Estate Planning

Trusts
PA-trust-signaturePreparing for your future or the future of your loved ones can be an uncertain process, but careful planning is essential. While no one can predict the future, our firm’s years of experience with advance estate planning techniques will ensure that your assets are protected to the greatest extent possible from estate taxes and creditors. No person is too rich or too poor to plan for the future, and many people are surprised to discover how much tax their heirs will have to pay. Here at PY&Y, we employ a wide variety of estate planning procedures, including marital trusts, disclaimer trusts, credit-shelter trusts, and more. All of these tools have the same goal – to reduce the amount of tax that your estate will pay and increase the amounts your beneficiaries will receive. But beware – trusts are not for everyone, and may cause harm if not properly drawn.

Wills
PA-willsEveryone needs a Will: no estate is too small, and it is never safe to be without one. If you have children or grandchildren, you need a Will to protect them when you are gone. Even if tax avoidance isn’t your main concern, our firm has drafted carefully-designed wills for decades, ensuring that our clients’ belongings reach the heirs that they select. We will sit down with you and your spouse, and take the time to fully understand your situation so that your Last Will and Testament will fully reflect your wishes. We will also discuss your need to carefully name beneficiaries of assets such as IRAs, 401(k)s, and CREF accounts, as these assets carry hidden income tax consequences. The naming of beneficiaries can change the effect of your Will and these issues must be examined as part of the entire plan.

Charitable Giving
PA-charitable-givingCharitable giving can have great estate planning consequences. Our office provides a wide array of processes for ensuring that the charities of your choice receive your full gift, and that you receive the full benefit. We can design charitable-remainder annuities, which allow you to give a gift to the charity of your choice and receive income from that gift during your lifetime. You may also receive immediate income tax deductions in addition to providing for your family members.

Articles

Estate Planning in a Digital Age

Estate planning has traditionally included signing a Will, a durable financial power of attorney and a healthcare power of attorney. As technology has rapidly progressed, there are now huge quantities of information regarding assets which are digitally stored and password protected, some of which is further encrypted. Email accounts and bank statements are just some examples of digital assets.

If you are disabled, and/or at your death, it is necessary to access all asset information to begin the process of estate settlement. If your executor does not have access to passwords, decrypting information and location of storage sites, assets may be lost. Such passcodes cannot be listed in a Will or Power of Attorney, as those documents will become public record.

There are cloud storage sites and service providers who offer storage of digital asset information and passwords. However, the security of such sites is subject to question, especially in light of recent hacker attacks on sites as supposedly secure as U. S. Government employee data.

When planning for eventual disability and death, it is advisable to provide complete information on access to assets to your agent under Power of Attorney, and to your Executor under your Will. Rather than risk keeping all such private passcodes on a hackable cloud site, it is safer to store paper copies in a secure, locked location, such as a safe deposit box in a bank, or perhaps a large gun safe at home which is bolted to the floor so that it cannot be stolen. Your agent and future Executor should be given the location, and means of access such as safe combination or key, or told where you keep the safe deposit box number, location of the box and its key.

Technologically savvy clients may desire to keep such access codes stored on computer, but remember that your computer is both hackable by experts and locked to those who will need to have this information when you are ill or deceased. You should keep a list of assets by location and account number, insurance policy information, annuities, and retirement benefits on paper as well, in a similar secure physical location. This enables your agent or executor to verify and be sure all assets are accounted for. There are possible scenarios in which you and your computer are both beyond access, such as a house fire, and so physical list storage in a safe deposit box will be vital.

As technology continues to develop, keep in mind the accessibility issues, and maintain means for the wrong people to be kept out and the right people in the loop at the right time.

By Lisa Pepicelli Youngs, Esq.

Frequently Asked Questions in Estate Planning

Many estate planning clients have similar questions about how to plan their estate and how the law works.  Below are answers to a number of frequently asked questions.

Q. If I have no Will, would all of my estate go to the state? A. Only if you do not have relatives who survive you; if you have living relatives, then the people who are your nearest class or group (i.e. children, siblings, or cousins) will receive your property. The Commonwealth would receive your estate, by “escheat,” but only if you have no close living relatives.

Q. What is probate? A. Probate is the process of filing your Will, having an Executor appointed to administer your estate assets, and paying your bills for a period of about one year after death.

Q. Can I change my Will? A. Yes. Your Will is prepared so that it is ready for use, but it has no legal effect until you die. You may change it as often as you like; a simple change can be done by “Codicil,” an amending document, or the Will can easily be rewritten. You should review your Will frequently to see if changes are needed. Because you may change your Will repeatedly, the Will is not filed at the Courthouse until after death, when it has become permanent.

Q. Can I write my own Will? A. Yes, but the advice of a professional is crucial as there are many pitfalls; attempts to do this on your own will endanger your plan, just as trying to self-treat a serious illness can jeopardize your life. Home-drawn or self-made Wills are often litigated and cause considerable expense to the beneficiaries.

Q. Do I have to leave something to my spouse and children? A. Your spouse has a legal right to a fixed share of your estate, even if your Will leaves him or her no share. You can avoid leaving an inheritance to your spouse only if you have a Prenuptial Agreement or other binding contract where your spouse has waived this right. However, you can disinherit any of your children as you see fit. It is advisable to mention the disinherited child in order to prevent a possible challenge to your Will. However, you should not specify explicit personal information or use the Will to take revenge, as the Will becomes public when it is probated.

Q. Can my Will be challenged? A. Yes, but the challenger must be a direct heir who will benefit if successful, and must show grounds why your Will should be invalidated. Common grounds are that you were under undue influence of another when you were in a weakened state, or that you lacked the mental capacity to understand your actions. The presence of witnesses and a notary at the time you sign you Will strengthens the validity and makes challenge difficult.

