Financial Planning#

Financial planning is a process involving setting, prioritizing, and managing your financial goals. It is implemented through a comprehensive strategy that integrates various aspects of your finances. This includes budgeting, saving, investing, tax planning, insurance, retirement, and estate planning.

Last year, on behalf of the Richmond Tamil Sangam, an awareness special program on Will & Trust was held. In it, our Sangam member and supporter, Mr. Ganeshkumar (XCurve Financial Solutions), clearly explained to our members about the Will, Revocable Trust, Power of Attorney, and Healthcare Directives in the US. He highlighted the key features with practical examples and patiently answered the questions raised by many during the event. This program provided useful information to the members and brought clarity to future planning.

In this post, we will look in detail at the Will, Trust, and Transfer on Death Deed (TOD) which are essential for the estate planning needs discussed in that event. Although there are many other ways, these three types are the easiest and sufficient for most people. Most legal rules vary depending on the state you live in. In this post, since we are in Virginia, we have written based on its laws and regulations!

1What is a Will?#

Like in India, a Will in the US is almost the same legal document. It is a legal way to clearly state who your money and properties should go to after you pass away. Similarly, there are ways to appoint a Guardian for your children under 18 years of age. Well, why is a Will necessary? We are only 30 or 40 years old, why should we worry about this now? It is sad to see many people over 50 without a clear Will specifying who their assets should go to after them.

Will Requirements in Virginia (Va. Code § 64.2-403)

• Age of the person writing the Will: 18 years or an Emancipated Minor
• Your mental state: Understanding of your assets, family relationships, and the consequences of the Will (Sound Mind)
• Must be in writing: The Will must be in written format
• Signature is mandatory: The person writing the Will (Testator) must sign
• 2 Witnesses required: 2 Competent Witnesses must sign in the presence of the Testator. When signing the Will, the witnesses do not need to sign in front of a Notary.
• Notary not required: A Notary is only needed to make a Self-Proving Affidavit.
• Tangible Personal Property List can be attached (Va. Code § 64.2-400): You can write a separate list to determine who should receive jewelry, artwork, or household items. This will be considered part of the Will. You can change this at any time; no witnesses are needed. But this does not apply to Money or Real Estate.

Holographic Will The entire state of Virginia recognizes handwritten Wills (Holographic Wills). But the court requires two independent witnesses to prove the handwriting during the Probate process. These witnesses need not have signed the Will beforehand. This is recommended only for emergency situations. It is better to avoid this as much as possible!

2What is a Trust?#

A Revocable Living Trust is a legal structure. It is generally very helpful to avoid the Probate process. You transfer the assets to the Trust while you are alive. You (Husband/Wife/18+ children) act as the Trustee and keep the assets under your control. This Trust can be changed or revoked at any time. It is better to do this through a qualified attorney. You will need to appoint up to 3 trusted family members or friends as a committee of trustees.

Benefits of a Trust

• Can avoid Probate: By avoiding the probate process, the assets go directly to the Beneficiary.
• Suitable for fast transfer: Since it avoids Probate, it can be completed in a few weeks (If not, Probate could take 12-18 months!)
• Privacy - Avoids public disclosure of assets: The Trust will remain private - your asset details will not come to the public view.
• Incapacity Planning: If you become incapacitated, a Successor Trustee will manage your assets (This only comes into effect if you become incapacitated!)
• If there are assets in multiple states, a separate Probate process in each state can be avoided.

3Why does a family need a Will or Trust?#

• If there is no Will or Trust, Virginia Intestacy laws will decide who the assets should go to (Intestacy is the state of dying without writing any legal Will to distribute one's assets).
• The court will decide who the Guardian for the children will be.
• It can cause delay and stress for the family.
• Probate costs will significantly increase.
• Assets may go to different people against your wishes.

