Happy Easter from Attorney William Kovatch

William J. Kovatch, Jr.
(703) 837-8832
info@kovatchelderlaw.com

Supreme Court to Address Same Sex Marriages

The Supreme Court announced that it would hear two cases which involve same-sex marriages.  One case is from California, and concerns a ban on same sex marriages approved by California voters.  The other is an appeal from the U.S. Court of Appeals for the Second Circuit which held that part of the Defense of Marriage Act was unconstitutional.

The Second Circuit case concerned a lesbian couple who had married in Canada, but lived in New York.  One spouse died, leaving her estate to her surviving spouse.  The surviving spouse claimed the marital deduction against the federal estate tax.  The Second Circuit held that the Defense of Marriage Act, which prohibits the Federal Government from recognizing same-sex marriages, violated the Equal Protection Clause of the U.S. Constitution.

The move by the Court does not necessarily mean that the Court will reach the central issue of whether same-sex marriages should be recognized in the United States.  Nonetheless, a possible outcome of the cases could be the resolution of whether same-sex couples can enjoy the same benefits under federal law as heterosexual couples.

By:  William J. Kovatch, Jr.
(703) 837-8832
info@kovatchelderlaw.com

The Pro Se Guardianship Proceeding

I don't want to sound as if I want to restrict access to our courts.  However, there is a trend, at least here in Fairfax County, Virginia, that has me concerned.  That trend is the rise in number of pro se guardianship petitions, or guardianship petitions that are filed without the help of a lawyer.

I understand the reason these petitions get filed without a lawyer.  Usually, there is a well-intentioned family member who just wants to make sure that an older person who appears more and more confused is getting the help they need.  In many cases, resources are tight, and the family member wants to try to avoid spending a lot of money.

Indeed, guardian petitions are costly.  This is one of the reasons why I warn people that they should put a comprehensive estate plan in place.  If drafted properly, a few dollars spent now can avoid thousands of dollars in expense and hassle down the road.  To properly pursue a guardianship petition, you should expect to pay a lawyer somewhere between $1,500 to $2,500, to pay a court-appointed guardian ad litem somewhere between $1,000 to $2,500, court costs of a little under $100, and additional costs such as doctor's fees, surety fees and other expenses

Even though the petitioners appear to be well-intentioned, and may resent the notion that they have to spend thousands of dollars out of their own pockets to pursue a guardianship case in Virginia, there is a reason for it.  A guardianship petition should never be taken lightly.  First, in Virginia, anyone can file a guardianship petition against anyone else.  If successful, the petitioner will be taking away numerous fundamental rights from the potential ward.  This could include the right to make medical decisions, the right to control your finances, the right to drive, and the right to vote.  Given the seriousness of the matter, courts simply cannot grant guardianship petitions on a whim.  They must be supported by evidence, and the potential ward must be given the meaningful right to contest the proceeding.

Those who file guardianship petitions pro se are often surprised to find out how they work in Virginia.  Before a guardian can be appointed, there must be an evaluation by a licensed health care worker who certifies that the person is incapacitated.  When the guardianship petition is filed a lawyer, called a guardian ad litem, is appointed to provide guidance to the court.  The guardian ad litem is required to investigate the matter, interview all of the relevant players, including family members and doctors, review all relevant information, including medical reports and financial records, and give a report to the court on whether a guardian is necessary.  This takes time.  And, that time gets billed.  Petitioners who choose not to hire their own lawyer are often surprised to find out that Virginia law places the cost of all of this on them.

To be certain, if a guardianship petition is granted, it is possible to get the court to order that the costs associated with the petition be borne by the ward, assuming the ward has sufficient funds.  In some cases, if the ward is indigent, the cost of the guardian ad litem is paid by the Commonwealth.  But, petitioners are taking the risk that all of the expenses will come out of their pocket.

Then, there is the case of the contested guardianship.  In most cases, the guardian is appointed through a simple hearing after the guardian ad litem files the report with the court.  But, if the potential ward objects, then there may need to be a hearing where the rules of evidence apply.  In fact, the potential guardian has the right to insist on a jury trial.  All of this adds to the hassle and expense.  Indeed, a contested guardianship case can cost n the tens of thousands of dollars in lawyer's fee, including the fee of the guardian ad litem.

