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There are many legal strategies involved in estate planning, including wills, revocable living trusts, irrevocable trusts, durable powers of attorney, and health care documents, like health care powers of attorney, advance medical directives or living wills. New clients often say that they do not have an estate plan. Most people are surprised to learn that they actually do have a plan. In the absence of legal planning otherwise, their estate will be distributed after death according to Virginia’s laws of intestacy. Of course, this may not be the plan they would have chosen! A properly-drafted estate plan will replace the terms of the State’s estate plan with your own. Start the process and create your estate plan alongside an experienced estate planning lawyer.
A power of attorney is a legal document giving another person (commonly referred to as agent or the attorney-in-fact) the legal right (powers) to do certain things for you. What those powers are depends on the terms of that document. A power of attorney may be very broad or very limited and specific.
All powers of attorney terminate upon the death of the maker, and may terminate when the maker (principal) becomes incapacitated (unable to make or communicate decisions). When the intent is to designate a back-up decision-maker in the event of incapacity, then a durable power of attorney should be used. Durable Powers of Attorney should be frequently updated because banks and other financial institutions may hesitate to honor a power of attorney that is more than a year old.
Your last will and testament is just one part of a comprehensive estate plan. If a person dies without a Will they are said to have died “intestate” and state laws will determine how and to whom the person’s assets will be distributed. Some things you should know about wills:
An advance medical directive or a living will is a document that specifies the type of medical and personal care you would want should you lose the ability to make and communicate your own decisions. Anyone over the age of 18 may execute an advance medical directive or living will, and this document is legally binding in Virginia.
Your advance medical directive can specify who will make and communicate decisions for you, and it can set out the circumstances under which you would not like your life to be prolonged if, for example, you were in a coma with no reasonable chance of recovery. A document that goes hand-in-hand with your advance medical directive is an authorization to your medical providers to allow specified individuals to access your medical information. Without this authorization, your doctor may refuse to communicate with your hand-picked decision maker.
Trusts come in many “flavors,” they can be simple or complex, and serve a variety of legal, personal, investment or tax planning purposes. At the most basic level, a trust is a legal entity with at least three parties involved: the trust-maker, the trustee (trust manager), and the trust beneficiary. Oftentimes, all three parties are represented by one person or a married couple. In the case of a revocable living trust, for example, a person may create a trust (the trust-maker) and name themselves the current trustees (trust managers) who manage the trust assets for their own benefit (trust beneficiary).
Depending on the situation, there may be many advantages to establishing a trust, including avoiding probate court. In most cases, assets owned in a revocable living trust will pass to the trust beneficiaries (or heirs) immediately upon the death of the trust-maker(s) with no probate required. Certain trusts also may result in tax advantages both for the trust-maker and the beneficiary. Or they may be used to protect property from creditors, or simply to provide for someone else to manage and invest property for the trust-maker(s) and the named beneficiaries. If well drafted, another advantage of trusts is their continuing effectiveness even if the trust-maker dies or becomes incapacitated. Reach out to our estate planning lawyers to find out if you and your family could benefit from establishing a trust.
There can be terrific grief and pain at the loss of a loved one. Beyond grief and pain, when you add external stresses to the equation you can have a disaster on your hands in very short order. Part of the responsibilities or duties of an executor or administrator of an estate can be to reduce the level of stress during the Virginia probate process. The fundamental duties of a personal representative (also known as an “executor,” if male, or an “executrix,” if female) of an estate are the same as those of a trustee–protecting the assets and interests of the beneficiaries. One way to protect those assets and interests and, at the same time, help the probate process go smoothly, is to have all of your ducks in a row and prepare for court as best you can.
A personal representative is required to prepare and file an inventory and a list of claims after the representative is approved by the court. The timeframe for this important chore is set by statute. This inventory should detail all of the assets subject to probate (i.e., that did not pass outside of probate by operation of law or otherwise). The property must be valued and even appraised as necessary. The claims include debts due and owing to the estate (not debts the estate owes to another party). The inventory provides both potential beneficiaries and creditors of the estate an idea of the estate’s assets and claims. [Beneficiaries want to know what they might get and creditors want to know if there is enough money to get paid.] If the inventory is filed late, the representative could be fined and removed, which would slow down the process (and raise tempers).
