New Virginia Law Tightens Rules on Power of Attorney Recordkeeping Exemptions

Almost one year ago, we published a blog post highlighting the broad range of individuals who may request records from an agent acting under a power of attorney in Virginia. Recordkeeping remains a core duty of an agent under both the Uniform Power of Attorney Act and the Virginia Uniform Power of Attorney Act (“VPOA”), serving the essential purpose of promoting accountability and proper fiduciary management. A new bill out of the Virginia General Assembly has added another layer of protection.

Under Virginia law, an agent must provide records to the principal (the person making the power of attorney), a guardian, or a court upon request, but as we wrote in our prior blog post, the Virginia Uniform Power of Attorney Act expands this obligation by allowing certain persons, including family members, beneficiaries, and other persons who demonstrate “sufficient interest in the principal’s welfare,” to access those records if they reasonably believe the principal is or was incapacitated. While this framework is intended to protect vulnerable individuals, it broadens the pool of people who may scrutinize an agent’s actions and potentially challenge them. Although principals may limit or eliminate such disclosures through clear language in the power of attorney—and courts have upheld these limitations—doing so should be approached with care.

The Virginia General Assembly has now added additional requirements and defined a process that must be followed to make these limitations valid.  On April 8, 2026, Governor Spanberger signed legislation into effect amending the VPOA to establish a formal process by which a principal may relieve an agent of the duty to disclose records. The purpose of this amendment is clear: to help prevent elder abuse and financial exploitation by ensuring that agents remain accountable via their disclosure duties unless the principal explicitly—and knowingly—exempts their agent from the duty to disclose.

Under new Va. Code § 64.2-1612(J), any provision relieving an agent of disclosure obligations is valid only if the principal signs or initials a specific statement, in the presence of a notary, acknowledging that:

• The principal understands the effect of the provision; and

• The provision reflects the principal’s wishes, even if it may not be in the principal’s best interests in the event of future incapacity.

This is a significant development. The General Assembly has effectively drawn a bright line: limiting an agent’s duty to disclose should not be done casually or buried in boilerplate language. Instead, principals must make a conscious, informed decision—one that recognizes the potential tradeoff between privacy and protection.

The practical impact is substantial. The required acknowledgment language—particularly the statement that the provision applies “regardless of whether such provision is in the principal’s best interests if the principal later becomes incapacitated”—will likely give many individuals pause. We hope too that it will prevent blanket exemptions sometimes included by the casual attorney who merely dabbles in trusts and estates as a practice. The requirement that the provision be specifically signed and notarized will draw more attention to the language, and hopefully prompt discussion on what exactly the principal is giving up, and why.  Thus, principals who have legitimate concerns about interference or harassment from certain individuals can still limit disclosure—but only after clearly acknowledging their intent, and the potential consequences of such a limitation.

In this way, the legislation reflects a broader policy choice: prioritizing the protection of vulnerable individuals over administrative convenience or unfettered fiduciary discretion. Given the increasing prevalence of elder financial exploitation—often involving trusted individuals within the family—this shift is timely and reflective of a growing policy need in the Commonwealth.

It is important to note that this new requirement applies only to powers of attorney executed on or after July 1, 2026. Provisions exempting agent disclosure in existing documents will be considered valid despite not having adhered to the new statutory process.

As always, careful drafting is critical. A well-constructed power of attorney should balance transparency, privacy, and protection in a way that reflects your unique family dynamics and planning goals.  Schooley Law Firm is here to provide you with thoughtful, individualized planning, while also protecting you, your family, and your future.  Contact us today with your estate planning needs.

Lessons From Strangers: A Memoir of Marriage

Abstract blue and black outlines of ospreys grace the cover of a recent book dominating discussion boards, local bookstore displays, and bestseller lists this year.  Strangers: A Memoir of Marriage is a captivating and atmospheric narrative written by New York socialite Belle Burden, descendant of Babe Paley and heir to the Vanderbilt fortune.  Burden’s memoir chronicles her sudden and unexpected divorce, initiated by her ex-husband just weeks into the pandemic lockdown of 2020. 

The memoir is emotional, reflective, and honest, walking readers through the phases of heartbreak Burden experienced.  Yet an equally striking and unsettling aspect of her story lies in the financial missteps that shaped the outcome of her divorce.

Burden’s substantial wealth was held in trusts established by her family—likely intended to preserve and protect those assets over time. Burden’s parents also required she enter into a prenuptial agreement as an added layer of protection. Nevertheless, a series of decisions ultimately placed much of her inherited wealth at risk.

Early on, Burden and her ex-husband entered into a prenuptial agreement which, while confirming her trusts as her separate property, also provided that income earned during the marriage would remain the separate property of the earning spouse.  Under Virginia law,  income earned during marriage is typically considered marital property, subject to equal distribution upon divorce.  In marriages where both spouses earn comparable incomes—or where both bring significant independent wealth to the marriage—this distinction may have limited practical impact.  However, in relationships where one spouse intends to leave the workforce or significantly reduce earning capacity to support the household, such a provision can produce starkly different outcomes in the event of divorce. 