4Transfer on Death Deed (TOD) - A New Alternative#

In Virginia, the Transfer on Death Deed (TOD or TODD) came into effect in 2013. This only applies to Real Estate. The property transfer document allows the property to be transferred directly to the named beneficiary after the owner's death. This avoids the probate process. If there is only one house, this is helpful.

Benefits of TOD Deed

• Avoids Probate: Real estate goes directly to the Beneficiary.
• Full control: You can sell it and get a Mortgage loan while you are alive.
• Easy to change: You can revoke or change the Beneficiary at any time.
• Step-Up in Basis for Capital Gains Tax: Capital Gains Tax for the Beneficiary will be reduced.
• Can be done at a low cost: The cost is much less than a Trust ($31-$50).

Previously, there was confusion that the TOD deed would not automatically be canceled even if the house was sold. But, according to the new rule (HB 1871) effective from July 1, 2025, if you sell the house to someone else and they register a new Deed, the old TOD deed will be automatically canceled. You do not need to register a separate Revocation Deed.

Requirements for TOD Deed

1. The Deed must be in writing.
2. Must be Notarized.
3. Must be recorded at the local court (Circuit Court Clerk Office) while you are alive.
4. The Beneficiary must be alive at the time of the property owner's death.

Disadvantages of TOD Deed

Although useful, there are many limitations:

• Covers only real estate. TODD does not cover bank accounts, investments, vehicles, or personal property. Additional planning is required for those assets.
• Warning: TOD Deed supersedes the Will. Even if you give the house to someone else in your Will, the house will only go to the person in the TOD Deed!
• It does not replace a Will: You still need a Will for other assets and to appoint guardians for minor children.
• Homeowner’s Insurance is not transferred until death and Title transfer occur. After the title transfer, the Beneficiary must obtain their own insurance.
• No asset protection: The asset remains fully yours until death, meaning it is exposed to your creditors, lawsuits, and Medicaid recovery claims (Through Trusts and TOD planning, Medicaid's 'Look-back' rules cannot be avoided. A five-year 'Look-back' rule applies in Virginia).
• Medicaid Lookback Rules: This is a US legal rule. A rule to check whether assets have been transferred during a specific period before claiming government medical assistance (Medicaid). Five-year lookback: This means the government will take into account asset transfers made in the past 5 years.
• It is a public record (public disclosure of asset details cannot be avoided): The document is publicly recorded, so your intentions and beneficiary names are not private.
• High chance of forgetting: People are very likely to completely forget to update the TODD after major life changes like divorce or family deaths.
• There are Beneficiary issues: In case the appointed beneficiary dies before you, and you have not updated this document, the property may go to the court probate process. There is no built-in arrangement for minor beneficiaries or those unable to manage the property.
• Mortgage loan issues: The beneficiary will also inherit the existing mortgage along with the property.
• Note: Motor vehicles follow the Department of Motor Vehicles (DMV) beneficiary rules instead of TOD Deeds.

5Trust vs Will vs TOD - When is each of these needed?#

*A Pour-Over will is a specialized legal document used alongside a living trust that acts as a "catch-all" to transfer any assets left outside the trust at the time of your death into that trust. It ensures all property is distributed according to the trust's instructions, preventing assets from passing through intestate succession. Difference from a Standard Will: While a standard will outlines the distribution of the entire estate, a pour-over will merely directs that any remaining assets be transferred to the established trust, which then governs their distribution

Situations where only TOD is sufficient

• If there is only one house (Simple Asset), TOD alone is sufficient.
• If there are Straightforward Beneficiaries: If you have a clear, problem-free plan of who the property should go to. For example, leaving everything to an 18+ adult son/daughter or a spouse.
• If there are No Minor Beneficiaries: All beneficiaries are adults. They are capable of legally managing properties and handling large assets immediately after your passing.
• If there are No Complex Conditions: You don't need to impose any conditions to receive the inherited property (e.g., using money only for education or receiving money only after reaching a certain age).
• If No Incapacity Planning Needed: This applies if you don't need a plan to manage your affairs in case you become incapacitated during your lifetime. This is because the TOD deed only takes effect after death.
• If there is Minimal Debt: You have very few outstanding debts. If your other assets do not have enough money to settle the debt, creditors are likely to claim rights over these TOD assets.

