Amy & Dan Smith's Planning for Life: The Marital Agreement

In Virginia, as in most states, a marital agreement can be entered into before or after marriage.  It can cover a variety of topics but commonly addresses issues pertaining to the disposition of property upon separation, divorce or death of the parties, including spousal support.  The agreement and any amendment thereto must be in writing and signed by both parties.  Commonly, lawyers will require a list of assets and liabilities of the parties as an attachment to ensure that the agreement has been entered into with full disclosure.  Each of the couple should have his/her own lawyer to avoid conflict of interest.

There is understandably a resistance to the idea of a marital agreement.  To say the least, it would likely steal some joy after the marriage proposal for one to suggest to his/her betrothed that, while intending to live happily after, they should discuss terms of divorce.  However, there is a place for the marital agreement even if divorce in not considered an option for the couple.  It is important, especially with second marriages and blended families, that the rights and obligations of the parties upon death be addressed, even if separation and divorce are not included in the agreement.

Each state has statues giving rights to a surviving spouse to elect a portion of the estate of his/her deceased spouse and to override provisions in a will.  Such an election can disrupt a well-considered estate plan intended to benefit the children of the decedent.  A marital agreement can specify the rights of the surviving spouse in the estate of the deceased spouse in return for a waiver of the statutory right of election.  It can also contain provisions concerning who may serve as agent under a power of attorney and medical directive and as executor of the decedent's estate.  These can be very divisive issues in blended families.

Often, parents want to preserve within their bloodline the inheritance that they intend to leave to their child.  They may insist that their son or daughter enter into a marital agreement as a condition to marriage in order to be sure that "grandma's silverware" doesn't eventually end up with the son/daughter-in-law either through death or divorce.  If a marital agreement is not possible, an alternative is for the parents to leave the inheritance in a trust for the child.  Properly structured, the trust could provide the benefit of the assets to the child (and grandchildren) while withholding ownership so that the assets are not available to the son-in-law or daughter-in-law in case of divorce or death.

As uncomfortable as the topic of a marital agreement may be, the fact is that a discussion of sensitive topics before marriage can be a very healthy exercise.  Attitudes may be revealed which had hitherto not been apparent in the bliss of infatuation, and thorny issues can be resolved before they are allowed to disrupt family harmony.

Children of a blended family are often comforted to know that issues pertaining to their potential inheritance have been addressed and are being protected by their parent.  Sharing the existence of - and in many cases the details of - a marital agreement with children can help to dispel distrust of the stepparent.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Challenges for Blended Families

The blended family has become more the norm than the exception in our society.  As with most second marriages, Amy and I came into our marriage with our own children, our own careers and our own estates.  We have experienced the challenges of the blended family.

Typically, a parent in a second marriage has conflicting loyalties.  There is the desire to provide for the well being of the second spouse while, often at the same time, there is a felt duty to preserve some part of the estate (especially, of that acquired before the second marriage) for his/her children of the first marriage.  This conflict can be especially acute if there is a significant age difference between the spouses.  Thus, the older spouse could provide a trust for the life of his/her spouse, but this could delay significantly the benefit to the children of the first marriage by many years.

Under the law of most states, including Virginia, a surviving spouse has a statutory right to a percentage of the deceased spouse's estate, no matter what provisions the decedent has made for the surviving spouse upon his/her death.  In other words, the surviving spouse may elect rights at law against the provisions of the will.  This right of election can result in a major disruption in a well-thought out estate plan.

A key tool in the planning process is the Marital Agreement.  In Virginia, as with most states, this can be entered before or after marriage.  The purpose is to address and resolve the possible legal issues that can arise from the marriage.  Many people consider such an agreement distasteful because it typically addresses the possibility of divorce, an awkward subject for two people planning for - or already in - a marriage.  While most lawyers would recommend including provisions pertaining to a possible dissolution of the marriage, the agreement does not need to cover that topic.  Rather, it can - and should - deal with the rights of the surviving spouse upon the death of the first spouse to die.  This would include the financial arrangements to be provided in each spouse's estate for the survivor and the right to serve as executor and/or trustee of the decedent spouse's estate and trust.  The marital agreement can also deal with the right of the spouse to be the agent for the other under a power of attorney or advance medical directive.  Such provisions can eliminate potential conflicts among the children of each spouse and the step-parent.

