Yates Campbell LLP

COVID-19 Update: We’re Still Here for You

Wed, 25 Mar 2020 21:06:00 GMT

We at Yates Campbell LLP are thinking of our staff, clients, friends, and members of our community during these difficult times. We remain available to assist with your legal matters, and the collective well-being is at the top of our minds.

While we have no reason to believe that anyone who has visited our offices has been exposed to COVID-19, we have implemented the following measures to do our part to limit the spread of the virus:

Our up-to-date technology enables us to be fully functional and serve our clients as usual, even though the above described procedures have been implemented.

If further restrictions are necessary, such as fully closing our office site, we have the ability to function completely remotely.

Please do not hesitate to contact us by email or telephone so that we may continue to serve your needs.

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2019 Virginia Developments Slides

Mon, 21 Oct 2019 18:33:00 GMT

At the 38th Annual Trusts and Estates Seminar , Tom Yates and Alvi Aggarwal gave a presentation on recent developments in Virginia trusts and estates law. The slides from that presentation are available at https://yatescampbell.com/2019-va-update-slides/ .

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Big Changes in Transfer Tax Laws in 2018

Thu, 22 Feb 2018 11:35:00 GMT

This year, new tax legislation—perhaps the most significant in over 30 years—went into effect. The new legislation markedly alters the tax laws for both individuals and businesses, including some of the estate, gift, and generation-skipping transfer tax provisions.

The new law did not eliminate the estate, gift, or generation-skipping transfer (GST) taxes, nor did it dramatically alter how these taxes work: the 40% rate, marital deduction, portability, annual exclusion, and lifetime exemption are still around. But the new law did increase some of the exemption and exclusion amounts.

Most significantly, the new law doubled the lifetime exemption, i.e., the amount each of us can transfer during our lives or upon our deaths before we have to pay estate or gift tax. The GST tax exemption amount also doubled. For 2018, the exemption amounts will be around $11.2 million.* However, unfortunately, the increased exemption amounts are temporary. They will revert back to their current levels in 2025—unless a change in the political tides reduces them sooner or makes them permanent.

The large but temporary exemption amounts have a couple of important implications:

In addition to the changes in the lifetime and GST tax exemptions, the new law creates a deduction for certain qualified business income, increases certain limits on charitable contributions, and expands the uses of 529 plans, among other changes.

This year also brings some new inflation-adjusted figures to familiar provisions of the tax code. For example, the gift tax annual exclusion amount for 2018 is $15,000 (up from $14,000 in 2017). Other inflation-adjusted amounts are available

All of these changes make 2018 a good year to evaluate whether your estate plan reflects your wishes and accomplishes your tax objectives. Please feel free to contact us to schedule a time to for such an evaluation.

*The official number has not yet been released by the IRS.

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Thorsen v. RSPCA: Thoughts on Va. Supreme Court Decision

Thu, 09 Jun 2016 10:53:00 GMT

In Thorsen v. Richmond Society for the Prevention of Cruelty to Animals , the Virginia Supreme Court established that attorneys who draft wills are liable to the intended beneficiaries of their services. The opinion is available here . This case is notable for two reasons: (i) it marks a change in what some, or perhaps many, attorneys believed to be the law on the rights of third-party beneficiaries of the attorney-client relationship in Virginia, and (ii) at least some attorneys are thinking about how to adapt.

Facts

Ms. Dumville hired Mr. Thorsen, an attorney, to draft a will. Ms. Dumville intended her assets to go to her mother, if her mother survived her. If her mother predeceased her, Ms. Dumville intended her assets to go to the Richmond Society for the Prevention of Cruelty to Animals, a charity. Mr. Thorsen understood Ms. Dumville’s wishes and prepared the will. Ms. Dumville signed it.

Ms. Dumville’s mother predeceased Ms. Dumville.

Due to a scrivener’s error, the will left only some of Ms. Dumville’s property (Ms. Dumville’s personal property, which was significantly less than all of her property) to the RSPCA. The rest ended up in the hands of Ms. Dumville’s heirs-at-law.

Mr. Thorsen fell on his sword and tried to correct the error. He was unsuccessful.

The RSPCA sued Mr. Thorsen in the Circuit Court for the City of Richmond. Mr. Thorsen lost. He appealed to the Virginia Supreme Court. He lost in a 6-1 decision. Justice McClanahan dissented.

Key Issues

Two of the issues the court considered are particularly interesting.