It is unclear whether Burden and her husband fully addressed this dynamic—specifically, that she would step away from compensated work and that her contributions to the home would be unpaid.  At the time, Burden may have believed her trusts provided a sufficient financial safety net.

However, Burden significantly depleted—if not entirely exhausted—her trust assets to purchase two residences for herself and her husband: an apartment in Manhattan and a home on Martha’s Vineyard.  Critically, both properties were titled jointly in her and her husband’s name.  As a result, despite being funded almost entirely by Burden’s separate inherited wealth, these homes became marital property subject to division upon divorce. 

According to her memoir, Burden’s husband later attempted to leverage this reality, asserting that she would need to buy out his interest in the properties to retain them.  At that point, Burden lacked the liquidity to do so—her inherited assets had already been distributed from the trusts and invested into the real estate.

A few lessons may be learned from Burden’s memoir:

·      Thoughtful Financial and Estate Planning Should Be Proactive, Not Reactive:  While no amount of planning can eliminate all risk, there were safeguards that could have been put in place to further mitigate Burden’s potential for financial exposure.  For example, more restrictive trust distribution provisions, the involvement of an active or professional trustee in major purchases, or careful structuring of title ownership could have preserved the separate character of those assets.  Burden notes that trustees approved the emptying of her trusts to fund the purchase of her homes.  While her trustees may have acted in the manner they thought best for Burden, more restrictive trust conditions, or perhaps requiring numerous trustees sign off on major decisions, could have prevented the unwise titling decision or the emptying of her trusts entirely.

·      There is No Substitute for Communication and Education: Burden’s experience highlights the importance of communication and financial education. Many families avoid discussions about money—sometimes out of discomfort, and sometimes out of a misplaced sense of security. Burden recounts that her family routinely paid restaurant bills without reviewing them, simply placing a credit card on the check presenter with the assumption that funds were always available, and checks were always correct. That sense of financial inevitability proved misleading: when her father died, he left behind millions of dollars in debt, which the family was then required to address. This demonstrates that even significant wealth, absent careful oversight and education, can mask underlying financial vulnerabilities.

·      Prenuptial Agreements Should Not Be Entered Into Lightly:  Many people view premarital or prenuptial agreements as some kind of default protection of wealth—perhaps the reason Burden’s parents required their children enter into such agreements with future spouses.  However, the financial results of prenuptial agreements are defined, in part, by a couple’s actions and financial decisions within the marriage.  Lawyers and clients alike must anticipate and consider what could occur during the marriage, and couples should communicate regarding finances, earning expectations, and ambitions early on, especially if they enter into a premarital agreement.  Burden’s attorney cautioned her against classifying wages as separate property, but Burden and her ex-husband proceeded anyway.  Before Burden stepped away from her career, she could have attempted to renegotiate and amend the prenuptial agreement – but did not.  These decisions (or lack thereof), coupled with the emptying of her trusts, proved costly.

For high-net-worth individuals, earning and accumulating money is not, by itself, a guarantee of long-term financial security or generational wealth. Effective planning requires collaboration with experienced professionals, as well as ongoing communication and education within the family.

At the same time, Burden’s story underscores a broader reality. While her losses were substantial, many individuals face far more precarious circumstances. Burden risked losing two residences—one a multi-bedroom apartment in Manhattan and the other a large, secluded home on Martha’s Vineyard. Many individuals, by contrast, struggle to retain a single shared home, lack the resources to buy out a former partner’s interest in the only residence they have, or are unable to obtain safe and secure housing on their own following divorce.

Burden also had advantages that are not universally available: strong family connections, continued professional engagement through pro bono legal work, and the opportunity—combined with talent and timing—to become a published author. For many, reentering the workforce after an extended absence or securing stable employment in the midst of personal upheaval is far more difficult.

Ultimately, Burden’s memoir illustrates a universal lesson: regardless of financial background—whether inherited wealth or modest means—failing to prioritize thoughtful financial and estate planning can lead to significant and lasting consequences.

Please email us at ttolson@schooleyfirm.com to receive an invitation to an evening that blends book discussion with practical insights into legal and financial planning. Schooley Law Firm is distinguished by its focus on client education and empowerment.  Our goal is always to help individuals, couples, and families understand their financial goals and available options, while providing the knowledge, confidence, and resources needed to fully participate in financial decision-making within their relationships and households.

Please Standby: The Critical Importance of Guardianship Designations in Your Estate Plan

            For many new parents, finalizing their estate plan is not top of mind considering the many other, novel tasks they face every day.  However, certain estate planning tasks should not be put off.  In particular, parents with minor children would benefit from the peace of mind and preparedness that comes with finalizing their guardianship designations, which they can accomplish in their simple estate plan documents or as a standalone form.

