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Agent’s Power to Gift

December 7, 2019 By John Lumpkins Leave a Comment

On December 5, 2019 the Virginia Supreme Court issued an opinion involving the gifting authority of an agent under a power of attorney. The case name is Davis v. Davis.

Whether to allow an agent to make gifts of a principal’s property is an issue that I talk to my clients about when they are updating their estate plan. Current Virginia law, which was updated in July 2010 with the adoption of the Uniform Power of Attorney Act (UPAA), requires the power to gift be expressly stated in the power of attorney. In Davis, a case out of Wythe County, in 1993 after an accident left him a quadriplegic, a gentleman named Sam Dickey appointed his mother Agnes Davis as his agent under a durable power of attorney. This document was prepared before the UPAA; in his POA Sam gave his mother the power “to sell and convey any and all personal property and all real property [Sam] may own…”

In 2005, years after Sam had moved into an addition his mother built onto her house for him, Sam wrote a Last Will leaving some of his property to his mother and some to his brother and sister. Rae Mills, a woman who was an employee at the family farm, also provided care for Sam in the years after his accident. She moved into Sam’s home in 2010 to care for him. In May 2013 Sam became ill and was transferred to a nursing facility.

On October 1, 2013 Rae and Sam were married in a “closed-door” ceremony at the nursing home – Sam’s family was not aware of this marriage until Oct 15 when a friend of Agnes’ told her that she saw on social media that Rae had changed her last name. on Oct 25, Dickey “triggered a ‘code blue’ which indicated… he was in jeopardy of dying.” On Halloween, using the power of attorney from her son, Agnes transferred the bulk of Sam’s property – worth over $2 million, to herself.

Sam passed away on November 15, 2013. Sam’s brother, who was the executor in Sam’s Last Will, wisely asked the Wythe County Circuit Court for guidance as to whether mom’s transfers to herself were valid. The trial court found that the power of attorney authorized the gifts, thereby leaving nothing in Sam’s estate to pass by Last Will. Rae appealed to the Supreme Court.

The Supreme Court opinion included a detailed analysis of the common law (before the UPAA) and of the UPAA. The justices reversed the trial court and held that the power of attorney did not grant Agnes the authority to make gifts of her son’s property. The challenge for mom was she had to rely on the language “sell and convey”. She tried to convince the justices that “convey” meant gift. That, to me, was an uphill climb, especially against the UPAA requirement that, “[a] power of attorney document must expressly grant the authority to make gifts.” Va. Code § 64.2-1622(A)(2). Also, under Virginia case law, a gift by the agent to the agent, is presumptively fraudulent.

Choosing your agent and what powers to grant is an important decision when creating your power of attorney. Whether to permit that agent to make gifts, to third parties and/or the agent herself, is a another critical decision point. In some circumstances, the power to gift can be a huge positive, particularly in the context of long-term care planning.

Tips for Personal Representatives

April 16, 2017 By John Lumpkins Leave a Comment

Before we share some helpful tips, a few definitions:

“Executor” is the person named or nominated in a Last Will to administer the estate.
“Administrator” is the person appointed by a court to administer the estate (typically where there is no Last Will – “intestate”)
“Personal representative” is a phrase that means someone who is charges with administering an estate, so it includes either of the above two words.

The above will be used interchangeably in this guide.

Locate Important Papers

An executor needs to determine if a will exists and if so locate the original. This can requires a thorough search of the deceased’s home, belongings and sometimes a safe deposit box. You need the original – or you will need ask a court to allow you to probate a copy if that is all you can find. If you know that the deceased had an attorney, contact that attorney to see if they have any knowledge of the existence of a will or its location. Sometimes people will keep copies of their wills in their homes, but leave an original with their attorney for safe-keeping. Virginia, unlike some states, does not allow persons to lodge their Will with the Court while they are alive.
Take note of and keep organized all financial and tax documents you comes across during your search. This will make your work easier later on.
You will likely will need to produce death certificates to close the deceased’s various accounts. The funeral home is the best place to get death certificates, but you can also order them from the Division of Vital Records. Get plenty of death certificates.

“Probate” any Last Will (But don’t qualify before you know that you need to!)

