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Most people are terrified to confront their own mortality, but careful planning for your loved ones is necessary to avoid costly mistakes. Hiring an estate planning attorney is serious business. Failing to properly prepare the relevant paperwork can lead to disastrous results, changing the intent of a will or trust.
Many times, people mistakenly believe that estate planning is only related to their death, and incapacity is often overlooked. As a result, most boilerplate estate plans fail to address and account for all the variables in the real world. The Commonwealth of Pennsylvania has specific laws that relate to what happens to an individual’s assets and dependents when they die, and other laws that apply to what will happen if an individual becomes incapacitated. It is vital to understand how these laws apply to you and your family, and to be prepared for both the inevitable and the unexpected.
The title of property will dictate how it is inherited after your death. Joint tenants with the right of survivorship, tenants in common, tenants by the entirety and trusts all have different meanings and ownership. The most common essential estate planning documents to have in place are a Last Will and Testament, an Advanced Health Care Directive, and a Power of Attorney.
Estate taxes, gift taxes, transfer taxes and income taxes affect how your beneficiaries will inherit your property. If you die before you have an opportunity to create the estate planning documents, your estate will be probated according to Pennsylvania’s Intestacy laws. As a result, all property commonly subject to your Will would be distributed by a set of rules established by Pennsylvania, and could result in your beneficiaries incurring unnecessary fees and taxes.
Trusts are tools to manage property. If it is used to manage property during your lifetime it is called a living or inter vivos trust. If it is used to manage property after your death it is called a testamentary trust. Trusts are governed by state law, and in the Commonwealth of Pennsylvania they are governed by the Uniform Trust Code.
Establishing a trust is rather straightforward. When a Grantor (the owner of the property) transfers ownership of property to a trustee for the benefit of a beneficiary, a trust is created. The trustee is responsible for administering the trust according to the Grantors wishes. The beneficiary typically receives the property outside of probate, which is the process of distributing a decedent’s assets in court. The probate process can be lengthy, costly and also expose a family’s private financial matters by making them a matter of public record. A properly established trust can ensure assets go to their intended beneficiaries in a timely, private and cost-effective matter.
Power of Attorneys – medical and financial
A Power of Attorney (POA) is a legal document that gives one person, referred to as the “agent,” the authority to act for another person, the “principal.” A POA can be general of specific. General POA’s allow an agent to act on your behalf in all matters and are traditionally useful in situations involving incapacitation. Specific POA’s are related to specific instances. If you want to sell a car, but have moved out of state, you can specify an agent to sign the documents on your behalf.
A Medical Power of Attorney is a specific type of POA, generally referred to as an Advanced Health Care directive. It is a form that elects someone else to make medical decisions regarding your care in the event that you are unable.
Estate administration at its simplest is the process of collecting the assets of an estate, paying any debts and taxes, and paying the remainder to the heirs of the estate. The initial task is arranging for the probate of a will or with a grant of letters of administration. These documents create the authority in an executor or administrator to probate an estate. Shortly thereafter the executor/administrator, through their attorney, advertises the estate, notifies banks, employers, insurance companies, stockbrokers and others of the death and identifies assets and debts. The executor’s or administrator’s attorney then prepares and files the Inheritance Tax return within nine months of the date of the decedent’s death, unless an extension is granted. Once the inheritance tax return is accepted, either a family settlement agreement is prepared, or a final accounting is prepared filed with the county Orphans’ Court. The process is neither quick, nor is it simple. An effective, compassionate advocate can make sense of the difficult road during a most difficult time.