Filing a guardian petition without a lawyer is also unfair to the guardian ad litem.  The guardian ad litem's role is not to be the layer of the petitioner.  It is to represent the best interests of the potential ward.  Yet, when a guardian petition is filed without a lawyer, inevitably legal requirements, such as the need for a doctor's evaluation, are overlooked.  This places the guardian ad litem in the very uncomfortable position.  Should the guardian ad litem help out the petitioner, and in effect do things that the petitioner's counsel would have done?  Or should the guardian ad litem simply recommend rejecting the petition for failing to meet the legal requirements, and foot the petitioner with a bill for his or her services in doing so.

And all of this is why pursuing a guardianship petition without a lawyer is a very bad idea.  Petitioners need to be forewarned on exactly what the process involves, and how much it can cost.  In the end, hiring a lawyer to guide you through the process will save everyone involved in the process time and expense, while protecting the rights of the potential ward.

By:  William J. Kovatch, Jr.
(703) 837-8832
info@kovatchelderlaw.com

Using Trusts and Powers of Attorney in Your Estate Plan

There are various tools that you can use in your estate plan to make sure that your property is handled the way you want.  Two such tools are the trust and the power of attorney.

A trust is a legal arrangement where one person, a trustee, holds and manages property for the benefit of another person, the beneficiary.  Through a trust agreement, the trustee is given instructions on what to do with the property held in trust.  This includes instructions on what to do with the property once the beneficiary has died.

The most common type of trust used in estate plans is the inter vivos, or living, revocable trust.  The owner of the property appoints himself or herself as both the trustee and the beneficiary.  He or she then appoints a successor trustee to take over when the original trustee dies or becomes incapacitated.  The trust includes instructions on what to do with the property upon the owner's death.

Revocable living trusts are commonly used to avoid probate.  That is, by owning your property through a trust, you do not have to file it with the probate division of the court, and go through the expensive and tedious process of probate.  In Virginia, where every estate with more than $50,000 (exclusive of real estate) must go through probate, using a living trust can save your heirs money and hassle after your death.

But, revocable living trusts can have other purposes.  They include assisting an older person who needs hep managing money by appointing a co-trustee to help make financial decisions. 

A power of attorney is a document that appoints a person to make decisions for you.  You appoint an agent, also known as an attorney-in-fact.  Your agent has the power to act as if her or she were you.  That can make it easier for you to have someone do your banking or sign documents in a real estate transaction.  Of course, since the agent can do things on your behalf, you better make sure your agent is a person you trust to act in your best interests.  Powers of attorney can be limited.  An example is a power of attorney to complete a real estate transaction while you are out of town.  Powers of attorney can also be general.  This is where you appoint an agent to do anything you can do.  They should also be durable, meaning that the powers of attorney is effective even when you are incapacitated.

The most common reason to have a power of attorney is to protect your estate from the need to engage in guardianship proceedings.  That is, if you become incapacitated, and you do not have a power of attorney, then in order for someone to take care of your estate for you, that person would have to go through a guardianship proceeding.  Guardianship proceedings are expensive and can be embarrassing.  By contrast, a power of attorney is usually a fairly simple and inexpensive document to create.

I go into more detail on trusts and powers of attorney in this article.

When you are ready to discuss you estate plan, you should contact a knowledgeable attorney to discuss the options available and the advantages and disadvantages of each option.

By:  William J. Kovatch, Jr.
(703) 837-8832
info@kovatchelderlaw.com

Social Security and Retiring Overseas

Some people look forward to retirement as an opportunity to live overseas.  It may be a chance to spend some time relaxing on a tropical island in the Caribbean.  Perhaps it is time to open a boutique or restaurant in an exotic location.  Or maybe, retirement is a chance to give back to the community, by performing a service, such as medical care, at low-cost or no charge to people of an impoverished nation.

Whatever the reason, retiring to live overseas may raise a number of legal and financial questions.  Will living overseas affect Social Security benefits? What about working overseas?  Are there tax issues to consider?

For U.S. citizens, the good news is that for the most part, living overseas will not affect your ability to collect Social Security retirement benefits.  Such benefits are contingent on your working for 40 qualifying quarters.  So long as you have those 40 quarters of earnings, and reach the right age, you can collect Social Security retirement benefits.  The payment of benefits to U.S. citizens does not depend on U.S. residency.  You can choose to have those benefits deposited in the United States or to another country, with the exception of Cuba, North Korea, Cambodia, Vietnam or areas that were in the former Soviet Union (other than Armenia, Estonia, Latvia, Lithuania and Russia).