            A guardian is someone who is named to have custody and take care of your minor children in the event you and your co-parent are unable to do so.  We often think of guardianship as something that may come into effect if both parents die or are incapacitated.  However, there are other situations in which parents may be unable to care for their child.  Consider, for example, parents who travelled abroad before the COVID-19 pandemic and were stuck out of the country due to travel restrictions, or immigrant parents who visit their country of origin and now face difficulty returning to the United States.  By designating a guardian, parents are able to plan for the future care of their children without terminating their own parental or legal rights.

Guardianship designations are frequently included as a portion of an individual’s last will and testament.  However, guardianship designations may also be made in a separate document.  Notably, parents may appoint a “standby guardian” in a written designation that details under what circumstances the guardian should be responsible for the care and custody of the minor child.  For example, parents may want a standby guardian to step in if they are deceased, or if they are incapacitated or detained for over one month.  You may feel that different triggering events justify your standby guardian stepping in.

A separate guardianship designation may be the preferable option for parents who want to keep their guardianship designation decision private or if they have a more complicated guardianship situation (such as naming one person to have custody of the children, and another to make the childrens’ education and health care decisions).  Because your will goes through probate and will be provided to any beneficiaries you name, your guardianship decision and any parameters you specify will also become available if made in your will.  Some parents may also prefer drafting a separate guardianship designation if they anticipate having to change the designation frequently; whereas a will must be notarized and signed by two witnesses, guardianship designations do not have this same requirement.  Finally, parents who anticipate potential last minute travel or unavailability may want to have a guardianship designation drafted quickly separate from their will, and want the freedom to make minor amendments without the need to draft and execute a will codicil.

            Regardless of the method of guardianship designation, it is crucial that parents take the time to carefully consider their guardianship decisions and communicate with their designated guardians regarding the guardians’ ability and willingness to care for the children.  Parents should consider not only their guardians’ ability to take care of children, but their location, values, lifestyle, and stability.  Guardianship designations can not only give parents peace of mind, but ensure children are kept in homes that best suit them and mirror what they are accustomed to in the event their parents are unable to care for them.

It is worth noting that, while you may request a specific guardian or custodian for your minor child in your estate plan, ultimately, Virginia law allows the court to determine guardianship.  This is to account for changed circumstances.  For example, perhaps you named your sister who lives in California to be the guardian of your child if you and your spouse die, but your parents live in the same city as you.  You may have made this decision to facilitate your child growing up with someone closer to your own age, rather than with your aging parents.  However, if you and your spouse both passed, for example,  several months prior to your child graduating high school and turning eighteen, the court may decide to give your parents custody of your child to allow your child to finish high school at the school they’re accustomed to, rather than requiring them to move to California, or your sister to move to Virginia, for mere months.  This, of course, would be different if there was a clear reason why your parents should not be the guardians.  You can specify in your estate plan people who you explicitly do not want to have guardianship—for example, estranged family members who otherwise may seem like viable candidates as guardians to the court.

Proper estate planning is critical for new parents, though among a blur of diaper changes, doctors’ appointments, and playdates, many parents may choose to put off this planning for a later date, until they’ve accumulated more assets or are simply less busy.  However, ensuring you have an estate plan set up prior to, or soon after, your child is born, is important and can give new parents the peace of mind in knowing their child will be taken care of if the parents are unable to do so.  At Schooley Law Firm, we can help take this weight off your shoulders and ensure your estate plan protects you and your children for long into the future.

If you need help creating or updating guardianship designations in your will, or would like to draft a new guardianship designation, contact us today to schedule a consultation and start planning for your future.

Schooley Law Firm Recognized in 16th Edition of Best Law Firms!

Today we are pleased to share Schooley Law Firm’s recognition in the 16th edition of Best Law Firms®. We are excited to be included in this elite and extremely impressive group.

Best Law Firms® rankings celebrate firms that have consistently demonstrated excellence in legal expertise and industry knowledge. Each firm included has been rigorously evaluated based on client feedback, peer recommendations, leadership interviews, and the depth of their practice. The result is a comprehensive guide for businesses and individuals seeking top-tier legal counsel in the United States.

Reflections from the Women & Wellness Panel: A Holistic Conversation

Last night, I had the privilege of speaking at an intimate women’s gathering at Chez Nous as part of a panel on holistic wellness. The room was filled with warmth, curiosity, and a shared desire to explore what wellness truly means for working women. I was joined by Elizabeth King, a financial planner from Seneca Wealth, Ellie Burke a life coach, and Ashley Williams a wellness instructor with The Well Collective—each of us bringing a unique lens to the conversation.

I was honored to be invited by a client and fellow attorney who thoughtfully curated the evening. She opened with a powerful question: “What does holistic wellness mean to you, especially for and as working women?” For me, as an estate planning lawyer, wellness includes the peace of mind that comes from knowing your affairs are in order. It’s about creating clarity and security for yourself and your loved ones—something that deeply affects emotional and financial well-being. I shared how estate planning isn’t just about documents—it’s about empowerment, legacy, and reducing stress during life’s most challenging transitions. Each panelist echoed similar themes: that wellness is multifaceted and deeply personal.

