Virginia Estate Planning: Types of Trusts
Find out more about the various types of trusts in the Commonwealth of Virginia, and learn a little about which types of trusts may be best for you.
If you have significant assets such as real estate or liquid capital, you may want to consider the estate planning tool know as a trust. A trust is an arrangement which you can create which allows you to transfer title of your assets and to plan for certain tax consequences of allowing those assets to go through probate. A trust is also an excellent way of avoiding conflict between your heirs over the meaning of a will, or how an estate will be settled by your executor.
However, there are many different types of trusts in Virginia, and it is important that you have a basic familiarity of these trust types to help you understand your lawyer’s advice.
Revocable v. Irrevocable Trust
A living trust is a type of trust that you create during your lifetime. There are two major types of living trusts; revocable and irrevocable trusts. With either type of trust, your assets are transferred into the ownership of the trust. Technically, you no longer own the property that is put in the trust.
The difference between the two trust types boils down to how much control you maintain over the trust after it is created. A revocable trust allows you to make changes to the trust during your lifetime. For example, if you decide you want to dismantle the trust.
In contrast, an irrevocable trust cannot be dismantled, and the property remains in the trust during your lifetime. There are several benefits to an irrevocable trust depending on the value of your estate and the likelihood that your heirs will contest how your estate is handled.
Subtypes of Trusts
These two major categories of trusts can be further split into various categories depending on why you create the trust, the type of property you put into the trust, and how much power you want to give to your heirs in the trust. Common examples of subtypes of trusts include;
Generation skipping trusts, which allow you to pass property from yourself to your grandchildren.
Land trusts, which allow land to be managed by your family.
Medicaid planning trusts, which allow you to put your property into a trust to allow you to qualify for medicaid if you have too many assets.
Special needs trusts, if you have a family member with mental health needs or other disabilities.
Spendthrift trusts, which allow you to limit the amount of money your heirs receive over a period of time if you are afraid they will spend all the money too quickly.
Charitable trusts, which allow you to leave money to a charitable organization of your choice.
QTIP, which is a type of trust that allows you to leave tax-incentivized assets to your spouse.
Why you need an estate planning lawyer.
As you can see, trusts are a very complicated area of law which require a significant amount of thought. There are many different types of trusts in Virginia, and the one that is right for you depends largely on why you want to create the trust and what the trust is to be used for. A lawyer can help you navigate these various types of trusts to determine which is best for you.
Bankruptcy: What to do prior to filing.
So you want to file for bankruptcy? Before you file, there are some things you need to know. Many people who file for bankruptcy don’t realize that there are federal laws that prohibit you from doing certain things before you file. Violating these rules may lead to your bankruptcy case being dismissed. A dismissal allows your creditors to continue collecting on your debt. Follow these steps in preparing for filing for bankruptcy.
Do Not Transfer Property to Family
Don’t do it. Transferring your car or your real estate to anyone prior to bankruptcy may violate several laws. The court has the ability to declare that those transfers were fraudulent. This can have a serious impact on both you and your family. Bankruptcy courts will “look back” over your finances for a period of time prior to your application to make sure you are not misleading your creditors or hiding assets. Not only could this type of activity result in your debt not being discharged, but you may be guilty of a crime.
File Your Tax Returns
Federal and state governments are heavily involved in the bankruptcy process. Failure to file your tax returns may result in tax liens and a more thorough examination of your bankruptcy application. As a result, failure to file your tax returns can also delay your bankruptcy proceeding. The trustee has the ability to prolong or even dismiss your case for failure to file tax returns.
Don't Run Up Your Debt
There are some people who decide, prior to filing for bankruptcy, to intentionally incur additional debt that they have no intention to pay for. This is fraud. The court has the ability to declare that you will still be on the hook for that debt. Furthermore, you could be investigated for criminal proceedings.
Gather Financial Paperwork
For each debt that you owe, you should begin preparing any documentation related to those debts. For example, if you owe credit card debt, obtain the credit card agreement and a statement of accounts. If you have a mortgage, get your mortgage agreement and an accounting of how much is remaining on your mortgage. It is also important to obtain proof of income for your family members such as paystubs and tax returns. This information will be invaluable for your attorney and will save time.
