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If you come to see me asking for just a Will, I will ALWAYS discuss with you whether you need a Financial Power of Attorney and a Health Care Power of Attorney and Living Will.  It is not because I am trying to upsell my services or print more paper and kill trees.  No, it is because I want to make sure you have the documents you need to protect yourself and to simplify things for your loved ones.

A proper estate plan deals with the here and now, the near future, and the distant future.  A proper estate plan is not just what happens when you die.  It has provisions for when your health declines and you can no longer act on your own behalf.  Most of us don’t spend a lot of time thinking about the possibility of future illness, incapacitation or death, nor do you want to.  Leave that to me to guide you through the process of determining what you need.

The key to recognizing which documents are necessary is to understand each document and when it becomes active.  Most people know that a Will becomes active on death and deals with the distribution of your assets.  It can also name a guardian for your minor children, and set up trusts to protect those assets.  Continue Reading Myth #8- I only need a Will.

Last week, I covered the myth that you need to avoid probate.  One common reason people want to avoid probate is because they believe it is one way to avoid inheritance tax.  Not so fast.  Whether or not an asset is a probate asset has no bearing on whether or not it is subject to inheritance tax. Both probate and non-probate assets are subject to Pennsylvania inheritance tax. So while there are reasons to ensure your beneficiary designations are current to keep the assets out of probate, avoiding inheritance tax is not one.  Your IRA or 401(k) will still be subject to inheritance tax.

Are there ways to transfer wealth free of inheritance tax?  Sure.  Life insurance is a great way to do so.  But not everyone can afford or qualify for life insurance.  You can also gift during your life time.  However, this can create other tax concerns.  Under certain circumstances, trust assets may not be subject to inheritance tax, but you might spend more money putting those assets in trust than what you would ultimately be saving.  So what does all of this mean for you?  Finding ways to reduce inheritance tax is important and I always work with my clients to do so.  However, I am mindful of the fact that in some cases, paying inheritance tax is actually the lesser of two evils.  Don’t avoid inheritance tax when it ultimately can cost you or your beneficiary more money elsewhere. Work with a qualified attorney to discuss your goals, but keep an open mind.  A thoughtful estate planning attorney will take the time to understand your unique circumstances so that they are able to consider all options and recommend the best plan for you.

Lindsay Schoeneberger is an attorney at Russell, Krafft and Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Widener University School of Law and practices in a variety of areas, including Estate Planning.

“I need to avoid probate!”  I can’t tell you how many new estate planning consultations begin with questions relating to the belief that it is important to avoid the probate process.  Clients desiring to avoid probate often ask for a complex and costly estate plan.  When I first started practicing, I couldn’t figure out where this fear came from.  But a quick search of the internet provides some insight.  Countless articles, books, and lectures tout the importance of avoiding probate like it is some poison laced process that only the strong survive. Continue Reading Myth #5- I need to avoid probate!

If myths 1 through 3 haven’t convinced you that you need a Will, perhaps this one will.  At more than one networking event or social gathering, I’ve been cornered by someone who thinks they have found a way to “game the system.”  Often times, this master plan includes putting everything in joint names with their spouse, parents, or children in order to avoid inheritance tax and probate.  Unfortunately, this “solution” doesn’t accomplish the tax goals, and creates a lot of pitfalls that might not make avoiding probate worth it.

For more on inheritance tax and probate, stay tuned for myth 5 and 6.  If the solution is to put everything in joint names with your spouse, that will actually avoid probate and due to the 0% inheritance tax rate for a spouse, there is no inheritance tax due either.  But what happens when the surviving spouse dies or if you die in a joint accident?  This solution, if it works, will only work once.  I don’t know about you, but that is not good enough for me to consider this a viable solution.

Putting assets in joint names with your parents or children can create a Pandora’s box of problems.  Once you put an asset in joint names with someone else, you lose complete control over the asset.  You own your house free and clear.  You decide to put it in joint names with your son Billy.  When you put it in joint names, you tell Billy this is only for estate planning purposes and nothing else.  Billy may or may not decide to follow that.  The law doesn’t care why you put it in joint names, but now that you did, Billy is part owner of your house.  He has the same control over that you do.  Even if Billy agrees that the house in in joint names for estate planning purposes only, it opens the house up to Billy’s creditors.  If Billy runs up substantial debts, your house that you own free and clear can be considered an available resource to pay Billy’s debts now that you put it in joint names.

Still on the fence about whether putting assets in joint names without consulting an attorney is a good idea?  Let’s say you transfer your house into joint names with Billy and two years later you need to qualify for Medicaid benefits.  Your transfer of the house into joint names would be considered a transfer not for fair market value within the five year look back period.  This creates a penalty period during which you are ineligible for Medicaid benefits.  This applies to other assets as well.  If you are considering transfer assets for whatever reason and are even remotely close to needed to plan for Medicaid assistance, it is a good idea to consult an attorney to ensure you are not inadvertently making yourself ineligible for services.

Lindsay Schoeneberger is an attorney at Russell, Krafft and Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Widener University School of Law and practices in a variety of areas, including Estate Planning.