Creative planning and honest communication can avoid painful, disruptive family conflicts.  Consider a factual situation:  The surviving wife discovers that, upon the sudden death of her husband, his adult children of the first marriage are appointed to serve as executors of the estate and as trustees for the trust established for the benefit of the surviving wife.  In other words, the step-mother must apply to her step-children for disbursements from the trust, and the step-children inherit what remains from the trust after the death of their step-mother.  This situation is destined to create on-going tension.  Creative alternatives exist which could have avoided such a potentially painful situation.

Planning in the context of the blended family can evolve as circumstances change, as, for example, children graduate from college, an inheritance is received, the residence is downsized, a spouse retires.  Thoughtful planning can accommodate life changes and avoid disruptive family conflicts.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Planning for Lives after Death

This past month I once again experienced life as prelude to practice.  It started with an email two weeks ago from a hospice caregiver at my father's request with words every child dreads: "Your Dad has asked me to write and tell you he thinks the end is near.  He says you'll know what to do."  What had been planned as a birthday celebration in Florida within 48 hours ended as a death vigil for my father.  My immediate family members were gathered at my parent's home to say goodbye.  Dad died quickly and peacefully after struggling for years with chronic pulmonary dysfunction.  Two of us were on either side of him holding his hands while he was sitting up on the couch, and we noticed that he stopped breathing.

The following days were busy with funeral arrangements.  Fortunately, my Dad had written out detailed instructions for his obituary, the funeral home, and church program, including specific hymns and names of those to deliver eulogies.  He had purchased a "burial package" from a local funeral home including the rental of a casket for visitation and funeral, followed by cremation, all of which was so helpful to minimize our decision-making at such an unsettling time.

What About Mom?

After the funeral, our first concern was for our mother and how her needs would be met in our family's "new normal."  Dad had always been the planner and decision-maker.  How could six brothers and sisters reach consensus to move forward and avoid the #1 problem encountered in the distribution of estate assets, money?  We'd never been particularly close but now was the time to bond for Mom's good.  Mom is physically healthy, and we hope will live for many more years.  However, she has some dementia and is unable to walk, requiring 24/7 skilled nursing care.  Fortunately, my youngest sister and husband volunteered the spare bedroom in their home for Mom's care.  Mom was visibly pleased with this decision.

Next, came the preparation for my sister's home to be fitted for Mom's needs.

Three of us sat down with care-givers and proposed an annual budget for Mom's continued care.  This included in-home nursing care (the largest expense item, approximately 2/3 of total budget), personal items, compensation for my sister's time, privacy and lost wages, and items needed to make her home handicap-friendly - including a light-weight wheel chair to fit through door frames, a hospital bed, shower stool and handle bars.

My siblings then advertised and interviewed qualified caregivers and gave them an in-home "test" to make sure each was a good fit not only for Mom's needs but also with my sister's family.  My sister called references provided by each applicant.

Mom moved in last week to her new home.  Her name is on the waiting list of a nearby assisted living facility in the event care provided in my sister's home is not sufficient for her physical needs.

Finally, we've all agreed on a conservative, relatively low-risk annual average financial goal for the investment return on Mom's assets to cover her on-going expenses.

Key Takeaways:

• Conduct a family meeting with all concerned parties before death or, if not possible, with the nominated executors and trustees, to review wishes in writing well in advance of need.

• Review estate documents and assets as soon as possible in order to assess how much is available for survivor's needs.

• Plan an annual budget for lifetime living expenses of surviving spouse and agree so there are "no surprises" when estate proceeds are reviewed.

• Consider purchasing long-term care insurance to offset cost of healthcare needs. The cost of in-home healthcare is expected to be one of the greatest living expenses in retirement until end of life and can significantly deplete family inheritance.

• Make time to grieve. Consider enrolling in a grief counseling program. I've found the "Grief Share" (www.griefshare.org) program in local churches to be effective for those who have suffered significant loss.

 From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Planning for the Unexpected

Life-changing medical events of the past week have reminded me to not only review my plans but perhaps serve as a messenger for a "call to action" to any of you who think financial and estate planning is for the well-heeled or something you cannot afford or don't need.