One thing to realize if you are a beneficiary is that the will may be “read” a few days after the funeral, but the gifts and bequests are not given out at that time. Yes, you may be entitled to the assets, but the inheritance is subject to the estate’s administration. The representative must settle the decedent’s debts and claims before he or she can make any distribution of the assets. So, beneficiaries, do not go to Grandma’s house with a moving truck and start taking whatever you want. Most likely, the representative is doing his or her job and making sure everything stays where it is until probate is closed.
As noted above, the representative must also keep the administration process moving along by settling all of the decedent’s debts. He or she must give proper notices to creditors, to include making publication in the appropriate newspaper and sending written notice to known secured creditors by certified mail. Also, some representatives are under the mistaken impression that all debts must be paid. He or she begins paying the decedent’s bills immediately, which is not necessarily good. Some states provide “permissive notice” to unsecured creditors and this may avoid paying some unsecured claims.
The representative must keep the beneficiaries in the loop, to include providing each with notice via certified mail that the will has been admitted to probate and a copy of the will. In addition, the representative must inform the beneficiaries regarding any information that might affect their rights. For instance, beneficiaries have the right to ask for a formal accounting by the independent executor.
The representative is responsible for the care and maintenance of estate property, treating it with even greater care than his or her own property. The representative is able to sell any property that is perishable or would deteriorate in value during the Virginia probate process.
As you can see, being a representative is a big, big job. Consequently, he or she can be removed if proven to have been guilty of any gross misconduct or mismanagement in the role of representative. The representative may be subject to a suit for breach of fiduciary duty. Along the way, there are taxes to be paid and returns to be filed, along with many other details.
While nobody wants to think about death or disability, establishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones. Proper estate planning not only puts you in charge of your finances, it can also spare your loved ones of the expense, delay and frustration associated with managing your affairs when you pass away or become disabled. The 4 basic documents that everyone should have in place regardless of whether they are age 18 or 81 and beyond, are a Last Will & Testament, Durable Power of Attorney, Health Care Power of Attorney and a Living Will.
If you become incapacitated, you won’t be able to manage your own financial affairs.
Many are under the mistaken impression that their spouse or adult children can automatically take over for them in case they become incapacitated. The truth is that in order for others to be able to manage your finances, they must petition a court to declare you legally incompetent. This process can be lengthy, costly and stressful. Even if the court appoints the person you would have chosen, they may have to come back to the court every year and show how they are spending and investing each and every penny. If you want your family to be able to immediately take over for you, you must designate a person or persons that you trust in proper legal documents so that they will have the authority to withdraw money from your accounts, pay bills, take distributions from your IRAs, sell stocks, and refinance your home. A will does not take effect until you die and a power of attorney may be insufficient.
In addition to planning for the financial aspect of your affairs during incapacity, you should establish a plan for your medical care. The law allows you to appoint someone you trust – for example, a family member or close friend to make decisions on your behalf about medical treatment options if you lose the ability to decide for yourself. You can do this by using a durable power of attorney for health care where you designate the person to make such decisions. In addition to a power of attorney for health care, you should also have a living will which informs others of your preferred medical treatments such as the use of extraordinary measures should you become permanently unconscious or terminally ill.
For more specific explanation of individual documents that should be drafted ahead of time that are used to provide for the instance of incapacity, such as Durable Power of Attorney, Health Care Power of Attorney and Living Wills, check out this link: Planning for Incapacity
If you leave your estate to your loved ones using a will, everything you own will pass through probate. The process can be expensive and time-consuming in some instances, and is open to the public. The probate court is in control of the process until the estate has been settled and distributed.
If you are married and have children, you want to make certain that your surviving family has immediate access to cash to pay for living expenses while your estate is being settled. It is not unusual for the probate courts to freeze assets for weeks or even months while trying to determine the proper disposition of the estate. Your surviving spouse may be forced to apply to the probate court for needed cash to pay current living expenses. You can imagine how stressful this process can be. With proper planning with the right attorney, your assets can pass on to your loved ones without undergoing probate, in a manner that is quick, inexpensive and private.
