Estate Planning

These tools allow you to ensure that your minor children will have a temporary guardian when you and your spouse are incapacitated (so the children do not go to social services) and a permanent guardian when you and your spouse are deceased. They ensure that you have people who will make health care decisions for you when you cannot do so for yourself and that people will be there to pay your bills and manage your finances. They also ensure that once you and your spouse are deceased, your hard earned assets will be managed and distributed properly, and maybe even protected (from your children’s potential divorce, creditor issues, and lawsuits).

What is a trust?

A trust is an agreement between three people: Settlor/Grantor, Trustee, and Beneficiary 

The Settlor is the creator of the arrangement who appoints a Trustee to hold the legal title to the subject assets for the benefit of the Beneficiary.
Although there are certain legal limitations, it is possible for the Trustor and Beneficiary to be the same person and is even possible for the trustor to serve as his own Trustee. In some situations, Trustors may wish a bank or other entity to serve as the Trustee.

Benefits of a trust

The benefits of a trust include:  (i) avoiding probate; (ii) capital gain tax savings; (iii) privacy of family assets and finances; (iv) avoidance of conservatorship; (v) creditor protection and protection of inherited assets from divorce for your beneficiaries; (vi) control of distribution and management of assets during life and after death; (vii) death tax avoidance or reduction.

What are the duties of trustee? 

• Your trustee manages the assets in your trust, properly account for trust transactions and follow all terms of the trust document and manage your trust to comply with all federal and state law requirements. Managing your trust typically involves evaluating and managing the trust assets to ensure that they are meeting the needs of the trust beneficiaries and are appropriate based upon the terms of the trust and the governing law of the trust.

• Proper accounting requires the trustee to follow the terms of the trust document to ensure that the principal and income of a trust generally must be handled and accounted for separately. Both receipts and distributions should be accounted for in this manner.

• One of the primary responsibilities of a trustee is to follow the terms of the trust document and carry out the settlor/grantor’s wishes.

• In addition, the trustee may have reporting requirements to the trust beneficiaries or the court, as well as federal and state tax-filing responsibilities.

Who benefits from a trust?

• In larger estates where tax savings are an important consideration, the use of trusts may play a paramount role.

• Even relatively small estates can usually benefit from the probate avoidance offered by a trust.

• Generally speaking, many individuals do not realize how large their estate is. This is especially true since all assets owned or in which one has an interest is included.

What happens if you do not have a will or a trust?

If you do not have a will or a trust and have not used other probate-avoiding methods, upon your death, your assets will pass according to the laws of the Commonwealth of Virginia or the state where you die. The "state plan" may not provide for those you desire to obtain your assets, and if it does, often presents problems. Furthermore, you do not choose who will represent you in probate – in fact, theoretically, a credit card company may even serve as the administrator of your estate.