Estate planning is essential to ensuring your health care requests and property distribution arrangements are honored. A complete estate plan can practically eliminate the legal issues that tend to crop up after death.
Making a will
Dying without a will is called dying intestate. An intestate estate is taxed to the maximum, and any decisions will be made according to state law. A will defines your property inheritance wishes and names a guardian for children, if applicable. In Pennsylvania, if you don’t have existing relatives, the state receives your estate.
A will should include:
- Property distribution decisions including gifts to family, trusts and charitable donations
- Arrangements for your children; pets should be considered as well
- The naming of an executor or executrix, who will administer your affairs
Every will is different. Consult an attorney when planning your will to be sure your wishes are made clear and you haven't neglected to include anything important in your personal estate circumstances.
Probate is a court-supervised process after death that authenticates the will, appoints an executor, inventories property, settles debts, locates heirs and distributes the property in accordance with the will or state law if intestate.
- Living trusts provide tax benefits to the trust beneficiaries, avoiding taxation on the estate of a beneficiary. Trusts don’t go into probate and creditors cant access it.
- Property transfers to the surviving owner of joint ownership real estate, bank accounts, vehicle, brokerage account, and individual stocks and bonds, avoid probate.
- Payable-upon-death beneficiary bank accounts and CDs and transfer-upon-death registrations and deeds like cars and real estate are probate avoiders.
- Transfer assets while alive, through an inter vivos gift. If you don't own it, it can't be taxed.
Formal probate is best avoided when possible, as probate is time- and finance-consuming. Like many states, Pennsylvania offers simplified probate procedures for low value estates of $25,000 or less. Many assets can be transferred outside of probate.
Financial power of attorney
Setting up a financial power of attorney is useful. You decide the person you want to make financial decisions for you if you become incapacitated. This avoids the court making the choice with a legal proceeding.
Noting that the document is effective immediately gives you with coverage immediately. Making the power durable allows the legality to continue into the future. A durable power of attorney can also be springing, which activates later upon incapacitation.
Health care and end-of-life choices
You have the right to make health care and end-of-life decisions in Pennsylvania. Your choices are enforced through an advance directive applicable for any incapacitating illness and end of life decisions.
- A living will document that contains your wishes regarding health care instructions including if you wish to receive life support systems
- Power of attorney for health care that specifies the appointment of a health care representative that will make health care choices on your behalf
Pennsylvania offers many do-it-yourself forms, like these for Allegheny County. If you wish for a customized document, you should consult an attorney.
Prearrangement and prepayment for funeral preparations is chancy. Inflation may not keep up with what you set aside. If you move, you may not receive a refund or the company may go out of business.
Or, you may wish to document your final arrangements through the witnessed will, power of attorney, living will or final letter of instruction. This is funded by an insurance policy made payable to an irrevocable trust, or special bank account.
Also, you may wish to include funeral provisions in the estate plan to avoid burden and expense to the family.
Most people should have at least basic plans for these items.
- Estate taxes may need to be set aside if your estate is over $5.25 million for the year 2013. If your spouse would be unduly burdened or other family member, you may benefit from a life insurance policy.
- Include a buy-sell agreement or trust for succession or sale of your business. Consider setting up a limited partnership under IRS estate freeze to reduce tax liability. Without planning, heirs may owe undue estate taxes—as high as 55 percent.
- Pets are legally considered property. Address them in the estate plan with a pet trust or pet guardian. This ensures the animal’s continued care.
These items are basic considerations that may apply to you. Depending upon your state of affairs, you may have additional considerations.
Additionally, estate law changes regularly. The best way to be sure your estate is handled in accordance with your desires, is to consult a Pennsylvania estate planning lawyer.