube.

There are two types of advance directives: a written directive and the appointment of a healthcare agent. The two types are explained in greater detail below. The two are not mutually exclusive. In fact, having a written directive and a healthcare agent affords you the greatest protection, as one cannot anticipate all possible medical events.

Written Directive – often referred to as a “living will”, the written directive lists what kinds of healthcare you want or don’t want if you are incapacitated and unable to express your own wishes. A written directive may address any type of care (i.e. psychiatric treatment), not just end of life or pull the plug issues.

Healthcare Agent -, you can appoint an agent to make healthcare decisions on your behalf. The appointment of an agent is sometimes referred to as a “Power of Attorney for Healthcare.” You may limit the authority of the agent in the directive. Ensure that you chose someone who is accessible and capable of making potentially difficult decisions about your care.

Advance Directives are not just for the elderly. Even if you are young and healthy, you should have an advance directive. Terry Schiavo was in her mid-twenties when she went into cardiac arrest and was left comatose.

The Virginia State Bar provides free advance directive forms on its website. Visit http://www.vsb.org/site/public/healthcare-decisions-day to download your free form. An advance directive does not be notarized.

Advance Medical Directives, along with wills and powers of attorney, are a necessary part of any estate plan. If you need help If you need help with estate planning in Chesterfield, Colonial Heights, Dinwiddie, Hopewell, Petersburg, Prince George, or Sussex. Give us a call at (804)668-5327 or email us at Contact@paulperduelaw.com to schedule a consultation.