Some Injured Third-Party Beneficiaries Can Sue Attorneys

The majority answers the question of whether a third-party beneficiary has a cause of action for breach of contract against an attorney in the affirmative. The opinion acknowledges the general common law rule in Virginia that strangers to a contract do not have rights under the contract. However, the majority also notes an exception to the rule allows third party beneficiaries to enforce certain contracts. An injured third-party beneficiary may enforce the contract that creates (or should create) the beneficiary’s interest if the beneficiary was “clearly and definitely” the intended beneficiary of the contract. The majority applies this exception to reach a contract between an attorney and a client to draw a will for the benefit of a particular beneficiary.

The majority seems to be extending the third-party beneficiary doctrine to this case for public policy reasons. Without this extension of the third-party beneficiary exception, the innocent beneficiary bears the burden of the attorney’s error.

As to the legal basis for this extension of the third-party beneficiary doctrine, the majority looks to the law of other states and the court’s decision in Copenhaver v. Rogers . 238 Va. 361. The extent to which the court’s decision in Copenhaver grounds the Thorsen decision is a point of disagreement between the majority and the dissent.

The majority opinion addresses the important issue of when a beneficiary is “clearly and definitely” an intended beneficiary of the contract between the lawyer and the client. The determination seems to be about the client’s intent and the attorney’s assent to the representation.

Drawing from Copenhaver , the majority gives the following examples: (1) where a client who tells his lawyer “he really does not care what happens to his money except that he wants the government to get as little of it as possible,” the beneficiaries will not be beneficiaries of the contract between the lawyer and the client; (2) where a client tells his lawyer “that his one overriding intent is to ensure that each of his grandchildren receive one million dollars at his death and that unless the lawyer agrees to take all steps necessary to ensure that each grandchild receives the specified amount, the client will take his legal business elsewhere” the grandchildren may be intended beneficiaries of the contract between the lawyer and the client, as long as the lawyer agrees to comply with the client’s directives. (P. 9)

What does the majority actually consider in upholding the determination that the RSPCA was “clearly and definitely” an intended beneficiary of the contract between Ms. Dumville and Mr. Thorsen? The key considerations seem to be the client’s intent and whether the attorney assented to draft the document. The opinion considers Ms. Dumville’s intent and Mr. Thorsen’s separately. As to Ms. Dumville, an overriding purpose of the contract was to benefit the RSPCA was key. However, as to Mr. Thorsen, the majority said, “the agreement to comply with specific directives is implied when the client contracts with the attorney to perform a specific service which the attorney then undertakes to perform. We cannot separate the obligations of the client’s intent from the agreement because, without the intent and the assent to take on those specific directives, there would be no retention agreement.” (P. 24)

The majority gives us the following additional examples where a third party may be a “clearly and definitely” intended beneficiary:

A residuary or contingent beneficiary can be a “clearly and definitely” intended beneficiary. The class of the beneficiary is a factor to be considered, but whether a residuary or contingent beneficiary is “clearly and definitely” an intended beneficiary is a fact-intensive inquiry. (PP. 14-17)

The examples in the opinion and the majority’s analysis of the Thorsen case suggest to me that third-party beneficiaries will exist in almost all estate planning engagements. The only example the majority gives of a case where a beneficiary is not “clearly and definitely” and intended beneficiary is where the client does not care who receives his money, as long as the government gets as little as possible. In order for me to prepare an estate plan for a client, the client has to select some beneficiaries (as I am not in the business of selecting beneficiaries for my clients). Once the client selects some beneficiaries, it is difficult to see which of those beneficiaries will not be “clearly and definitely” intended beneficiaries under Thorsen . Perhaps there is something that makes only some chosen beneficiaries “clearly and definitely” intended beneficiaries in the statement that “one of the primary purposes for the establishment of the attorney-client relationship [must be] to benefit the nonclient;” however, I am not sure where to draw the line and am inclined toward caution. (P. 12)

The Third-Party Beneficiary May Sue Many Years After the Will is Signed

The majority determined that the statute of limitations on the third-party beneficiary’s right of action begins to run when the beneficiary is injured (i.e., at or after the testator’s death). This is a departure from the general rule that such limitations periods begin to run at the time of the breach. The rationale underlying the rule in this case seems to be in that the RSPCA “was unable to bring suit in the years following the execution of the will: lacking a vested interest and possessing only a bare expectancy, it had no standing to sue. Not even slight harm or damage accrued to the RSPCA until the testator’s death.” (P. 20) Query whether death will always be the time at which the limitations period begins as to third party beneficiaries in cases like Thorsen or whether “vesting” is really significant.