The situation happened quickly.  I had visited my parents last month and, while chronic issues were evident, crisis did not seem imminent.  Then one of my elderly parents began falling at home repeatedly.  My other parent, also physically impaired, did not register the gravity of this matter and did nothing.  My sister, arriving a few days later, immediately called 911, taking my parent to the hospital emergency room.

I won't go into the details of what transpired the next four days but suffice to say it was quite intense.  Our large family was split as to what action to take while our other parent accused some of us as "over-reacting."  The doctor made it clear to us that my parent would not be released from the hospital until a plan was in place at home for 24/7 nursing care.  Two of the first questions were "how much will it cost" and "how will we pay for it?"  Even for someone with adequate financial resources, it can be quite sobering to calculate what the cost of 24/7 home care might add up to over the course of a year and the impact it can potentially have on retirement savings and the amount left for heirs.

For example, while Medicare may pay up to the first 20 days of qualified, skilled nursing care after a hospital stay, thereafter it could be as much as $20 per hour.  Multiply this by 168 hours per week ($3,360) times 52 weeks and the total could come to as much as $174,720 per year.  Unfortunately, my parents had refused long-term care insurance years before, thinking they would never need it.  What to do?

First, my parent told the doctor that family members would provide this care at home.  I loved what the doctor said about family members taking care of critically ill parents:  It's the family's job to love the patient, not provide nursing care, unless they are professionally trained.  After spending 14 hours a day for 4 consecutive days in the hospital, I had a better understanding and appreciation of the professional nursing skills and sheer physicality required to feed, toilet, transport and bathe my parent (who was essentially dead weight) without causing further injury.

We kids thought the ultimate medical decision rested in the hands of my brother, who had been named power of attorney.  This was incorrect.  We had to find out who held my parent's medical directives and decision-making powers restricted to health-related matters.  (See complete "Health Care Decision Making" article previously posted.)  After lots of confusion, tears and prayer, my parent was allowed to return home the last day of my stay and is now experiencing a "new normal" in light of these events.  I hope my story will help some of you review your plans for when the unexpected occurs and consider the following action items if not in place:

• Ask a legal professional in your state of residence to execute a written medical directive, selecting an agent (usually a family member) to execute your wishes.

• If your agent is not capable to make appropriate medical decisions when needed, provide appropriate language in your documents to remove agent, specify under circumstances agent can be removed, and then provide the name of a successor.

• Discuss your wishes with loved ones preferably before a crisis occurs.

• Consider setting aside separate funds for health-care needs or invest in long-term care insurance.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Looking Beyond U.S. Borders

Even though U.S. equities still represent the single largest portion of the world stock markets, more than half of the world's total stock market capitalization lies outside the United States, and economic growth rates outside the United States have in some cases exceeded that of the United States.  Investors are beginning to consider diversifying their holdings beyond U.S. borders as a result.  In the past, I have often recommended allocating no more than 10-20 percent of an investor's overall portfolio to international funds.  However, with the growth of global markets and the European Central Bank's recent initiation of quantitative easing, many experts now suggest an even higher percentage can be appropriate given the right circumstances.

The following article "Thoughts on Europe" is from Chris Bailey, Raymond James European Strategist.  The complete article can be found on my website www.amysmithwealthmanagement.com under "Market View" then "Investment Strategy Quarterly."

Thoughts on Europe

From the perspective of American investors, this year's rise of the U.S. dollar pushed most international markets into losses although the history books show that, in local currencies, many European and international equity markets made gains during 2014.  However, any losses are modest compared to those apparent in mid-October when most international equity markets hit their lows for the year.  By contrast, fixed income markets in Europe and Asia have been very strong with generally material yield compression to levels not seen in modern financial history.

To understand the reasons for the above, it's necessary to review the policy actions of the European Central Bank (ECB) and Bank of Japan (BOJ) and the People's Bank of China (PBOC).  Throughout 2014, the ECB loosened policy that included interest rate cuts and the announcement of asset buying support mechanisms.  Meanwhile, the BOJ announced a material expansion of the quantitative easing program and the PBOC also cut interest rates for the first time in two years.