A common mistake we see is personal representatives go to the courthouse and qualify as executor or administrator when they really did not need to. Sometimes is best to simply record (some people say “probate”) the Will, but not qualify as executor or administrator.
There are many factors to consider in determining whether to qualify. Situations where you might not need or want to qualify can include:
- The deceased had very little personal property in her name (even if she had real estate).
- The deceased had debts well in excess of the value of his assets (the estate is insolvent).
Recording or probating the Will without qualifying is simple and typically involves little expense and less than an hour visit in the Circuit Court Clerk’s Office. And if you later need to qualify you can still do so.

Notify Beneficiaries and Creditors

If you probate the Will, whether you qualify or not, Virginia law spells out the notice requirements – to heirs (persons who would inherit if there is no will) and beneficiaries. The notice requirements are time sensitive. The Circuit Court Clerk’s Office provides you the forms you should use. Even if you don’t qualify, you are required to send out notices to heirs and beneficiaries. Notifying the creditors is a prudent step, but early notification is not required by law.

Keep Estate Assets Segregated; If You Qualify Create an Estate Bank Account

Just because a person dies, doesn’t mean that money stops coming in and bills no longer need to be paid. It’s wise to set up a separate account where post-mortem income, like paychecks or money owed from other sources can be held. Additionally, the personal representative must keep on top of paying the deceased’s bills. You can safely cut off the deceased’s cable TV service for example, but expenses like mortgage payments and utility bills must continue to be addressed.

Prepare an Inventory of Assets and a List of Liabilities

Within four months of qualifying a personal representative must file with the Commissioner of Accounts a written inventory of estate assets. The valuation of those assets should be the value as of the date of death. So from early on you should begin keeping good records of what you are doing. And a personal representative is also responsible for paying, from the assets of the estate, all valid debts of the deceased. So you should look through the financial records of the deceased closely to try and identify all debts. If no one is living at the residence of the deceased, you should have the USPS forward the deceased’s mail to your address.

Manage the Estate Property

Pay Creditors; Do So Before Making Distributions to Beneficiaries

A personal representative is not personally liable for the deceased’s debts, but if you make mistakes in managing the estate assets you can become personally liable. Be careful when distributing any money – for payment of debts or to beneficiaries. You should only pay valid debts, and you don’t want to make distributions to beneficiaries before making absolutely sure you have enough assets to pay all valid debts.

File Tax Returns

The executor needs to ensure that the deceased’s tax returns are timely filed. For final income tax returns, the timeframe is generally the first of the current year through the date of death (April 15th deadline, just as if they were alive). For very large estates, estate tax returns (both federal and possibly state if applicable) may have to be filed as well. And even if the estate is below the current threshold for estate tax liability, in some cases you may still want to file an estate tax return for the purpose of electing what is called portability of the exclusion. Generally, federal estate tax returns are due nine months after the date of death, but six-month extensions are available with some advance notice and an estimated payment.

Distribute Assets to Beneficiaries

Once all debts are settled, the personal representative must distribute the estate’s assets to the beneficiaries. If there is a Last Will, it will control who gets what, and the executor must follow its instructions. This includes setting up trusts or other entities outlined in the document. If no will exists, then state intestacy law, here is Virginia’s, determines how everything is distributed. Note that an executor may be require to liquidate property that isn’t specifically specified in the will in order to meet other obligations in the document. This can be an emotional stage, as there’s very little rhyme or reason as to what beneficiaries will fight over. It’s important to keep lines of communication open and try to balance everyone’s competing interests.

If there’s anything left over in the estate after all of the will’s specific distributions have been made, then it’s the executor’s responsibility to dispose of it – typically in accordance with what is called the residuary clause of the Last Will.

Maintain Open Communication with Beneficiaries and Others

I wrote this in the previous section, but it is worth its own heading. Many difficult estate administration situations can be made easier, or even the difficulties avoided, if the personal representative regularly and openly communicates with others about what is happening with the estate.

Make Timely Filings with the Commissioner of Accounts

We noted earlier the inventory filing requirement. In most cases the personal representative will also be required to file annual accountings. These are due four months after the end of each twelve-month period, starting from the date of qualification. It is very helpful to keep the lines of communication open with the Commissioner’s office. Most offices in Virginia are staffed with persons who are willing to help and guide the personal representative, but they cannot and will not give legal advice. Mark Shepard, the Commissioner of Accounts in Henrico County, which surrounds the City of Richmond, has a website with very helpful information for persons who have matters before his office.

