» Estate Planning

First, congratulations on taking the pivotal step of creating and executing estate planning documents. For most clients, signing their estate planning documents brings a sense of relief and satisfaction. Now you need to know what to do with them. Once your estate planning documents are signed, the originals should be kept in a safe place (such as a fire-resistant safe at your home). We also recommend that you show your executor the exact location of your original will during your lifetime. Your original will needs to be found in the event of your death. If the original will cannot be located, Pennsylvania law presumes that you revoked it. While there are ways for a lawyer to try to probate a photocopy of a will, doing so can be expensive with an uncertain outcome.

“In this world nothing can be said to be certain, except death and taxes,” Benjamin Franklin, 1789. The Pennsylvania Inheritance Tax is a tax imposed on the privilege of inheriting property when someone dies. The inheritance tax rate is based on the relationship between the decedent and the beneficiary. Unlike an estate tax, there is no threshold below which the tax is not imposed. By default, it is the beneficiaries, not the estate, that are ultimately liable for paying this tax; however, a will often provides that the estate should pick up this tab as well.

Every parent with young children should make estate planning a priority. Estate planning deals with much more than dispersing assets after someone dies. If you have minor children, there are several crucial estate planning options you should consider; for example, parents, with or without significant assets, should have an estate plan in place setting forth their wishes for their children, including nominating a guardian in the event both parents die while their children are still minors. Furthermore, for any property left to a minor, the will should include a testamentary trust that provides instructions for how the trust should be used (e.g., health, education, maintenance, and support) and should set forth the age at which the child can receive their inheritance outright. A proper estate plan can ensure your minor children are taken care of by ensuring that your children will be placed, if necessary, with a guardian you trust and that your estate is administered according to your wishes.

If you have a retirement plan (e.g., IRA, 401(k), 403(b), etc.) or own a life insurance policy, you are probably familiar with the concept of a beneficiary designation. Assets that pass by beneficiary designations will pass directly to your named beneficiary, overriding any contrary provisions that may exist in your will. Failing to review beneficiary designations could wreck other parts of your overall estate plan because they typically override other estate planning documents such as a will. A complete estate plan includes making sure any accounts you have with a beneficiary designation(s) work effectively and efficiently to achieve your overall estate planning goals.

This is the point when things get a little technical and legalistic. Really, how often does someone use the terms “probate assets” or “non-probate assets?” When a person dies in Pennsylvania, all of their property is divided into two categories. Probate assets are those assets that the decedent owned in their name alone and in some circumstances jointly with someone else but without rights of survivorship (also known as Tenants in Common). Non-probate assets pass directly to another person by operation of law (e.g., jointly owned bank accounts, life insurance, IRAs, 401(k)s, real estate owned as joint tenants with rights of survivorship, and many more). When planning your estate, it is important to know and understand the difference between probate and non-probate assets. The distribution of non-probate assets is not controlled by your will or Pennsylvania’s intestacy laws.

Everyone really should have these three fundamental estate planning documents: a Last Will and Testament, a Financial Power of Attorney, and Health Care Power of Attorney with an Advance Directive. Planning ahead will make sure that your wishes are followed after death, your family is spared unnecessary expense and delay, and someone you trust will be in charge if you ever become unable to manage your own affairs. Additional documents, such as trusts, could be necessary depending on your specific goals and family circumstances.

Nope. A revocable living trust will not reduce the Pennsylvania inheritance tax or federal estate tax, nor will it reduce your legal fees. The claim that living trusts reduce taxes is one of the most common myths out there. This is important; a living trust does nothing to protect your assets from taxes, creditors, or lawsuits.

A revocable living trust may be a good idea for some, but it is not for everyone and does not reduce the time and expense of estate administration in Pennsylvania. However, a revocable living trust can be a good option if you own out-of-state real estate, so you can avoid probate in multiple states, and because many other states have a more complicated probate process. Revocable living trusts can be useful in certain circumstances, but they are not for everyone.