What I do
While most of us don’t want to think about death, incapacity, 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 the expense, delay and frustration associated with managing your affairs when you pass away or become disabled.
Estate planning is a process designed to bring you peace of mind. I will listen to your specific values, goals, and concerns and offer options that best serve your needs. Each client is unique and there is not a one size fits all in estate planning.
WHY EVERYONE NEEDS AN ESTATE PLAN
Everyone has an estate and everyone will leave something for loved ones or beneficiaries to handle. Estate planning is a process of determining what assets you own, what you want to do with them upon your death, and how to best accomplish these goals. The job of the attorney is to guide you through this process and create documents that will accomplish these goals. As you age, or develop an illness, if you have beneficiaries with special needs, if you want to keep the government and courts out of your personal affairs, or if you have beneficiaries who are immature or squander money, you will benefit from having an estate plan. In addition to peace of mind, you will know that you have made the time after your passing easier on your loved ones and they will know your wishes.
WHAT HAPPENS IF YOU DO NOT HAVE AN ESTATE PLAN
If you pass without an Estate Plan, the laws of The Commonwealth of Virginia will determine your plan by the laws of intestate succession. This is a default plan for disposition of your assets after death. This can result in consequences that you may not have intended, putting the assets in the hands of family members that might be inappropriate and is usually a poor choice. Not having a plan in place leaves the decision of who will be Guardian of your minor children to the court system and could result in your children being placed with child protective services if there is no clear instruction for temporary guardianship. It also leaves the executor at the mercy of the court system and could involve years of filing accountings for moneys for your surviving children or other beneficiaries, with the court system.
If you pass away without establishing an estate plan, your estate would undergo probate, a public, court-supervised proceeding. Probate can be expensive and tie up the assets of the deceased for a prolonged period before beneficiaries can receive them. Even worse, your failure to outline your intentions through proper estate planning can tear apart your family as each person maneuvers to be appointed with the authority to manage your affairs. Further, it is not unusual for bitter family feuds to ensue over modest sums of money or a family heirloom.
WHAT ESTATE PLANNING INVOLVES
A Last Will and Testament is the most common Estate Planning document, but this is not a complete plan. A Will directs the distribution on your assets upon your death and specifies how these assets are managed after death. A Will is also where you appoint a legal Guardian for your minor child/children. A will has no legal affect during your lifetime and DOES NOT address physical or mental incapacity during your lifetime.
A complete Estate plan requires at a minimum two more documents in addition to the Will; a Durable Power of Attorney, that appoints an agent to manage your financial and legal affairs if you are incapacitated, and an Advanced Medical Directive, that appoints an agent to direct your healthcare in the event of incapacity and expresses your wishes for care at the end of your life. More advanced planning, may include establishing a Trust, which can help avoid the costly and time consuming process of probate.
BENEFITS OF A REVOCABLE TRUST
A Revocable Living Trust is a powerful estate-planning tool capable of giving you complete control over your assets while you are alive and after you have passed away. You do not need to transfer your assets all at once, but can do so as you acquire new assets and at the time of your choosing. One of the main benefits of a Revocable Living Trust, besides allowing your estate to avoid probate, is that it lets you make changes as your personal, family and financial situation changes. It is also a private document.
PROVIDING FOR MINOR CHILDREN
First and foremost on the minds of most parents is the safety and well being of their child/children. Part of ensuring that you provide this as a parent involves Estate Planning that includes a protection component for your minor children. This plan addresses what would happen if an emergency situation arises where you and / or your spouse are unavailable to your children for an extended period, or the worst-case scenario, of the simultaneous death of both parents.
A contingency plan should include a list of persons you’d like to manage your assets and name a guardian you’d like to nominate to raise your children in your absence. 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.
You should give careful thought to your choice of guardian, ensuring that he or she shares the values you want instilled in your children. You will also want to give consideration to the age and financial condition of a potential guardian. Some guardians may lack child-rearing skills you feel are necessary. If you fail to plan, the decision as to who will manage your finances and raise your children will be left to a court of law.
Another issue to consider during the planning process is whether you’d like your beneficiaries to receive your assets directly, or to have the assets placed in trust and distributed subject to conditions and circumstances such as age, need and even incentives based on behavior and education. All too often, children receive substantial assets before they are mature enough to handle them prudently.
Estate planning also explores your charitable intentions and whether you want to benefit a charitable organization or cause. Your Estate plan can provide support for such organizations, during your lifetime or upon your death.
CONSIDERATIONS FOR ARTISTS
The biggest consideration for Artists, is what to do with your inventory of art upon your death. Your loved ones probably have their walls full. You know how challenging it has been to sell your art while living. With current IRS rules, lifetime giving of artwork does not result in much monetary benefit for an artist as you can only write off the cost of your materials. So what can you do?
- Upon your death, your art can pass to your heirs directly. The benefits of this are that your heirs get a step up in basis. What does this mean? It means that the works are valued at the fair market value on your date of death. If your work is sold by your heirs at this value, they will not have to pay income taxes on the sale (unless work is sold in excess of the fair market value). If your work is donated by your heirs to a qualified charity, your heirs get a charitable contribution for the fair market value at your date of death.
- Art can pass directly to charity. Your estate gets a charitable write off for the fair market value of your art.
For most Artists, I recommend a Revocable Living Trust that allows you to transfer in your art business. I also recommend that you schedule your specific gifts of art to your heirs, how you want your art supplies distributed, and line up a charity for possible charitable donations by your heirs or direct donation to the charity. Other considerations unique to artists, include digital assets, such as your website, and copyrights.