Post- Thorsen Claims

Thorsen changes who can make a claim against the estate planning attorney for breach of the attorney-client contract and when. In changing those things, Thorsen may affect the frequency of particular types of claims against estate planning attorneys. For example, post- Thorsen , we might see more claims that the estate planning attorney’s error caused a beneficiary to get less than he or she otherwise would have. In Thorsen , a beneficiary received less due to a scrivener’s error. Errors that alter beneficial interests are not always so straightforward. Misunderstandings of default rules (like the rule against perpetuities, elective share, or tax apportionment), inappropriate tax planning, failures to include special needs trust provisions, improper execution, and unreasonable delays could also result in different beneficiaries taking or different allocations among beneficiaries.

The implications of Thorsen may not be limited to estate planning. As Justice McClanahan notes in her dissent, the court may intend to abolish the requirement of privity in all legal malpractice actions. (P. 32, FN 6) It is easy to imagine facts similar to those in Thorsen in estate administration, family law, and other contexts.

Implications for the Attorney-Client Relationship

The majority acknowledges the need for the injured beneficiary to have recourse against a negligent attorney, and Justice McClanahan points out countervailing public policies, chief among which is preserving the sanctity of the attorney-client relationship. (P. 28) While I agree with the majority that the injured beneficiary should have recourse (and am quite comfortable being liable for any negligent acts I might commit), I think Justice McClanahan makes important points about the effects the majority’s decision may have on the attorney-client relationship. The idea that it is not only the client who matters does not fit well into how I have previously thought of my client relationships. The prospect, reasonable or not, of being a defendant in many dissatisfied beneficiaries’ lawsuits—because I am here rather than because I was actually negligent—also concerns me.

Attorneys in other states are already dealing with potential liability to third-party beneficiaries, and perhaps we should not expect major changes in the estate planning field in Virginia in response to Thorsen . However, I think we may see some changes. In particular, we may see Virginia attorneys attempt to limit their liability or reduce their potential negligence.

Some attorneys may seek to limit their liability to third party beneficiaries in their engagement or other agreements with clients. It is an open question whether this will be effective in Virginia.

As to minimizing potential negligence, we might see attorneys practice more defensively. Attorneys may write more warning and confirmatory letters, have another attorney in the office review their estate planning documents, have an another attorney or a paralegal attend some client meetings, include estate tax planning provisions in more documents (increasing length and complexity), expend the resources necessary to be able to produce documents more quickly, implement more extensive practice management solutions, insist more strongly on clients signing documents in their offices, ask (and require answers to) more questions, and similar. These measures would very likely raise the costs of estate planning services, though the measures may ultimately be beneficial for clients.

In their efforts to minimize potential negligence, attorneys may also become more reluctant to take on or continue in cases they perceive as more likely to result in a claim by an intended third-party beneficiary. That perceived likelihood might result from the atypical nature or complexity of a client’s wishes, the litigious nature of a beneficiary, the client’s lack of comprehension of the limitations on the feasibility of his or her estate planning objectives, or other concerns.

Thorsen may not be the final word on attorney liability to third party beneficiaries. Virginia courts will continue to define the contours of these rules, and we may see a response from the legislature. As long as Thorsen is the law, however, I think we will see estate planning attorneys (and possibly other attorneys) thinking more about—and altering—how they practice.

About the author .

Follow @AlviAggarwal

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Ancillary Probate in Virginia

Tue, 29 Dec 2015 17:46:00 GMT

What happens when a resident of another state dies owning Virginia real estate?

When a person dies owning real estate in more than one state, ancillary probate may be necessary to transfer some of the real estate.

Let’s say Henry passes away. At the time of his death, Henry was a resident of a state other than Virginia. Let’s call that other state “Home State.” Henry’s wife, Wendy, probated Henry’s will and qualified as the executor of Henry’s estate in Home State. At the time of his death, Henry owned a piece of real estate in Virginia. That real estate was Henry’s only Virginia asset. Wendy wants to be able to sell the Virginia real estate. What does she need to do?

