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Virginia Enacts Domestic Asset Protection Trust Legislation

On July 1, 2012 Virginia became the 13th state to permit a settlor to establish an irrevocable trust where the settlor is a beneficiary and can still receive spendthrift protection against the claims of the settlor’s creditors. SB 11, which was signed by Governor Bob McDonnell on April 4, 2012, expanded the number of types of permissible trusts in Virginia and added new Virginia Code Sections 55-545.03:2 and 55-545.03:3 to permit self-settled domestic asset protection trusts. The legislation is effective for trusts created on and after July 1, 2012.

Generally, a settlor establishes an irrevocable trust to minimize the settlor’s taxable estate and/or protect the settlor’s assets from claims from the settlor’s creditors. However, only under very rare occasions can the settlor be the beneficiary of the irrevocable trust. These rare occasions and lack of control make irrevocable trusts less attractive to most potential settlors. Virginia’s new law makes it

Highest Court in the State of Maryland Recognizes Valid Out-Of-State Marriages

In a recent decision, Port v. Cowan, 2012 Md. Lexis 283 (May 18, 2012), the Maryland Court of Appeals held that Maryland courts will recognize a valid same-sex marriage entered into in another state for purposes of granting a divorce to such same-sex spouses who otherwise meet the criteria for divorce under the laws of Maryland. In support of its unanimous decision, the court cited the the general rule that Maryland courts will honor marriages entered into in another state, as long as the marriage was valid in the state where it was performed. Further, that court determined that recognition of a validly-performed out-of-state same-sex marriage is not repugnant to, but is actually consistent with Maryland public policy, in light of several currently enacted Maryland laws that protect and support same-sex couples.

As discussed in a recent article on CNN.com, Port v. Cowan highlights the challenge faced by

I am the parent of a child with special needs…

Question: As the parent of a child with special needs, I know I need to have a Will, and probably a special needs trust, but do I really need to have a durable power of attorney for financial affairs?

Yes. Your Will is only effective if you die, whereas a power of attorney is effective while you are alive. If you became incapacitated due to an accident, disease or other cause, no one can handle your financial affairs. At that point, someone would have to hire an attorney and go to court to seek guardianship of your assets, so they have the authority to act for you and continue to pay your and your family’s bills.

However, appointing an agent in a financial power of attorney avoids this costly court guardianship proceeding. Your agent can continue to manage your assets and use your funds to meet the financial needs

Administering an Estate for the First Spouse of a Married Couple to Pass Away in 2011 or 2012

If you are administering an estate for the first spouse of a married couple to pass away in 2011 or 2012, you should consider whether or not to make a “portability election” under Section 2010(c)(5)(A) of the Internal Revenue Code.

Section 2010(c), as recently amended, generally allows a surviving spouse of a U.S. citizen decedent who passes away in 2011 or 2012 to use the decedent’s unused Federal estate tax exclusion amount in addition to the surviving spouse’s own basic Federal estate tax exclusion amount. This eliminates the need for spouses to re-title property and/or create trusts solely to take advantage of each spouse’s full basic Federal estate tax exclusion amount.

Under the current tax law, a person’s applicable Federal estate tax exclusion amount is the sum of (1) the basic Federal estate tax exclusion amount (currently, $5,000,000 minus any taxable lifetime gifts) and (2) in the case of a

I am the parent of a child with special needs…

Should my relatives give money directly to my child with special needs?

No.  Family members and friends should be cautioned against gifting money or property, or leaving money or property in their wills directly to your child except in ways that do not result in a loss of eligibility for public benefits or liability for the cost of your child’s care.  If you desire, a special needs trust can be established during your lifetime to accept such gifts.  It would be prudent to have grandparents’ wills reviewed by an attorney familiar with special needs trusts to avoid bequests that will have unintended and unwanted consequences.  Further, neither you nor your relatives should establish any Uniform Transfer to Minors Act (UTMA) accounts for your child, as these accounts may disqualify your child for Supplemental Security Income (SSI) and Medicaid.

I am the parent of a child with special needs…

I am the parent of a child with special needs.  Should I give money to a relative to care for my child with special needs after my death instead of giving the money directly to my child?

No.

Your expressed desires to your relative about the money create only a moral obligation on your relative and are not legally binding obligations that can be enforced. Further, if the relative dies, divorces or has financial problems, your child’s lifestyle could be negatively affected. Specifically, in a divorce, your child’s monies may be considered part of the marital property and part or all may be awarded to your relative’s spouse. If the relative dies, the money passes into the relative’s estate and goes to his or her beneficiaries or heirs, which might not be your child. Also, if your relative has to declare bankruptcy, creditors could put a lien on your child’s monies.

I am the parent of a child with special needs. Why is it so important for me to have a Will?

To ensure your estate is distributed according to your wishes.

If you die without a will and have assets in your own name, your assets will pass by your state’s law of “intestate succession,” which sets forth who in your family will receive your estate and in what order. This distribution may be contrary to your wishes and may result in your child being denied eligibility for public benefits (generally, an individual may not receive SSI or Medicaid if they have more than $2,000 in assets). For example, if you die without a will in some jurisdictions, the law requires your assets be divided between your spouse and your child, even though you may want your assets to go to your child only if your spouse is not alive. In addition, a court would have to appoint a legal guardian that is accountable to the court to invest and manage your minor

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