What is an estate plan?

An estate plan is relevant regardless of where you're at in life.

When you hear estate plan you may think one of two things – “I’m too young to care” or “It’s a will, why am I wasting my time reading this?”

Both answers miss the mark because an estate plan is comprehensive, applicable no matter the age, and valuable no matter your net worth.

An estate plan is just a way to describe documents that make your wishes known after you’re gone. These documents lay out the who, the how, and the what about your life and your intents when you can't be there. This article is meant to give you a general overview of these documents, not to deep dive into them. We’ll do that as this series develops. An estate plan should generally include advanced medical directives, powers of attorney, guardianship appointments, and either a will or a trust.

Let’s talk powers of attorney (“POAs”). POAs are “durable” meaning they’re valid even if the designated “attorney” is incapacitated unless the document says otherwise. POAs are either general, meaning the designated person becomes your agent for all parts of your life, or limited, meaning they act as your agent on specific topics.

General POAs entitle your designee to (i) pay your bills; (ii) transfer assets; (iii) manage investments; and (iv) handle legal issues on your behalf. The designee has an obligation to ensure they’re acting in your best interest. Limited POAs, such as medical POAs, entitle someone to make medical decisions on your behalf, often in accordance with your stated preferences. Virginia law provides POA powers to spouses, as long as a divorce is not pending, then to children, then to parents, then to adult siblings.

You can have multiple POAs outstanding provided you avoid overlap with their powers. For example, it can provide some assurance to have a general POA to someone you know who is very financially savvy and your medical POA to someone who has always shown a deep understanding of your way of thinking. This strategy enables you to select the people you trust the most in their respective areas of competency.

Now let’s look at guardianship appointments, also known as standby guardianships. Virginia allows the use of a standby guardian when parents experience a triggering event (Such as death, illness, and immigration issues). By default, Virginia places children in the guardianship of a surviving spouse and, where no such person exists, to other family or confidantes. The Clerk and the Circuit Court will do their best to align the placement of children with the guardian who provides for the best interest of the child but that’s the catch – the court is doing its best, not you. Standby guardianships allow you to clearly define who, how, and when someone else will take over the care of your children.

Finally, we’ll turn to wills and trust. These are the most common things when you think of estate planning. First things first, no matter how much or how little you think you have, have a will or a trust. Wills are the traditional document we think of which goes through a process known as probate. Probate is where the administrator of your will files an accounting of your assets with the court, publishes notice to your creditors that you have passed, settles all outstanding debts, and distributes assets. The estate will still pay out elective shares as applicable and can be sued for a variety of reasons. Wills can also be drafted to help discourage challengers if you’re concerned about delicate family situations.

Trusts, on the other hand, actively seek to avoid probate by sending property into the name of the trust. If something never enters an estate it can avoid challenge, elective shares, etc… There are other tax and accounting considerations but, in general, think of trusts as the best way to avoid challenges. Trusts can be sued like wills but, generally, trusts tend to be more durable.

Virginia law provides for the distribution of assets if you have neither of these documents. Virginia law looks to divide the estate evenly based on who is closest in relationship to you upon your passing. Unnervingly, however, it defers estate administration to whoever can claim your estate and doesn’t file a waiver of qualification. This means that you’re vulnerable to one unchanging truth – people are crazy. Having witnessed first hand what it looks like when an estate without much in it still has sentimental items, trust in the law to mitigate greed, hurt feelings, and nostalgia is a misplaced trust.

In addition to wills and trusts there are a variety of automatic transfers to consider. Payable on death and transfer on death instruments don’t need to enter an estate because the offerings under those instruments operate under contract.

An estate plan covers a great deal of ground. There is no stage in life where an estate plan is irrelevant – the news reminds us of the sobering reality of how unpredictable life is. From the untimely passing of athletes like Jon Huber to the nearly endless lifespan of Keith Richards, life is arbitrary. Whether you have the net worth of a Warren Buffet or, like me, you question if it’s moral to have an estate with nothing but student loan debt and hope, the greatest value of an estate plan is really quite simple – certainty for you to enjoy today and certainty for those you care about to enjoy long after you can’t see it.

Get started today on your estate plan, set up a consultation here today.