Month: January 2019

I don’t have an “estate,” why do I need a plan?

The term “estate planning” can be a bit of a misnomer. The term “estate” can summon images of a stately manor full of housekeepers and stables out back. The truth is that every single person has an “estate” – whether that means assets, liabilities, or dependents that rely on them for everyday care and financial support. 

So why does everyone need a plan? Oftentimes family members will disagree about what your wishes would have been, which can lead to more confusion and difficulty during an already hard time. You can use estate planning tools to prevent these problems and make transitions as smooth as possible for your loved ones. Below are some essential areas of estate planning that apply to everyone, regardless of wealth. 

Guardianship for Minor Children

Although there will still be requirements for a court proceeding, a will can designate who you want to care for your children in the event something happens to both parents. You can specifically outline your wishes for where you want your children to be raised and whether you want them versed in a particular religion. Your chosen guardians will have to petition the court and get formally appointed, but you can minimize any confusion or conflict between your loved ones by creating a specific appointment in your will. 

Naming an Executor

Families are complicated and family dynamics during stressful times can cause conflict and damage relationships.  Feuding siblings are probably the most common cause of litigation over an estate.  It’s often best to name an objective, independent representative as executor of the estate, another family member or close friend, instead of one of your children. Even if the estate is to be divided equally between siblings, giving the ultimate decision-making power to one of your children may be a recipe for disaster. An independent representative, whose only allegiance is to your wishes, will settle the estate and potential disputes fairly.

Gifting Important Personal Items 

The death of a loved one often doesn’t bring out the best in relatives, especially when it comes to heirlooms and other valuable or meaningful items owned by the deceased.  To keep family members from squabbling over, stealing, or hiding items that they want, talk with your children, grandchildren, and other family members now about which possessions mean the most to them.  Then put it in writing.  Clearly list exactly what you want to bestow on each heir and where it is kept, and attach this list to your estate planning documents.  Remember, it’s easy to challenge a “verbal” agreement in court, but much more difficult to disprove a written one.

Naming a Financial and Healthcare Power of Attorney

Having a Durable Power of Attorney and Advance Healthcare Directive in place means your loved ones won’t have to guess or argue about who should be in charge of making important decisions on your behalf if you become incapacitated. These documents can not only avoid conflict and confusion for your family members, but they can also mean avoiding costly and time-consuming guardianship and conservatorship proceedings through the court. 

In an Advance Healthcare Directive you can clarify your wishes regarding life-support and life-sustaining treatment, as well as your position regarding organ donation. These are areas where every individual may have a slightly different opinion, so being clear about your beliefs and wishes can provide peace of mind for those taking care of you. 

About Melone Law, P.C.

Melone Law, P.C. is a family and estate firm serving Virginia Beach and Northern Virginia. Our philosophy is to provide all of our clients with the highest quality legal representation, innovative legal solutions, and unsurpassed dedication to customer service.  Through our high standards, we strive to be a trusted resource to our clients.We know from experience that a successful attorney-client relationship depends on our ability to understand your needs and objectives.  For more information about estate planning, contact our Reston office today at 703.995.9900 or Virginia Beach at 757.296.0580 or visit our website: www.MeloneLawPC.com

The Top 5 Common Mistakes When Choosing Life Insurance Beneficiaries

So you’ve made the responsible decision and purchased a life insurance policy to ensure your dependents will be cared for in the unfortunate event something happens to you. Naming a beneficiary should be the easy part, right? But mistakes made when choosing your beneficiary can lead to unforeseen consequences. 

When a mistake happens, it can mean added difficulty, stress, and a financial burden on those you intended to benefit. Below are 5 of the most common mistakes made when choosing a life insurance beneficiary. 

1. Naming a minor child. 

            While an adult beneficiary will receive funds outright, life insurance proceeds will not be paid directly to a minor. Instead, the court will have to appoint a guardian to manage the funds until the child reaches the age of majority. Going through guardianship proceedings can be costly, especially if they are contested. Designating a guardian for minor children in your will does not solve the problem either – the court will have to ultimately appoint someone to act on behalf of the minor. 

            The better alternative is to establish a trust as beneficiary of the policy and to name a trusted adult or financial institution to manage the funds on behalf of your child. 

2. Naming your estate. 

            Designating your estate as beneficiary of a life insurance policy reduces some of the benefit of holding the policy. Funds will have to be transferred to your heirs through probate with court oversight, meaning a longer wait, and will be subject to any outstanding claims from creditors as well as taxes and fees. 

3. Naming young-adult children.

            Life insurance proceeds will be paid to an adult child beneficiary without taxes, fees, oversight, or direction as to how funds can be used, meaning they can be spent immediately on anything. In addition, the funds will count as an asset for FAFSA purposes, meaning a potential loss of eligibility for student loans. Adult children with special needs could also lose eligibility for government assistance from SSI and Medicaid. 

            Again, the better alternative is to establish a trust for the benefit of your adult child. Funds can be used for education, living expenses, and anything else designated by the trust or in your trustee’s discretion. However, trust assets will not be considered for FAFSA purposes and can avoid the loss of government assistance programs. 

4. Naming only one beneficiary and/or forgetting to update your beneficiary. 

            You have the option to name several backup beneficiaries to plan for every contingency. If your primary beneficiary pre-deceases you, don’t let the payout go through probate! See #2 above.   

If you go through a divorce or have another significant life event, you should double-check your policies and update your beneficiaries. A designated beneficiary on your policy will always trump whatever else is in your estate plan. Even if you’ve been divorced, if your ex-spouse is named on the policy, they will receive the benefit. 

It’s a good idea to double check your beneficiary designations every 3-5 years to make sure they are up to date. You should provide as many details as possible for each beneficiary including their SSN, address, and contact phone numbers. 

5. Increasing your tax burden. 

            If the insured, policy owner, and beneficiary are three separate people, then any payout could be subject to gift taxes. In such an instance, the policy owner would be taxed for making a gift, if the policy amount exceeds federal limits. 

            This issue can be avoided by making sure the insured is also the policy owner in most instances. In some cases, usually involving divorce or child support, the policy owner and insured will be different parties. In those cases it may be advisable for the policy owner to keep themselves named as the beneficiary, if allowable under the order.  

Life insurance is an important aspect of any estate plan so take the time to learn about your options and ensure your resources reach your intended beneficiaries. For an estate plan evaluation contact Melone Law P.C. in our Northern Virginia office at 703-995-9900 and in Virginia Beach at 757-296-0580. 

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