It is important that your estate plan address issues regarding the upbringing of your children. If your children are young, you may want to consider implementing a plan that will allow your surviving spouse to devote more attention to your children, without the burden of work obligations. You may also want to provide for special counseling and resources for your spouse if you believe they lack the experience or ability to handle financial and legal matters. You should also discuss with your attorney the possibility of both you and your spouse dying simultaneously, or within a short duration of time. A contingency plan should provide for persons you’d like to manage your assets as well as the guardian you’d like to nominate for the upbringing of your children. The person, or trustee in charge of the finances need not be the same person as the guardian. In fact, in many situations, you may want to purposely designate different persons to maintain a system of checks and balances. Otherwise, the decision as to who will manage your finances and raise your children will be left to a court of law. Even if you are lucky enough to have the person or persons you would have wanted selected by the court, they may have undue burdens and restrictions placed on them by the court, such as having to provide annual accounting.
Because the laws in place are not perfect, those who identify as LGBTQ in life will have certainly have specific challenges to consider when they create their estate plan. Our office is committed to providing representation to everyone, including those who are homosexual, bisexual, or transgender. We pride ourselves on offering everyone the advice that they need to make sure they get the fullest protections available under Virginia law.
Do you want to benefit a charitable organization or cause? Your estate plan can provide for such organizations in a variety of ways, either during your lifetime or at your death. Depending on how your planned giving plan is set up, it may also let you receive a stream of income for life, earn higher investment yield, or reduce your capital gains or estate taxes.
Whether there will be any federal estate tax to pay depends on the size of your estate and how your estate plan works. Many states have their own separate estate and inheritance taxes that you need to be aware of. There are many well-established strategies that can be implemented to reduce or eliminate death taxes, but you must start the planning process early in order to implement many of these plans.
A well-crafted estate plan should provide for your loved ones in an effective and efficient manner by avoiding guardianship during your lifetime, probate at death, estate taxes and unnecessary delays. You should consult a qualified estate planning attorney to review your family and financial situation, your goals and explain the various options available to you. Once your estate plan is in place, you will have peace of mind knowing that you have provided for yourself and your family in case the worst happens.
Asset protection planning involves making prudent decisions today to protect yourself, your business, and your hard-earned assets from loss due to lawsuits, creditors or bankruptcies. Asset protection planning is especially prudent for professionals and business owners, whose personal assets could be at risk due the nature of their employment.
Statistically and anecdotally, we all know that the number of divorces, lawsuits and bankruptcies is staggering. While no one believes lightning will strike them, wealth created through a lifetime of work, saving and investing can be lost overnight if these forms of man-made lightning do strike. To protect your assets from such disaster, proper risk management strategies should be given careful consideration. These strategies include exempting your assets from the claims of creditors, limiting your liability through legal entities, and transferring your risk through insurance.
State and federal laws exempt some of your assets from the claims of creditors. Important to note is that while some states allow you to choose either the state or federal exemptions, in others you must use the state exemptions … and federal bankruptcy exemptions are not available.
Once you have identified the protected asset classes available to you under applicable law, it may be prudent to maximize your protection by converting non-exempt assets into exempt assets.
Many entrepreneurs operate their businesses as sole proprietors rather than through a legal entity, such as a Corporation or a Limited Liability Company. Whether their business is home-based or in the Fortune 500, these business owners are attracted by the informality of sole proprietorship. They also do not want to incur legal fees to create and maintain a legal entity. However, in addition to other advantages, conducting business through a legal entity may offer substantial risk management benefits.
While lawsuits brought against a sole proprietorship are really lawsuits against the owner’s personal assets, lawsuits against a properly created and maintained legal entity are really lawsuits against the entity’s assets. Nevertheless, the selection of an appropriate legal entity is critical for managing your risk.
When was the last time you reviewed the details of your liability insurance program with your insurance professionals? Are your policies current? Are the coverage limits adequate and are the deductibles reasonable? Have you scrutinized the policies for loopholes? Remember: the fundamental philosophy of any insurance coverage is to pay a premium you can afford to transfer a risk you cannot afford. During your asset protection planning, take time to understand both the risks you have retained and the risks you have transferred.
