Frequently Asked Questions
When someone dies without a will, the laws of intestacy apply. This does not mean that your assets go to the state, a common misconception. Rather, state law says that your probate estate will go to your heirs at law. (See “Probate Estate” and “Heirs at Law” in the Technical Terms section, below.)
It is important to have a last will and testament for several reasons:
- You can direct where your estate goes when you pass away rather than having the state’s default rules apply.
- In your will, you can nominate a person who will administer your estate. This person is called the executor.
- If you have minor children, you can say who you want their guardian to be.
- If you have an estate that may pass to young beneficiaries, beneficiaries with special needs, or beneficiaries who have problems handling money, you can appoint someone to administer that beneficiary’s share of the estate. That person is called a “trustee.” In your will, you may also nominate the trustee.
- In Virginia, a will can waive surety bond which the executor or trustee would otherwise have to get. Waiving the surety bond will save money. (For further explanation, see “Surety” in the Technical Terms section.)
A will is one part of an overall estate plan. A will controls the probate estate (see Technical Terms), but not property that is jointly owned with right of survivorship, or accounts that have beneficiary designations. Estate planning involves looking at the whole set of assets, making sure that they will go to the people you want them to go to. This process involves looking at the tax implications. It also involves practical concerns, such as asking whether assets should be given outright to a beneficiary or held in trust.
Estate planning also includes protecting yourself and your estate during your lifetime. This effort can be furthered by making sure you have other appropriate documentation in place, such as a power of attorney and advance medical directive (a healthcare power of attorney and living will), where you appoint people to make business and medical decisions in the event of your unavailability.
Avoiding probate can be very helpful in some instances. This can be accomplished through beneficiary designations and the use of trusts. Trusts come in varying forms and play an important role in estate planning.
A big misconception is that if you don’t have a will, everything goes to the state. Again, this isn’t the case; the state just has a hierarchy of who gets your estate, and you may not want your estate plan subjected to that hierarchy. A will overrides the hierarchy.
Some people think that they don’t need a will because they don’t view themselves as wealthy. Not everyone needs a will, but rarely is wealth the determining factor. If you have minor children, you need a will so you can appoint a guardian for them. If you have intended beneficiaries who aren’t those who the state has selected for you as your heirs, you need a will so the state’s default rules won’t apply. If you have beneficiaries who are young, have special needs, or have difficulty managing money, you need a will to appoint someone to handle the finances for them. This isn’t an exhaustive list.
Another misconception is that just because a will is valid, it’s a good will. Having a valid will and having a good will are two different things. In fact, sometimes having no will is better than having a bad will. Merely having a valid will does not mean your estate will pass as you want it to. A poorly drafted will often invites problems, including expensive and time-consuming litigation, and having to petition a court for aid and guidance because of unclear wording.
A will is an incredibly important document. It can be a vehicle for passing your life’s earnings, your sentimental items, and in some instances your children, to the intended recipients.
Don’t try to draft your own will. The careful, experienced, estate planner has discussed financial and family dynamics with many different people. When you fill out a form downloaded from the Internet, you are not having a conversation with someone who keeps asking, “What if . . . ?” In our discussions with clients, we often hear the client say, “I never even thought about that.”
Take the time to vet the person preparing your will and related documents. If the attorney preparing your will also handles criminal cases, personal injury, divorces, bankruptcy, and who knows what else, is this an attorney who is a jack of all trades, but a king of none? Find an attorney who specializes in estate planning.
Not everyone needs a will. But if you do need a will, it should be done right.
Your heirs at law are the people who will receive your probate estate if you don’t have a will. If you want to see the technical language, take a look at Virginia Code § 64.2-200. A quick overview is:
- If you are married and don’t have children by anyone else, your spouse is your sole heir.
- If you are married but do have children by someone else, your spouse gets one-third of your probate estate and your children (all of your children) get two-thirds.
- If you are unmarried and have no children or further descendants, your parents are your heirs, if they are alive.
- Next in line come your siblings, including the children of deceased siblings.
- Next come cousins, etc.
“Intestate” means without a will. “Intestacy” is the situation of having no will.
“Probate” has more than one meaning. It can mean the simple act of recording a will in the circuit court clerk’s office after the testator (the person whose will it is) has died. Sometimes recording the will is all that is needed, such as where the only asset controlled by the will is real estate. More commonly, though, probate refers to the process of administering the estate.
The probate estate consists of the assets that are controlled by the will, or by the laws of intestacy if there is no will. To help understand this, it is easiest to look at what is NOT in the probate estate.
Property that is owned with right of survivorship is not in the probate estate if the other co-owner is still alive. Common examples are the family home owned by both spouses, and joint checking accounts.
Life insurance is not in the probate estate if the beneficiary listed on the policy survives you.
Retirement accounts (IRAs, and such) most always have a designated beneficiary. If the beneficiary survives you, the account passes directly to him or her.
The terms “living trust” and “living will” are often confused simply because they sound so much the same. They are not.
A living trust is a tool designed to avoid the probate process. You can prepare a trust agreement that says where your assets will go when you pass away, just like a will would do. To avoid probate, assets will need to be registered in the name of the trust while you are alive, or held in some manner that will cause the assets to be transferred to the trust, outside of probate, when you die. For example, you can go to the bank and sign paperwork that will make your checking account POD (“pay on death”) to the trust. Similarly, investment accounts can be made TOD (“transfer on death”) to the trust.
A living trust is a good estate planning tool, but it is not always the best tool. Preparing the trust document is more complicated than preparing the average will, and correspondingly more expensive. Having the assets lined up to go into the trust also requires more work. You need to look at the overall picture to see if a living trust is right for you. Factors to consider are:
- Does your executor live out of state?
- Do you own real estate in another state?
- Do you want privacy for your estate administration?
- Do you expect a trust to be administered for an extended time following your death?
In most estate planning documents we prepare, we include provisions that apply in case part of your estate goes to young people or to people who, for whatever reason, cannot handle money themselves. This is called a trust. We go on to state that the trust is a “spendthrift trust,” and make reference to Virginia Code § 64.2-743. Clients often ask us, “What is a spendthrift trust?” It means that the assets in the trust are not subject to involuntary or voluntary transfer by the beneficiary. This is easily illustrated by an example:
- Your will might say that if any part of your estate goes to a beneficiary under age twenty-five, the money will be held in trust for the beneficiary until reaching that age. If the beneficiary gets into debt trouble, creditors won’t be able to garnish money from the trust (which would be involuntary transfer). Also, the beneficiary cannot trade away his or her money in the trust (which would be voluntary transfer). Money in the trust is protected from the beneficiary’s poor decisions.
In wills, we almost always say that you waive surety on the executor’s bond. Surety is similar to an insurance policy that will pay the estate if the executor mishandles and loses money. As with an insurance policy, the protection is not free. If surety is required, your executor must pay a premium from funds in the estate. In most instances, Virginia law allows you to waive surety. Since you are naming a trustworthy person as your executor, you will most likely want to waive the requirement of surety.
One instance where Virginia law does not allow you to waive surety is if you don’t have a Virginia resident serving as executor. This is one of the factors in favor of using a living trust, discussed above. The trustee of a living trust is not required to have surety.