What is an estate plan?

 The good news is that everyone has an estate plan; Virginia has written one for you.  The legislature has written wills, trusts, AMDs and POAs; HOWEVER, the bad news is that you will probably not like what the legislature has written for you.

If you choose not to do your estate planning and you choose to not create the appropriate documents, the state of Virginia says who gets your property and when they get it. Briefly, Va’s plan works like this if you die without a will:

• your spouse will take all; unless you have children that are not from your current marriage; if so:

• the children that are not of your current marriage take approximately 66% of the part of your estate that is not jointly held with your spouse (the evil ex-spouse then controls the money for your minor children) and your present spouse takes 33% ; OR

• if you have no spouse but you have children, the children take all; however,

• if your children are under the age of 18, the child’s money is managed by the person that the child lives with which might not be the person that you would have chosen to manage the money for your children; THEN

• the worst part of this scenario is that at age 18 the child gets ALL of the money, at one time, with no one to tell them how they should manage or use the money.

• It is ALMOST NEVER appropriate for an 18 year old child to have a great deal of money with no controls on their use of the money.  Receiving large sum of money at age 18, with no help as to how to manage the money, can damage a person for the rest of that person’s life.
  

• The same holds true for grandchildren; for these same reasons they should not receive an inheritance from you without your input of how they should use the money neither should they receive this money from you without you choosing who manages the money and how that money can be used for your grandchildren.

Virginia’s plan does not protect people from the money; NOR does it protect the money from the people.  There are many persons, that although they are adults, who should not receive a large sum of money with no one to help them manage the money.

Spendthrifts

These are people who if you give them $100 to go to the fair, they are broke within one hour after getting there.

The safest way to give these people money is to use a trust to drip money on them over time so that the money will last them for as long as you determine they should receive the benefits therefrom; AND preserve part of the money for their retirement, because if they are spendthrifts they will most likely not have any money saved when they retire.

Children or Grandchildren who haven’t learned how to manage money OR who would use money in a way that you do not agree with.  The proper use of Trusts will prevent the condition known as AFFLUENZA – the condition in which the child who receives a large sum of money never develops the skills necessary to function in society.

Drug and or Alcohol Abusers

The receipt of a large sum of money without the proper controls in place could actually be dangerous for a person with an addiction.  If these people receive a large sum of money all at one time it could actually lead to their death.  I can help you craft a plan to provide safeguards for those persons who need help in this area of their life.  You can provide money for treatment and/or withhold money from your heir during those times when the person is drinking and/or drugging.

Medicaid Recipients

Persons who are receiving Medicaid payments, or who will become eligible to receive the payments will definitely become ineligible to continue to receive the benefits if they receive a sum of money outside of a trust.  It is imperative that the proper trusts are in place to preserve Medicaid recipients’ inheritances for them.  Without the proper trusts in place, the “spenddown” provisions of the Medicaid law says that their inheritance must be spent on their care before they are eligible to receive Medicaid benefits.

Supplemental Trusts will enable persons who are receiving Medicaid payments, or who will become eligible to receive the payments, to use their inheritance as they see fit AND retain or become eligible for governmental benefits.

Very simply put, an Estate Plan is where you determine the disposition of your estate after you die.  If you choose not to create the necessary documents you still have chosen how your estate will be given to your heirs; you have chosen the State’s method.

The state’s method might work for some people.  If assets are to pass from a husband to a wife, or visa versa, the way in which assets are held, or owned will probably determine how the assets will pass, and the will, if there was one, would control very little.

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