By Angela M. Ward, Attorney
As 2022 draws to a close, it’s time to think about new year resolutions. And one of the best resolutions you can make is to update your Estate Plan. Whether you’re writing your first Will or updating an Estate Plan for the twentieth time, there is a long list of considerations. Here are nine tips to get you started.
Create or Update Your Last Will and Testament
In many ways, creating a sound Will is a kindness. The author of a Will makes their passing easier by mapping out last wishes, considering the tax implications of inheritances, and providing for heirs in thoughtful ways. A Will reduces conflict, confusion, and hurt feelings.
Additionally, how a Will and estate are structured may affect taxation rates. Without expert help, heirs may incur additional taxes and sell or liquidate assets to pay those taxes.
A Will also provides for the welfare of dependents. Whether that dependent is a child, a dependent adult, or a pet, the Will provides a legal tool to assign guardianship. Without guardianship arrangements, a court may appoint a guardian or assign foster care until disputes are settled.
Once a Will is created, it’s smart to revisit it once a year. Update the Will to accommodate major life events such as the addition of a child, marriage, divorce, death of a spouse, starting a business, selling a business, or acquiring or disposing of valuable assets such as homes, vehicles, jewelry, or artwork.
Review Assets and Ownership Structures
To sidestep estate or inheritance taxation, some people utilize co-ownership strategies. A person may make an heir a co-owner of their home, bank accounts, investments, vehicles, or other assets so that upon their death, the co-owner takes ownership immediately and reduces estate and inheritance taxes.
While co-ownership offers some benefits, it also presents some perils. For example, co-owned assets may be put at risk in a divorce, bankruptcy, or if they are listed as collateral for a loan. In some cases, making a person co-owner may subject them to gift taxes.
While co-ownership may be a good choice in some situations, it’s wise to consider all the implications. An Estate Planning attorney can help clients evaluate options.
Establish Guardianship for Children and Pets
Parents should assign guardianship in a Will, even if verbal agreements are already in place. Without a record of the deceased wishes, other friends or relatives may claim rights to guardianship.
Don’t forget to assign a guardian for pets, and never assume the child’s guardian is willing or able to care for a pet.
It’s wise to speak with potential guardians before making them a part of an Estate Plan. Evaluate guardians to confirm they are emotionally, physically, and financially up to the task. Be honest about the financial support that will be provided for the dependent’s care.
Over time, a designated guardian may move, become divorced, or experience a dramatic decline in income or health. Including a secondary guardian in the Will ensures that dependents are cared for even if the primary guardian is unable to fulfill their duties.
Provide Care for Special Needs Dependents
Dependents with special needs require additional consideration in an estate plan. If a dependent relies on specific facilities, schools, or resources, choosing a nearby guardian may be a good choice
When bequeathing money and assets to a dependent with special needs, ensure the inheritance does not disqualify them from receiving aid. In these cases, a Special Needs Trust can be set up that allows a Will to provide financial support without jeopardizing their required assistance.
Update Retirement Account Beneficiaries
Often years, even decades, pass between the writing of the Last Will and Testament and the administration of it. Over time, a person can marry, divorce, welcome new family members, or lose loved ones.
That’s why it’s a good idea to complete an annual review of the beneficiaries named in retirement accounts, life insurance, investment accounts, and other pensions or financial accounts.
It’s also helpful to name these accounts and their beneficiaries in a Will and consider them part of an estate.
The Role of Secondary Beneficiaries
Again, time passes between writing a Will and administering it. To reduce litigation and expense, create a succession of heirs. In addition to primary heirs, name a secondary or contingent beneficiary who will inherit only if certain conditions are met, such as the death of the primary beneficiary or if the primary beneficiary can’t be located.
Also, name secondary beneficiaries for a retirement account or other tax-deferred accounts. While employer-sponsored 401(k)s, insurance policies, 529 college savings plans, health savings accounts (HSA), or IRAs require the account owner to name a primary beneficiary, most accounts also provide the option of naming a secondary beneficiary.
Explore the Role of Trusts
Trusts are hard-working tools that can fill various roles in Estate Planning. Some trusts are created to avoid taxes. They can be very advantageous for those whose assets are large enough to incur federal estate tax. For people who pass away in 2023, the exemption amount will be $12.92 million. Few Pennsylvania estates qualify for these kinds of trusts, and estates without such trusts are usually easier to administer.
Testamentary Trusts designate a person or firm, known as a trustee, to distribute the inheritance under the terms specified in the Will. For example, some parents have trustees manage the estate for minors (under the age of 18 for the purpose of inheritance) until the minor reaches the age of 18 or later, as designated in the Will. The trustee acts as a parent until any remaining principal can be given to the beneficiary once they reach 18 or any other age specified in the trust.
A Special Needs Trust may be established for persons with special needs so that they are not disqualified from receiving the assistance they may require by inheriting a lump sum.
Consider Charitable Donations
There are many ways to make charitable donations a part of an Estate Plan. Some people establish a trust with conditions for using the funds, such as a scholarship. Others bequeath property or assets. Some prefer to name a charity as the beneficiary of a life insurance policy or retirement account.
When making charitable donations a part of a Will, it’s important to use the official name of the charity, the address, and the registered charity number. Again, it’s wise to talk to an experienced Estate Planning attorney about your options.
Assign an Executor of the Will
An executor manages the transfer of assets. They ensure bills and taxes are paid and oversee the execution of the Will. In addition, they handle administrative tasks such as notifying banks, terminating credit cards, and notifying the Social Security Administration.
If a person has no Will, referred to as “intestate,” or does not name an executor of the will, the Register of Wills appoints an executor, usually a spouse or child of the person who died.
Get Help from an Experienced Estate Planning Attorney
Creating an Estate Plan can feel overwhelming. But you don’t have to handle it alone. Going and Plank offers caring, compassionate guidance to individuals and families. For more than 60 years, the Law Offices of Going and Plank have helped Lancaster County families and individuals develop wills and estate plans. Contact us for more information.
Want to learn more about Wills, Trusts, and Estate Planning? Check out these articles.
Why Parents at all Income Levels Should Understand What a Trust is and When to Create one
When Should Families get Serious About Creating Wills and Trusts?
9 Things to Consider When Create a Last Will and Testament in Pennsylvania
Power of Attorney: Learn What it is, Why You Need it, And What’s Different in Pennsylvania
Thinking About Assigning Power of Attorney? Learn What That Means in Lancaster County.
