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Estate Planning Basics

Desk-3076954_960_720Many people come into our office wanting to know what planning they need. We often are able to demonstrate very quickly that it is impossible for someone to know exactly what another person needs, because each person is different, and everybody's goals are different. Although I cannot specifically tell every person what they need without knowing details, there are certainly some basics that everybody should have in place regardless of their age or their wealth.

 

A Last Will and Testament

A Last Will and Testament will allow an individual to determine where the assets will go upon their death. This document will specifically govern assets that are in the person's name but not jointly owned assets or assets that have a designated beneficiary.  

 

Financial Durable Power of Attorney

This document will allow another individual to make financial decisions for you if you are “unable” to manage your own financial affairs. “Unable” can be because of unconsciousness, being out of the country, or just simply not being able to make those decisions. This will allow your bills to be paid while you are incapacitated, and allow your life to continue on, even if you are not able to make decisions for yourself. The key to this document is having it in place before losing capacity, because the alternative of a guardianship is certainly not a perfect choice.

 

A Health Care Power of Attorney

A health care power of attorney will allow you to have your medical decisions be made by another individual in the event that you are not able to make them for yourself. If this document has a living will embedded in it, also called an advanced health care directive, that would also allow someone to know what your wishes are at end of life or "end stage medical condition" so that your wishes are carried out in that instance. 

 

The FINANCIAL POWER and Medical Power of Attorney do not have to be the same person or people and often people tend to have them be different because of one person being better with finances and maybe the other being better with medical decisions.

 

Beneficiary designations: 

Many people forget about the fact that there are assets and accounts that require the designation of a beneficiary. For example, life insurance, 401(k)s, IRAs, annuities, etc. will allow you to name a beneficiary right on the contract or policy. Whoever you name as the beneficiary will receive those items outright. It is essential that everybody check their beneficiary designations and make sure that it is consistent with your other estate planning. For example, if you name everything to one person in your will but your beneficiary designations name someone else, when you die, everything would be going to who is named as the beneficiary designations, and nothing will be going pursuant to the Will. This is often a case or a situation where people don't understand the implications, and it is imperative that you check your beneficiary designations often to make sure that they are up to date with the rest of your planning.

 

Guardianship designation:

If you have a child who is under the age of 18, it is important and essential that you name who you want to care for that child in the event that you were to pass. The guardian of your child will physically raise and take care of your child until they reach the age of 18. It is important not only to name that person, but to name a back up, in case something happens to the person initially named. Without naming your preference in the document, it can certainly get ugly, and may lead to a fight in a court room with a judge that is totally unnecessary and avoidable. 

 

If you have these basics taken care of and make sure that everything is consistent with your wishes, your bases will be covered, regardless of your age, health status, or wealth. To the extent that you do have significant wealth or that there are complications to your situation, then certainly there are other estate planning techniques that may be used. But as a basic rule of thumb, these are the essentials that everybody needs, regardless of age and wealth. 

 

If you would like to learn more about the basics or the essentials of estate planning, please give our office a call at (717) 845-5390 to learn more.

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Are Estate Planning Online Documents “Good Enough”?

Real-estate-3408039_960_720We get asked all the time by people about whether or not an estate planning online document would be "good enough." The bottom line with the do-it-yourself options and the online options is that they are not state specific.

 

Each and every state in the country has their own nuances and their own unique rules, and many of the generic form databases and/or online functions do not meet the nuances of each state. I have actually seen, in several cases, where they advertise that they do, and even the paperwork that the client receives says that it does, but in reality, it simply does not. 

 

The other major issue that I have with online estate planning tools is that it is "junk in" and "junk out." What I mean by that is they are going to ask you questions that you have to answer that will determine how the document will be drafted. If you do not know the answer or know the implications of the answer that you are giving, there is no way that you can know whether that document will work at the time that you need it to. 

 

I also worry about the unknown and about implications and situations that are currently not a concern but become so in the future. Most of the online or do-it-yourself forms are very short, very simplistic, and very basic.

 

The problem with that is what happens if a beneficiary is receiving public benefits at the time of your death? What happens if an individual receives money outright and is in a horrific car accident and kills 10 people? There are so many variables that change estate planning that are just not accounted for in the do-it-yourself or online programs.

 

One rebuttal that I often hear is that they do not have enough money to worry about those situations or those minor exceptions. I certainly appreciate that and respect that, but I think in some cases, that is a very easy cop out and is a very short sighted answer. It does not take a lot of money to have an unforeseen incident occur to lose it and to be extremely hurt and disappointed over the consequence of that action.

 

For example, a client recently went the online program route and had planning done, but unfortunately had a stroke and needed to go into a nursing home. The person lost all of their assets because the planning was not done correctly, and the family is very regretful that they made that decision. 

 

The gentleman made a very conscious decision, that he saved a couple hundred dollars and did his documents online because he did not feel that he had enough to warrant our services and our expertise. To the individual, a couple hundred thousand dollars was not a lot of money and he could not justify the expense of using our firm versus the cost of the online program. Unfortunately, the gentleman lost several hundred thousand dollars to the nursing home simply because he used an online form that did not provide for the advanced planning that would be needed. This is a very common occurrence, where people can't seem to justify the investment and having planning done appropriately, because in their eyes the amount of money that they have doesn't justify the excess expense.