Wendy needs to probate Henry’s will in Virginia. She needs to obtain an authenticated copy of the will probated in Home State and a certificate of probate from the relevant court in Home State. She may also need her certificate of qualification from the same court and possibly other documentation or information. Let’s say Wendy obtains the necessary documents from the appropriate court in Home State. She (or her lawyer) makes an appointment with the clerk of the appropriate Virginia circuit court to probate the will in that court. If the will meets Virginia’s execution requirements or is self-proving under the laws of Home State, the will is effective as to Henry’s Virginia real estate. Note: The probate of the will in Virginia (or any state other than Home State) is called “ancillary probate.” The probate in Home State is sometimes called “domiciliary probate.”

The effect of the probate of the will in Virginia is generally (but not always) to vest title to the real estate in the beneficiaries under the will. The Virginia case Broaddus v . Broaddus , 144 Va. 727 (1925) is the basis for that rule. Once title is vested in them, the beneficiaries can sell the real estate, if they wish to do so. Let’s assume that under Henry’s will, all of Henry’s property passes to Wendy. Assuming Henry’s will is effective to vest title to his Virginia real estate in the beneficiaries of his will, Wendy, in her capacity as the sole beneficiary under the will, would be able to sell the real estate upon the admission of the will to probate in Virginia.

Alternatively, a foreign executor can, under certain circumstances, convey the Virginia real estate without qualifying in Virginia. Once the will is probated in the Virginia circuit court for the property’s jurisdiction, the foreign executor will be able to sell the real estate if the following requirements are met: (i) the executor qualified under the laws of the state where the will was probated, (ii) the will is valid and executed according to Virginia law, (iii) the will gives the executor the power to convey the real estate. So, assuming Henry’s will and Wendy met the foregoing requirements, Wendy could sell the Virginia real estate in her capacity as the executor of Henry’s estate. This rule, which is perhaps unusual, is in Section 64.2-524 of the Virginia Code . In many other states, Wendy would be required to qualify as an ancillary administrator before she would be able to sell the real estate. (Note: While qualification as an ancillary administrator may not be required, it is possible and may be advisable under certain circumstances. A qualified lawyer can advise.)

Although Wendy does not have to qualify as a personal representative in Virginia, she does have to comply with certain Virginia probate requirements. At the time of probating Henry’s will, Wendy will need to pay certain fees to the clerk and the applicable probate tax. Once Wendy probates Henry’s will in Virginia, she needs to send Notices of Probate to the appropriate people and file an Affidavit of Notice . Whether Wendy sells the Virginia real estate as the beneficiary or the foreign executor, she does not have to file inventories or accounts in Virginia.

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Pooled Income Funds

Tue, 22 Dec 2015 17:43:00 GMT

Charitable trusts are often appealing to donors who wish to give significant sums to charity. These kinds of trusts afford tax benefits for donors and allow donors to retain certain benefits for themselves or their family members. For small donations, however, charitable trusts are not typically feasible: they involve setup and administration costs in the thousands of dollars. Charities can set up pooled income funds (among other arrangements) to provide similar tax and retained benefits for donors making smaller contributions.

A pooled income fund is a sort of shared charitable trust. It is set up and maintained by a public charity. It does not involve setup costs for the donor. Once established, pooled income funds operate basically as follows:

For the charity, the appeal of establishing a pooled income fund is in making smaller donations appealing to and feasible for donors. The donor who has appreciated assets but wants to retain income, as well as the donor who wants the benefits of a charitable remainder trust without the up-front costs, may find pooled income funds particularly appealing. Also, donors may find that a pooled income fund that is less than 3 years old can provide them with a larger charitable deduction than can an older fund, because of the way the tax code and regulations require the remainder value to be calculated.

Like any legal arrangement, pooled income funds are not appropriate for all public charities. Pooled income funds require maintenance, may compete with other giving vehicles that charity offers, and may not draw donors at the rate the charity hopes. For the right public charity, a pooled income fund can be a valuable source of funds and donors.

If you would like to discuss whether a pooled income fund might be right for your organization, please feel free to contact our office.

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Unitrust Conversions in Virginia

Mon, 14 Dec 2015 17:37:00 GMT

Unitrusts and the Big Problem They Address

Some trusts have different income beneficiaries and remainder beneficiaries. Such a trust might provide, for example, that the surviving spouse receives all of the income while he/she is alive, and the children receive what’s left upon the surviving spouse’s death. The interests of the income beneficiaries (the spouse in the example) and the remainder beneficiaries (the children) in these kinds of trusts conflict as to investments: the income beneficiaries want the trust to produce as much income as possible (even at the expense of growth), while the remainder beneficiaries want the trust to grow as much as possible (even at the expense of income). The trustee of such a trust—who, like any trustee, has a duty to act impartially as to the beneficiaries—is in the difficult position of having to decide how to invest the trust property. The trustee and beneficiaries in this situation have a few options. One option is to convert the trust to a unitrust.

