My father-in-law just lost his wife and wants to stay on his farm in Virginia. He is 85. He has put all his savings accounts, annuities, etc in POD accounts for his two sons. His will says everything splits 50/50. Would a life estate help him to stay in his houses and should the 150 acres of land be split up and put in a trust now? I'm a realtor in Arizona and don't know how the laws work in Virginia.
Thanks for your help.
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The right answer depends on what property he has and what his goals are, and what is already in place. Most likely he needs will, but he needs to consult a local lawyer to discuss the best options for him.
In Virginia, life estates are rarely used anymore, for obvious reasons your estate planning attorney can discuss with you. More likely, a local attorney would set up a pour-over will that directs all individually owned assets to pass to the trust. The trust would avoid probate for all assets titled in it prior to your father-in-law's passing and would also give his children a means to administer his assets during his lifetime if he is unable to do so himself. Since I don't have your father-in-law's financial information, I can give specific advise, but generally the POD accounts would be change to name the trust as beneficiary and the real estate would be retitled in the trust during his lifetime. The attorney should also prepare a
power of attorney
and advanced medical directives (plus accompanying HIPAA release).
If you have specific questions, just email me; otherwise I encourage you to get with a qualified local estate planning attorney and have them get the necessary documents in place as soon as possible.
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The second answer offers sound advice. It is important to recognize that there may be other appropriate estate planning alternatives (family limited partnership comes to mind immediately if your facts fit, along with a gift giving program) to the ones discussed that may assist your family. A good estate planner from VA should be presented with all the facts and family goals to set up a comprehensive estate plan.
In estate planning, one size does not fit all. A good estate planner uses the many tools and strategies that he or she has learned over time. So implore your father-in-law to get with a good estate planner. It will be the best thing you ever do for the family.
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You have raised a number of interrelated issues. I will address them separately, but collectively they strongly suggest that your father-in-law would be well served by discussing his desires and concerns for his care during his life and the distribution of his property after his death with an experienced estate planning attorney.
Placing everything POD to his sons potentially leaves a huge gap in his estate plan; there is no clear direction on what should happen with the assets if a son predeceases him. Depending on how the POD designation is made it is possible that the assets would pass contrary to his intentions.
In terms of the real esate, you allude to a possible Medicaid eligibility or long term care concerns, i.e. how does he keep the house (Medicaid) and/or how does he stay in the house (long term care). Medicaid eligibility is determined based on one's assets and income. A life estate is not considered an asset. However, if he gifts the property to his sons and retains a life estate there is a 5 year look back/penalty period, i.e. the value of the gift is imputed to him as an asset. Government assistance for care in the home is available but sometimes limited under Medicare. Long term care insurance is a good option, but may be prohibitive in terms of premium costs given his age.
A revocable living trust is an excellent way to manage property through someone's life and to distribute their property at their passing. The real estate would be retitled in the name of the trust, but the division would not occur until your father-in-law's passing.
Any lifetime gift implicates gift tax concerns. Tax may not be due, but a return must be filed for any gift to an individual over the annual exclusion amount, which is $13,000 for this tax year.
Your father-in-law needs documents naming individuals to handle his financial and medical affairs during his lifetime: a will only provides for division of assets at his death. This is another potential gap in his current plan. Without financial and medical powers of attorney, if he becomes incompetent, i.e. unable to understand and manage his affairs, then the only recourse for family assisting him will be by petition to the court to be his guardian and conservator. This process, even if uncontested, is lengthy (several months) and expensive (usually at least $3,000). Also, guardians/conservators must report to the court every year after their appointment until the person dies. Most importantly it is avoidable at much less cost by having good documents in place now.
Disclaimer: This answer is provided for informational purposes only. This answer does not constitute legal advice and should not be relied on. Legal advice can only be provided after consultation with an attorney with experience in the area in which your concern lies. This is so because each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and/or documents at issue. This answer does not create an attorney-client relationship.