 

This is a very glaring example of how he did save a couple hundred dollars, but in return he lost a couple hundred thousand dollars of his hard earned money, that could have gone to his family. The children and I have had several conversations about it and one of them even was encouraging him to hire our firm to get the work done properly. The son just could not understand why dad went with the cheap option online after he was warned, numerous times, by me and others.

 

It is very sad these days that online companies and attorneys who do not specialize in an area are able to market that they are a one stop shop and do everything. When in reality, they don't and their documents don't provide for the same things.  Beware of saving a couple dollars or a couple hundred dollars when the risks to you and your family are much greater than that. Go to a specialist who understands estate planning, elder law and asset protection and can give good advice and can provide personal assistance and not just a form document that gets spit out of a computer. 

 

If you would like to learn more about this, please contact our office at 717-845-5390.

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Biggest Mistakes In Special Needs Planning

Photo-1599818497948-eea9a2698dddIt is imperative that families of individuals with disabilities and special needs get appropriate advice when it comes to their estate planning.  Special needs trust planning can provide a family significant peace of mind knowing that their children will not only continue to receive the government benefits that they are entitled to, but also access to the money that they are leaving them in a special needs trust. 

It is often a shame to see mistakes that families make in this area.  They often are the same mistakes and I would like to assist today by shining a light on them.  Although there are many more, here are just a few of the biggest mistakes that we see families making in the special needs context: 

 

1. Taking the cheap way out – In light of how easy it is to get documents done online or in the age of every attorney believing that they "do that too" it is very easy for consumers to believe that quality does not matter.  Although I have written many other blogs that talk about why quality does matter in all planning context, it certainly matters in the special needs context more than ever.  Many of your online drafting companies as well as your inexpensive local attorney options are usually not people who specialize in this area.  Special needs planning, more than any other area, requires knowledge and skill to ensure that a beneficiary does not get disqualified from any governmental benefits.  Avoid the temptation of taking the inexpensive or cheap way out and get the planning done correctly.

2. Waiting until it is necessary – We often see people in this context who do not want to come to grips with the fact that they need to get the planning done sooner rather than later.  They often will wait until the moment is perfect or until they have every answer to every question that they may ever need to know.  Because of what is at stake, it is essential not to procrastinate and to get the planning done as early as possible. If you die without the correct planning in place, the risk is loss of benefits to your child, not only from their government benefit perspective, but loss of access to all the money that you are going to leave them as well.  Avoid the temptation to be perfect and get documents placed that will protect your family.  You can always update and make changes later to make it "perfect" but don't procrastinate and take a chance on it being too late. 

3. Failing to name an appropriate trustee or co-trustee – The selection of a trustee is an extremely important decision in all trusts.  However, this decision is probably more important in the special needs context than in any other context because of all the stringent rules that are required for special needs trust administration and the fact that one mistake or one improper distribution can have an individual lose their SSI benefit or Medicaid benefit. It is imperative that the trustee be up on the law and know the rules that apply to special or supplemental needs trusts inside and out.   We typically recommend a corporate trustee in this instance and many of them are non-profit organizations that will act as trustees and do so as a profession on a normal ongoing basis. If you have a family member that you would like to name, consider adding them as the co-trustee with a corporate fiduciary. It is difficult for a corporate fiduciary to stay on top of all of the real changes in the social security context through the POMS and in the Medicaid context through case law and regulations, which makes it impossible for an individual to stay on top of all of those regulations.  Our recommendation is to find a corporate fiduciary that you are comfortable with and then add a family member as a co-trustee to allow a family member to be involved.  

4. Getting it done early and forgetting about it – As I stated above, getting it done early is imperative, but you also don't want to get it done and never update it.  These are living, breathing documents and there are a lot of things that can change in our lives that would affect the documents themselves.  Make it a plan to touch base with the attorney who drafted the documents at least once a year.  There are often changes in the special needs arena and we recommend making updates as changes in the law and changes in the social security POMS occur on at least an annual basis.  Don't fall trap to creating the documents and never reviewing them.  

We hope that these common mistakes to avoid when drafting special needs trust planning was a valuable use of your time. If you would like to learn more about special needs trust planning, please contact our office to learn more information about our special needs trust workshop. 

If you would like to have additional information or to discuss this further, please give us a call at 717-845-5490.

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Crap, My Beneficiaries Died Before Me, Now What?

Photo-1585580829906-2113552a6f48As an estate planning and elder attorney, we always encourage people to plan ahead in case something unforeseen were to happen.

 

In some cases, we plan ahead and unfortunately, the people that we have named die before us. If this happens, it is important to review your planning to determine whether or not you need to make any changes or whether or not your plan is sufficient as-is.

 

When an individual tells me that their beneficiary has passed, that typically tells me that they have named that individual as a beneficiary on a non-probate asset, such as a life insurance policy, an annuity, a retirement account, a payable on death account, a transfer on death account, or in trust for account. If this is the case, the first thing to do is to look to see if you provided for a contingent or successor beneficiary.