Digital assets are a new asset class and an important part of estate planning today, when the average person has more than 130 digital accounts. Few Americans have made any plans for how these accounts will be managed if they become incapacitated or when they die. If you’ve had a colleague or a loved one who was active on social media and passed, you know how disconcerting it is to get automatically generated “updates” from them.
Digital assets are a new asset class and an important part of estate planning today, when the average person has more than 130 digital accounts. Few Americans have made any plans for how these accounts will be managed if they become incapacitated or when they die. If you’ve had a colleague or a loved one who was active on social media and passed, you know how disconcerting it is to get automatically generated “updates” from them.
Digital assets include any online account requiring a login and a password. Think about the bills you pay online, or the sites you visit for shopping, gaming, social posts, medical and financial portals, podcast subscriptions, streaming subscriptions, music libraries and travel rewards programs. Those are part of your digital asset portfolio.
Cryptocurrency is also a digital asset, as are NFTs –nonfungible token, digital collectables valued anywhere from hundreds to millions of dollars. And if you’re not convinced cryptocurrency is here to stay, its market value is now counted in the billions.
If you own a business and have a website, the URL for the website likely has some value. If your business records are online, those are digital assets also.
This digital asset class requires a digital solution. We have established a relationship with a trusted partner to provide our clients with a digital estate planning solution to work seamlessly with our traditional Estate Planning. We believe this is the best way for most people who want to proactively protect their digital assets and understand how having a digital asset plan, like having an estate plan, will prevent a host of problems in the near and distant future.
Identity theft affects roughly 1 in 20 Americans every year, with total fraud losses in 2019 of nearly $17 billion, according to one major credit bureau. The number has increased dramatically as cyber identity theft has continued to grow. AARP reports that nearly 800,000 deceased individuals are targeted for identity theft annually. That’s almost 2,200 a day, and this number is growing There’s even a name for it: stealing the identity of the deceased is called ‘ghosting’.
Today’s identity theft takes place online and stealing the identity of the deceased is remarkably easy if no protection has been put into place. According to AARP, it can take as long as six months before financial institutions, credit reporting bureaus and even the Social Security Administration coordinate and finalized death records. It only takes a few keystrokes and a credit card number (often stolen) for a cybercriminal to purchase a Social Security number and retrieve enough information about a deceased person to steal their identity, open new credit card accounts, even take out a mortgage on the family home. In six months, your loved one’s identity can be bought and sold any number of times.
Transferring digital assets after death is a difficult task when no prior digital planning has taken place. Consider a traditional bank account. There are policies and procedures in place to accept a Power of Attorney, a paper trail of bank statements and a branch to visit or an 1-800-number to call. Lacking any paper statements, account information or passwords, how will your heirs locate your accounts?
Every now and then we read about a family desperate to salvage family photos or records from an iPhone, usually after the family has gone to court in an effort to retrieve data from a loved one’s phone. Most people are not in a position to take Apple to court, and resign themselves to the loss of photos, emails and any other assets on the phone or stored in the cloud. By preparing your digital estate plan now, your family will be able to avoid this stress and cost.
We suggest considering all of the financial, personal, sensitive, or private information on your device(s), including desktop computers, laptops, tablets, and cell phones:
It doesn’t take long for cybercriminals to hack into systems once they’ve learned a person has passed away.
Here’s a problem people worry about but don’t like to discuss. You may have accounts or subscriptions you’d like to keep private. You may even have items on your devices you meant to delete but never got around to. Without proper context, revealing them could forever change how your loved ones, colleagues and those important to you will remember you. A digital asset estate plan addresses these issues as well.
Depending upon the type of work you do, you may have a legal responsibility to ensure the privacy of work-related files are protected. Even if there is no legal responsibility, there may be corporate information at risk. A digital estate plan should address the secure transfer and cleaning of work files.
We do a lot of estate planning to protect families from needing to go through probate, which, depending upon where you live and the complexity of your estate, can take months or even years. During that time, your digital assets will remain vulnerable if you don’t take steps to protect them.