For non-U.S. citizens, otherwise eligible for Social Security benefits, the issue is a little more complicated.  Currently, citizens of List 1 will continue to receive Social Security payments no matter how long they live outside of the United States.  In some other countries, List 2, a citizen may not receive U.S. Social Security benefits if those benefits are based on being a dependent or survivor of the wage earner.  Finally, some countries only permit Social Security payments for the first six months of living outside the United States.  However, if you return to live in the United States for an entire calendar month, payments will resume for another six months when you return to the foreign country. A complete explanation of these rules can be found on the Social Security website, http://www.socialsecurity.gov/pubs/10137.html (“Your Payments While You Are Outside The United States”).

Retiring overseas, therefore, creates some issues with respect to your Social Security benefits.  Before making the decision to retire, you should consult with your financial advisor and your lawyer to see just what impact living and working overseas will have on you and your income.■  

Choose Your Trustees, Agents and Health Care Proxies Wisely

This week, a colleague asked me to review a trust for her. We were concentrating on the tax provisions. But what struck me most of all were the provisions concerning the Trustee.

There were instructions to the Trustee about what to do if the beneficiaries engaged in drug abuse. There was a provision about how to handle the house, because the client had feared that one sibling might use the house as a tool to bully the other. Then, to my surprise, the siblings were named as the successor co-trustees. Wow. That was odd.

As the name suggests, appointing a trustee requires trust. You have to trust that the person you appoint is going to fulfill your wishes and going to be fair with your beneficiaries. The same concept applies to appointing an agent through a power of attorney and a health care proxy or health care agent through an advance directive. If you can't trust the person, then you are giving that person way too much power.

This is where family dynamics come in. In way too many cases, people choose trustees, agents or health care proxies because they don't want there to be hurt feelings. One sibling was chosen over the other as trustee, so that must mean you favor that one. Quite frankly, I think those types of considerations should be given minimal weight in the grand scheme of things. The primary consideration should be do you trust this person to do the things you want done, while being fair to the beneficiaries. If you fear that the person you want to appoint will bully others, then you've made the wrong choice. If you appoint co-trustees because you fear one will bully the other, then you are forcing two people to work together who probably shouldn't. Again, you've made the wrong choice.

In most families, choosing an adult child as a decision-maker or fiduciary is a good choice. But, if your family dynamics is such that you cannot trust siblings to work together, then you need to make another choice.

Here are some considerations I give to my clients when choosing a trustee. Number one, trust. Can you trust this person? Number two, age and health. Is this going to be a person who will be around and able to act when you get sick or pass away? Number three, proximity. If you want a decision to be made quickly, then it may be advantageous to have someone who lives nearby to be the decision-maker, and not the adult child who lives on the other coast or on another continent.

Sometimes, we come to a point where it is clear that a friend living close by is a better choice for fiduciary than an adult child. If that is the case, don't be afraid to hurt your family's feelings. This is an important choice for you, not for them.

We Specialize in Small Estates

Are the executor or personal representative on a Virginia estate worth more than $50,000, but less than $200,000? These estates are particularly troublesome, because you still have to file inventories and accountings, and pay the Commissioner of Accounts filing fees as well.

We specialize in assisting with small estates, and doing it at a price that is reasonable. We have a good working relationship with a fiduciary accountant who can prepare the filings at an hourly rate that is lower than an attorney's rate. Attorney rates will only be charged for court proceedings, and reviewing the filings before they are submitted to the Commissioner of Accounts Office.

If you are responsible for an estate that is worth less than $200,000, contact William J. Kovatch, Jr. now for help.

Giving a Gift to a Minor Through Your Estate Plan

Whether to a child, a grandchild, a special niece or nephew, many people wish to give gifts to minors through their estate plan. It can be accomplished through a will, a trust, a life insurance policy, or even by naming a beneficiary on a retirement account. Making the gift correctly can avoid a lot of hassle.

In this article, I am not addressing the tax implications through the estate tax, the gift tax or the general skipping transfer tax. I am only addressing the mechanics of how the transfer is made.

Many states, like Virginia, have the Uniform Transfer to Minors Act. If a minor is the beneficiary of a gift from a will, trust, insurance policy or other source, then the gift-giver has the power to appoint a custodian. The custodian then has the authority to hold the gift for the minor until the minor reaches 18, and use the money for the minor’s benefit.

If the gift-giver fails to name a custodian, then this can create problems. In Virginia, the person who wants to hold the property for the minor must then petition the court to be appointed the guardian of the estate of the minor. This is true, even if that person is the minor’s custodial parent. The guardian of the estate must post a bond with surety, and then comes under the supervision of the Commissioner of Accounts. Before using the money for the minor’s support, the guardian of the estate must consider all other sources of income or support for the minor. Generally, this means that the money cannot be used until the minor reaches the age of eighteen. As you can see, the need to go to court and the supervision afterwards creates a hassle and expense.