A unitrust is a trust that instead of paying all of its income to the income beneficiary annually, pays a percentage of its net asset value annually. In a unitrust, the interests of the income beneficiaries and the remainder beneficiaries are aligned: everyone wants the value of the trust to increase.

The Conversion Process

Virginia law provides a mechanism for converting a trust that pays its income (let’s call this kind of trust an income trust) to a unitrust.

In Virginia, the percentage that the trustee pays to the income beneficiaries has to be a “reasonable current return” and between 3% and 5% of the net assets. In determining the percentage, the trustee is directed to take into account the grantor’s intentions, the beneficiaries’ needs, economic conditions, projected current earnings and appreciation, and projected inflation.

Virginia law requires the trustee to follow a specific procedure to convert an income trust to a unitrust. The procedure depends on who the trustee is: there is one set of steps for “interested trustees” and another set of steps for other trustees. The process is similar for both types of trustees, but the interested trustee has to appoint an independent person to make certain decisions. The adoption of a written policy and notice to the beneficiaries are required in either case. The trustee, for a variety of reasons, may prefer to accomplish the conversion through an agreement with the beneficiaries rather than by notifying them and allowing them time to object.

Unitrust conversions are one way to align the interests of a trust’s income and remainder beneficiaries. However, not all income trusts and portfolios are good candidates for unitrust conversions. The trust’s portfolio and terms will significantly affect whether a unitrust conversion makes sense. Your financial, tax, or legal adviser can help you begin to assess whether a unitrust conversion might make sense for your trust.

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Our Estate Planning Process

Mon, 07 Dec 2015 17:37:00 GMT

Our estate planning process is a collaboration between us and our clients. The process itself is something we work with each client to define, so it varies from client to client. The time it takes to get from contacting us to a complete estate plan also varies from client-to client. Some clients wish to have their estate plans signed within a few weeks of contacting us, and we work to accommodate those clients. Many clients prefer to go through the process at a more leisurely pace.

All of that said, our estate planning process typically consists of the following phases: (1) information sharing, (2) designing the plan, (3) reviewing and revising the documents, and (4) signing and follow-up.

(1) Information Sharing

Let’s say you call or email one of our attorneys and say something like, “Hi, I think I need an estate plan. Can you help me?” The attorney would typically ask you if you have a few minutes to talk by phone about estate planning and whether we’re the right law firm to help you with your estate plan. If, at the end of that phone call, it seems like we would work well together, we’d schedule a meeting to talk about the details of your estate plan. If we’re planning the estates of you and your spouse, we would need both of you to participate in this meeting. We would also send a questionnaire for you to fill out and send back or bring to the meeting. The questionnaire asks you to fill in information about yourself, your family, and your assets. The questionnaire is extensive, but we ask that you just fill in just the information you have readily available. For someone who is unfamiliar with estate planning, we might also send some optional reading material.

(2) Designing the Plan

During our meeting, we would discuss how, exactly, your estate plan will work. We’d talk about things like who should manage your finances if you’re unable to do so yourself, whether you’d ever want anyone to “pull the plug” if you’re ill, who should receive your property when you pass away, how those people receive the property, and more. This meeting typically lasts between 45 minutes and 2 hours. Additional meetings, phone calls, and emails may be necessary, depending on your goals.

(3) Reviewing and Revising the Drafts

Once we’re all on the same page about how your estate plan should work, we would draft your estate planning documents. We’d send the draft documents to you (and your spouse, if we’re working with both of you) by mail and/or email to review at your convenience. We’d be available to discuss questions and changes as you go through the documents.

(4) Signing and Follow-Up

Once the documents are acceptable to you, we would arrange for you to sign them. We prefer to have our clients sign estate planning documents in our office, as we like to ensure the documents are executed correctly and to serve as the witnesses. Proper execution and credible, locatable witnesses can be helpful if any questions or challenges arise over your estate plan. We typically keep electronic copies of our clients’ estate planning documents and send the originals to the client.