Who Can See Your Money? Virginia's Surprising Power of Attorney Privacy Rules.

Virginia’s Agent Recordkeeping and Reporting Requirement

Recordkeeping and accounting are important parts of an agent’s job under a power of attorney (“POA”). Recordkeeping is required under both the Uniform Power of Attorney Act (“UPOA”) and the Virginia Uniform Power of Attorney Act (“VPOA”), and serves a public policy purpose in ensuring proper fiduciary management and accountability. However, who has a right to examine these records—and what if you do not want your fiduciary records to be viewed by certain individuals? Under Virginia law, it is critical to plan for this in your POA. Otherwise, your agent’s records may be reviewable by certain categories of individuals, referred to herein as “interested parties,” you never thought would see your financial information.

Both the UPOA and VPOA require agents to keep records and receipts of actions taken on behalf of the principal and require disclosure of such records to the principal or the principal’s guardian, conservator, or other fiduciary if the principal or other fiduciary requests disclosure, or if the agent is so ordered by a court. However, the VPOA expands on this, requiring that agents provide similar records and accountings to certain interested parties if the interested party “has a good faith belief that the principal suffers an incapacity or, if deceased, suffered incapacity at the time the agent acted.” See Va. Code § 64.2-1612(I). According to the VPOA, this ability to view records is available to individuals authorized to make health care decisions for the principal; the principal’s spouse, parent, or descendant; the principal’s sibling, niece, or nephew; beneficiaries to the principal’s estate; the adult protective services unit of the principal’s local social services; among other individuals.

While this provision of the VPOA is aimed at ensuring incapacitated principals are not taken advantage of by their agents, it also greatly expands the scope of who can potentially review the agent’s actions. This power given to interested parties could have significant implications for many principals and agents alike, as it could open the door for family members or beneficiaries to review and interfere with the agent’s decisions by bringing an equitable accounting action against the agent in court. 

Fortunately, the VPOA notes that the principal can “otherwise provide[]” in the POA that the agent should not provide receipts to certain individuals or third parties. Specifically, a principal can include in their POA language stating that they do not want their agent to disclose receipts, disbursements, or other similar information to anyone, any individual, or any select group of individuals. This helps principals who anticipate issues with specific family members or others seeking to review their agent’s actions who would never benefit from the estate plan to get ahead of the problem and permit their agent to refuse certain individuals the ability to review the agent’s disbursements.

For example, in Phillips v. Rohrbaugh, a Virginia circuit court found that the principal’s power of attorney specifically exempted his agent from having to disclose records related to disbursement, even with circumstantial evidence of nefarious acts, where the power of attorney stated that “my agent shall never be required to make disclosure or inspection of my affairs, or their actions as my agent… to any third party.” Id. (emphasis in original). The court upheld this decision despite family members of the principal suspecting improper actions of the agent. Thus, as demonstrated by the court, while Virginia law may by default require transparency in the agent’s management of the principal’s affairs, this requirement can be written around if the situation warrants such a limitation on transparency.

The Phillips power of attorney provided the agent a broad exemption from disclosure, which may not be advisable for everyone. The ability to review an estate’s accountings and disbursements made by an agent is a critical component of building trust and helps protect an estate’s assets from an agent seeking to engage in self-dealing. Transparency is generally not problematic for an agent with honest intentions and good recordkeeping skills. However, there are many reasons you may wish to protect your agent from certain individuals and exclude your agent from Virginia’s default requirement to disclose to interested parties. For example, certain individuals may not benefit from your estate plan and questions they ask may be a form of harassment. At Schooley Law Firm, we want to ensure your estate plan is customized to your specific family and your personal needs, and always seek to obtain a comprehensive picture of your situation to get your planning right. 

If you need help with creating or updating your power of attorney, contact us today to schedule a consultation and start planning for your future.

"Hot" Powers: What are they, and how to use them.

Recordkeeping and accounting are important parts of an agent’s job under a power of attorney (“POA”). Recordkeeping is required under both the Uniform Power of Attorney Act (“UPOA”) and the Virginia Uniform Power of Attorney Act (“VPOA”), and serves a public policy purpose in ensuring proper fiduciary management and accountability. However, who has a right to examine these records—and what if you do not want your fiduciary records to be viewed by certain individuals? Under Virginia law, it is critical to plan for this in your POA. Otherwise, your agent’s records may be reviewable by certain categories of individuals, referred to herein as “interested parties,” you never thought would see your financial information.

