Private Client Services Update – 2018 Virginia Legislative Update

    By Sarah E. Messersmith, Estate, Trust & Wealth Transfer

    2018 Virginia Legislative Update

    Trusts & Estates Law Changes

    The 2018 Virginia legislative session resulted in several important changes to trusts and estates law. Except as otherwise noted, the new laws become effective July 1, 2018.

    Creating Consistencies Between Estate and Trust Law (House Bill 746)

    Virginia Code Section 64.2-404.1 will permit judicial reformation of the terms of a will or codicil to correct mistakes or achieve the decedent’s tax objectives. Similar provisions already exist in the Virginia Uniform Trust Code.

    Virginia Code Section 64.2-412 will be amended to provide that a divorce or annulment of a marriage has the same effect on the parties’ trust agreements as it does on their wills. A divorce or annulment revokes any disposition of property or any beneficial interest conferred on the former spouse, and administration shall proceed as if the former spouse died before the divorce or annulment. Upon the filing of an action for divorce or annulment, any provision of a trust appointing the spouse as a fiduciary or granting the spouse a power of appointment is revoked and the spouse will be deemed to have died before the filing.

    Virginia Code Section 64.2-415 will be amended to extend ademption to trusts. By way of example, if a trust provides for a distribution of a particular stock to a beneficiary, the distribution shall include additional stock of such entity received by merger or stock splits. Also, if a trust provides for a distribution of a particular parcel of real estate to a beneficiary, the distribution shall include any condemnation award or insurance proceeds that remain unpaid at the time of the settlor’s death.

    Virginia Code Sections 64.2-416 and 64.2-418 will be amended to extend the concept of lapse to trusts. Unless drafted otherwise, a trust distribution to a beneficiary who predeceased the settlor and who was a grandparent or descendant of a grandparent of the settlor will not lapse, but instead will be distributed to the surviving descendants of the deceased beneficiary.

    Trust Decanting (Senate Bill 78)

    This is a reinstatement of prior trust decanting law requiring that a trustee who exercises decanting power must be a disinterested trustee. A court has the power to appoint a special fiduciary to undertake the decanting. Virginia Code Sections 64.2-701 and 64.2-779.5 are revised, and the effective date of these revisions was March 23, 2018.

    Augmented Estate (House Bill 754)

    A technical correction will be made to Virginia Code Section 64.2-308.10 to clarify that the surviving spouse claiming an elective share does not have the right to claim a share of the deceased spouse’s separate property. The deceased spouse’s fiduciary, however, may satisfy the surviving spouse’s rights by using separate property if the fiduciary elects to do so.

    Insurance Proceeds Protected From Creditors (Senate Bill 176)

    Previously, creditors could make claims to the cash surrender value or loan value of certain life insurance over which the owner reserved the right to change the beneficiary. This bill removes such creditors’ rights by revoking Virginia Code Section 38.2-3123.

    Ethically Inappropriate Medical Care (House Bill 226)

    Virginia Code Sections 32.1-127 and 54.1-2990 will be amended to establish a procedure for physicians to cease providing ethically inappropriate medical care. A hospital providing life-sustaining treatment must have in place a policy for determining the appropriateness of the medical care, to include a process of obtaining a second opinion, review by an interdisciplinary committee, and ability of the patient or his or her agent to participate in the process. A determination as to whether medical care is appropriate or inappropriate is to be based on the patient’s medical condition and not the patient’s age, disability or diagnosis of persistent vegetative state, except to the extent related to the patient’s medical condition. Any physician who determines that he or she is providing inappropriate medical treatment shall first make an effort to transfer the patient to another physician, but if this cannot be accomplished within fourteen days, the physician may cease to provide the treatment. However, artificial nutrition and hydration may only be withheld if their continuation would be harmful to the patient or contrary to the patient’s clearly documented wishes.

    Real Property and Personal Property Taxes for Single Member Limited Liability Companies (House Bill 894)

    Virginia Code Section 58.1-3651 will be amended to permit localities to extend the real property or personal property tax exemption to a single member limited liability company if the single member of such entity is a nonprofit organization.

    Unused Land Preservation Tax Credits (House Bill 1460)

    An individual may now transfer unused land preservation tax credits at death to a recipient under a will or other instrument of transfer. If an individual dies without a will, any unused land preservation tax credits will pass to his or her heirs at law by intestacy. Virginia Code Section 58.1-513 will be amended accordingly.

    The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2024.