This is a big one among couples with kids from previous relationships.  People come in and say they want to leave everything to their spouse and then their kids.  Often time people think they can control what happens to their belongings after their surviving spouse dies through a basic Will. Continue Reading Myth #3- When my spouse dies, my kids get what is left.

You might have read myth one and said, “Lindsay I don’t have kids and I’m married.  I don’t need a Will because everything will go to my spouse.”  You may be right.  Then again you may not be.  Do you really want to take that chance?  The intestate statute has limited circumstance where the spouse inherits your entire probate estate.  Many times people do not realize that still having living parents can prevent your spouse from inheriting everything.  Let’s put this into real terms.  You and your lovely bride are freshly married and own a business together.  You haven’t done any estate or business succession planning.  You own the business as individuals with no right of survivorship and the house you live in is in her name alone.  You wife dies without a Will while her parents are still living.  As a result of how your assets are titled, her house and her share of the business are probate assets.  You are entitled to the first $30,000 of her estate and then you must split the remaining estate 50/50 with her parents.  That’s right, you now own a house and a business with your in-laws.  I hope you have a good relationship.

Now you may be asking yourself, what if we had kids?  Well if you add kids into the equation above, instead of splitting the assets with your in-laws, you now own a house and business with your children.  If the children were your wife’s from a previous marriage, you don’t even get the first $30,000 of the estate.  The moral of the story is, if you don’t want to end up in business with someone you never intended to take as a business partner, make sure you and your spouse have a Will.  You probably want to speak with an attorney about business succession planning as well, but that is a different article.

Lindsay Schoeneberger is an attorney at Russell, Krafft and Gruber, LLP in Lancaster, Pennsylvania. She received her law degree from Widener University School of Law and practices in a variety of areas, including Estate Planning.

I can’t tell you how many times I hear “Oh I don’t have anything but debt, why do I need to plan?” or “I’ll get around to it, besides it is not like I am rich or anything.”  People tend to think that estate planning is something only the wealthy need to worry about.  This probably comes from a lack of understanding as to what estate planning really is and what it can do for you and your family.  Estate planning for most people involves three documents – Will, Financial Power of Attorney, and a Healthcare Power of Attorney.  (For more on what each of these documents do, stay tuned to the Lancaster Law Blog.)  Estate planning is a comprehensive approach that covers needs during your lifetime, at the end of your life and after death.  If you have any assets and you want to control what happens to them, you need a Will.  If you have children and want to control who is caring for them after your death, you need a Will.

Several attorneys at Russell, Krafft & Gruber, LLP have written blog articles extolling the virtues of writing a Will.  Well allow me to throw my hat in the ring as well.  I have worked with too many clients who come to us with an estate that is subject to the Pennsylvania intestate succession rules because the decedent passed away without a Will.  Some of the conversations that follow with the person’s family and friends can be heartbreaking. It is hard to comprehend that all of the verbal promises Uncle Rick made every Christmas that you would get his prized 1932 Roadster on his death could be meaningless unless Uncle Rick wrote it down.  It won’t matter that this is the car the two of you worked on tirelessly for years to restore.  If Uncle Rick didn’t have a Will and you are not in line as an intestate heir, you are out of luck.  You better hope Aunt Sally wants to gift it to you. Continue Reading Myth #1 – I don’t have enough to warrant any estate planning.

What should I discuss with my family?

Discussing your eventual death is not a pleasant conversation to have, but it is a necessary one.  It is important to let your family know what your wishes are.  Depending on what your documents say, your family members may have some big decisions to make regarding your end of life care, burial, and dispositions of assets.  If you have never discussed any of this with them or told them where to look for your documents, they could be left in the dark during an already trying time.

I have many clients who come in to a meeting feeling like the weight of the world is on their shoulders, who visibly exhale with relief by the time we execute their documents.  Preparing and executing the proper document is crucial but take it a step farther.  Let someone know about your final decisions.  You took the first difficult step by having the documents drafted.  Now make sure someone knows where to find them and what to do with them.  This will provide peace of mind to you now and to your loved ones in the future. Continue Reading Commonly Asked Estate Planning Questions – Day Five

Do I really need a Power of Attorney?

There is no legal requirement that you execute a Power of Attorney, financial or otherwise.  You could go through life never having to give someone else authority to act on your behalf.  But, what are the chances that you will go through your whole life never needing someone to step in and act on your behalf even if it’s just for a short period of time?  That you will never find yourself in the hospital unable to transfer money to cover bills or unable to communicate your medical decisions?  That you will always maintain you mental faculties? Probably pretty remote.

So what happens if you never appointed an agent to act on your behalf?  The Court will have to intervene.  A petition will be prepared to have you declared incapacitated and a guardian will be appointed to make decisions on your behalf.  Once you are declared incapacitated, you can no longer make legally binding decisions for yourself.  The Court will now require your guardian to file annual reports of all of your assets and income.  This is an intrusion most people want to avoid.  Preparing a Power of Attorney and appointing someone to act as your agent for financial and medical decisions while you are competent avoids involving the Court in a guardianship process.  Continue Reading Commonly Asked Estate Planning Questions – Day Four