Both the UPOA and VPOA require agents to keep records and receipts of actions taken on behalf of the principal and require disclosure of such records to the principal or the principal’s guardian, conservator, or other fiduciary if the principal or other fiduciary requests disclosure, or if the agent is so ordered by a court. However, the VPOA expands on this, requiring that agents provide similar records and accountings to certain interested parties if the interested party “has a good faith belief that the principal suffers an incapacity or, if deceased, suffered incapacity at the time the agent acted.” See Va. Code § 64.2-1612(I). According to the VPOA, this ability to view records is available to individuals authorized to make health care decisions for the principal; the principal’s spouse, parent, or descendant; the principal’s sibling, niece, or nephew; beneficiaries to the principal’s estate; the adult protective services unit of the principal’s local social services; among other individuals.

While this provision of the VPOA is aimed at ensuring incapacitated principals are not taken advantage of by their agents, it also greatly expands the scope of who can potentially review the agent’s actions. This power given to interested parties could have significant implications for many principals and agents alike, as it could open the door for family members or beneficiaries to review and interfere with the agent’s decisions by bringing an equitable accounting action against the agent in court.

Fortunately, the VPOA notes that the principal can “otherwise provide[]” in the POA that the agent should not provide receipts to certain individuals or third parties. Specifically, a principal can include in their POA language stating that they do not want their agent to disclose receipts, disbursements, or other similar information to anyone besides the agent (or another, select group of individuals). This helps principals who anticipate issues with specific family members or others seeking to review their agent’s actions to get ahead of the problem and permit their agent to refuse certain individuals the ability to review the agent’s disbursements.

For example, in Phillips v. Rohrbaugh, a Virginia circuit court found that the principal’s power of attorney specifically exempted his agent from having to disclose records related to disbursement where the power of attorney stated that “my agent shall never be required to make disclosure or inspection of my affairs, or their actions as my agent… to any third party.” Id.

Understanding Probate: Common Questions Answered

Probate can feel overwhelming, especially when you’re dealing with the loss of a loved one. At Schooley Law Firm we strive to make this process as smooth as possible for our clients. Here, we address some of the most common questions about probate to help you better understand what to expect.

1. What is Probate? Probate is the legal procedure that occurs after someone passes away. It involves validating the decedent's will (if one exists), settling any outstanding debts, and distributing the remaining assets to the beneficiaries.

2. How Long Does Probate Take? The duration of probate can vary widely. On average, it may take anywhere from a few months to more than a few years, depending on factors like the complexity of the estate, whether there is a will or not, and the jurisdiction's specific requirements. While it can seem lengthy, understanding the timelines can help manage expectations.

3. Do All Estates Go Through Probate? Not necessarily. Certain assets can bypass probate altogether. Properties held in joint ownership accounts with designated beneficiaries, or assets placed in a revocable trust can often be transferred directly to the heirs, avoiding the probate process. In addition, if the assets in your personal name at your death total less than $50,000, it is possible to avoid some formalities of the probate process. 

4. What Are the Costs Involved in Probate? Probate can incur several costs, including probate tax, court fees, legal fees, and fees to the Commissioner of Accounts. The total cost can vary based on the estate's value and complexities. It’s essential to be aware of these potential expenses early on.

5. Can a Will Be Contested? Yes, a will can be contested during the probate process. Common grounds for contesting a will include claims of lack of capacity, undue influence by another party, or failure to adhere to proper legal formalities in executing the will.

Navigating the probate process doesn’t have to be daunting. At Schooley Law Firm, we’re here to guide you through each step, ensuring your loved one's wishes are respected and upheld. If you have more questions or need assistance, please reach out to us. We’re here to help you find clarity during this challenging time.  

For more information on probate or to schedule a consultation, call (804) 270-1300. Let us help you through this process with compassion and expertise.

Common Estate Planning Mistakes to Avoid

When it comes to securing your legacy, estate planning is essential. Unfortunately, many people make common mistakes that can lead to confusion, financial loss, or even family disputes. Here are some key pitfalls to avoid in your estate planning journey.

1. Failing to Create a Plan. One of the most significant mistakes individuals make is not having any estate plan in place. Without a will or trust, state laws will dictate how your assets are distributed, which may not align with your wishes. Take the time to create a comprehensive estate plan that reflects your desires.

2. Not Updating Your Documents. Life changes, such as marriage, divorce, the birth of a child, or the death of a loved one, can significantly impact your estate plan. Failing to update your documents accordingly can result in unintended consequences. Regularly review and revise your estate plan to ensure it remains relevant.

3. Overlooking Tax Implications.  Estate planning isn’t just about distributing assets; it’s also about tax considerations. Ignoring tax implications can lead to significant costs for your heirs. Work with Schooley Law Firm or a tax professional to understand potential tax liabilities and how to mitigate them.

4. Choosing the Wrong Executor or Trustee. The selection of an executor for your will or trustee for your trust is critical. Selecting someone without the necessary skills, time, or willingness to serve can complicate the administration of your estate. Choose individuals who are responsible, organized, and trustworthy.

