What exactly is "Estate Planning," and what are some potential pitfalls I should look out for in the Keystone State?
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[Please note: this post and all other posts should not be relied upon as legal advice, please contact us to ensure accurate, up to date, and timely legal advice and representation before taking any actions.]
No one, regardless of age or financial status, can afford to ignore the importance of estate planning. The broad concept of planning your estate really means taking the time to make a plan for what will happen to your assets, property, and personal belongings after you pass away. When it comes to passing on a legacy, Pennsylvania has its own set of rules and regulations that you will need to be especially aware of if you are a resident of the state or even if you own property within the state itself. Some of these rules and regulations can be very complicated and, as such, its recommended that you consult with an attorney when making plans about all of the topics we cover below regarding planning your estate. As attorneys, it is our top priority to educate our clients about the significance of estate planning and then use our knowledge and skills to assist them in developing a strategy that is unique and responsive to their needs. Below, I will give a few brief overviews of the process itself and touch upon some unique considerations and concerns that you might want to bear in mind as you start to think about the process. As always though, I encourage you to reach out to our office regarding specific estate planning needs and to always consult with a qualified attorney before taking any actions.
One of the key components of estate planning is creating a will. Writing your “Last Will and Testament” can be a very important part of your estate planning process. To put it simply, writing a will is nothing more than the process of deciding what will happen to your property and possessions after your death. A will is a special document though too, it is one that is governed by very specific rules that help to make your decisions clear and enforceable going after you have passed away. Having an attorney assist you with this drafting process is especially important so that you make sure your will and the intentions you want to express within it have the desired legal effects. Although the prevalence of wills and the weight they carry have fluctuated over time, many people still find that a well-drafted will is the most practical and effective way to address their estate planning concerns. If you haven't already done so, you should create a will that specifies how you want your assets and property distributed after your death. Speaking with an attorney you trust is typically the first step in this process. Having a will in place guarantees that your property will be distributed according to your wishes. Pennsylvania's intestacy rules will govern the distribution of your assets in the absence of a will, and its important to note that they may not reflect your preferences.
Educating yourself about the ins and outs of Pennsylvania's inheritance tax is also crucial part of any estate strategy. Inheritance taxes are levied on the transfer of assets from a decedent (deceased person) to their heirs in a number of states, with Pennsylvania being one among them. The value of the property being transferred and the nature of the relationship between the deceased and their heir determine the tax rate your heirs might be expected to pay. It is important to consult with an attorney about this process and about any concerns you might have when it comes to leaving a tax burden on your heirs. Often too, involving any financial planners can be especially beneficial for getting a better understanding of what types of assets you have and how they might be taxed according to the laws of Pennsylvania. Our law firm has experience working directly with financial planners to help get a better understanding of your assets to make sure your estate plans are specifically tailored to match your needs and circumstances.
As you might expect, estate planning is often more than just making a will and researching inheritance tax regulations. Sometimes, when we examine the needs and circumstances of an individual planning their estate, it becomes clear that they might benefit from establishing something called a “Trust”. If you find, after consulting with an attorney, that depending just on a will isn't adequate for your circumstances, you may want to create a trust. A trust is one "instrument" that you have at your disposal in the estate planning process. To put it simply, a trust is a legal arrangement that you can set up during your lifetime or immediately at the time of your passing that will handle your assets in a way that goes beyond what a simple will might otherwise be able to accomplish for you. This legal arrangement is usually expressed in the form of you transferring your property or assets to a trustee who manages the assets for the benefit of your named beneficiaries. Naturally then, an important part of your estate planning process involves carefully considering who you want to be your “trustee” as well as who you are setting up the trust to benefit – your “beneficiaries”. Planning a trust can be a complicated process, it also is important to understand how to create a valid trust that works as you intended and to understand the proper way to “fund” that same trust after you have created it. With that in mind, it is especially important that you work with a qualified attorney throughout the process. An attorney can help you understand the ways in which a trust might be beneficial to you and your specific circumstances - including the ways in which they can be useful in avoiding probate, reducing taxes, and protecting assets.
In considering this broad overview of useful estate planning topics, it is important to also remember a few additional documents that you will want to consider making when you consult with your attorney. Establishing a "Power of Attorney" is another crucial step in estate preparation. It may sound obvious or simple, but just taking a few moments to think about who you trust to make important decisions on your behalf can alleviate a lot of potential uncertainty and trouble later on, in the event something happens to you that renders you incapable of making decisions for yourself. Oftentimes, the last thing your friends or family members want to be doing when something bad happens to you is fighting over who has the right or responsibility to handle your affairs and make decisions for you. Setting up a clear plan ahead of time can make everything easier for your loved ones. If you or a loved one ever become incapacitated and unable to make decisions for yourself, this paper could, quite literally, be a lifesaver. Once again, talking with a qualified and experienced attorney can often give you essential insight into understanding how to create a valid document that makes your wishes clear and lays out an easy to follow plan for your friends or family. An attorney may also be able to help you anticipate potential problems or conflicts that you might otherwise inadvertently create by naming the wrong individuals or making it harder for the people you name in your document to actually have the power to make decisions on your behalf. To put it simply, powers of attorney are a great tool available to you that will allow you to appoint someone to make decisions on your behalf in case you become incapacitated and unable to make decisions for yourself.
Lastly, it is important to review and update your estate plan regularly. Life changes such as marriages, births, and deaths can all impact your estate plan. It is important to review your plan every few years or after major life changes to ensure that it still reflects your wishes.
To sum it all up, estate planning is an important aspect of everyone's life, and it is especially important to understand the specific laws and regulations governing estate planning in Pennsylvania. By considering a will, understanding inheritance tax laws, considering trusts as a planning option, and regularly reviewing and updating your plan, you can ensure that your assets go to the people you want them to go to and that your wishes are respected after you pass away. You can use these tools to give yourself and your loved ones peace of mind, knowing that you have taken time to set up clear plans and wishes for everyone and that those plans are easy to follow and respect.
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