By Attorney
It’s that time of year again. It’s time to take stock of 2018 and make resolutions for 2019. The approach of a new year is a great excuse to pay attention to that list of important tasks that you have been putting off. So as 2019 approaches, get serious about flossing. Start volunteering for a cause you care about. And make sure that you create or update your estate plan.
While things like flossing and volunteering may be pretty straightforward, creating an estate plan can be intimidating for many people. You can make it easier on yourself by breaking this big, complicated resolution into ten smaller parts.
Resolution #1: Create a Will, or Review and Update the one You Have
Wills are useful documents that ease the burden on the people you love. If you haven’t created a will by the time you pass, the state will reassign your assets to your closest relatives, or your heirs. Laws of secession vary depending on your marital status, but your spouse, child, parents, aunts or uncles, cousins, or even distant relatives could inherit your assets. Families forced to divide estates in this way often experience conflict, confusion, and hurt feelings.
Additionally, the way you structure your will and your estate may also force your heirs to pay additional taxes, and even sell or liquidate your assets to pay those taxes.
While some people imagine an “estate” to be a large home with a lot of land, an estate is simply a legal term that refers to all of your assets, including bank accounts, investments, real estate, retirement accounts, and personal possessions like vehicles, pets, homes, jewelry, artwork, and home items.
Your estate also includes your dependents and responsibilities. If you have dependent children, the creation of a will allows you to assign guardianship. If you do not specify guardianship arrangements in your will, the court will appoint guardians, which may include foster care.
If you provide for a relative, or if a friend or relative lives with you, you may want to make sure your will instructs others to care for them after you’ve passed. The same goes for pets or other responsibilities.
If you’ve already created a will, make sure you revisit it once a year. You’ll also want to update your will when major life events happen including the addition of a child, divorce, marriage, death of a spouse, starting a business, selling a business, acquiring of major assets (such as a home, boat, or jewelry), or disposing of major assets.
Resolution #2: Talk to Your Family About Guardianship and Pets
Talking about your death is difficult for many people. However, when you have children or dependent adults in your family, it’s your responsibility to have discussions with people to help you find the right guardian.
Make a list of relatives or friends you would like to name as guardians for your dependents and speak with them before including them in your will. Make sure they feel emotionally, physically, and financially up to the task. Discuss your wishes, the responsibility involved, and be honest about the financial support you can provide after you pass.
It’s also wise to name at least one secondary guardian, in case your first choice is unable to fulfill their duties. Situations change over time. Your designated guardian may have moved overseas, become divorced, experienced a dramatic decline in income, or may be in the middle battling a long-term illness at the time of your passing. By naming a secondary guardian, you have ensured that, even if your first choice does not work out, your dependents end up in a home you’ve chosen for them.
If you have pets, think about who will care for them after you’re going, and spell out your wishes in your will. Shelters are full of animals that were surrendered after their owners passed. By naming your pet’s guardian in your will, you make it easy for the executor to relocate your pets quickly. Contact Going and Plank to help you get started.
Resolution #3: Decide on Care for Special Needs Dependents
If you have a dependent with special needs, take time to map out their care in your will. Whether you’re planning for a child or an adult, you’ll want to look for a guardian who will care for them as well as you have. Think about a person’s ability to accommodate your dependent(s) in their home. Will they have the time, fortitude, and resources to address their special needs? Consider their age as well. For example, naming your parents as a guardian may seem like a good idea when you have young children, but as they age, you may want to replace them with younger guardians.
If your special needs dependent relies on certain facilities, schools, or resources, geography may also be a consideration. Finding a guardian close to home may make sense. Choosing a guardian in a city with similar resources and facilities may also be a good choice.
You may want to bequeath money and assets to a dependent with special needs, but if they receive public assistance, an inheritance may disqualify them from receiving aid. In these cases, a special needs trust can be set up that will allow you to pass on financial support to your loved one while they continue to receive the assistance that they require.
Resolution #4: Review Your Assets and Ownership Structures
In an attempt to sidestep estate or inheritance taxation, more and more people have been leaning on co-ownership strategies. Co-ownership allow assets to pass ownership outside of probate. This reduces probate fees in the estate and eliminates the delay in transferring ownership upon death.
In a co-ownership, you may decide to make a relative the co-owner of your home, so that upon your death, they become the full owner immediately, while also reducing estate and inheritance taxes. Co-ownership is also becoming more common with bank accounts, investments, vehicles, and other assets.
While co-ownership solves some issues, it also presents some risks. For example, if you make your daughter the co-owner of your home, in a divorce, her husband would have a right to half of her share, or one-quarter of your home’s value. If your daughter had to declare bankruptcy or liquidate assets, her half of your home would also be included in those bankruptcy proceedings. Additionally, if your daughter defaulted on a loan, her half of your home might be considered an asset to be seized.
In Pennsylvania, co-ownership also comes with its own set of tax issues. A shift in ownership may mean your co-owner is now subject to gift or income taxes.
It’s also important to remember that your co-owned assets may fluctuate in value, providing an uneven inheritance. For example, you may want to co-own your home with your son and co-own your vacation cottage with your daughter. Over the years, your home may decrease in value while the value of your vacation cottage skyrockets. At the time of your death, one property may be worth twice as much as the other.