Other options in this situation can be for the Commissioner of Accounts to hold the money in an interest bearing account until the minor reaches the age of eighteen. Or, if insurance proceeds, the insurance company can hold the money until the minor reaches the age of 18.

Nonetheless, these options all leave something to be desired. It involves giving up control, and/or accepting court supervision.

The way to solve that problem is by leaving the gift through a well crafted trust. By creating a trust, the gift giver can define how the money is to be used, and when the money is to be turned over the to minor. For example, the trust can provide that the money can be used at the discretion of the trustee for the minor’s expenses. The money need not be turned over when the minor reaches age 18. Rather, if there is a concern that the minor would not be responsible enough, then the money can continue to be held in trust until the beneficiary reaches a suitable age, as defined by the gift-giver. Moreover, if the minor is disabled, as defined by Social Security law, then the trust can and should be drafted in such a way so as to avoid disqualifying the beneficiary from government benefits.

Gifts to minors through an estate plan are usually best made through a trust. For advice on how to craft such a trust to suit your specific needs and desires, call me at (703) 837-8832.

Beware the Contested Guardianship!

Guardianship proceedings exist to create protection for people who are no longer capable of making decisions for themselves. Often, a relative, such as an adult child, will bring a guardian petition when the mental abilities of an elderly person has started to deteriorate. Sometimes, a guardian petition is brought by a concerned family member to protect the elderly person from the exploitation of another.

In my experience, most guardianship petitions are uncontested and well-intentioned. But sometimes, a guardianship petition becomes just another phase in a bigger dispute among adult children. Far too often, disputes between adult siblings get heated because there is a belief that mom has money.

A contested guardianship case can become a problem quickly. In Virginia, if a guardianship petition is successful, and the elderly person's estate has the funds, all of the costs, including lawyers' fees, are paid from the elderly person's estate. If the adult children cannot agree on what is best for the elderly parent, and litigation ensues, this means that money that should be used for mom's care winds up getting eaten away by lawyers' fees.

Morally, adult children should give serious thought to just how hard they want to fight in a contested guardianship case. In fighting to control what happens to mom and her assets, the children could wind up throwing her money away.

Special Needs Trusts and Your Will

A colleague asked me when a special needs trust is written into a will, does a new document creating the trust need to be drafted. I answered that if the trust was created properly, then no.

However, this raised a separate question for me. Why was the special needs trust created by will, as opposed to a living trust?

To back up, a special needs trust is an instrument to make funds available to benefit a person with disabilities, so that the person would not be disqualified for public assistance. It must be drafted and administered properly, or else the funds in the trust can be considered resources, and thus disqualify the person for government programs such as Medicaid.

The problem with writing a special needs trust in the will is that the will has to be probated. Once the will is probated, here in Virginia, the Commissioner of Accounts for that county will be responsible to oversee the administration of the trust. This will necessarily involve the filing of inventories and accountings, filing fees, and the expense of hiring professionals, such as a lawyer and accountant, to make sure the filings are done properly. All of this can add to the hassle and expense of administering the trust.

A better way to handle the desire to make a special needs trust as part of an estate plan is to create the trust as part of a living trust. That way, upon death, the trust does not have to go through probate, and you do not have the watchful eye of the Commissioner of Accounts over you.

If you want to benefit a person with disabilities through your estate plan, it is best to consult a lawyer experienced and educated in special needs trusts to assist you and create the most efficient plan for you.

Who Will Make Your Funeral Arrangements?

While many people do not want to think about their own funeral arrangements, there are some who have some pretty strong feelings about the subject. The question is, how do you enforce your wishes, since you will not be around to direct your family?

Under Virginia law, the next of kin are entitled to make the decision regarding the disposition of a loved one's body and the funeral arrangements. But, the definition of next of kin is broad, including a spouse and any adult children. If there is disagreement, then the disagreeing next of kin can petition the circuit court.

This seems like an awful lot of trouble. It is especially problematic where a person has entered into a second marriage, or where a person is separated from his or her spouse and has not yet gotten a divorce.

Virginia law does have a solution. A person can designate an individual to be the person to make the decisions regarding the funeral arrangements and the disposition of the body. The designation must be in writing and notarized. It must also be accepted in writing.

