Virginia Trusts & Estate Planning Strategies 

Also Serving Washington, D.C.

How to plan for Irrevocable Trusts or Asset Protection Trusts

In most instances, when a person is speaking about a trust, they are usually referring to a "Revocable Living Trust." As discussed on the Estate Planning Page, revocable trusts are typically the best way to allow someone to manage your assets if you become incapacitated. Moreover, the revocable trust avoids the associated costs, hassles, and public record process that basic wills, conservatorships, and guardianships often incur.

However, revocable living trusts provide no asset protection against lawsuits, creditor claims, and Medicaid spend-downs. The reason that these types of trusts do not protect assets is that the creator (i.e., Grantor) of the trust can change, alter, and revoke the trust whenever he or she wants. In addition, the Grantor maintains all control over trust-held assets and income. In sum, because the Grantor has full control, they own it, and, if they own it, then it is part of their estate and subject to creditors and the like.

When we talk with families in Virginia about these choices, we often explain how revocable and irrevocable trusts fit into a broader estate plan that complies with Virginia law and, when appropriate, federal tax rules. A trust attorney Virginia residents choose should be able to walk them through how these decisions may affect probate in local courts, such as those in Virginia Beach, Williamsburg, or Fairfax County, and help them compare trust options to more traditional planning based only on a will.

The Difference of Irrevocable Trusts

Irrevocable Trusts are different. By its namesake, the term irrevocable means that there is some aspect of the trust that the Grantor cannot change. Perhaps it is a limitation on accessing the income or principal of the trust by the Grantor directly whenever they desire.

Irrevocable trusts have become much more flexible and user-friendly over the past few years based upon their prevalent practical uses and changes to the law. These types of trusts come in a wide variety of flavors these days, so it is important to seek legal counsel to determine which type of irrevocable trust would be the perfect fit for protecting and preserving your assets from estate taxes, lawsuits, and the catastrophic expenses of long-term nursing home care.

For many clients, an irrevocable trust is considered alongside long-term care planning, gifting strategies, and tax planning so that all pieces work together rather than in isolation. We routinely help clients evaluate when to give up certain rights or control in exchange for potential protection from future creditors or Medicaid spend-down requirements under Virginia rules. By reviewing family dynamics, types of assets, and anticipated healthcare needs, we can help you decide whether an irrevocable trust should be added to your planning or whether another tool may better accomplish your goals.

What are Dynasty Trusts?

A Dynasty Trust is a trust that continues for approximately 100 years or longer and provides payments to future generations without any additional estate or generation-skipping transfer taxes.

The Dynasty Trust strategy is different from the standard estate plan, whereby the husband and wife usually leave all of their assets outright to their children equally upon their passing.

A Dynasty Trust continues for the children's lifetimes, with the children receiving income or principal from the trust each year. As each child dies, the trust then continues for the deceased child's surviving children with income or principal available for the grandchildren during their respective lifetimes. Depending on a number of factors, the trust may continue for great-grandchildren and even longer if desired.

A Dynasty Trust ensures that your assets will stay in your generational line after you pass away. Although the beneficiary may eventually have investment control over the trust, he or she will not legally own the assets, which means that the trust will not be subjected to claims of the beneficiary's creditors, not subject to division upon a beneficiary's divorce, and not subject to a child leaving the assets to a second or third spouse outside your blood line.

Many families in Virginia who own closely held businesses, significant real estate, or investment portfolios look to Dynasty Trusts as a way to promote long-term stability and family values. With thoughtful drafting, provisions can be included to encourage education, responsible financial behavior, and compassionate support for beneficiaries while still guarding the trust from unnecessary risk. When you meet with a trust lawyer Virginia residents turn to for guidance, you can explore how a Dynasty Trust might coordinate with existing wills, powers of attorney, and business succession plans so that everything works together for future generations.

Virginia's Special Needs Trusts

A Supplemental Needs Trust (sometimes called a Special Needs or Disability Trust) is a specialized legal document designed to benefit an individual who has a disability. A Supplemental Needs Trust is most often a “stand-alone” document, but it can form part of a Last Will and Testament or Living Trust after the parent of a special needs trust child passes away. Supplemental Needs Trusts have been in use for many years and were given an “official” legal status by the United States Congress in 1993.

A Supplemental Needs Trust enables a person under a physical or mental disability, or an individual with a chronic or acquired illness, to have, held in Trust for his or her benefit, an unlimited amount of assets. In a properly drafted Supplemental Needs Trust, those assets are not considered countable assets for purposes of qualification for certain governmental benefits.

Governmental benefits that Supplemental Needs Trusts are designed to preserve may include Supplemental Security Income (SSI), Medicaid, vocational rehabilitation, subsidized housing, and other benefits based upon need. For purposes of a Supplemental Needs Trust, an individual is typically considered impoverished if his or her personal assets are less than $2,000.00.