Here’s the challenge you’ll face if you decide to tackle this on your own. Each online platform has different rules, processes, and requirements for your loved ones to be able to access your accounts when you are gone. Some provide the ability to name a “legacy” contact, while others simply delete your files after a certain period of inactivity. Some will never allow anyone to access your assets. You would need to create a list of all of your accounts, all of your passwords and user names, and all of the policies and procedures required by the platforms for someone to access your accounts after you have passed.
Sometimes the hardest part of creating an estate plan is deciding who to name as Executor, Health Care Proxy or Agent, or Power of Attorney. This is not an unusual problem, although it is one that can be difficult to discuss. We can help!
In today’s mobile society, adult children and their spouses move to make their homes in a new place. Just as often, seniors decide it’s time to downsize and enjoy a leisure-focused lifestyle, complete with a more comfortable climate or a walkable community. While it’s easy to stay in touch with family when they live far away, it’s also very important to have someone in nearby who can spring into action if an emergency occurs.
In these situations, Attorney Robert W. Haley has served as a fiduciary for clients. He has served as an agent under a Power of Attorney, or be named as trustee or executor, working closely with you and under the ethical guidelines set by the Virginia State Bar. Mr. Haley can act as your fiduciary, relying on his ample experience as an agent, trustee and executor and relying on his knowledge of estate planning law.
This is a great relief to clients when they are concerned about having a trusted person they can count on during a difficult time.
Unfortunately, there are many families where it simply is not wise, or even safe, for family members to be named as Agent, Power of Attorney or Health Care Proxy or Agent. These are not happy situations, but they do occur. A family member may have a problem with substance abuse, or there may be a long-standing estrangement. Blended families can also pose a very difficult challenge for those serving as agents or executor in estate planning situations!
When this is the case, it makes good sense to have a trusted professional serve as a fiduciary. Attorney Robert W. Haley can serve in all of these roles, allowing clients to know they are in trusted and experienced hands. There is a great peace of mind that comes from knowing your estate and your family will be managed properly, without the family’s history of challenges becoming enmeshed in the estate plan.
Sometimes planning for incapacity can be more difficult than planning for death. Trusting someone to follow your choices as expressed in a Living Will or a Health Care Power of Attorney is a big leap of faith. If your beloved spouse is not able to act during times of great stress, which is not unusual, or if you’re not sure your adult children will be able to follow your directions, having a dedicated professional overseeing your wishes is a great comfort.
After helping you to create an estate plan, Attorney Robert W. Haley will be familiar with your own unique situation. He and the attorneys at the firm will help you clarify your wishes for incapacity and commit them to paper in your estate planning documents. You’ll be able to focus on your life instead of worrying about whether or not your spouse will be able to make the tough decisions if and when the time comes.
It’s very important to have your estate planning documents created and finalized with the necessary legal documents stating your choice of Executor, Durable Power of Attorney for financial matters, and Health Care Power of Attorney for medical matters. You’ll also need to name at least one successor Executor, Power of Attorney and Health Care Proxy. Attorney Robert W. Haley can help you determine who should be named for a primary, successor and if necessary, even a third person to be responsible for these tasks.
If you don’t have a properly prepared will and other estate planning documents, it is possible your estate will be handed over to your heirs if there is no surviving spouse or domestic partner. If this is the last thing you would want to happen, having an estate plan created and completed with our firm is the best solution.
Attorney Robert W. Haley has the experience and is highly qualified to serve as a fiduciary. His knowledge and diligence has been recognized by the Courts, who have appointed Mr. Haley as a conservator of an estate or on occasion, as successor administrator on Probate estates where the original fiduciary has been removed.
In an effort to ensure he can provide excellent fiduciary services to his clients, Mr. Haley is currently studying to become an Accredited Investment Fiduciary (AIF). This is an advanced designation attained only by individuals who have met educational, competence, conduct and ethical standards to carry out a fiduciary standard of care and serve the best interests of their clients. Fi360 is accredited by the American National Standards Institute (ANSI) for the AIF® Designation, making the designation part of an elite group of accredited designations recognized by FINRA.