Depending on the type of estate plan you signed and the nature of your assets, we may recommend some follow-up work. For example, if your estate plan included a revocable trust, the trust would need to be funded. We assist clients with as much or as little of the process of funding their trusts as they wish.

As time passes, laws, wishes, and circumstances change. These changes sometimes necessitate changes in estate plans. We suggest our clients assess their estate plans after significant life changes (births, deaths, marriages, divorces, significant changes in wealth, etc.) and at least every few years. We can assist with the assessment and any necessary updates.

If you would like to speak to us about estate planning, please feel free to contact one of our attorneys .

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How to Choose a Lawyer for Your Will, Trust, or Estate

Tue, 30 Jun 2015 16:00:00 GMT

You might think that any lawyer with law degree (a J.D.), a license to practice law, and no disciplinary complaints can make you a good estate plan or advise you well regarding an estate or trust. Those things are important, but they might not be enough. Just like you wouldn’t go to just any licensed doctor for brain surgery, you might not want to go to just any licensed lawyer for an estate plan or advice regarding a trust or estate. Choosing the right lawyer is even more important in large estates and contested matters.

So how do you pick a lawyer who is likely to be good at estate planning or advising you regarding an estate or trust?

Specialties for lawyers don’t work like specialties for doctors. Basically, any lawyer can call himself a wills, trusts, and estates attorney. There are board certifications for lawyers; however, they aren’t widely available, and the standards for board certification might not be sufficiently rigorous. The rest of this post will help you take a more careful look at your prospective lawyer’s qualifications to practice in the field of wills, trusts, and estates and—I hope—help you sort the good from the mediocre (and bad).

In reading, please keep in mind that these are my opinions. Many lawyers (probably including some at Yates Campbell LLP !) will disagree with me.

1. Practices Primarily in the Field of Wills, Trusts, And Estates

Have you ever heard the saying about a jack of all trades being a master of none? I recommend looking for a lawyer who practices primarily (75% or more) in the field of wills, trusts, and estates. Based on my experiences with many lawyers and their documents, I consider this the single most important criterion in selecting a wills, trusts, and estates lawyer. The law and best practices change often in this field, and keeping up takes time. You might have to ask the lawyer or office staff to find out how much of a lawyer’s practice is in the area of wills, trusts, and estates.

2. Credentials

An LL.M. degree is an advanced degree in law, usually in a particular area of law. In the wills, trusts, and estates field, you will find many lawyers who have LL.M. degrees in estate planning or tax law. An attorney who has one of these degrees has had formal training in some of the more complex issues that arise in estate planning and tax matters.

There are many certifications a lawyer can obtain and many membership organizations a lawyer can join. Some are wills, trusts, and estates-specific. The requirements to become certified or join a particular group vary greatly: some involve a rigorous application process, while others can be bought. Some certifications and memberships are certainly worth considering in assessing lawyers. Membership in the American College of Trusts and Estates Counsel (ACTEC) , for example, is considered very prestigious among wills, trusts, and estates attorneys. It is a membership that must be earned, and many of the members are considered preeminent attorneys in this field. Membership in most bar associations (mandatory state bars, like the Virginia State Bar, aside) is purchased. For example, I am a member of the Fairfax Bar’s Wills, Trusts and Estates Section . I joined by filling out a simple application and paying dues. I consider the organization very worthwhile, but no one should conclude anything about my skills based on that membership.

3. Experience

Experience is valuable to a lawyer. I recommend you assess the experience of the lawyers you are considering. In weighing a lawyer’s experience, consider how much of the lawyer’s experience is in handling cases like yours.
Also be sure to look into whether any lawyer you’re thinking about hiring is keeping up with the laws and best practices. As I mentioned above, the law and best practices in this field change often. Whether a lawyer is keeping up will likely affect what the lawyer can do for you.

4. How the lawyer works

Lawyers’ processes and policies vary. Make sure the processes and policies of the lawyers you’re considering are feasible for you. Here are a few questions you might want to ask:

There are no right answers to these questions. The answers just need to satisfy you.

5. Comfort Level

You will probably have to share personal information with the lawyer planning your estate or working with you on an estate or trust administration. Discussions about family issues and money are unavoidable. I recommend choosing a lawyer you feel comfortable talking to.