Situations where only Will is sufficient

• No owned house or real estate property.
• Only a few bank accounts (Digital Accounts/Assets).
• Total assets are less than $75,000 (Small Estate Affidavit can be used).
• If only a Guardian nomination for children is needed.

Situations where Trust is required

• Those who have their own house and a rental property.
• Those who have properties in multiple states (to avoid Multiple State Probate).
• Those who want privacy (if asset details need to remain private without becoming public records).
• If assets need to reach the family quickly after one's passing.
• If there is a Differently Abled Person / Special Needs child or family member.

6How to create a Will?#

First, if there is legal assistance at your workplace (EAP - Employee Assistance Program), there might be estate planning help available. In the company I work for, they provided free software to help write a Will and Trust. Furthermore, if legal advice is needed, there is a discount of up to 25% on fees if you go to an attorney they recommend.

Do It Yourself (DIY / Online method)

• Software available on the internet to create: LegalZoom, Trust & Will, Nolo (Price $50-$200). At the workplace, software to write a Will and Trust might be available for free. (EAP - Employee Assistance Program or Legal Plan).
• When is the DIY method useful: Uncomplicated family, simple assets in one state.
• Virginia legal requirements: 2 witnesses, signature, Self-Proving Affidavit recommended.

Situations where an Attorney is needed

• Blended Family (Remarriage, Step Children)
• Special Needs family member
• Properties in multiple states / countries
• Business Ownership
• Estate over $15 million per person ($30 million for couples) (According to the One Big Beautiful Bill Act [OBBBA 2025], starting in 2026, there is no Estate Tax up to $15 million for an individual ($30 million for couples). Only those with assets above this limit need tax planning.)
• Complex Trust planning

Even though a Will can be easily created online, it is better to show it to a good attorney and get an explanation!

7How to create a Trust?#

As mentioned above, if there is legal assistance at your workplace (EAP - Employee Assistance Program), there might be estate planning help. In the company I work for, they provided free software to help write a Will and Trust. Furthermore, if legal advice is needed, there is a discount of up to 25% on fees if you go to an attorney they recommend. Even if you write the Trust using the software, you need an attorney's help to transfer your assets to the name of the Trust.

8Probate Costs and Duration#

Probate Tax (Va. Code § 64.2)

• State Tax: $1 per $1,000 of estate value ($0.10 per $100)
• Local Tax: $0.33 per $1,000 (varies by locality)
• Example: $500,000 estate value = $500 State Tax + ~$166 Local Tax

Other expenses

• Executor Compensation: The Executor's compensation is approved by the court on a reasonable basis. Five percent is just a general guideline, not a guarantee.
• Commissioner of Accounts: $660 to $2,000+
• Attorney Fees: Hourly or flat fee depending on need.

Duration

• Normal estates: 6-12 months
• Complex estates: 12-18+ months
• Creditor Period: Minimum 12 months
• Small estates (<$50,000): Small Estate Affidavit - After 60 days

9Healthcare Directives#

When you are unable to make decisions in a medical emergency, these documents communicate your decisions.

Key Documents

1. Healthcare Power of Attorney: Appointing someone to make medical decisions when you cannot.
2. Advance Medical Directive (Living Will): Your decision regarding treatments like Life Support, CPR.
3. HIPAA Authorization: Permission specifying who can be shared medical information with.
4. Mental Health Directive: Decisions about mental health treatment.

Why are these needed for an 18-year-old child? Very important: After children turn 18, parents automatically do not have any medical rights! Under HIPAA law, hospitals can refuse to share information. It is essential to prepare these documents before children go to college.

