By Angela M. Ward, Attorney
As we get close to the New Year, many are thinking about resolutions for 2023. It is a time of new beginnings, and one of the most important resolutions a Lancaster County resident can make includes the plan to create a Will that protects loved ones.
A Will is important not only for the accurate distribution of assets but also to ensure that dependents are protected in the event of a guardian’s death and to provide peace of mind that the deceased’s loved ones will receive the necessary care.
Create a Last Will and Testament or Update an Existing One
According to the Pennsylvania laws of intestate secession, without a Will in place, an individual’s assets will be passed to the closest relatives upon death. Sometimes, that may be a spouse, parent, sibling, child, or even a distant relative. Without a Will, assets may not pass to those the decedent intended, and the care of dependents may be cast into confusion and legal conflicts.
Contrary to some people’s beliefs, the definition of an Estate is not limited to large assets such as land. Instead, an Estate refers to any kind of property or assets such as bank accounts, investments, real estate holdings, and personal possessions.
Inheritance is subject to state and federal taxation. As a result, there are cases in which heirs are forced to sell inherited assets to cover those taxes. An experienced Estate Planning attorney can advise on the composition of the Will and the structuring of assets to help alleviate or even eliminate tax burdens and ensure that the beneficiaries inherit as the decedent intended.
Discuss Future Guardianship
One of the key considerations during Estate Planning is ensuring the needs and responsibilities of dependents are addressed. If a parent fails to name a guardian in their Will, the court usually assigns it to the nearest relative. The court may even appoint temporary guardians or place the children in foster care in cases where guardianship is contested.
Parents can start the process by making a list of potential guardians and discussing those plans with the candidates to ensure they are willing to take on the responsibility.
Situations can change over time, so it is vital to create contingency plans. Parents should consider designating a secondary guardian to step in if the primary guardian can no longer fulfill their duties.
If dependents have special needs, it may be wise to select a guardian near the facilities or resources needed to care for the dependent.
The Role of Trusts
There are several types of Trusts that may be crucial in estate planning. Some special needs dependents rely on government programs. However, an inheritance may sometimes disqualify a dependent from receiving access to those resources. In order to avoid disqualification, a Special Needs Trust can be created to provide financial assistance in addition to what is provided through government programs for their care.
Some Trusts also help heirs minimize taxes. They may reduce federal estate taxation for the very wealthy individual. But unless an Estate contains assets over the federal estate tax exemption, which is presently over tens of millions of dollars, bypassing these costly Trusts is financially prudent.
If a beneficiary is under the age of 18 years, then a Testamentary Minor Trust is required. It puts an adult in charge of the minor’s assets until the minor reaches the age of majority and instructs the Trustee to distribute assets as needed and then releases the principal when the minor reaches 18 years or later if the Trust so dictates.
Review Co-Ownership Structures
Individuals who want to avoid items in the Will being subject to estate timing and taxation issues can use co-ownership. This is a legal process where an individual shares ownership rights with another person. Jointly owned assets only pass to the other co-owner if one dies.
If both die simultaneously, this becomes an issue, and the Estate could be tied up in probate. Additionally, creditors could take any jointly owned asset as long as they have a valid claim.
More challenges come with the co-ownership of assets. For example, a co-owner may be subject to transfer, income, or gift taxes when they become the sole owner of a jointly held asset. So, full consideration must be given to state laws before changing asset ownership.
Add Secondary Beneficiaries and Review the Last Will
When doing Estate Planning, it is wise to consider what happens with any distribution if a beneficiary is unable or unwilling to accept an inheritance. Document a contingency scenario and identify secondary heirs. In Pennsylvania, tax-deferred accounts like a 401k, life insurance policy, 529 plan, HSA, or IRA also allow holders to name primary and secondary beneficiaries. Secondary heirs will inherit the property in case the primary beneficiary:
- Chooses to disown the assets
- Refuses the inheritance
Additionally, it’s smart to review a Last Will and Testament at least once every year to ensure it is up to date. This keeps beneficiaries top of mind and allows one to change beneficiaries if necessary when any major event happens, such as the addition of a new child, divorce, marriage, death of a beneficiary, or disposal of assets.
Contact an Experienced Estate Planning Attorney
Create a sound Estate Plan in 2023 to protect your family. For more than sixty years, the Law Offices of Going and Plank have helped Lancaster County families and individuals meet their legal needs. Contact Going and Plank to discuss your situation.
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