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When children & grandchildren inherit: per stirpes, per capita, and more—Part 2

Tue, 23 Jun 2015 14:00:00 GMT

Choosing “Something Else”

Previously , we distinguished English per stirpes from the other distribution methods. In the scenario in Part 1, in which all of Henry and Wendy’s children die before them, the allocation methods other than English per stirpes all produced the same result. In this post, we’ll use a different set of circumstances to differentiate the allocation methods other than English per stirpes.

Let’s assume that when Henry and Wendy die, Clarence and Charles are already deceased, but Catherine is still living.

Here is how the couple’s property would be allocated if their wills or trusts directed property to be allocated by the modern per stirpes method:

As Fig. 4 shows, the modern per stirpes method would result in an allocation that looks something like the English per stirpes allocation. Henry and Wendy’s property would be divided into shares at the closest generation with a living descendant (their children’s generation). A one-third share would be distributed to Catherine, and the other one-third shares are distributed down the lines of each of the other children. Clarence’s children share his one-third, and Charles’s child receives his one-third. Ultimately, the grandchildren end up with unequal proportions of their grandparents’ estate. The modern per stirpes method treats each line of descendants equally, but it determines lines using the closest generation in which someone is living.

Modern per stirpes is the default option in the law of Virginia and many other states. If a person dies as a resident of Virginia without a will or trust, that person’s property is allocated among his or her descendants by the modern per stirpes method.

Here is how the couple’s property would be allocated if their wills or trusts directed property to be allocated by the per capita at each generation method:

As Fig. 5 shows, a per capita at each generation allocation would result in each grandchild without a living parent receiving an equal amount. The property would be divided into shares at the closest generation with a living descendant (the children’s generation). A one-third shares would be distributed to Catherine. The shares of the deceased children (Clarence and Charles) would be combined and re-divided into equal shares for the children of Clarence and Charles. So, the children of Clarence and Charles would receive equal amounts. The per capita at each generation method aims to treat descendants in the same generation equally. Law students are taught to remember the per capita at each generation principle as “equally near means equally dear.”

Here is how the couple’s property would be allocated if their wills or trusts directed property to be allocated by the pure per capita method:

As Fig. 6 shows, a pure per capita allocation would result in Henry and Wendy’s property being divided equally among their living descendants. Catherine and each of Clarence’s and Charles’s children would receive equal shares. The pure per capita allocation does not appeal to many people.

Fairness has a Price

At this point, it may seem that the modern per stirpes or per capita at each generation allocation is the most fair. That may be the case. But, in all methods other than English per stirpes, the order of deaths can play a significant role in how much each person receives.

With an English per stirpes distribution, the shares of each descendant will always be determined by how many children you have and which line a grandchild is in. Query whether that is right or fair, but it is consistent and predictable.

With modern per stirpes, per capita at each generation, and per capita, the order in which people die plays a role in how much each descendant receives. Consider the following examples:

Example 1: Consider Gilbert’s inheritance under the modern per stirpes allocation method. If Catherine is already deceased when Henry and Wendy die, Gilbert gets 1/6 of Henry’s and Wendy’s property (Fig. 3). However, if Catherine is living, Gilbert gets 1/3 of Henry’s and Wendy’s property (Fig. 4).

Example 2: Consider Georgia’s inheritance under the per capita at each generation method. If all of Henry and Wendy’s children are deceased, Georgia gets 1/6 (Fig. 3). Georgia receives nothing if Catherine survives (Fig. 5). If Charles, rather than Catherine, were to survive Henry and Wendy in Fig. 5, Georgia would receive 2/15 instead of 1/6.

Under the modern per stirpes, per capita at each generation, and per capita allocation methods, the amounts of Henry’s and Wendy’s property that each grandchild receives depends on which of the children happen to be living when Henry and Wendy die. Having shares determined by order of death is a necessary consequence of these distribution methods. The distribution method in which the order of deaths matters least is English per stirpes.

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When children & grandchildren inherit: per stirpes, per capita, and more—Part 1

Tue, 16 Jun 2015 16:00:00 GMT

Many parents wish for their property to pass to their children when they die. If the children die before the parents, the parents often want the property to go to their grandchildren instead. This sounds simple enough, but there are a few different ways property can be allocated among surviving children and grandchildren.

The primary methods for allocating property among descendants are the following: (1) English per stirpes, (2) modern per stirpes, (3) per capita at each generation, and (4) per capita. These different allocation methods can lead to different amounts of property in the hands of each descendant.