Pay yourself for your services

This is not a legal requirement, but neither is working for free an obligation. Doing a proper job as executor takes time and effort. The law permits you to be paid for your services. We’ve rarely seem this, but the Last Will can set forth a fee schedule. Absent that, the law allows you to take a reasonable compensation for your services. Many jurisdictions in Virginia follow a Uniform Fee Schedule. Commissioner Shepard has a page on his website detailing how his office handles executor compensation.

Hire professionals to help you

Advice and guidance from an experienced lawyer and CPA can save you from headache and heartache or worse. Our law firm regularly offers guidance to Virginia executors and administrators. In simple estates sometimes an hour-long consultation is all that is needed. But situations are as varied as the people and families involved, and occasionally the counsel of an experienced professional is needed from start to finish. Questions like, should I or can I sell the real estate? Sometimes there are different interpretations of language used in a Last Will. More than once we’ve seen the situation where a child is living in the late parent’s house and does not want (or cannot afford) to move, even though the house is now owned jointly by that child and his siblings.

Our firm will find the answers to your questions and keep you on the right track. We enjoy working closely with our clients to find the best solution in a challenging and often emotionally-charged situation. If you would like help with your estate administration situation, call us at 804.756.4600, or Contact Us.

Do I need a Last Will?

April 16, 2017 By John Lumpkins Leave a Comment

Do I need a Will in Virginia?

If you want to control who inherits your probate estate when you die, then you should have a Virginia lawyer experienced in estate planning draft a Last Will and Testament for you.

If you want to appoint the responsible adult(s) who will have custody (guardianship) of your children until they reach majority, then you should have a Virginia lawyer experienced in estate planning draft a Last Will and Testament for you.

A Last Will and Testament is simply a written document that must be signed be you.

It explains how you want your probate estate to be distributed at your death. Your Will is only effective at your death. Unless you enter into a contract promising that you will not change your will, while you are alive (and mentally competent) you can amend the terms of your Will, or you can revoke your Will.

What is the Probate Estate?

It is critical to understand that a Will only controls distribution of your “probate estate”. Property that is not part of your probate estate will not be controlled by the terms of your Will. Virginia law names such nonprobate transfers, “nontestamentary transfers.” If your goal is to “avoid probate” then you would not plan to direct your estate at your death by a Will. The probate estate is, essentially, all property that is in your name at your death which does not pass by survivorship provisions (e.g., a bank account held as joint tenants with right of survivorship) or by beneficiary designation (e.g., a life insurance policy naming a surviving spouse as a beneficiary).

Avoiding “probate”, in my opinion, is something to consider, but it is not, for property passing in Virginia, a factor that should be allowed to interfere with the achievement of other objectives, especially as to the control of one’s property that is being administered for the benefit of younger beneficiaries. The probate tax in Virginia is 10 cents per $100 or .1%. Revocable Living Trusts can be a great tool, but in my experience too many individuals and couples that have them don’t understand what they have and they end up not effectively using their trusts.

There are many factors to consider in deciding whether to use a Last Will and Testament as your primary estate planning tool or whether a trust of some sort is appropriate. I can help you understand the differences when you are preparing your estate plan.

Many of the following FAQ’s are drawn from information prepared and published by the Trusts and Estates Section of the Virginia State Bar.

Who may make a will?

Any mentally competent person who is at least eighteen years old may make a Will. However, a subsequent challenge in Court with proof of any fraud, duress, or undue influence by another person on the testator may lead to the Will being deemed invalid.

Who should have a will and why?

Every mentally competent adult should have a Will. Here are a few of the reasons:

You can direct how you want your property divided at your death.
You can name the person you want to handle your estate (called the “executor” or “personal representative”).
You can reduce the expenses of administering your estate.
You can save taxes.
You can nominate a guardian for your minor children.
You may provide for a trust for the support and education of your children without the necessity of costly court proceedings.

Must a will be witnessed? Must it be notarized?

