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Wills vs. Living Trusts


A common and basic estate planning dilemma involves choosing whether to create a living trust or to write a will. These two instruments are similar because they create mechanisms for the distribution of property after death. But they have very different structures and uses, which are important to note when creating an estate plan.

When determining whether to use a trust or a will (or some combination thereof) to distribute assets, you should consider the advantages and disadvantages of each instrument.

WILLS

Advantages:

1. Less expensive on the front end. It typically costs more to set up a trust than to draft and execute a will.

2. Governing law. The law of wills has more protections in place for probated estates than laws governing trusts.

3. Time limit for creditors. The probate court sets a deadline for creditors to make claims on an estate.

4. Maintain title on property. There is no need to transfer title of property to another entity to make a will valid.

Disadvantages:

1. Public record. Upon death, your will is filed in probate court and is available for anyone to view.

2. Expensive probate. Probate can be both slow and costly.

3. Incapacity of testator. A will is only effective upon death, and cannot create mechanisms if the testator were to become mentally or physically incapacitated.

4. Multiple probate proceedings for out-of-state property. If you die with property outside the state where the will is effective, that property must be probated separately in that state.

5. Loss of control over fiduciaries/guardians. While you can nominate your own fiduciaries and guardians in a will, the probate court ultimately has the final say and has the discretion to ignore the testator’s wishes if he/she believes it’s in the best interest of the estate or children.

LIVING TRUSTS

Advantages: 

1. Avoid probate. Living trusts dispose of property like wills, but without the money and time costs associated with probate.

2. Incapacity of trustee. A living trust can immediately transfer property to someone else in the event of mental or physical incapacity without a court order.

3. Privacy. Unlike a will, a trust instrument is not a public document.

4. Out-of-state property. There is no need to probate out-of-state property held in trust.

5. Control over fiduciaries. Since a court is not involved in trust administration, you have complete control over who you name as trustee.

Disadvantages:

1. Initial cost. Unlike creating and executing a will, drafting documents and setting up the trust can be expensive.

2. Loss of ownership of trust property. You must relinquish formal title to the property placed in trust to a new entity.

3. No cut-off date for creditors. Creditors do not have a time limit for bringing claims against your trust.

4. No guardians for minors. You cannot designate guardians for minors in a trust.

For individuals and couples with large or complex estates, a good option is to utilize some combination of the two.  A will is highly recommended for anyone with minor children wishing to make a recommendation of guardianship as well as for anyone wanting to distribute property upon their death without losing control of it in their lifetimes. Under the right circumstances, supplementing that will with a living trust can provide you the security of knowing that your wishes will be carried out without interference from a court. Regardless of the approach you choose, be sure you contact an attorney before proceeding because much can go wrong if your trust or will is drafted or executed improperly.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1100 N. Glebe Road, Suite 1010, Arlington, VA 22201 || (571) 393-1236 || pyabut@prylaw.com

Wills on the Hill


This past November, my wife and I had a our first child. We very quickly discovered the trials and tribulations of being new parents: lack of sleep, overnight feedings and diaper changes, uncertainty over the right things to do to soothe your child, and the virtual disappearance of a social life. The experience, as so many of you know, has been life-altering — so very challenging but also extraordinarily rewarding.

As a new parent, I understand the impact that raising a child has on the daily schedule.  While caring for a newborn, finding time to eat (and shower!) can prove a challenge–the idea of tackling tasks beyond that may seem like a distant dream. As time goes on, these time commitments change but don’t necessarily decrease. As a result, you may end up putting aside tasks that you meant to do.

And if you are a new parent, maybe you’re thinking a little bit more about the future than you before. Will you have to find daycare? Where are the best elementary schools in your area? What happens if he or she gets accepted to Harvard?

And what happens if you die?

That last question is likely to be the last thing on your mind when you’re young and single and invincible. But when you start a family, it becomes important to consider how they will be provided for if the unthinkable happens. Many people have pensions or retirement plans that automatically pass to a designated beneficiary upon death (be sure to keep them up to date!), or jointly own a house or car or other property with their spouse, so there is no question as to where these assets will go. However, that potentially leaves a lot of assets and valuables whose ownership would be in dispute. That’s where a will comes in. A properly written and executed will informs everyone you leave behind of your last wishes and eliminates sources of conflict and confusion.