Unifying reasons for these actions was a fear that these economies would slip into a slower growth zone, such as outright recession in Europe and Japan and below recent-trend-growth rates in China.  In the last few months of 2014, the anticipated expansion of these pro-growth policies into 2015 has provided a strong boost since the mid-October lows.  In late December, market fears about the euro zone resurfaced amid political crisis in Greece, stoking concerns about a renegotiation of it's bailout.

Europe's outlook for 2015 rests on the credibility of policy-makers.  Further stimulus measures to help boost growth seem very likely in the euro zone; however these are unlikely to be sufficient on their own to sustainably boost the local economies and retain investor confidence.  This role rests with the speed of structural reforms around taxation, labor markets and other company productivity initiatives.  If legislation movement in Europe can be successfully accomplished, the investment outlook for the euro zone in particular is bright.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Five Equity Market Themes for 2015

By Amy Smith

Each year I read many market forecasts for the coming year from investment experts around the globe. Accordingly, I’d like to provide you with a recent article from Jeffrey Saut, Raymond James Chief Investment Strategist titled “Five Equity Market Themes For 2015”. (Readers may find the complete 2015 Outlook from Raymond James Investment Strategy Quarterly on my website www.amysmithwealthmanagement.com under “Market Views.”)

Lower Fuel Prices

This extended period of lower fuel costs should benefit companies that are dependent upon fuel as an input, such as the airlines, trucking and cruise lines, railroads, shipper, etc. Additionally, consumers are paying less at the pump and the hope is that those savings will now flow into other areas of the economy, like the consumer discretionary sector.

Smarter Policy Makers

One of my major themes has been that we will elect smarter government policymakers and subsequently smarter policies. With the mid-term elections over, we now shall see whether these newly elected officials can help enact policies to further boost the economy and create jobs.

Interest Rate Increases

The Federal Reserve is expected to begin raising short-term interest rates in the second half of 2015. Will the market begin to anticipate this move and buck the trend of lower rates that we have seen in 2014? We believe so, with higher rates more likely in second half of 2015, because the economy is strengthening.

Immigration Reform

President Obama issued an Executive Order in November that may allow approximately five million immigrants to legally work (and pay taxes) here in the United States. This action should benefit certain companies and industries, while providing additional tax revenue for the country.

Long-Term Secular Bull Market

Equity markets tend to enter a long period of expansion after emerging from an extended period of negative returns (the lost decades of 1964-1982, or 2000-2012). Typically, these expansion periods last for about 15 years with annualized returns of roughly 16 percent per year. Using March 2009 as a starting point implies that we may have another 10 years left in the current secular bull market. Of course, there will be corrections, but they should be viewed within the context of the long-term secular bull market. To quote my departed friend Sir John Templeton, “Bull-markets are born on pessimism, grow on skepticism, mature on optimism and dies on euphoria.” We are still in the skepticism phase …

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Planning Your Will

A will is a highly protected form of writing. The requirements for a valid will must not be casually regarded. With rare exception in Virginia, only the original of a will – not a copy – may be admitted to probate. To be admitted to probate a will must (1) be in writing, (2) signed by the testator (the person making the will) and (3) signed by two competent witnesses who were both present with the testator either to watch him sign it or to hear him acknowledge his signature. There is a popularly known exception for a will, which is entirely in the handwriting of the testator, called a “holographic” will. However, it is dangerous to rely on this exception because it is very narrowly applied by the courts.

The requisite formalities may not be strictly applied to wills made by persons in military service. Wills made by a person deemed of “unsound mind” or by a minor are not valid.

The most convenient and efficient manner of proving a will is for the will to include a notarized statement (an “affidavit”) reciting that the formalities were followed. If a will is presented with such an affidavit attached, it is said to be “self-proving.” Without the affidavit, the witnesses must appear personally before the clerk or may, in some cases, provide a written statement to prove the due execution of the will.