5. Not Considering Special Needs. If you have dependents with special needs, failing to make appropriate provisions can jeopardize their eligibility for government benefits. Utilize special needs trusts and consult with a professional to ensure their financial security.

6. Ignoring Digital Assets. In today’s digital age, it’s essential to include your digital assets in your estate plan. This could include online accounts, cryptocurrencies, and digital files. Make a comprehensive list of your digital assets and provide instructions on how to access them.

7. Neglecting to Communicate Your Plan. Many people avoid discussing their estate plans with family members, fearing it will cause conflict. However, not communicating your intentions can lead to confusion and disputes after your passing. Open discussions can help manage expectations and reduce stress for your loved ones.

8. DIY Estate Planning. While creating a will online may seem like a convenient and economical option, DIY estate planning can be fraught with pitfalls. State laws vary, and a poorly executed plan can lead to confusion and legal challenges. It’s often best to consult with a professional to ensure your estate plan is valid and comprehensive.

Effective estate planning requires careful consideration and regular maintenance. By avoiding these common mistakes, you can help ensure that your wishes are honored, your loved ones are cared for, and your estate is managed smoothly after your passing. Consulting with an experienced estate planning attorney like the ones at Schooley Law Firm can provide you with the guidance you need to navigate this important process.

Understanding Qualified Terminable Interest Property Trusts

A QTIP Trust, or Qualified Terminable Interest Property Trust, is an estate planning tool that allows a person to provide for their surviving spouse while also controlling how the assets are distributed after both spouses have passed away. Here’s a breakdown of its key features:

1. Provide for Surviving Spouse: The surviving spouse receives income generated from the trust assets during their lifetime, and the grantor can choose to provide limited access to the principal. For example, the grantor can allow the surviving spouse to access the principal for certain needs, like support and health.

2. Qualified Property: The trust is designed to qualify for the marital deduction under the Internal Revenue Code, which allows the transfer of assets to a surviving spouse without incurring federal estate taxes at the time of the transfer. By qualifying for the marital deduction, the QTIP Trust allows for the deferral of estate taxes on assets transferred to the trust, benefiting the surviving spouse without immediate tax consequences.

3. Control Over Final Distribution: After the surviving spouse passes away, the remaining trust assets can be distributed according to the grantor's wishes, often specified in the trust document. This allows the grantor to ensure that children from a previous marriage or other beneficiaries receive the assets.

4. Flexibility and Protection: QTIP Trusts can provide financial protection for the surviving spouse while ensuring that the original grantor's intentions are met regarding the distribution of their assets. The terms of a QTIP Trust can be structured to adapt to changing family dynamics or financial situations, offering flexibility in managing the trust assets. In addition, assets held in a QTIP Trust may protect from creditors of the surviving spouse, as the trust can offer a layer of financial security.

5. Tax Deferral: QTIP trusts allow the surviving spouse to defer estate taxes until they pass away, which can benefit the overall estate planning strategy.  The value of the trust is included in the surviving spouse's estate, which may help manage tax liabilities more effectively.

Overall, a QTIP Trust is an effective way to balance the financial needs of a surviving spouse with the desire to control the distribution of assets after their death. If you’re looking to learn more about QTIP trusts and how they can benefit your estate planning, don’t hesitate to contact us. We invite you to schedule a meeting with one of our esteemed attorneys to discuss your options and answer any questions you may have.

CTA: “Which way do I go? Which way do I go?”

In a game of ping pong, the Fifth Circuit Court of Appeals in Texas has lobbed another shot.    Just three days after the three-judge “motions panel” issued a “stay” of the District Court’s nationwide injunction of the need for certain “reporting companies” to file Beneficial Ownership Information Reports (“BOIRs”) with FinCEN in compliance with the Corporate Transparency Act (“CTA”), the three-judge “merits panel” vacated the stay, on December 26, 2024.  Some may liken the courts’ and FinCEN’s response to the  Texas Top Cop Shop, Inc. v. Garland case to the “Whose On First” skit by Abbott and Costello.  On December 3rd we had a nationwide injunction, on December 23rd we had a stay of that injunction and on December 26th, a vacation of that stay.

I need a vacation after all of this.  And if you already filed the BOIR for your reporting company, stop reading now and continue on merrily with your holiday vacation.

So, to get down to nuts and bolts.  The reason the CTA was enacted was to enable law enforcement to identify the actual owners and controllers of companies being used for financial crimes and money laundering.  Due to the December 23rd reversal of the injunction, Fin CEN issued a Notice allowing most reporting companies an extension of time to file until January 13.  This deadline no longer applies, FOR NOW.  The court has a hearing for oral arguments set for March 25, but this may not be the last word before that date.  We previously notified our clients to go ahead and file (because we do not think you are criminals), and this newest reversal does not change that opinion.   It just allows for more procrastination.

Happy New Year from the Fifth Circuit and Schooley Law Firm.

Corporate Transparency Act Due Dates Back in Force!