I have started a program called Wills on the Hill because I know the limits on time that parents face. While I can help draft and execute wills throughout Washington, DC, and Northern Virginia, if you live in Capitol Hill or nearby neighborhoods, I offer home visits for initial consultations and other meetings as needed.  Yes, I can do house calls during your child’s nap time, on evenings and weekends, or whenever you may have a free moment.

The rewards of this effort have been multiple for me. In the months that I’ve been offering this service, it has been a pleasure to fill a need within the community by easing the way for people seeking to secure their families’ futures. On a more personal level, it has been wonderful to grow my practice closer to home, which allows me a bit of flexibility to peek in and check on my son’s progress rolling over. So if this service is of interest to you, please review the resources on my site — and as always, please contact me with any questions.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1100 N. Glebe Road, Suite 1010, Arlington, VA 22201 || (571) 393-1236 || pyabut@prylaw.com

What is a “residuary estate?”


Generally a will contains three types of property to be distributed: direct bequests (gifts) to specific individuals, property to be held in trust for someone else (“testamentary trusts”), and the residuary estate.

A “residuary estate” contains all of the assets leftover after direct bequests and testamentary trusts.  In other words, it is what remains after you have given everything away to those whom you specify in the will.  Furthermore, any specific bequests that lapse before you die (for example, gifts to specific people who die before you do) automatically pass into the residuary estate.

In the probate process, all taxes, administrative fees, and creditors’ claims are paid out of the residuary estate before it passes to your named beneficiary or beneficiaries in the will.  Therefore, if you have precious family heirlooms or other items that you want other people to have after you die, it is important to specify them as gifts to keep them safe from probate.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1100 N. Glebe Road, Suite 1010, Arlington, VA 22201 || (571) 393-1236 || pyabut@prylaw.com

Limits on Wills


A will can give peace of mind by determining how your assets will be distributed after you die.  However, there are limits on what property a will can cover.  Assets that cannot be subject to a will include:

  • Property held in joint tenancy with right of survivorship.  This generally affects married couples, but anyone can acquire and own property jointly.  A right of survivorship means that if one co-owner dies, the other automatically takes over the other’s share.
  • Pensions, retirement, life insurance, and other accounts that have right of survivorship and/or named beneficiaries.  These accounts already have beneficiary provisions that a will cannot override.  Transfer of ownership would be effective immediately at death and before a will goes through probate.
  •   Assets held in trust.  While a will can set aside assets to create a trust, it cannot affect property already held in trust for a named beneficiary.

The common thread in these instruments is the named beneficiary.  In short, a will only can dispose of assets whose ownership would be in question upon death of the testator.  Any will provision that tries to change named beneficiaries for established trusts or payable-on-death accounts is automatically invalid.  Furthermore, payable-on-death and right-of-survivorship assets are not subject to estate taxes.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1100 N. Glebe Road, Suite 1010, Arlington, VA 22201 || (571) 393-1236 || pyabut@prylaw.com

Where’s there’s no will, there’s still a way


"food NOW! food NOW!" by author

“food NOW! food NOW!” by author

When a person dies without a will, state law substitutes and property is distributed according to statute.  This is called “intestate succession.”

In Virginia, if you die with:

  • Children, but no spouse — children inherit 100%.
  • Spouse, but no children — spouse inherits 100%.
  • Spouse and children, all of whom are descendants of that spouse — spouse inherits 100%.
  • Spouse and children, at least one of whom is from someone other than than that spouse — spouse inherits 1/3, children inherit 2/3.
  • Parents, but no spouse or children — parents inherit 100%.
  • Siblings, but no spouse or parents — siblings inherit 100%.

For a complete list of intestate inheritance rules, including decedents with no siblings, parents, spouses or children, see Va. Code § 64.2-200.

In the District of Columbia, if you die with:

  • Children, but no spouse — children inherit 100%.
  • Spouse, but no children or parents — spouse inherits 100%.
  • Spouse and children from you and that spouse, and spouse has no other descendants — spouse inherits 2/3, children inherit 1/3.
  • Spouse and children from you and that spouse, and spouse has descendants from another relationship —  spouse inherits 1/2, your children inherit 1/2.
  • Spouse and children from you and someone other than that spouse — spouse inherits 1/2, your children inherit 1/2.
  • Spouse and parents — spouse inherits 3/4, parents inherit 1/4.
  • Parents, but no spouse or children — parents inherit 100%.
  • Siblings, but no spouse, children or parents — siblings inherit 100%.