The will should name the executor (also called the “personal representative”) and, if there are children under the age of 18, a guardian for the person and property of each minor child. An executor is required to give bond at the time he/she is “qualified” (that is, when he/she is appointed). The bond is a personal pledge by the executor in the amount set by the clerk that he/she will perform the required duties of the office. In many cases a “surety” will be required. A surety is a contract from an insurance company to protect the beneficiaries and creditors of the estate. A surety policy requires annual premiums until the estate is settled. Increasingly, insurance companies are raising the requirements for issuing surety contracts making them more difficult to obtain. The will may waive the requirement for a surety. However, while the executor need not be a resident of Virginia, the surety requirement cannot be waived for a non-resident executor. This problem can be avoided by having the non-resident executor appoint a resident co-executor to serve.

The testator expresses his directions regarding the disposition of his estate in the will. The law allows the will to refer to a separate informal writing outside of the will to direct the disposition of items of tangible personal property, such as furniture and jewelry. It is important to note that the will has no effect on property placed in certain forms of ownership such as, for example, property in a living trust, in joint tenancy with survivorship, in accounts with pay-on-death designations, and life insurance and retirement funds with beneficiary designations. These forms of ownership supersede any provisions in a will.

Marriage, divorce and the birth of a child can affect the provisions of an existing will. Thus, in such situations, and upon a change in financial circumstances, the will should be reviewed. A change to a will, called a “codicil,” requires the same formalities as the will.

At the risk of sounding self-serving (admission: your author is an attorney), the do-it-yourself will and trust kits are not recommended. Dollars saved initially are often lost in fees and courts costs necessary to unravel self-made documents.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Smith & Pugh, PLC: What's So Complex About Administering a Trust?

The process of identifying and collecting assets; paying debts, expenses and taxes; and making proper distributions of remaining assets after one’s death is referred to as estate or trust administration.

The identification of assets begins with the inquiry as to how assets are titled. Assets that are jointly held with survivorship will pass automatically to the survivor; assets that have a beneficiary designation will go to the person(s) so designated. Assets held in a trust are to be administered pursuant to the instructions provided in the trust document. Assets in a person’s sole name must be administered pursuant to the terms of his/her will or, if none, by the laws of intestacy (that is, death without a will).

The collection of assets depends on who may access the deceased person’s assets. With respect to assets held in a trust, the trust document typically designates someone (individual or financial institution) as Trustee. A person who established the trust (the Settlor or Trustor) often designates himself/herself as trustee. Upon his/her death, a successor trustee is typically named in the document. In other words, the trust document itself gives the successor the legal authority to administer the assets.

If assets are administered under a will, an Executor (sometimes called “Personal Representative”) is named to administer assets. If there was no will, an heir (or sometimes a creditor) may step forward to be the Administrator. In either case, however, the Executor or Administrator must apply to the local court having probate authority to qualify as such. This begins the process referred to as probate. This process can vary greatly from state to state.

The administration of the estate of a deceased person can be viewed as:

1. determining the extent and nature of the deceased person’s assets,

2. transfering title of assets to obtain legal control,

3. paying debts, expenses and taxes, and

4. distributing the remainder pursuant to the terms of the trust, will, or laws of intestacy.

This person may be an Executor under a will, or an Administrator in intestacy, or a Trustee under a Trust. Sometimes the documents require that the assets be held in trust for an extended period such as for the life of a beneficiary or until the beneficiaries reach a certain age. By the end of the process, there should be no assets left in the name of the deceased person.

Estate and trust administration takes time. How much time depends on several factors: Can the original documents be located easily? Is real estate among the assets? Are the assets easily liquidated? Are there estate or income taxes to pay? Who is the executor or trustee? Who are the beneficiaries and can they be located? Are there any provisions in the trust or will that are unclear? Are there significant assets which were held jointly or passed by beneficiary designation? Were the rights of the surviving spouse addressed in the documents?

As with estate planning, the complexity of the administration of an estate or trust is affected by the beneficiary list and decedent’s financial holdings. Anyone who has served as Executor, Administrator, or Trustee can attest that these are positions of great responsibility. For most clients, service in such a position is a once in a lifetime role. Most people finding themselves with such responsibility can benefit from legal and accounting guidance throughout the process.

The foregoing article contains general legal information only and is not intended to convey legal advice.

Daniel D.  Smith and W. Franklin Pugh are partners in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176 (703-777-6084, www.smithpugh.com).

Amy V. Smith, CFP®, CIMA®: Starting at the Finish Line

In preparing for a recent speaking engagement on “Financial Planning for Life,” I was reminded that there is more to talk about than money in the world of financial planning. Money is just the vehicle to get us to our financial destinations.