To illustrate the various options, we’ll use the fictional family of Henry and Wendy. Henry and Wendy have 3 children, Clarence, Charles, and Catherine. Each of their children has at least 1 child. Here’s the family tree, as it currently stands, with all of the couple’s children and grandchildren living:

English per Stirpes or Something Else?

Let’s assume that when Henry and Wendy die (or when the survivor of them dies), all of their children are already deceased. In this circumstance, there are really two different ways their property could be allocated among the grandchildren: the English per stirpes method would produce one result, while all the other allocation methods would produce another result.

Here’s how the couple’s property would be allocated if their wills or trusts directed property to be allocated by the English per stirpes method:

As Fig. 2 shows, an English per stirpes allocation would result in Henry’s and Wendy’s property being divided into 3 shares, one share to represent each child. A one-third shares is distributed down each child’s line: Clarence’s children share his one-third, Charles’s child receives his one-third, and Catherine’s children share her one-third. Ultimately, the grandchildren end up with unequal proportions of their grandparents’ estate. The English per stirpes method treats each line of descendants equally.
All of the other allocation methods, in contrast, cause each grandchild to end up with an equal share in this circumstance. Fig. 3 illustrates this outcome:

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Essential Estate Planning Documents

Thu, 16 Apr 2015 20:40:00 GMT

There are certain estate planning documents that every person should have. These documents make life easier on you and your loved ones if you become unable to make decisions for yourself or pass away.

Durable Power of Attorney for Financial Affairs

In a Durable Power of Attorney, you appoint another person to manage your finances. The person you appoint can have all the powers you have with respect to your property (a “general” power) or powers limited in scope, duration, or to specified property (a “limited” power). The power is said to be “durable” because it remains effective even if you become unable to act for yourself, e.g., if you lose mental clarity in old age. The durability of the power is what makes it so valuable in an estate plan: the person you appoint can manage your finances without the intervention of a court.

Advance Medical Directive

An Advance Medical Directive has two major parts: a living will and a health care power of attorney. The living will portion declares your wishes about the provision, withholding, or withdrawing life-prolonging treatments in the event you are diagnosed with a terminal condition. The value of a living will is in that it makes your wishes known, potentially avoiding a dispute among your family members. The health care power of attorney appoints another person to make health care decisions for you if you’re incapable of making informed decisions about conditions and treatments yourself. The value of a health care power of attorney is that it ensures there’s someone you trust to make decisions and carry out your wishes regarding medical treatment, and it can prevent a court proceeding to have a guardian appointed.

A Will (possibly with a Revocable Trust)

Just a Will

A Will is a written legal declaration about how your property should be distributed after your death. In addition to disposing of property, a Will also names an executor (a person who will do the actual distributing of the property) and guardians for your minor children. A Will can actually be quite complex: for example, it can contain tax planning provisions and establish trusts that come into existence at your death.

Pour-Over Will & Revocable Trust

For some people, a Revocable Trust with a Will will be more appropriate than a Will alone. Like a Will, a Revocable Trust contains a declaration of how your property should be distributed. Unlike a Will, a Revocable Trust exists as soon as you sign it. Consequently, it can facilitate the management of your assets while you are living. Additionally, assets in a Revocable Trust do not have to pass through the probate process upon your death. Revocable trusts can be even more complex than wills: for example, they can contain tax planning provisions, establish other trusts that come into existence later, and give powers and benefits to other people while you’re still alive.

Almost all Revocable Trusts are accompanied by Pour-Over Wills. A Pour-Over Will “pours” any property that isn’t in your Revocable Trust at the time of your death into the trust. Like any other Will, a Pour-Over Will also names an executor and guardians for minor children.

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What Is an Estate Plan?

Wed, 15 Apr 2015 23:03:00 GMT

When you complete the estate planning process, you walk away with a set of documents. Those documents contain your wishes in case you die or become incapacitated.

It’s a bit of an oversimplification to say an estate plan is the set of documents that results from the estate planning process. Really, the documents are what implement the estate plan. To put it another way, the estate plan is the strategy that drives the contents of the documents.

On the most basic level, an estate plan and the documents that implement it address issues like who should manage your finances if you’re unable to do so yourself, who should take care of your kids if you die, and how your property should be divided up among the people and causes you care about. But a good estate plan does more. A thoughtfully crafted estate plan is flexible and powerful. It can, for example, convey values, give loved ones direction, and help diffuse potential conflicts among heirs.

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