10Multi-State/Country Assets#

If you have properties in multiple states in the US or abroad, special attention is needed.

Multi-state assets in the US

• Ancillary Probate: A separate Probate process will take place in each state.
• Solution: All state properties can be included in a Revocable Living Trust.
• Alternative: TOD Deed in each state (if that state allows it).

US/Indian Assets

• A separate Will is needed for each country.
• Estate Tax Treaties must be considered.
• India: Succession Certificate is absolutely necessary. For more information, visit the following web links:

• ICICI Bank NRI Edge portal has one of the most detailed guides: https://www.icicibank.com/nri-banking/nriedge/nri-articles/estate-and-succession-planning-for-nris
• GetBelong's NRI Estate Planning Guide: https://getbelong.com/blog/retirement-estate-planning-nris/

• Recommendation: Consultation with an International Estate Planning Attorney is mandatory.

11Power of Attorney#

A document appointing someone to manage your financial affairs in the event you become incapacitated. This is only needed for the most unavoidable necessary moments. It is better to avoid it at other times! Also, it is good to revoke it after the need is over.

Types of POA Documents

• Durable POA: Continues even if you become Incapacitated.
• Springing POA: Takes effect only if a specific event occurs.
• Limited POA: Only for specific events.

12Full Family Protection Checklist#

13Important things many people miss#

• Beneficiary vs Will: If there is a Beneficiary on a 401(k), Life Insurance, or Bank Account, those forms override the Will. A Trust can be the Bank Account Beneficiary.
• Trust Funding: Just creating a Trust is not enough; assets must be transferred to the name of the Trust.
• TOD Deed Recording: Invalid if not recorded at the Circuit Court before death.
• Life Changes: Marriage, divorce, childbirth - documents must be updated.
• New Home: Check if the Title is in the correct name and if it has been added to the Trust.
• Joint Account Issue: If a child is added as a Joint Owner, their creditors can take the asset.
• 18-year Healthcare: As soon as children turn 18, Healthcare POA and HIPAA must be done.
• Digital Assets (RUFADAA Act): Just keeping a password list is not legally sufficient. You must add a 'Digital Assets Clause' in your Will or Power of Attorney document, providing your Executor the legal consent to access your Email, Photos, and Social Media accounts. Without this consent, Google or Facebook can refuse to give information to your family.

Conclusion#

This is a recommendation only (Consult an Estate Planning Attorney according to your specific situation).

• If you have a house (Minimum requirement)

• Transfer on Death Deed (TOD) [Very simple method & low cost] OR
• Revocable Living Trust and Pour-over Will [Cost around $500-$1000, better done with the help of an attorney]

• If you do not have a house

• In all bank accounts (Savings, Checking, CD, Brokerage), insurance, and retirement, you must register the name of the spouse/son/daughter as the beneficiary. If possible, it is good for the wife to be a co-owner on all accounts.
• Will [Cost around $100-$500, better done with the help of an attorney]

• For the head of the family, at least a 20-25 year Term Life insurance is very essential (even if on a visa). It is best if its value is ten times your annual income + remaining mortgage (10 X Annual Income + Remaining Mortgage). The annual premium for this varies depending on your age.
• Power of Attorney
• Healthcare Directives
• If you have 18+ year-old children, Healthcare Directives are essential for them too.
• Follow the things given in the Full Family Protection Checklist!

This planning will provide protection and clarity to your family. Start today - being prepared for unexpected situations is the greatest gift you give your family.

Helpful Sites

Virginia State Bar Trusts & Estates Section: https://vsb.org

Virginia Courts Self-Help: https://selfhelp.vacourts.gov

Glossary

Legal terms can be confusing. Here are some terms you need to know when creating your Last Will (Will and Testament).

https://www.freewill.com/glossary

With Virginia State legal requirements. This document is for general awareness information only. Not legal advice. Consult an Estate Planning Attorney for your specific situation.