The Schroeder Law Firm, P.C.

Do I Need a Will or Trust?

W. Harrison Schroeder, Esq.

Posted January 18, 2016, by W. Harrison Schroeder, Esq.

There are many important reasons to have a will or trust.

First, to select a suitable guardian for your minor children and a responsible executor to handle your estate. Without a will, those roles might be filled by irresponsible people or even people that you don’t know. Additionally, in your will, you can waive the statutory requirement that your executor obtain a surety bond, which would save your estate that expense (which can be substantial).

Second, to control your money from beyond the grave. Trusts can be set up for a multitude of reasons. For example, if your child divorces, your money may not end up where you expect it to. A trust can be used to keep the assets separate and out of reach of your child’s spouse. If your child has creditors or lacks health insurance, the child’s inheritance could be lost to creditors. A trust can be structured to protect the inheritance from creditors. If your child is young or generally bad at managing money, a responsible trustee can be appointed to handle the inheritance for the child until the child reaches a certain age. If you have a child with special needs, leaving your money to that child outright would disqualify them from receiving government benefits. Instead, your money should be left to a special needs trust, which can be structured to improve the quality of life of that child by providing things that government programs do not. Trusts can also be used to control how your money is to be used: you might want your money to be used only to pay for the college educations of your grandchildren, for example.

Third, to dispose of your property while avoiding family disputes. With a will, you can specifically set forth who gets what to avoid squabbles. If you have children that do not get along well or cannot agree on things, sometimes it is best to specify that your real estate or other property be sold by your Executor and the proceeds distributed, rather than leaving it to your children to decide what to do with the property. Alternatively, you could leave a parcel of real property to one child and then use other assets of the estate, or even life insurance proceeds, to even things out among the children.

Fourth, to reduce estate taxes. In 2016, the federal unified credit exclusion (the amount each person can leave to the next generation free of estate taxes) is $5.45 million. That amount certainly covers most people. However, if you anticipate your estate exceeding that amount, trusts and annual gifts (the 2016 annual gift tax exclusion is $14,000) can be used to increase the amount that you can pass to the next generation. Keep in mind that those figures may change at the whim of our Congress. In Virginia, the estate tax statutes are set up to mimic federal estate tax laws, such that if federal estate tax is due, then Virginia estate tax will be due. Conversely, if no federal estate tax is due, then no Virginia estate tax will be due. However, when you probate your will, Virginia will charge a probate tax. The probate tax is not substantial, but can be avoided through the use of life estates, pay on death designations, and revocable trusts.

Let us help you protect your legacy. Contact our office at (540) 745-4435 to schedule an appointment to discuss your estate plan.

Burwell House
304 East Main Street
Post Office Box 156
Floyd, Virginia 24091-0156

Telephone: (540) 745-4435
Facsimile: (540) 745-4436

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