Planning your estate is an effort to protect yourself and your assets.
However, by ensuring your estate is secure, you ultimately provide a future for your beneficiaries – namely, your children.
There are many ways you provide for your children in your estate plans. Knowing your options makes it easier to secure your children’s futures.
Virginia Law & Simultaneous Death of Spouses
The Virginia Code provides legislation entitled the “Uniform Simultaneous Death Act,” which provides for the coinciding death of you and your spouse.
Essentially, if you and your spouse perish within 120 hours (5 days) of each other, it is considered lawfully “simultaneous.”
In other words: neither of you predeceased the other.
For example, if you and your spouse are involved in vehicle accident, and your spouse survives in the hospital fewer than 120 hours after your death, it is ruled a simultaneous death.
The simultaneous death of spouses is tricky when it comes to children. If you and your spouse perish, what happens to your children?
While your child’s natural guardian would be your surviving spouse, your estate plan should extend beyond naming a single guardian.
Establishing a testamentary guardian in your will allows you to name a responsible and willing individual to inherit responsibility for your children in the event that you and your spouse perish simultaneously.
Failing to name a testamentary guardian for your children results in the court appointing a guardian.
Your child’s court appointed guardian is likely to be a family member, such as a close relative, if they are found suitable.
In Virginia, if the court is unable to establish a reliable guardian for your child, the child becomes a ward of the Commonwealth until other arrangements can be made.
Trusts are a probate-free way of transferring your property to your minor children.
There are several types of Virginia trusts that operate well for transferring property to minor children.
An education trust allows you to leave some or all of your assets to your child.
However, an education trust’s assets are only applicable to the child’s education.
In other words, your child cannot access the assets within the trust for any purpose other than funding their education.
Rather than your beneficiary receiving your trust assets, you appoint a trustee to manage the trust.
The trustee is responsible for transactions regarding the trust.
This ensures that the funds of the trust are being properly applied to the beneficiary’s academic needs.
These needs include books, room and board, and any other academic fee issued by the institution.
Your beneficiary does not have direct access to the assets of the trust.
“Family Pot” Trust
A “family pot” trust includes part or all of your estate assets to be inherited by your beneficiaries.
The assets you include become a “community estate” which is equally owned by all of your named beneficiaries.
Establishment of a “family pot” trust allows any beneficiary to access the trust assets in any amount, for any reason, and at any time.
Your beneficiaries are given full access to the trust assets, leaving little financial restriction to protect your trust assets.
Inclusion of a “spendthrift” provision in your trust documents prohibits your beneficiaries from transferring the interest and assets of your estate.
A particularly useful provision for beneficiaries that you fear may be too immature to manage their inheritance, the “spendthrift” protects your trust assets from depleting.
You are able to list which assets your beneficiaries have access to, how they are able to use those assets, and any other restrictions you feel are necessary.
You also have the ability to control the age at which your beneficiaries gain access to their inheritance, if you feel that they are too young to manage it wisely.
The inclusion of a “spendthrift” provision protects your assets from depletion as a result of poor or incapable management.
Virginia Child’s Trust
A child’s trust allows you to name your children as the beneficiaries of your estate and its assets, while bypassing estate taxes and probate proceedings.
You can create separate child’s trusts in order to bequeath particular assets to individual children. However, you must create a separate child’s trusts for each child.
However, it is important to remember that naming your children as beneficiaries does not mean that they will have immediate access to your trust assets.
Virginia provides restrictions on the age and amount of child property ownership, which includes inheritance.
In Virginia, a child must be 18-years old in order to hold property independently.
Children younger than 18-years of age may legally own generally between $2,500 and $5,000 worth of property.
Anything surpassing that threshold must be managed by a Virginia minor property guardian until the child comes of age for the inheritance.
Keep in mind that your child’s property guardian is not the same as your child’s legal guardian.
You will need to provide who is caring for your children as a legal guardian in addition to naming your child’s property guardian.
However, the same person can be assigned to both roles.