What we do when we arrive is another issue.

Why should we try to plan for life? Because life is full of surprises. We cannot control our future, but we can control our financial behavior—planning, saving, budgeting, investing, and covering risk of loss. This is when the discipline and benefit of financial planning is realized.

After 15 years as a certified financial planning practitioner, I have learned that the essence of effective financial planning is holistic, not compartmentalized. To talk only about money is to see a work of art with one eye closed.

Sticking with the vehicle analogy, you may have a brand new car, but where is it taking you? If you’re planning a trip, where are you going? How will you get there? When will you arrive? You’ll likely need a road map to reach your final destination.

The same analogy applies to financial planning. For example, when setting goals for retirement, most of us will want to maintain, at the very least, today’s standard of living, before inflation, when we retire and not take a pay cut when we no longer earn an income. How and when we plan to get there is the equivalent of a financial road map, a financial plan.

Starting this month, I’d like to expand the scope of this column to include the whole picture, not just the parts, and begin asking the “big questions.” This means not only presenting ideas on individual topics such as investments, taxes, and insurance, but also exploring how these financial vehicles can work together to benefit you, the reader, in your personal retirement planning, risk management and legacy planning.

To address these bigger life issues, I’ve invited my husband, Dan Smith, practicing estate planning attorney for more than 40 years, to join me in writing this column with a new title to fit this broader perspective: Amy and Dan Smith’s Planning For Life. Dan and I have been married almost eight years. We both experienced the death of our spouses. While neither of us had planned for this to happen, it did. Were we prepared? Not really. Were these lessons learned that influenced our work as professionals? Absolutely.

As this column goes forward, we will share with you information and suggestions, which hopefully, you will find helpful in your planning for life.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Smith & Pugh, PLC: The Essential Components of Estate Planning

The careful planning of an estate can serve to avoid unnecessary taxation and expense and, very importantly, assure that the desired distribution of assets will be carried out accurately and efficiently.

Where minor children are involved, careful thought should be given to the appointment of guardians for the person of the child and to the appropriate method of distributing assets to the child or held for his/her benefit. Custodial accounts may be utilized until the child reaches age 21, or trusts may be established to provide for the administration of assets for the child’s benefit until a later age.

Many clients consider the use of a revocable living trust for the purpose of avoiding probate and adding flexibility to the administration of their estates during their lifetime. A common misunderstanding is that a living trust avoids death taxes; in fact, that is not the case. However, the living trust may contain a plan which will serve to avoid death tax, particularly when husband and wife are creating estate plans jointly. However, such provisions can be included in a properly drafted will as well. The trust will avoid probate with regard to the assets which are properly included therein, whereas assets passing under a will are subjected to the process of probate.

A will or trust may also address payment of estate taxes. Moreover, a married couple, planning together, can arrange their affairs so that, between them, they may pass twice the value of assets tax-free to the next generation than one individual might do acting alone.

The proper designation of beneficiaries for life insurance, annuities, and retirement plans is a very important component of estate planning. Typically, the applications for these contracts or accounts include beneficiary designation forms. Careful planning is required in the completion of the beneficiary forms to avoid misdirection of benefits or the inadvertent failure to take advantage of tax and probate avoidance opportunities. Your primary will or trust will not control the distribution of such assets unless the completed form specifically so designates, or one fails to designate beneficiaries. It is very important to ensure that the beneficiary designation forms complement your will or trust, rather than working at cross purposes.

Estate planning also should involve the preparation of durable general powers of attorney and medical directives. The primary purpose of these documents is to designate substitute decision-makers in the event you become unable to manage your affairs during your lifetime or make informed medical decisions. The medical directive may include a “living will” to address questions about end-of-life medical and support measures.

Wills, trusts, powers of attorney, and medical directives are important legal documents that require thoughtful planning. While many of estate planning documents have standard legal wording,“one size fits all” documents usually fail to meet an individual's needs fully and accurately.

The foregoing article contains general legal information only and is not intended to convey legal advice.

Daniel D.  Smith and W. Franklin Pugh are partners in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176 (703-777-6084, www.smithpugh.com).