Many people have preconceived notions about trusts and believe that they are only for multi-millionaires who wish to leave large trust funds to their children. However, this is far from the truth; trusts can be invaluable tools in the estate plans of millions of individuals! Trusts are simply an arrangement where one party holds property on behalf of another party. In an estate planning context, trusts are created by the person doing the estate planning (the settlor), who authorizes another person (the trustee) to manage the assets for the benefit of a third party (the beneficiaries). There are many reasons for establishing trusts including tax minimization or providing for the needs of underage beneficiaries.
Some types of trusts that may be useful in estate planning in certain instances are:
Many people leave money to their children or their grandchildren in a trust as part of a comprehensive estate plan. This is typically done to ensure the money is there for the children’s benefit while they are younger-for support, education, medical expenses, etc. Once the children reach a certain age or achievement level (such as obtaining a bachelor’s degree), they may receive money from the trust to do with as they please.
Special needs trusts are tools that enable a person to leave property to an individual with special needs. Many individuals with special needs receive government benefits. If they were to suddenly inherit money, they would be disqualified in most cases from those benefits until the inheritance was spent. Special needs trusts protect those individuals’ government benefits while allowing them to have money for any extras they may need.
Married couples sometimes include trusts in their wills, or separately, for the benefit of their spouse, typically for two reasons: (1) taxes, and (2) property protection. In previous years, marital trusts were needed for some couples to take advantage of estate tax exemptions, and they may be needed in the future as the laws are expected to change. Marital trusts can also protect property from a spouse to ensure that it ultimately goes where it needs to go. For example, a husband with grown children from a previous marriage may decide to let his wife use his property after he passes, but puts it into a trust so that after she passes away it goes to his children.
Revocable living trusts are documents completely separate from wills although they often work hand-in-hand with wills to carry out the decedent’s wishes. Revocable living trusts are primarily used to avoid probate in certain states (not Virginia) where probate is particularly cumbersome, or in a few other instances, such as when a person owns real estate in multiple states. However, these types of trusts are not for everyone and these type of trusts do NOTHING to protect your assets in the case of someone going to a nursing home or in regards to their long-term care expenses later on. In fact, it may even complicate Asset Protection in a crisis situation! It is HIGHLY recommended to have a full understanding of the short and long-term consequences of this type of trust before proceeding. Towards that end, be sure to check out this blog article from our website for more information in regards to Revocable Living Trusts.
Irrevocable life insurance trusts (or ILIT’s) can be used in order to move a person’s life insurance proceeds outside his or her estate for estate tax purposes.
Spendthrift trusts are generally established to protect the beneficiaries’ assets from both themselves and creditors. These trusts usually have an independent trustee which has complete discretion over the distribution of assets of the trust.
As you can see, these are a few examples of many different types of trusts possible, each of which can be customized to serve a valuable purpose in accomplishing the wishes of those making gifts or planning an estate. An experienced estate planning attorney in your area should help you assess your finances and goals to determine the best vehicles to preserve your wealth and your legacy.
Contact us today to schedule a consultation with one of our attorneys and see if a trust is truly right for you and your family! Our firm serves clients all over southside Virginia, and has offices in Danville, Bassett and Lynchburg to serve you!
Every year, more than 900,000 shelter animals are euthanized. How many of them were beloved pets whose owners could no longer take care of them? Today’s pets are treated like members of the family, beloved for their faithful and constant affections, providing comfort during tough times and unquestioning, unending love. But what happens when their owners are disabled and can’t care for their animal companions or when they die?
You can protect your pet from becoming another statistic by establishing a trust for your pet to provide for their care when you can’t be there for them. Regular people use these trusts to protect their pets from being placed in a shelter where they may meet a terrible, undeserved ending.
Just as one of the main goals of estate planning is to provide for your loved ones, a pet trust is designed to protect your pet. Unlike a promise from a friend or relative, a trust for your pet is legally binding and enforceable. With a pet trust, you can be sure your pet will have the same comfort and care, with or without you in their lives.
Our estate planning law firm can help prepare a plan and a trust to ensure your pet has a comfortable life. The pet trust will need to be created and funded and a trustee will need to be named who will be in charge of ensuring the directions in the trust are followed. A caretaker will be named, a person you choose who you feel will take the best care of the pet. The expenses necessary for veterinary care, housing, grooming, feeding, and training or exercising, will be covered by the trust.