Q. What will happen to my young children if I die? A. Your Will should provide two things for your young children – a guardian of their persons who will take custody and raise them, and a guardian of their property or trustee who can manage their money and property. These roles can be filled by two separate people or by the same person, depending upon your preference and the character of the person or people involved. If the estate is large, a financial institution may be useful as trustee; although a bank will assess a fee, its management skills and its permanency can provide benefits. You should discuss these matters with the people you wish to name.

Q. How do taxes on an estate work? A. The Pennsylvania Inheritance Tax is four and a half percent (4.5%) of the net value of your estate on property passing to your children, grandchildren, or parents. Brothers’ and sisters’ shares are taxed at 12%, and nieces, nephews, more distant relatives, and friends receiving a share are subject to 15% tax. If your estate is valued in excess of a statutory threshold, there will be Federal Estate tax consequences, in a graduated bracket system, depending on this value. Gifts to your spouse or to charity are excluded from tax.

Q. Will my life insurance be part of my estate? A. This depends upon the terms of the policy and how you name the beneficiary. If you name a person who is living, the proceeds will likely go to that person and will not be part of your estate. You may name your estate as beneficiary and this will bring your policy proceeds into the Will plan, which can be beneficial if your estate needs the money to pay bills and/or taxes, or if your Will establishes a trust for young children or disabled persons. If you name one beneficiary who dies before you, the policy will likely pass to your estate; however, some policies have an automatic “default” to your nearest degree of relatives. You should renew your beneficiary description frequently and ask for written verification from the life insurance carrier. These matters should be reviewed by your attorney and insurance agent.

Q. What is an Executor? A. An Executor is the person named in your Will to handle your property and pay your debts immediately after your death. The Executor has duties, imposed by law, to conserve and protect your assets and to carry out your instructions set forth in your Will. If you do not have a Will, an Administrator will be appointed by the Courts from among your nearest relatives, and the Administrator is bound by law only and does not have the Will to instruct him or her. An Executor or Administrator is entitled to a fee for serving, unless your Will prohibits the taking of the fee. An Administrator may be required to post a bond which can be costly.

Q. Is my IRA a part of my Estate or Will? A. An IRA should have a named beneficiary and an alternate or contingent beneficiary. When an IRA is named to a living person, that person can continue to hold the IRA in retirement status, with continued deferral of income tax. If an IRA has no living beneficiary, or if it is named to the Estate, it will cease to be a retirement account and income tax will be due as if the entire account had been withdrawn.

Q. What is a Trust and do I need one? A. A Trust is a separate entity created by an agreement or Will. Most people do not need to create a Trust during life, although a Trust can be useful for certain tax planning for wealthy people, or in the case of a disabled or underage beneficiary. There are salesmen who will sell a “package trust” for $2,000 to $4,000 by misrepresenting its advantages and using scare tactics. Consult a local attorney before buying any such costly “trusts”.

By Lisa Pepicelli Youngs, Esq.

Your Financial Power of Attorney May No Longer be Valid After 2014

There are numerous things to look forward to in 2015:  A New Year, new goals, and a new law regarding Financial Powers of Attorney.

A Financial Power of Attorney is a document that allows you to name one or more Agent(s) who can make financial and other decisions for you.  But I’m perfectly able to care for myself – why do I need this Power of Attorney?  You never know what might happen.  Suppose you are injured in a car accident and are unresponsive for weeks, or suppose you go on a last-minute vacation.  Who will pay your bills and manage your finances?  Your spouse?  Your child?  A friend?  Banks and other institutions generally do not allow a spouse or child to act for you unless he/she has authority under a Financial Power of Attorney, or some other recognized authority.

Pennsylvania recently changed the law for Financial Powers of Attorney.  Certain parts of that new law are already in effect.  However, changes in the law such as the front page Notice, who must sign the document, how the document must be signed, and other changes will take effect January 1, 2015.

What does this mean for you?  Even if you already have a Financial Power of Attorney, yours may no longer be valid after January 1, 2015.  A bank or other institution may no longer recognize your document if it does not comply with the requirements of the new law.  Additionally, circumstances may have changed in your life since you signed your Power of Attorney, and you may wish to revise the document.  Now is always a good time to review your Power of Attorney with a lawyer.

If you do not already have a Financial Power of Attorney, don’t wait!  Nobody has a crystal ball to predict the future.  Nobody can predict when the need for a Power of Attorney may arise.  Without a Financial Power of Attorney in place, generally the only other way for someone to manage your finances is to have that person appointed as a guardian by the court.  This process is time consuming and much more expensive than having a Financial Power of Attorney prepared by a lawyer who is familiar with this area of law.

Don’t wait!  Call a lawyer who does Powers of Attorney – before the unexpected happens.

By Jeffrey C. Youngs, Esq.

Trust Scams Still Hurting Seniors

“Come have a free lunch/dinner. Let us sell you a sweet deal. Just tell us a little about yourself. Send back this post card with your name and address. We want to help. You’re foolish if you don’t buy a trust package from us.” Continue reading

Keeping Original Legal Documents Safe: The How and Why

You’ve just left your attorney’s office having signed your estate planning documents.  These documents may include a Will, and one or more Durable Powers of Attorney.  Your lawyer said to you “Keep these originals in a safe place and don’t lose them.”  This sounds easy enough to do, but the lawyer never explained how to keep them safe, or the importance of keeping them safe.  This article explores both these questions. Continue reading

Living Together Presents Need for Special Planning

The number of couples living together without marriage has increased sharply in recent years.  The law holds many benefits for married couples, but these do not extend to those couples who are only cohabiting.

The unexpected death of one member of a couple is traumatic and emotionally difficult.  If proper estate planning is done in advance, the loss need not be financially devastating as well. Continue reading