Contact a Lawyer
Bankruptcy is a complicated process. As evidenced above, creditors have a number of opportunities to examine your finances. If you have been moving debt around or incurring additional debt, you may not be eligible for a discharge and could remain on the hook for the debt. Therefore, it is important that you speak with a lawyer to avoid these, and other, mistakes.
Bankruptcy: What to expect at your 341 Meeting
You’ve chosen a lawyer, decided on which chapter of bankruptcy is best, and have filed your initial paperwork with the court. What comes next? There are several steps in the bankruptcy. One of the first steps is a meeting known as the “341 Meeting.” It is also known as a “Creditor’s Meeting.”
What is a 341 Meeting?
A 341 meeting is a hearing held by the trustee who has been assigned to your case. The meeting is an opportunity for the trustee and for any creditors to ask you a series of questions regarding your eligibility for bankruptcy. Your lawyer should prepare you in advance by providing you with a list of questions that the trustee will be asking. If there are any issues with the paperwork that you have filed with the court, the trustee will likely raise those issues at the 341 hearing. Your bankruptcy proceeding cannot go forward until you have satisfied the trustee’s requirements for the 341 meeting.
Who will be present?
There are a number of different people that could be present at your 341 meeting. At a bare minimum, you must attend. The trustee who has been assigned to your case will also be in attendance, as will your lawyer. Representatives from your creditors can also make an appearance to challenge your bankruptcy paperwork and ask questions regarding your finances. The last group that could be present at your 341 meeting is the Department of Justice (“DOJ”). The DOJ gets involved with 341 meetings if there are allegations of bankruptcy fraud. The DOJ takes such allegations very seriously.
What do you need to bring?
Every jurisdiction is unique, but there are a few things you should bring with you to your 341 meeting. You should have several forms of ID with you including your driver’s license, social security card and passport. You will also need to bring a completed set of questionnaires that will be provided to you by your attorney. All of this paperwork will need to be provided to the trustee for their review. Finally, you will likely be required to bring proof of income and your bankruptcy paperwork. There may be other paperwork required depending on the type of bankruptcy you have filed and any objections that have been made by the trustee.
Why you need a lawyer.
You absolutely need a lawyer for the 341 Meeting. The purpose of the 341 Meeting is to allow the trustee and the creditors an opportunity to confirm that you have followed all the rules. Failure to follow the relevant bankruptcy rules could result in your case either getting delayed or dismissed. Worst case scenario; the DOJ could even get involved. Therefore, make sure you have your attorney prepare you for the 341 Meeting and walk you through what is likely to happen.
Bankruptcy Basics: Chapter 7 and Chapter 13
WHAT IS BANKRUPTCY?
Do you have credit card bills? Are utilities going unpaid? Are you afraid of being evicted or losing your home? If you answered yes to one of these questions, bankruptcy may be right for you. Bankruptcy allows you to get a fresh start by removing your personal liability for certain types of debt. Bankruptcy can be a long process or a short process, depending on your income and the amount of property you own. The two most common types of bankruptcy are Chapter 7 and Chapter 13.
CHAPTER 7 BANKRUPTCY
A Chapter 7 bankruptcy is available to you if you make below a certain amount of income. This type of bankruptcy is a relatively fast process, and typically takes one to four months. There are two subtypes of a Chapter 7 bankruptcy that I will talk about at a later time; asset cases and no asset cases.
CHAPTER 13 BANKRUPTCY
A Chapter 13 bankruptcy is a much longer process than a Chapter 7 bankruptcy. This type of bankruptcy is for you if you make above a certain level of income. This type of bankruptcy can take between three to five years to complete. You set up a payment plan with the court during this type of bankruptcy, and that payment plan is used to pay down your debts.
WHY YOU NEED A LAWYER
Bankruptcy is complicated. There are dozens of documents that need to be filed with the court and several things you must do before you can qualify. If you fail to properly complete the paperwork, your bankruptcy may be dismissed and you may still be on the hook for your debts.
You also need a lawyer to help you determine which type of bankruptcy is best for you. If you are considering bankruptcy, contact a lawyer.