When should you have a pet trust created? As soon as possible. The last few years have taught many of us the unfortunate lesson that life is fragile and unexpected events occur. The sooner your pet trust is created, the sooner you can relax knowing your beloved animal friend will be cared for, no matter what the future may bring.
Our estate planning law firm can help prepare a plan and a trust to ensure your pet has a comfortable life. The pet trust will need to be created and funded and a trustee will need to be named who will be in charge of ensuring the directions in the trust are followed. A caretaker will be named, a person you choose who you feel will take the best care of the pet. The expenses necessary for veterinary care, housing, grooming, feeding, and training or exercising, will be covered by the trust.
When should you have a pet trust created? As soon as possible. The last few years have taught many of us the unfortunate lesson that life is fragile and unexpected events occur. The sooner your pet trust is created, the sooner you can relax knowing your beloved animal friend will be cared for, no matter what the future may bring.
Here are some of the most commonly asked questions about Pet Trusts:
You can protect your pet with a pet trust. Even though you consider your pet as a companion, legally, your pet is personal property and does not have an individual legal rights like those of a person. This is why a pet trust is so important. A legally binding trust is the best approach.
This is a common mistake people make with the best of intentions. It may seem easy, but this creates a number of problems.
If your estate goes through probate, who is responsible for your pet during the year or more it takes to settle the estate? Pets can’t wait for probate. They need food, water, shelter, and human affection every day.
Your pet will know you are gone and be grieving. This may make your pet less attractive to adult children who might have once offered to care for it. Your siblings may not want to care for your pet, as it may remind them of you.
During probate, your pet may end up in a shelter, despite promises made by friends or family. Many people are now use pet trusts to provide funds and direction for the care of their pet.
Unlike a will that is subject to probate process, any trust becomes effective immediately upon the terms outlined in your trust – usually upon death or incapacity. Your pet trust specifies the details concerning the care and control of your pet, as well as providing funds for their care. A pet trust can also give specific directions about the daily care, medical attention, physical control, and even burial of your pet.
A trust is a legal entity set up to accomplish a particular purpose. You and your estate planning attorney will outline the specifics of when and under what circumstances the trust is to take effect. This includes how the trust will be funded and the name of a trustee and successor trustee. You’ll also name a caretaker and provide details for how the caretaker should treat your pet. The trustee will be in charge of managing the funds in the trust and distributing the funds as needed to the caretaker.
You want your pet to be fed, cared for, and to receive medical attention. You may also want to designate funds for pet insurance, or even to enforce the trust. In your trust, you can also leave real property for housing your beloved companion.
A ‘pet trust’ is a generic term applied to a trust that provides for a pet. Animals may not legally be a beneficiary of traditional trusts because one of the legal requirements for a trust is that there must be a beneficiary, and the beneficiary must be able to enforce the terms of the trust. So, the choice and structure of a pet trust must take this into account and be properly worded to accomplish your goals.
Most trusts for the care of pets include the following:
Some states have enacted statutes allowing enforceable pet trusts that can designate a third party who has the power to enforce the terms of the trust – to compel the caretaker or trustee to use the trust funds for your pet. Some issues have been found with these trusts include whether the amount of funds in the trust is ‘reasonable’ according to court standards, and who the designated third party to enforce the trust would be.
This is a type of trust set up for a specific purpose (such as to provide for a pet) but without a definite beneficiary. The problem with an honorary trust is that without a statute specifically authorizing it as a pet trust, it is essentially unenforceable.
One of the best methods to ensure the care of your beloved pet is to set up a traditional legal trust. Your attorney can carefully add language to avoid problems. One method used is to actually place the pet and sufficient funds into the trust. The pet and the funds are the body of the trust. Your attorney then names the caretaker of your pet as the ‘beneficiary’ of the trust. You name a trustee – the party responsible for managing the funds and the caretaker.
We will advise you as to the correct type of trust for your unique situation.
You’ll need to gather some information to evaluate how much money will be needed. A senior dog who takes daily medication and may need surgery in the near future will need one type of budget, while animals with very long life spans, such as horses, reptiles, or certain types of birds, will need another.