If you feel strongly about the disposition of your body and your funeral arrangements, this should be part of your estate plan. You should put your desires in writing, and designate a person whom you trust to go through with your plan. A lawyer can help you accomplish this.

Non-Probate Assets Are an Important Part of Your Plan

This article reminds us of how important it is to make sure you are naming your beneficiaries properly. Pay on death accounts or accounts with a death beneficiary are an important part of your estate plan. They are meant to pass property, such as life insurance proceeds, or retirement accounts, without the need to go through the probate court. But, since they are not governed by the court, you need to make sure that you are naming your beneficiaries properly.

For example, when I have a couple with young children, I normally recommend a living trust as the corner stone of the estate plan, so money can be managed for the children should the parents meet an early demise. But, for most young couples, their "wealth" will be held in pay on death accounts like life insurance. For the plan to work, the couples have to change their beneficiaries to the trust.

Likewise, it is important on major life events to change the beneficiaries of the accounts. Such events include a marriage, a divorce, a death in the family, or some similar event. It is a good idea to review the beneficiaries regularly to make sure your estate plan is working the way you intend it to work.

Even Those With Less Than $1 Million Need to Plan

This article explains what estate planning is, and why even those without $1 million need to plan. For Virginia residents, anyone with more than $50,000 in assets needs to plan. I have seen estates worth around $100,000 incur over $10,000 in estate administration costs. Spending $2,000 or less to consult with a lawyer can save both the expense and the hassle.

The 25 Documents You Need Before You Die

The 25 Documents You Need Before You Die

Long Term Care Insurance

With modern medical science, the good news is that more people are living longer. The down side is that more people are requiring long-term care, such as nursing homes, for chronic illnesses. With the average nursing home cost in Northern Virginia at over $5,000 per month, those who find themselves in the need for long-term care are scrambling to find a way to pay for it.

One common solution is for the person to apply for Medicaid. This is a government-sponsored health insurance program for the needy. To qualify, a person’s medical expenses must be greater than his or her monthly income, and the person’s countable resources must be below $2,000 for a single person and $3,000 for a married couple.

However, the increased costs of medical services to the elderly has become a larger burden on the Government. The Government’s response has been to encourage more and more people to buy long-term care insurance. That is, an insurance policy to provide benefits when a person finds himself or herself in need of long-term care. Unfortunately, with some premiums reaching over $300 per month, people have been resistant to buy long-term care insurance.

In 2005, the Federal Government tried the “stick” approach to encouraging people to buy long-term care insurance. Congress passed the Deficit Reduction Act (“DRA”), which had a huge impact on Medicaid applicants. In order to qualify for Medicaid, a person cannot give resources away for nothing. The 2005 DRA changed the way that the period of ineligibility is calculated for those who do try to give assets away. It increased the look-back period to five years before the Medicaid application. Plus, the period of ineligibility ran from the date of the application, no matter when the uncompensated transfer took place in that five year look-back period.

In 2007, Virginia took a “carrot” approach, instituting the Long-Term Care Insurance Partnership. Now, in Virginia, if a person buys a qualified long-term care insurance policy, that person will be able to protect additional resources when qualifying for Medicaid. That is, for every dollar paid out under a qualifying insurance policy, the countable resource limit is increased by a dollar. For example, if a person receives $100,000 in insurance proceeds, then that person can protect an additional $100,000 as a non-countable resource when applying for Medicaid.

Purchasing long-term care insurance also has income tax advantages. If the policy is employer-provided, then any amount paid by the employer is not included in the employee’s income. Moreover, qualifying amounts paid by the employee will count toward the employee’s medical expense deduction. In 2009, for people under the age of 40, that amount was $320. For people between 41 and 50, the amount was $600. For people between the age of 51 and 60, the amount was $1190. For people between the age of 61 and 70, the amount was $3180. For people 71 and over, the amount was $3980.

Thus, there are advantages to purchasing long-term care insurance. You should discuss long-term care insurance as part of your estate plan, to protect your wealth from medical expenses. To find a plan that is right for you, talk with a qualified long-term insurance agent.

Lost Will Can Cause Evidentiary Problems

In Virginia, when the executor is ready to open an estate, he or she makes an appointment with the probate division of the circuit court, and, among other things, brings the will. The probate division will require an original signed copy. But what if the will is lost? What do you do then?

The probate division will not accept a photocopy of the will. To admit a photocopy of the will, the executor will have to file an action in the circuit court requesting an order that the photocopy be admitted to probate.