A Supplemental Needs Trust provides for supplemental and extra care over and above that which the government provides. The law firm of J.S. Burton can assist you with your unique special needs trust issue.

When we help families in Virginia structure a Supplemental Needs Trust, we pay close attention to how distributions will interact with programs such as Virginia Medicaid and federal SSI so that essential eligibility is preserved. Parents or caregivers often want guidelines on which expenses the trustee can pay, how siblings can be involved in future decision-making, and what happens if the beneficiary later moves out of state. By addressing these issues in advance, we aim to give families confidence that their loved one will have support that complements, rather than jeopardizes, public benefits over the course of their lifetime.

Irrevocable Life Insurance Trusts

An Irrevocable Life Insurance Trust (ILIT) can effectively eliminate the death proceeds from your life insurance policy (along with any accumulated cash value) from being included in the calculation of estate taxes due at your death. An ILIT can provide tax-free liquidity to your estate to pay debts and expenses, but also provide tax-free wealth to your beneficiaries.

In practice, an ILIT often requires careful coordination of premium payments, beneficiary designations, and timing of transfers so that tax rules are followed and your objectives are met. We work with clients and their financial advisors to design ILITs that fit into a larger estate plan, taking into account Virginia estate administration procedures and how your executor or trustee will use the policy proceeds. By clarifying roles, funding strategies, and long-term goals, we help you use life insurance as a planning tool rather than simply an asset.

Private Foundations

Private foundations maintain or aid charitable, educational, religious, or other activities serving the public good, primarily through the making of grants to other nonprofit organizations. Foundations can be established during your lifetime or after your death through your estate planning documents. The private foundation can have personal income and estate tax savings benefits. In addition, this unique structure can also be designed to allow family members and future children to work for the foundation, which allows you to pass on the spirit of philanthropy from one generation to the next.

When clients are considering a private foundation, we compare this option to donor-advised funds, charitable trusts, and outright gifts to determine which structure offers the right level of control and administrative responsibility. Establishing a foundation in Virginia also involves complying with both federal tax regulations and applicable state registration or reporting requirements, which can feel overwhelming without guidance. By outlining the practical steps, governance expectations, and family involvement opportunities, we help you decide whether a foundation is the best vehicle to support the causes you care about over many years.

Strategy of Deferring Capital Gains Penalties Through Trust Planning

Deferring Capital Gains through trust planning can provide a very powerful alternative to the typical 1031 exchange or real estate installment sale.

This powerful technique provides owners of highly appreciated assets, such as residential or commercial real estate, with the following benefits:

This powerful technique can offer the following potential advantages:

• Capital gains tax deferment to help reduce the immediate tax impact of selling highly appreciated assets
• A lifetime income stream that can provide more predictable cash flow in retirement
• Investment flexibility by allowing diversification into different types of assets over time
• Disciplined retirement savings through structured distributions from the trust
• Continued family control over how and when proceeds are managed and distributed
• Tax-free estate/inheritance transfer to one's heirs when coordinated with broader estate planning strategies

These strategies can be particularly appealing for property owners in high-growth areas of Virginia, such as Northern Virginia and the Hampton Roads region, where appreciated real estate can trigger significant tax consequences. By using carefully structured trusts, you may be able to sell or diversify out of a single asset while smoothing out your income and planning for future generations. We discuss how these trust arrangements intersect with federal tax law, Virginia property rules, and your broader estate planning so that any deferral technique complements, rather than conflicts with, your overall goals.

Choosing A Trust Attorney In Virginia

Many people are unsure when it is time to speak with a lawyer about trusts or which type of planning professional they should contact first. In Virginia, trusts are governed by state statutes and interpreted by local courts, so it is important to work with someone who understands how these rules apply to real families and businesses. When you meet with our firm, we start by learning about your goals, your family members, and the kinds of assets you own so we can recommend whether a revocable trust, an irrevocable trust, or other planning tool is most appropriate. This approach helps you move forward with clarity instead of feeling overwhelmed by the many options you may see online.

We also explain how your trust will be implemented and administered over time, including what responsibilities your chosen trustee will have and how that person will interact with beneficiaries. If you live or own property in areas such as Virginia Beach, Williamsburg, or McLean, we take into account how your plan will be carried out in local circuit courts and under Virginia’s probate and tax framework. By discussing fees, timelines, and next steps in plain language with a trust lawyer in Virginia, we aim to make it easier for you to decide whether now is the right time to put a trust in place and what level of ongoing support you would like from our team.

Contact the attorneys of J.S. Burton, P.L.C. at (888) 885-9001 for a consultation today.