Virginia529 College Savings Plan
Not to be confused with an education trust, the Virginia529 College Savings Plan is an account you fund during your lifetime in order to pay for your child’s future education.
Your Virginia529 is managed by a government financial institution, but is owned by you.
The beneficiary of your account receives the accrued funds of the account so long as they are used towards college educational expenses.
The Virginia529 operates under similar restrictions as the education trust, however, the Virginia529 accrues interest on the funds you have attributed or invested, depending on the plan you’ve chosen.
While your education trust protects your assets, the Virginia529 provides you with the opportunity to grow your assets.
Life Insurance, Annuities, & Pensions
You must consider your children when you are making decisions regarding your life insurance coverage and inheritance.
Should you and your spouse perish simultaneously, your children must be named as the alternate beneficiaries to your insurance, annuity, and pension funds.
While the Virginia minor property restrictions are still prevalent, your child’s property guardian is named to manage the funds in the best interest of your child and your overall estate.
Once your child comes of age, they are able to inherit the entirety of the fund remainders.
Life insurance, annuities, and pensions are excluded from your overall estate, therefore bypassing probate proceedings.
Minor Beneficiary Provisions
Minor Property Guardianship
As stated, children in Virginia can inherit your property.
However, the property must be valued below the $2,500-$5,000 threshold for minor property ownership.
Once the child reaches the age of 18, the property is fully inherited.
Until that time, you must appoint your child’s minor property guardian.
Your child’s property guardian manages the estate in the best interest of the child, while seeking to preserve the assets of your estate.
Once the child reaches the age of 18, your child’s property guardian relinquishes all authority over the property and the child is granted full ownership and access to the inherited assets.
Child of a Previous Marriage
It’s important that you are considering all of your children – including children from a previous relationship or marriage.
You may want to ensure that they are given a portion of your estate, or you may want to disinherit them entirely.
Either way, it is wise to include your wishes in your estate documents.
If you have a child from a previous marriage that you are considering in your estate plans, it is helpful to discuss your wishes with your family.
Fewer surprises in the inheritance gives your estate a better chance at avoiding the contest of unhappy beneficiaries.
Your stepchildren are also a big consideration under your estate plan.
Remarriage makes you a big part of the lives of your spouse’s children.
If you are considering an inheritance that would extend to your stepchildren, you will need to provide for that in your estate documents.
Your stepchildren will generally not inherit your property unless you specifically provide for that in your will or other documents.
You might want to disinherit a child or relative, and that’s okay.
There are plenty of valid reasons for wanting to disinherit, none of which are required to be explained in your estate documents or to your beneficiaries.
If you are disinheriting one of your children, you may say so expressly.
Otherwise, you may simply leave them out of your beneficiary listing.
This automatically disinherits them, unless circumstances provide for your children to inherit your intestate assets.
Testate & Intestate Inheritance
There are two main categories of inheritance: testate, and intestate.
Dying testate means you’ve left behind a will to direct how your property is managed and inherited.
Dying intestate means you haven’t left behind a will with those same designations.
An estate passed on through testate proceedings are distributed as your estate plan has established.
However, if your estate is left intestate, your beneficiaries are determined by state law of succession.
Virginia intestate succession of your estate is as follows:
- Your spouse inherits your estate as common law property; they share ownership of your estate under marital law
- Children and grandchildren, if there is no surviving spouse
- Your parents, if surviving you, under the circumstance that you have no surviving spouse, children, or grandchildren
- Siblings, assuming none of the aforementioned beneficiaries have survived you
The line of intestate succession continues until the closest family member is determined.
However, keep in mind that if you have children from a previous marriage and your estate is left intestate, 2/3 of your property will be distributed to those children, while 1/3 is given to your surviving spouse.
This can only be changed by creating a will to direct otherwise; however, in Virginia, you can never fully disinherit a spouse.
Establishing an estate plan that covers your children is vital to their futures.
Remember, your estate plan should be updated each time a child is born or perishes.
It is important for you and your children to keep your estate plan up-to-date.
To establish or update your estate plan for your children, schedule a consultation with our estate planning attorney.