On December 3, 2024, the US District Court for the Eastern District of Texas issued a preliminary nationwide injunction against the Federal government, effectively prohibiting it from enforcing the reporting deadlines for certain entities under the Corporate Transparency Act.

However, just days later on December 23, 2024, the United States Court of Appeals for the Fifth Circuit rendered the prior injunction invalid by issuing a “stay” of the injunction. The court determined that the reasons for the injunction were insufficient to justify its continuation, allowing the provisions of the CTA to move forward as originally intended. The original plaintiffs had not requested such relief, and the district court had not tailored the relief to the penalties before it. Notably, the most recent Congressional spending bill passed to avert a government shutdown had originally included an extension of the filing deadline to December 31, 2025, but this was stripped from the bill before passage.

As a reminder, CTA is a U.S. law enacted in 2021 as part of the National Defense Authorization Act. Its primary purpose is to combat illicit financial activities by increasing transparency in corporate ownership. Under the CTA, most corporations and LLCs are required to disclose their beneficial owners via the Financial Crimes Enforcement Network (FinCEN).

With the injunction lifted, the due dates for compliance with the Corporate Transparency Act remain intact. Businesses are now required to adhere to the established timelines for reporting beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN).

The reporting regime went into effect on January 1, 2024. Entities created before that date have until JANUARY 1, 2025, to file their beneficial ownership in formation report with FinCEN. Any entity created after January 1, 2024, and before January 1, 2025, has a period of 90 days. Any entity created on or after January 1, 2025 is required to submit its initial report within 30 days. These due dates are critical for ensuring that the CTA's provisions are implemented effectively, and non-compliance could lead to significant penalties, and even criminal charges.

ALL PERSONS WHO ARE REQUIRED TO REPORT SHOULD DO SO BY JANUARY 1, 2025
As we navigate this evolving legal landscape, companies must stay informed and up-to-date on compliance obligations.

Considerations for End-of-Year Gifts: A Guide from Schooley Law Firm

As the year comes to a close, many individuals reflect on their financial goals and the impact they can have on their loved ones and their communities. One effective way to express generosity and plan for the future is through end-of-year gifting. However, navigating the complexities of gifting can be daunting. Here are some important considerations to keep in mind when planning your end-of-year gifts.

Understand the Tax Implications

Gift-giving can have significant tax implications for the giver. The IRS allows individuals to give up to $18,000 (as of 2024) per recipient without triggering the requirement to file a gift tax return. If you’re married, you and your spouse can jointly gift up to $36,000 to any single recipient without taxes. Additionally, gifts can reduce your taxable estate, which might be beneficial if you’re concerned about estate taxes in the future.

Consider Timing

Timing your gifts can be essential. If you're considering large gifts, making them before the year ends can be beneficial for tax planning purposes. Consider whether it might make sense to give now versus waiting until the new year, particularly if you anticipate changes in tax laws or personal financial situations.

Focus on Education and Healthcare

Tuition payments for qualified education expenses and payments for medical expenses are typically exempt from gift taxes if paid directly to the institution or medical provider. This can be a great way to support loved ones without affecting your annual exclusion limits.

Document Your Gifts

 Proper documentation is crucial not only for tax purposes but also to clarify your intentions. Keep clear records of the gifts you make, including who received them, the amount, and the date of the gift. This can help prevent family disputes and offer clarity for your estate planning process.

Make Meaningful Gifts

Consider not just the financial value of your gifts, but also the meaning behind them. Gifts that provide experiences or support a loved one’s passions can create lasting memories. Whether it’s funding a family trip, contributing to a child’s education, or supporting a favorite charity, think about how your gifts can make a positive impact.

Utilize Trusts for Larger Gifts

For those considering larger gifts, particularly to children or grandchildren, utilizing a trust can be a prudent strategy. Trusts provide more control over how the assets are used and can help prevent potential issues with mismanagement. They can also protect assets from creditors and ensure they are distributed according to your wishes.

Consult with an Estate Planning Attorney

 Before making any significant gifting decisions, it’s wise to consult with an estate planning attorney. The attorneys at Schooley Law Firm can provide personalized advice tailored to your financial situation, help you understand the implications of your gifts, and ensure that your estate plan aligns with your gifting strategy.

End-of-year gifting can be a fulfilling way to share your wealth and make a positive impact on others. However, it’s essential to approach this strategy thoughtfully, considering the tax implications and the potential benefits to both you and your beneficiaries. By planning and consulting with professionals, you can maximize the advantage of your gifts, ensuring they achieve your personal and financial goals.

Understanding the 2025 Annual Exclusion Amounts for Estates and Gifting

As we approach the end of 2024, it’s essential for individuals and families to familiarize themselves with the new thresholds for estates and gifting in 2025. The IRS typically adjusts these amounts annually to keep pace with inflation, and this year is no different. Let’s break down the significant changes and what they mean for your planning.