But, proving that the court should issue the order is not always an easy task. The reason is that a person who writes a will has the right to revoke it. One way he or she can revoke it is by destroying the will. So, when you do not have the original will, you have to satisfy the court that the testator did not revoke it by destroying it.

Virginia law creates two presumptions. The first is that when the will was in the possession of the testator, if the will cannot be found, the will is presumed to have been revoked. The second is that when the will was not in the testator's possession and cannot be found, the will is presumed lost and not revoked. Either presumption can be overcome, but only with clear and convincing evidence.

The best practice is not to rely on presumptions. For example, assume the testator gave the original copy of the will to his or her lawyer for safe-keeping. After the testator's death, the lawyer cannot find the will. The executor should present testimony from the lawyer, not only that he or she cannot find the will, but also on the surrounding circumstances. Why was it lost? Did the law firm move? Did the lawyer have any communication with the testator after signing the will?

The executor should try to present other evidence as well. What kind of person was the testator? Did he or she talk with anyone about the will? Was there any family discord that would show that the testator had reason to revoke the will? Is there any reason to suspect undue influence?

The executor should be prepare to make this motion before going to the probate division. Without an order, the probate division will not admit the photocopy of will to probate. A qualified estate administration lawyer can help.

Planning for Adults with No Children

Recently in my practice, I have noticed something of a trend. That trend is the growing number of older adults who are single, childless and seeking estate planning advice. There are a host of reasons why they are single and childless. Some may have gone through a divorce and never remarried. Some may have been widowed. Some may have focused so much on their careers that they simply never married and had children.

Planning for this set of the population presents some special challenges. The first of such challenges is determining who to choose to serve in various positions of trust, called fiduciaries. Often, when you have a married couple with mature adult children, the couple will look first to the adult children to serve in such positions as executor, trustee or health care agent. When you have an older adult who does not have any children, however, the choice of who shall serve in these positions is not as obvious.

When the single older adult has siblings, often they will think first of appointing a sibling to serve in a position of trust. This, however, can present some special considerations. First, siblings tend to be relatively close in age. Thus, there is a question of whether the sibling will actually pass away first. This could leave the older adult in need of appointing new fiduciaries when their siblings pass away. There is also the risk that once the older adult passes away, the sibling will be unable to take on the role of fiduciary because of factors such as dementia or other health conditions. These problems can be avoided by having the older adult appoint alternative fiduciaries to serve in the event that their first choice either passes away first, or cannot serve for other reasons.

Another potential problem is that siblings may live in different areas of the country. If the sibling must travel a long distance in order to accept an appointment, that may serve as a disincentive to act. In this regard, the older adult should understand that accepting a fiduciary role is voluntary. Even if a person is named in a legal document, that person can still turn down the role.

In some cases, there may be a niece or nephew who is close, in an emotional sense, to the older adult. Such a person may be a better choice, simply because a niece or nephew is likely younger, and thus more likely to outlive the older adult. But, in some cases nieces and nephews may also live quite a distance away from the older adult. Moreover, if the niece or nephew is appointed as an agent to make health care decisions, there could be question of whether that niece of nephew truly knows what the older person would have wanted.

An older adult could look to friends and co-workers. Again, because people tend to associate with others who are close to them in age, this may not alleviate the concern of who will be the first to pass away. Plus, despite friendship, some people may be hesitant to ask someone who is not a relative to take on the burden of administering their estate, or making health care decisions for them.

There may be no simple solution to the dilemma of appointing fiduciaries. At the very least, there should be alternatives named in case the primary choices are unwilling or unable to serve. But, identifying the people who will serve may take some additional time and consideration.

The next issue is exactly what to do with the older adult’s wealth after death. If the older adult has no children, then there will be no obvious choice to inherit that person’s estate. In some situations, the older adult may have done a great job in planning for retirement. He or she may have valuable retirement accounts and investments. He or she may also own real property.

To whom the estate should be left is a very personal question. This may an opportunity for the older adult to leave a legacy, and thus give much of the estate to charity. Perhaps there is a favorite sibling or nephew to whom the older adult would like to leave a gift. Perhaps the older adult has simply not thought about their distribution plan.

What is certain is that if the older adult does not create an estate plan, the state government will create one for them. When a person has not left a will, or placed his or her property in trust, then that is called intestacy. The intestacy laws will then determine who inherits the person’s property. Intestacy laws vary by jurisdiction. But, they tend to favor relatives. Usually, spouse and/or children are the first choice to inherit the estate. If the older adult has no spouse or children, intestacy laws usually look first to see if there is a surviving parent, then brother or sister. In the end, if there is no one to take the estate, then the property will escheat. That means it will belong to the state. If the older adult is not happy with this plan, then it is imperative that he or she think long and hard about how he or she would want his or her property distributed.

