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.

In a historic 2014 ruling, the U.S. District Court in Whitewood v. Wolf made same-sex marriage legal in Pennsylvania. This ruling, while finally allowing a sizable segment of the population the same legal freedoms heterosexual couples have always enjoyed created problems for some same-sex couples that had done their best to take care of one another in a pre-Whitewood world.

Prior to the legalization of same-sex marriage, it was not uncommon for same-sex couples to go through an adult adoption. This was the only method available to them to create a legal family unit. By one partner adopting the other, couples were able to enjoy some of the protections and benefits only available to families. One of those benefits was a reduction of inheritance taxes. Prior to the Whitewood ruling, when one partner of a same-sex couple died, the other partner would have to pay 15% inheritance tax because the surviving partner was simply viewed as “other heir” under the tax code. Imagine paying 15% tax on assets you helped acquire during your relationship, while married heterosexual couples were taxed at 0% on the same inheritance. By adopting one’s partner, same-sex couples created a legally recognized family unit and reduced inheritance to the 4.5% of lineal heirs. While a vast improvement, the solution was far from perfect. Continue Reading Legalization of Same-sex Marriages in Pennsylvania Causing Adoption Reversals

According to Ron Swanson of Parks and Recreation fame, “the three most useless jobs in the world are, in order, lawyer, congressman, and doctor.” While Ron Swanson may be my favorite television character of all time, I, of course, beg to differ with this assessment.

The above quote comes from Season 6 of Parks and Recreation, and the context is a discussion about the value of having a Will drafted by a lawyer. Ron proudly presents his Will which was handwritten by himself at age 8 on a yellow piece of notebook paper.

The Will states:

Upon my death, 

all of my belongings shall transfer 

to the man or

animal who has 

killed me. 

[several weird symbols that only the man who kills him will know] 

Ron Swanson

The burning question: would Ron’s Will be enforceable in Pennsylvania? Continue Reading Is Ron Swanson’s Will Valid in Pennsylvania?

There are a lot of misconceptions and different definitions for a Notary.  In drafting this blog post I found several different definitions, including one from Google that says a Notary is “a person authorized to perform certain legal formalities, especially to draw up contracts, deeds, and other documents for use in other jurisdictions.”  Wikipedia says “[a] Notary is a lawyer (except most of the United States).”  Neither of these are true in Pennsylvania.  So what is a Notary?  Why do you want something notarized? Continue Reading What is a Notary?

As you update your Facebook page, have you ever wondered how your beneficiaries could obtain access to your “digital assets” upon your death?  Indeed, could they access your digital assets if you were incapacitated during your lifetime?  Prudent people plan through financial powers of attorney for incapacity during lifetime, or for the disposition of their financial assets and real estate upon their deaths under their wills.  Not enough attention has been paid to digital assets.  “So attention must be paid,” as Willy Loman said.

Does the persons (or institution) that would act as your agent during life, or as your executor upon death, know the location of your passwords and usernames?  Do they know whether you have an Amazon account or are active with social media sites?  As part of your estate planning, you should prepare an inventory of such information.  You may even consider expressly providing for access by your agent during life or by your executor upon death.

Google, for example, has available an “inactive account” option that allows notices to be sent to specified persons if there is no activity on your account for a predetermined period of time.  For example, if your Gmail/Google account were to be dormant for several months, 30 days prior to your predetermined deadline, you would receive a warning email or text alert.  After the deadline has passed, the action you set for your account will occur. This action could include deletion of the account.

You may consider giving some attention to the disposition of these “assets”.  After all, your digital assets may be every bit as valuable as the china, silver or fishing rods used to be, and may provide access to financial assets.

Jon Gruber is an attorney at Russell, Krafft and Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from the University of Virginia and practices in a variety of areas, including Estate Planning and Estate and Trust Administration.  

I often hear people say they need to do "their will" when they refer to estate planning. Of course estate planning involves making a will, and most people see the will as the most important aspect of estate planning.  Choosing to establish a power of attorney, however, may be the most important decision that a person makes when creating their estate plan. The person who is giving the power of attorney is known as the principal.  The person to whom the power of attorney is given is referred to as the agent.  Although the law has many provisions to protect individuals from unscrupulous agents, the damage an untrustworthy agent can do may be difficult or impossible to fix, and it directly affects what is left when a person passes away that can be given to beneficiaries under their will.

The duties Pennsylvania’s Probate, Estates and Fiduciaries Code places on an agent is to act as a fiduciary, or a person who must act with a high standard of care for the benefit of another, to the principal.  What this specifically means is that the agent must:

            1.         Act for the benefit of the principal;

            2.         Keep the agent’s money and other assets separate from the principal’s;

            3.         Exercise reasonable caution and prudence when acting on behalf of the principal; and

            4.         Keep accurate records and receipts of deposits, withdrawals and deposits.

Choosing the right agent who will dutifully follow the law is critically important because powers of attorney in Pennsylvania are generally durable, meaning they continue to have effect when the principal becomes incapacitated or disabled.  Therefore, your agent must act for your benefit in handling your financial affairs when you are no longer able.  Your agent will have full access to your bank accounts, stocks and other property. 

Continue Reading Pennsylvania Power of Attorney: One of the Most Important Decisions in Your Estate Plan