 

If you did provide for a backup beneficiary, then the person that you have named as the contingent will be the person who receives your money if you were to die. If you did not provide for a contingent or backup beneficiary, then the money would go through your estate.

 

Your estate means that if you have a Last Will and Testament the terms of that document would govern. Therefore, if the beneficiary that you have named is no longer alive and there is no contingent beneficiary, we will look to the Will to see who the beneficiary is under your Last Will and Testament. If it was the same person that was named in the non-probate asset, then we would look to see if the Will provides for a backup or any contingent beneficiaries.

 

If the Will does not provide for anyone else to receive the asset and did not provide for a word such as "per stirpes" then we may have to look to the laws of intestate succession in the Commonwealth of Pennsylvania. If it does say per stirpes, then that individual’s children would inherit the monies that that individual was entitled to.

 

If there is no designation such as per stirpes and the beneficiary is not alive, then we will look to the rules of intestate succession in the Commonwealth of Pennsylvania. The state will provide under this statute an order of who would inherit first, second, third, etc. The Commonwealth of Pennsylvania would not be entitled to any of the money unless there are absolutely no beneficiaries or family members that are alive, which is very infrequent if not virtually impossible.

 

If you are trying to determine who is going to take under the Pennsylvania intestate succession statute, I highly recommend that you seek professional advice for this hierarchy.  Seek out the advice of an attorney who specializes in estate planning and has extensive knowledge in estate administration, but also has done cases where there is no Will and the intestate succession statute has governed.  

 

While it sounds pretty simple, this is not a common occurrence.  So it would be important to have somebody who has the experience to understand what is going to happen.  The bottom line is that if we plan properly and provide for contingent beneficiaries and make a back-up plan in case they die, the fact that your beneficiary died before you should not become a huge issue.

 

I hope that this article also helps you understand the interplay and inner workings between probate and non-probate assets and how, if there is no contingent beneficiary named and the beneficiary of the non-probate asset is no longer around, it would then default to the estate of the individual.  The estate would be governed either by the terms under the Last Will and Testament or under the Pennsylvania intestate succession statute.

 

If you would like to learn anymore about this topic, please feel free to give us a call at 717-845-5390 or attend one of our upcoming workshops to learn more.

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I Am Named As An Executor In A Will. Is That A Good Thing?

Photo-1539541417736-3d44c90da315I often find in my estate planning and elder law practice, that every child, or every family member, wants to be named as an executor in their loved one's documents.

 

However, I often find that nobody actually knows what that means, and has absolutely no idea how much work it entails. I think people believe it is a rite of passage, or an honor to be named, which it can be, but it also comes with a lot of work, and some significant responsibility. 

 

The person who is named as the executor in a Last Will and Testament is considered to be a fiduciary and is held to a higher standard than an ordinary individual or beneficiary. If the executor does not carry out his or her duties and obligations appropriately,  if the appropriate taxes are not paid or the beneficiary’s interests were not protected like they were supposed to be the executor can be held personally liable in the Commonwealth of Pennsylvania. 

 

Furthermore, it is imperative that the person who is being named as the executor is a very organized individual, who is able to handle balancing and managing a checkbook and also multi-tasking. The relationship of a person to another individual does not make them the right choice or the right candidate for the position.

 

If you are named, my recommendation would be to start understanding now what that entails, and what you will be asked to do down the road. If you are not comfortable serving, I would advise that you let the person know so that they can make alternate or contingent plans in their estate planning. 

 

If you find yourself named as an executor, I would highly recommend that you seek advice from an attorney who has lots of experience in this area. Oftentimes, people are lulled into thinking that acting as the executor and opening the estate is a very simple process, and that an attorney is not needed.

 

While I agree that the original meeting at the courthouse and getting the grant of Letters Testamentary are not difficult things, that is merely the first step, from that point forward there are a myriad of requirements of notices to not only beneficiaries and heirs, but also creditors. There is a Pennsylvania inheritance tax return required to be filed as well as potentially a fiduciary income tax return. Being named is only the first step, and that is by far the easiest. 

 

Due to the fact that an executor is a fiduciary and is held to a higher standard and can be held personally liable to creditors and to other beneficiaries, I highly recommend seeking the advice of counsel. Not any counsel, but counsel who is familiar with the inner workings of the estate administration process in Pennsylvania, including but not limited to, the priority statutes, understanding who gets paid first, second, third, etc., which can certainly cause issues if the estate does not have a lot of money or happens to be an insolvent estate.

 

While it can be an honor to be named as an executor, we urge you and encourage you to understand all of the expectations that it comes with and what you can do ahead of time to be prepared. If you find yourself named, plan seek the counsel of a qualified individual to walk you through the process so that you do not have to worry about any potential liability or any potential pitfalls of which you may be unaware.

 

If you would like to learn more about being an executor in the Commonwealth of Pennsylvania, please give our office a call at 717-845-5390 or come to one of our upcoming workshops to learn more.

 

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