The unique challenges presented by single, older adults without children require greater attention and consideration. Consulting with a professional may be helpful, but it may not answer all of the questions. In the end, the choices in creating an estate plan are very personal, and should match a person’s own goals and values.

Avoiding Guardianship Proceedings

Proceedings to appoint a guardian or conservator can very difficult ones. Such proceedings can be costly. The petitioner (the person bringing the lawsuit) may be required to advance to the attorney his or her fees, and, in Virginia, may also be required to advance court costs and the fee for the Guardian ad Litem. While some of these costs may be recoverable from the estate of the ward (the person who needs the guardian) if a guardian is appointed, they remain at risk during the pendency of the proceeding. The petitioner may also need to pay the doctor a fee for preparing a report.

Guardian proceedings are intrusive. The petitioner may be required to air out in public papers and a public hearing those facts that require the appointment of a guardian. This can include evidence of behavior showing that a person has lost the ability to make decisions or engage in activities of daily life without assistance. This can be embarrassing for the family.

For these reasons, if a proceeding to appoint a guardian or conservative can be avoided it should.

Guardianship proceedings can be avoidable with a little planning. If you believe that you may need help in the future with finances and healthcare decisions, and you know somebody you can trust, you can make legal arrangements to appoint another person to make those decisions for you.

Through an advance health care directive (also known as an advance medical directive), for example, you can name a trusted person as your “health care proxy,” and give that person instructions on how you want medical decisions to be made. If you become unable to make the medical decisions for yourself, your health care proxy steps in to make the decisions, based on your guidance.

Another important tool is a power of attorney. With this document, you can appoint an agent who will have the same legal power you have to make decisions regarding your property. The power of attorney can be as broad as you like, or as narrow.

Finally, if you have a complicated financial situation, and foresee the need professional help in managing your assets, you can create a living trust. Through the trust agreement, you can appoint a person to help you manage your property, but still maintain control over that property. You can even use this legal tool as a substitute for a will to avoid probate.

These legal arrangements are far less expensive than a guardianship proceeding. They also have the advantage of keeping your personal matters private.

If you have, or a person you know has, been diagnosed with the condition such as Alzheimer's disease, dementia or certain mental illnesses, it would be beneficial for you to consult with a lawyer now to consider the options and avoid later guardianship proceedings.

The Utility of a Living Trust

If you've even only thought about planning your estate, many people assume that any plan must include a living trust. While I agree that the living trust can be a useful document, I also believe that it is not for everyone. Before you make any decision whether to create a living trust, take into account your individual situation and the advantages and disadvantages of including a living trust in your estate.

What is a living trust? A trust is merely a legal arrangement where one person, called a trustee, holds property for the benefit of someone else, called the beneficiary. A trust can be created by a person through a will, which is called a "testamentary" trust. A trust can also be created while a person is alive, which is called an "inter vivos," or living, trust.

In most instances, when a person creates a living trust, that person becomes both the trustee and the beneficiary. That way, to the outside world, how the property is held appears no different than if no trust were created. But, if a property is included as part of a living trust, the creator can establish rules about how the property is to be distributed after his or her death. That way, the property can pass to someone else without the need to go through probate. Probate is a court proceeding that can tie up an estate for several months before property can be distributed. In Virginia, when a probate estate is opened, a tax is applied based on the value of the property passing through probate.

Avoiding probate is the primary advantage of a living trust, and the reason this type of instrument was created. One thing to consider is that in Virginia, probate can be expensive.  Filings, such as inventories and accountings, can come with filing fees of hundreds of dollars.  That does not include the lawyer's and accountant's fees in drafting up the filings.  However, there are some disadvantages that need to be considered before you decide to make a living trust.

The problem is that owning property through a living trust can be inconvenient. Property needs to be titled through the trust. Checks drafted on accounts held by the trust need to be signed by noting the signatory is the trustee. Thus, the benefit of avoiding probate should be weighed against the inconveniences and costs associated with setting up a living trust.

For example, in Virginia, real estate passes to the next owner upon the filing of the will. Thus, if the bulk of a person's estate is real estate, probate in Virginia can be a simple process. Moreover, for most pieces of property, the probate tax can be less than the price of establishing a living trust.