2025 Annual Exclusion Amounts:

For the year 2025, the IRS has announced an increase in the estate tax exemption limit. This adjustment is crucial for estate planning, as it affects the amount individuals can pass on to their heirs without incurring estate taxes. Estates of decedents who die during 2025 have a basic exclusion amount of $13,990,000 per individual — a notable increase from $13,610,000 for estates of decedents who died in 2024.

What does this mean for you? If your estate is valued below the new exemption threshold, your heirs will not have to pay federal estate taxes, allowing more of your wealth to be transferred to your family. For those with estates that exceed this limit, it’s an excellent time to consult with an estate planning attorney at Schooley Law Firm to explore strategies such as trusts or charitable donations to minimize tax liability.

New Annual Gift Exclusion for 2025:

Another significant update is the annual gift exclusion amount, which has also seen an increase. In 2025, the annual gift exclusion will rise to $19,000 per recipient—an increase from the $18,000 limit in 2024. This means you can gift up to $19,000 to each person in your life without needing to file a gift tax return. This provision can be particularly beneficial for families looking to assist with expenses like education, home purchases, or other financial needs. Gifting within these limits helps reduce your taxable estate and can be an effective tool for generational wealth transfer.

Strategic Considerations:

With the new exemption and exclusion amounts, now is a key time for individuals and families to reassess their estate and gifting strategies. Here are a few things to consider:

1. Annual Gifting: Maximize your gifting strategy by giving the maximum exclusion amount each year. By doing so, you can meaningfully reduce your estate's size over time.

2. Utilizing Trusts: If your estate exceeds the exemption limit, consider establishing irrevocable trusts to shield assets from estate taxes.

3. Charitable Contributions: Charity donations not only fulfill philanthropic goals but also reduce your taxable estate and may provide immediate tax deductions.

4. Review Estate Plans: Ensure your estate plan reflects the new thresholds and aligns with your financial goals.

5. Consult Professionals: Consider working with tax professionals, estate attorneys like the ones at Schooley Law Firm, and financial planners to navigate these changes effectively.

The 2025 annual exclusion amounts provide an excellent opportunity for effective estate planning and wealth transfer strategies. Understanding these changes will empower you to make informed decisions, ensuring you leave a legacy that aligns with your family's needs and values.

As always, proactive planning is key, so call Schooley Law Firm today to evaluate your situation and make the necessary adjustments as we move into the new year.

Federal Estate Tax Returns – Why file?

With the most recent tax law changes, most estates are no longer subject to reporting requirements and/or paying a federal estate tax at death. However, filing a United States Estate and Generation-Skipping Transfer Tax Return, also known as IRS Form 706, is one of the most important things you can do after the death of a loved one and many people are unaware of this requirement. In this post, we'll discuss some of the reasons why you would file an estate tax return.

First and foremost, a federal estate tax is a tax on the transfer of property after death. If the deceased owned assets worth more than a certain amount, their estate will be subject to federal estate tax. For 2024, the federal estate tax exemption is $13,610,000 per individual, meaning that estates worth less than this amount are not subject to federal estate tax. However, if the estate is valued above this exemption amount, then a federal estate tax return must be filed.  The estate tax return provides the IRS with information about the estate's assets, deductions, and taxes owed, and it is used to calculate the estate tax liability. It is important to file the estate tax return accurately and on time (9 months after the date of death) to avoid penalties and interest charges.

While we are focusing on federal estate tax requirements, it is important to note that each state has its own estate tax laws. Virginia is not one of the states that imposes an estate tax. If you're a resident of Virginia, you are not required to file a Virginia Estate Tax Return.

If the estate is not subject to federal estate tax you may still elect to file an estate tax return to take advance of portability. A portability return is a type of federal estate tax return that allows a surviving spouse to take advantage of their deceased spouse's unused estate tax exemption. In practical terms, this means that if a spouse dies and leaves behind an estate that is valued below the federal estate tax exemption amount, any unused portion of their exemption can be transferred to their surviving spouse. The surviving spouse can then use this unused exemption to reduce or eliminate their own estate tax liability when they pass away. To take advantage of portability, the executor of the deceased spouse's estate must file a federal estate tax return, even if the estate is not otherwise required to file.

Form 706 also provides an opportunity to claim valuation discounts for certain assets. If the estate includes assets that are difficult to value, such as closely-held businesses or real estate, it may be necessary to file an estate tax return to claim valuation discounts. Discounts typically reflect the reduced marketability or lack of control associated with these types of assets.

Filing an estate tax return is an important step in the process of settling a loved one's estate. It can help ensure that the estate complies with all applicable laws and establish the value of the estate for future tax purposes.  It is important to understand the federal estate tax laws and the estate tax laws in your state. Consult with Schooley Law Firm to ensure that you're taking advantage of all available exemptions and planning strategies.

If you're not sure whether or not you need to file an estate tax return, or if you need assistance filing an estate tax return, contact us today at (804) 270-1300 to schedule a consultation.