In Virginia, the signing of a will must generally be witnessed by two competent persons, who also must sign the will in front of the testator. An exception to the witness requirement is made if the testator writes out the entire will in his or her own handwriting and signs and dates it. Such a will written in the testator’s hand is called a holographic will. In 2007 Virginia passed a law that allows, in limited circumstances, a Circuit Court to excuse compliance with some of the formalities of the execution of a Will.

Although Virginia law does not require a Will to be notarized, it is a highly recommended practice that hopefully all lawyers follow. If the testator and witnesses take an oath and sign the Will before a notary public, the will is presumed to be properly executed and will be accepted by the court without testimony from the witnesses. This extra page with the notary’s acknowledgement that all the parties made a certain oath and the signatures of the testator and witnesses, is called a self-proving affidavit or self-proving certificate.

How long is a will valid?

Your will is valid until you revoke it, generally either by physical destruction (tearing or burning it up, for example) or by signing a superseding will or written revocation. However, if you get divorced after signing a Will, Virginia law in most cases will consider the Will partially revoked with respect to your ex-spouse. Also, if you are married, your spouse may have rights in your estate regardless of what is provided in your will. This is called an elective share and is calculated as a share of your augmented estate.

What happens if I don’t have a will?

This is called dying “intestate”. In that case state law governs the distribution of your property. Your bills and final expenses are still paid (from your personal property), but whatever probate property that is left in your estate will be distributed in accordance with state law. In Virginia the first few steps are: first, to a surviving spouse, unless the intestate decedent is survived by children or their descendants any of whom are not children of their descendant of the surviving spouse (in which case 2/3 goes to all the intestate’s children and their descendants, and 1/3 to the surviving spouse); second, if not surviving spouse, then to all the intestate’s children and their descendants; third, if none of the above, then to the intestate’s father and mother or the survivor. There are eight more steps, for a total of eleven set forth in Virginia law.

Is joint ownership a substitute for a will?

No. As noted above joint ownership with survivorship will bypass the Will, but not all assets can be documented as being jointly owned or passed by beneficiary designation. Also if the co-owner with survivorship rights or the beneficiary predeceases you, or, for instance, dies in a common accident, then that property passes by intestacy. There are also potential tax problems with joint ownership. If a married couple owns a large enough estate, joint ownership of assets between husband and wife may result in unnecessary federal estate taxes at the death of the survivor. Joint ownership between parent and child can often foster disputes among family members and/or lead to unexpected and unnecessary federal gift taxes.

Is a living trust a substitute for a will?

No, a funded revocable (“living”) trust can be a valuable and important part of the estate plan for many people, but it does not eliminate the need for a will. If you have a living trust, you will still need a Will to dispose of those assets that have not or cannot be placed in the trust.

As useful as they are, living trusts are not appropriate for everyone. As I noted above, in my experience I’ve seen too often persons have trusts in place as an integral part of their estate plan but because they did not understand exactly what they had, they fail to get the full benefit of their trust(s). Only a lawyer, fully informed as to your situation, can tell you if you should consider a revocable living trust, and only your lawyer should prepare it. And your other advisers such as accountant, financial adviser and insurance agent should be aware of an involved in the ongoing maintenance of your estate plan.

Can I “cut-out” certain family members from inheriting any property?

Yes, with limitations. The legal phrase for a spouse, child or descendant who is left out of one’s will is “pretermitted spouse” or “pretermitted heir”. Virginia law, which was recently significantly revised by the General Assembly, provides protection for a pretermitted spouse to claim an “elective share” of a percentage (that increases in relation to the length of the marriage) of the decedent’s “augmented estate”. There are several steps involved in calculating the augmented estate; it includes gifts made by the decedent during several years before death. So if a husband wrote a Will that left his wife nothing, upon his death his surviving wife will likely consider her rights under Virginia law to claim an elective share. Virginia law does not protect pretermitted children unless the child was born (or adopted) after the execution of the will. Related to this question, minor children whom the decedent owed an obligation of support have rights to claim some allowances from the estate (this right to allowances is in addition to anything the Will leaves the child).

Does the Court make sure that the instructions in my Will are followed?