For the complete rules of intestate succession for DC, go to D.C. Code § 19-306§ 19-307§ 19-308§ 19-309, § 19-310§ 19-311, and § 19-312.

Because these are default rules, it is important that you create a will so you do not have the state distributing your property in a manner that is against your wishes.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1100 N. Glebe Road, Suite 1010, Arlington, VA 22201 || (571) 393-1236 || pyabut@prylaw.com

Changing your will


"waving goodbye to the sun" by author

“waving goodbye to the sun” by author

Like the tides, life does not stay the same from one moment to the next.  Changes may be sudden and immediate, like having children or selling your house, while others may happen gradually over time.  Chances are that if you have already written a will, changes in your life may not be reflected in what your final wishes were at the time.

There are two ways to make changes to a will:

  1. You can write an entirely new will.  A properly executed and witnessed will automatically supersede and replace all others before it.
  2. You can amend provisions of your will while leaving the rest of it intact.  This is called a “codicil,” and it is not a matter of simply crossing out and replacing items on the page.  A codicil must properly be witnessed and executed like a complete will for it to be effective (i.e., signed before two witnesses, and both witnesses signing in turn).  Any amendment that is not properly executed will be deemed invalid by a probate court.

A codicil may also be used to “revive” or reinstate a former  (“revoked”) will.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1100 N. Glebe Road, Suite 1010, Arlington, VA 22201 || (571) 393-1236 || pyabut@prylaw.com

Peace of mind on a piece of paper


"ducklings asea" by author

“ducklings asea” by author

Life is full of uncertainty.  People get married, kids are born, accidents and illnesses happen.  Death is an inevitable fact of life, and it can happen without warning.  And since we cannot take our possessions with us when we die, it is important to figure out well ahead of time how your assets will be distributed when the unthinkable happens.

A will is a statement (oral or written) that directs the disposition of your property after you die.  It becomes final when it is properly signed and witnessed, and it becomes effective after you die and when all probate procedures are met.

It is important to note that a will has no legal effect as long as the testator (the person who wrote the will) is still alive.

What you need to know before you write a will

Before you create a will, you have to gather necessary information.  This includes:

  • Beneficiaries and heirs — people or charitable organizations who will inherit your property.
  • Property (including where it is located and who is on the title) and debts.
  • Bequests — the names of people and specific property they will receive, and who will receive the property if they do not outlive you.
  • Residuary beneficiary — the person or people who will receive property you do not specify in the will.
  • Executor (and alternate) — the person or people who will be responsible for carrying out the will.
  • Guardian (and alternate) — person or people who will care for your children or dependents.
  • Provisions for disposition of your debts and funeral expenses.  Usually, this comes from the residuary estate (i.e., what is leftover after specific bequests of property).  Please note that will executions often take place after the funeral, so it may be prudent to take care of burial arrangements separate from a will.

Elements of a will

In order to be legally binding, a will must meet several basic requirements.  These are:

  • Legal age — you must be 18 in both DC and Virginia.
  • Testamentary capacity — also referred to as “of sound mind,” meaning you must have the sufficient mental capacity to create a legal will.
  • Intent to make the document or statement your will.
  • The will must be voluntary, without coercion or duress.
  • The will must properly dispose of your property.
  • The will should be written and witnessed by two other parties (though wills can be oral).
  • The will must be properly executed, per state law.  In DC and Virginia, this means that you must sign the will in front of two witnesses, and both witnesses in turn must sign as well.

PLEASE NOTE: There is no notary requirement for a will in either Virginia or DC.

Once your will is properly signed and witnessed, you should keep the original in s secure place, either in a safety deposit box, safe, or with your attorney.

This blog is an advertisement for the Law Office of Philip R. Yabut, PLLC, and the information in this post is not to be construed as legal advice, nor does reading it form an attorney-client relationship. Please do not post confidential information in the comments section.

Philip R. Yabut, Esq. || 1100 N. Glebe Road, Suite 1010, Arlington, VA 22201 || (571) 393-1236 || pyabut@prylaw.com