You and your estate planning attorney will need to consider the costs of housing in your current community and review local veterinary costs to arrive at a realistic number.
You can protect your pet with a pet trust. Even though you consider your pet as a companion, legally, your pet is personal property and does not have an individual legal rights like those of a person. This is why a pet trust is so important. A legally binding trust is the best approach.
Many are under the mistaken impression that their spouse or adult children can automatically take over for them in case they become incapacitated. The truth is that in order for others to be able to manage your finances, they must petition a court to declare you legally incompetent. This process can be lengthy, costly and stressful. Even if the court appoints the person you would have chosen, they may have to come back to the court every year and show how they are spending and investing each and every penny. If you want your family to be able to immediately take over for you, you must designate a person or persons that you trust in proper legal documents so that they will have the authority to withdraw money from your accounts, pay bills, take distributions from your IRAs, sell stocks, and refinance your home.
A Durable Power of Attorney is a document that empowers another individual to carry on your financial affairs in the event you become disabled or incapacitated. Without a Durable Power of Attorney in place, it may be necessary for one of your loved ones, including your wife or adult child to petition a court to be appointed guardian or conservator in order to make decisions for you when you are incapacitated. The guardianship process involves the court system, is time-consuming, expensive, and often costing thousands of dollars in addition to being emotionally draining for your family.
There are generally two types of durable powers of attorney: a present Durable Power of Attorney in which the power is immediately transferred to your attorney-in-fact; and a ‘springing’ or future Durable Power of Attorney that only comes into effect upon your subsequent disability as determined by your doctor. When you appoint another individual to make financial decisions on your behalf, that individual is called an agent or attorney-in-fact. Most people choose their spouse or domestic partner, a trusted family member, or friend for this duty.
Generally, any individual over the age of majority and who is legally competent can establish a Power of Attorney.
In general, an agent, or attorney-in-fact, may be anyone who is legally competent and over the age of majority. Most individuals select a close family member such as a spouse, sibling or adult child, but any person such as a friend or a professional with an outstanding reputation for honesty would be ideal. You may appoint multiple agents to serve either simultaneously or separately. Appointing more than one agent to serve simultaneously can be problematic because if any one of the agents is unavailable to sign, action may be delayed. Confusion and disagreement between simultaneous agents can also lead to inaction. Therefore, it is usually more prudent to appoint one individual as the primary agent and nominate additional individuals to serve as alternate agents if your first choice is unwilling or unable to serve.
The law allows you to appoint someone to decide about medical treatment options if you lose the ability to decide for yourself. You can do this by using a “Durable Power of Attorney for Health Care” or Health Care Proxy where you designate the person or persons to make such decisions on your behalf. You can allow your health care agent to decide about all health care or only about certain treatments. You may also give your agent instructions that he or she has to follow. Your agent can then make sure that health care professionals follow your wishes and can decide how your wishes apply as your medical condition changes. Hospitals, doctors and other health care providers must follow your agent’s decisions as if they were your own.
A Living Will informs others of your preferred medical treatment should you become permanently unconscious, terminally ill, or otherwise unable to make or communicate decisions regarding treatment. In conjunction with other estate planning tools, it can bring peace of mind and security while avoiding unnecessary expense and delay in the event of future incapacity.
Some medical providers have refused to release information, even to spouses and adult children authorized by the Healthcare Power of Attorney on the grounds that the 1996 Health Insurance Portability and Accountability Act, or HIPAA, prohibits such releases. Therefore, as part of your incapacity planning, you should sign a HIPAA authorization form that allows the release of medical information to your agents, successor trustees, family or any other individuals you wish to designate.
The Estate & Elder Law Center of Southside Virginia, PLLC serves people with legal needs throughout Virginia, with offices to serve you in Bassett and Danville as well as our newest office located in Lynchburg: The Estate & Elder Law Center of Central Virginia, PLLC.
Certified Elder Law Attorney® Robert W. Haley and staff are ready to help you with mapping out the future through estate planning and medicaid planning/asset protection. Let our firm put our experience and diligent legal representation to work for you!
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