While co-ownership may be a good choice in some situations, it’s wise to think through all the implications before assigning co-ownership to any of your assets. Every situation is different, and each state has different inheritance tax laws. Schedule a time to talk to our estate planning attorney to discuss your situation.
Resolution #5: Review Retirement Accounts and Beneficiaries
While preparing for your passing is wise, remember that years, even decades, can pass between the writing of the will, and the administration of it after your death. Your personal and financial situation may change dramatically in that timeframe. You may divorce, remarry, gain beloved new family and friends, or lose friends and family along the way.
It’s important to remember that your beneficiaries, young or aged, may either fall out of favor or pass on during your lifetime. That’s why it’s so important to periodically update your will, and review all the beneficiaries named in retirement accounts, life insurance, investment accounts, and other pensions or financial accounts.
It’s wise to review your beneficiary designations on all of these types of assets at least once a year. If you experience any significant life changes, such as marriage, divorce, the birth of a child, or the death of a spouse, that’s also a good reason to review your beneficiary lists.
Remember to name these accounts and their beneficiaries in your will and to consider these accounts as part of your estate. Contact our estate planning attorney to help you set up your will and beneficiaries.
Resolution #6: Assign Secondary Beneficiaries
Years, even decades, can pass between the writing of the will, and the administration of it after your death. In that interim, your beneficiaries, young or aged, may pass on. To reduce litigation and expense after your death, be sure to include a succession of heirs by naming secondary beneficiaries.
A secondary or contingent beneficiary will inherit only if certain conditions are met, such as the death of the primary beneficiary, if the primary beneficiary chooses to disown the assets, or refuses the inheritance, or if the primary beneficiary can’t be located.
It’s also wise to name secondary beneficiaries for a retirement account or other tax-deferred accounts. When you decide to contribute to an employer-sponsored 401(k), insurance policy, 529 college savings plan, health savings account (HSA), or IRA, you must name a beneficiary. Most accounts give you the option of naming primary and secondary beneficiaries. Check with an experienced estate planning attorney to make sure your will takes the death of a beneficiary into account.
Resolution #7: Explore the Role of Trusts
Trusts are useful tools in estate planning. There are three basic types of trusts to consider.
(1) Trusts Established to Reduce Estate Taxes
Some trusts are created to avoid taxes. They can be very advantageous if your assets qualify your estate to incur federal estate tax (as of June 2018, any assets over $11.2 million.) Estates with lower values may want to consider the expense of creating trusts carefully. Most Pennsylvania estates do not qualify for these kinds of trusts, and estates without trusts are usually easier to administer.
(2) Testamentary Trusts. These types of trust allow you to designate a person or firm, known as a trustee, to be responsible for distributing the inheritance under the terms specified in the will. For example, if you have minors (under the age of 18 for the purpose of inheritance) named as beneficiaries in your will, a trustee will be responsible for managing the inheritance until the minor reaches the age of 18 or later as you so designate. You can also specify which powers the trustee has while the inheritance is in his/her or its custody. Typically, the trustee is responsible for investing the inheritance and using the money for the minor’s needs. In effect, the trustee acts as a parent until any remaining principal can be given to the beneficiary once he or she reaches 18 or any other age that is designated in the trust.
(3) A Special Needs Trust. This type of trust can be set up for persons with special needs so that they are not disqualified from receiving the assistance that they may require by inheriting a lump sum.
Resolution #8: Consider Charitable Donations and Structure Your Estate Appropriately
There are many ways to make charitable donations, including establishing trusts, bequeathing property or assets, or even naming a charity as the beneficiary of a life insurance policy or retirement account. If you choose to leave a gift to a good cause, use the official name of the charity, the address, and registered charity number. It’s smart to talk to an experienced estate planning attorney about your options.
Resolution #9: Assign an Executor of the Will to Handle the Administration
When you create a will, it?s wise to choose an executor. An executor manages the transfer of assets after you’re gone. They’ll make sure bills and taxes are paid, and make sure your will is appropriately executed. They will also take care of administrative tasks such as notifying banks, terminating credit cards, notifying the social security administration and other organizations. If an asset needs to be sold, they will manage the process, and they will distribute assets to heirs.
You may name an individual, or if you have a large or complicated estate, you may decide to leave executor duties to a law firm. Naming a trusted and responsible executor ensures your estate is executed efficiently, without incurring additional costs or delays.
Resolution #10: Talk to an Experienced Estate Planning Attorney
If you’ve been married, have children, own any property, or have retirement accounts or pensions, you may want to speak to an experienced estate attorney to make sure you’ve considered all your options and that your will and trust are constructed in ways that make it easy for your loved ones to move through probate.
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Planning your will, trust, business succession, and end-of-life health care considerations often become a solitary activity. But you don’t have to handle it alone. Contact the legal team at Going and Plank for caring, compassionate guidance to individuals and families. We help you create last wills and testaments, trusts, living wills, powers of attorney, business successions, probate, and estate administration. Our law offices provide a low-stress environment staffed with experienced legal experts that are here to help you calmly develop estate plans to address inheritances, taxes, health care issues, and business succession.
For more than 60 years, the Law Offices of Going and Plank have helped Lancaster County families and individuals develop wills and estate plans. If it’s time for you to create or revise your will, trusts, or estate plans, contact Going and Plank for sound, affordable legal counsel.
The Law Offices of Going and Plank are proud to participate in the Metlife Legal Plan.