In Virginia the Circuit Court has jurisdiction over most matters pertaining to the administration of estates and trusts, but there is no special “Probate Court” in Virginia. Oversight of estate administration is conducted by a private office operated by a person with the title Commissioner of Accounts. Typically that person is a lawyer. In larger jurisdictions this is a full time job; in smaller counties and cities the Commissioner of Accounts will often maintain his or her own private law practice. The Commissioner is appointed by and serves at the pleasure of the Circuit Court judge(s) in the jurisdiction. The Commissioner’s duties are statutory. The Commissioner is charged with the responsibility of supervising the timely and proper filing of fiduciary inventories and accounts by administrators and executors of decedent’s estates, trustees of testamentary trusts, trustees of trusts for minors, guardians of the property of minors, conservators for incapacitated adults and foreclosure trustees. The Commissioners’ offices typically serve the citizens well, however, they don’t have the resources to monitor every detail of the administration of the estate. If a beneficiary or other interested party suspects that an executor or administrator is not properly performing his or her duties, the beneficiary should promptly retain a lawyer to investigate.

Who should draft my will?

A person who drafts a will must be familiar with the law in order to avoid the many pitfalls and to comply with the formalities necessary to assure the will’s validity. Only a practicing lawyer is professionally qualified to give you advice regarding your will, to prepare your will, and to supervise its signing.

Practical Suggestions

Planning your financial affairs – for during your life and at your death – is a very personal and individual matter. You should decide for yourself the general purposes you wish to accomplish, then consult with your lawyer and any other advisors to plan properly how to accomplish your goals. Ideally your lawyer, financial advisor, and any accountant or life insurance agent you employee, should work together – at a minimum discuss with each other – the implementation of your estate plan.

Take these four practical steps to save time and help assure a sound result:

1. Inventory your assets. List in reasonable detail all of your property, real and personal; life insurance policies; and retirement plans, with your best assessment of their values. Determine current title on each asset and the current beneficiary designation so that your advisers may review and help you make and changes consistent with the plan.

2. Inventory your liabilities. List all debts and obligations, including principal amounts, payees, and essential terms.

3. Identify Persons and Roles. List your family members and any other persons or organizations whom you wish to benefit from your estate. Decide who might be an appropriate executor, trustee (for managing assets for the benefit of younger beneficiaries), or guardian for your minor children.

4. Decide what you want to accomplish. Determine what your objectives are and to whom you wish your assets distributed. Then meet with your lawyer and other advisers to work out the details and prepare the necessary documents. It will help if you have with you your working papers, list of assets and liabilities (identify retirement/IRA accounts, and whether traditional or Roth), and life insurance policies with you.

Secure your Last Will & Testament

April 16, 2017 By John Lumpkins Leave a Comment

The Virginia Supreme Court clarifies the burden in cases of lost original Last Wills.

An original Last Will and Testament is needed when a person goes to the Circuit Court Clerk to probate a will. Courts can accept a copy, but before the court will probate a copy the person presenting a copy must overcome a presumption that the original was destroyed by the testator with the intent of revoking the Last Will. Additionally, that presumption of revocation can be overcome only by “clear and convincing” evidence that the testator did not revoke the Last Will.

On June 4, 2015 in Edmonds v. Edmonds, the Virginia Supreme Court upheld an Arlington County trial court decision finding that the proponent of a copy of a Last Will proved that the Will was not revoked. In Edmonds the decedent was survived by his second wife, a daughter by that marriage, and a son by a prior marriage. When he died in 2013 his original Will, done in 2002, could not be found. In that 2002 Will he had not left anything to his son. His son challenged the widow’s efforts to probate a copy of the 2002 Will, and after the trial court held in widow’s favor the son appealed to the Virginia Supreme Court. The son argued that in order to meet the clear and convincing standard of proof, the wife needed to prove the cause of the disappearance of the Will (a cause, of course, other than the testator destroyed the Will). The Supreme Court rejected this argument and made it clear “that it may very well be impossible for the proponent of a missing will to explain what happened to the will, and therefore the statements of the testator regarding his testamentary intentions may be the best evidence to rebut the presumption of revocation.”

The Edmonds case should block future arguments that a proponent of a copy of a Will must prove what happened to the original Will, but the “take-away” from the case is a reminder to safely and securely store your original Last Will and other estate plan documents, and provide instructions and access only to those persons you trust completely.