What, then, are some of the main reasons aside from avoiding probate to have a living trust?

One is to control the distribution of an inheritance to a minor or person who has not reached an age of maturity. Parents of young children, or even young adults, can establish a trust in order to place a responsible person in charge of an inheritance until the child reaches a certain age. For a plan like this, it may even make sense to designate the trust as the beneficiary of any life insurance or other pay-on-death accounts, such as retirement benefits.

Another reason is to have a living trust is to provide for your care if you become unable to manage your affairs because of disability. By naming a person to step in as trustee if you become disabled, you can ensure that someone can have access to your finances and pay your bills. In many instances, banks and other financial institutions are more willing to work with a trustee than a power of attorney.

Finally, creating a living trust can provide assistance to people who need help managing their money. If there is no one in the family or close friends that would be appropriate trustees, by creating a living trust and naming a professional as the co-trustee, you can provide some assurance that the trust will be managed properly.

A living trust is a very flexible document, and can be a useful tool for your estate plan. Whether to create one, and how to structure it are issues you should discuss with an attorney as you consider your own estate.

Preparing for Probate

It is traumatic enough when a loved one dies. Eventually, however, someone faces the task of wrapping up the affairs of the dearly departed. It can be daunting. There are bills to be paid, property to find, and, if anything is left, heirs to be paid.

How should someone begin? First, forget everything you've ever seen on TV. There is never a time when all of the heirs and people mentioned in the will are brought into a room for a formal reading of the will. Quite frankly, administering an estate will take time. It could be months before anyone really knows where the money is going.

First, you need to see if there is a will. Often, close relatives will know if there is a will and where it is kept. If you know who the decedent's attorney was, the attorney may know. Some people will file their will with the probate court while they are still alive. In some jurisdictions, if you are in possession of someone's will, you are legally obligated to come forward and file it. Failure to do so in the right period of time could result in fines.

You certainly should not wait for the will to be found to make funeral or memorial arrangements. With the time it takes to probate an estate, the will is not the place to put funeral or memorial instructions.

Next, you need to start identifying the decedent's assets. Did he own a house? Does he have a bank account? What other possessions did the decedent have? It may be necessary to safeguard the decedent's property until the administration is complete. If the decedent owns real estate, and no one else will live there, the utility companies should be notified.

Next, it is time to consider whether the decedent left a spouse and/or children. Immediate family will likely be entitled to an allowance from the estate until the administration is complete. This is also the time to consider whether the decedent had any pay on death accounts, such as life insurance or pension benefits. It is also the time to consider whether to file for any survivor's Social Security benefits. The final income tax return may need to be filed.

Whoever is responsible for winding up the decedent's affairs should also try to collect some initial information about the decedent's debts. Once initial information about a decedent's assets and debts have been collected, it may be time to file to open a probate estate. Many jurisdictions charge a probate fee based on the value of the property which will pass through probate. This is why you need at least a good estimate of the decedent's assets and liabilities before filing for probate. Notices will need to be given to the decedent's heirs at law, heirs mentioned in the will, and known creditors. A notice may need to be published in a newspaper.

In some states, if the assets are so few, it may not be necessary to probate the estate. Also, if the decedent's assets were mostly held in pay on death accounts, there may not be enough assets passing through a will or the law of intestacy to open an estate with the probate court.

Once an estate has been opened, the person in charge of winding up the affairs (depending on the circumstances this is the executor or the personal representative) will need to obtain a tax identification number for the estate, and open a bank account for the estate. The decedent's other accounts may need to be transferred to the new account.

The administrator will also have to be familiar with the probate court requirements. Usually, an inventory of the decedent's assets will need to be filed with the court and provided to the heirs and creditors. Later, the administrator will likely need to file accountings to show how the decedent's assets have been managed. The administrator should be sure to keep receipts.

There will usually be some kind of proceeding to determine the claims of any creditors. Once all creditors have been identified, their claims should be examined to determine their validity. Each jurisdiction will likely have in its law a listing of which claims have priority. The claims must be paid in that order. If anything is left over, the administrator may then be required to file an estate tax return and pay any estate or inheritance tax due. Then, the heirs can be paid.

Once all of these steps have been taken, then the administrator can file to close the estate. This an important step. In many states, opening the estate places the tax authorities on notice. The tax authorities will be looking for the estate to be closed to make sure any taxes that are due will be paid.

Probate need not be feared. While it involves a lot of steps, with proper advice and organization, it can go smoothly.