When Cohabitating Goes Wrong

This blog discusses cohabitating in the context of two adult individuals who live together but who are not married. They can be a partner, significant other, or simply friends. We will not be discussing the pitfalls of owning property jointly or other obvious pitfalls of cohabitation but rather we will be discussing the downfalls of not having estate planning documents to allow that significant person in your life to help make decisions.

In the Commonwealth of Pennsylvania, you must be married in order to have certain rights under the context of the healthcare statute. It also requires marriage to have rights under the intestate succession statute in the Commonwealth of Pennsylvania. However, many adult individuals will decide later in life to never get married for one reason or another.

This is certainly a personal choice and preference, but if you are not legally married you will not have the ability to go into a hospital to make a decision for your partner or significant other. Without having a Healthcare Power of Attorney in place that appoints an agent your partner or significant other would have no ability or authority to make decisions for you. Instead family members, who may or may not have been involved in your life, for years would be able to come in and make those decisions.  

Often times if there is a guardianship proceeding that has to occur (because you don’t have a Power of Attorney or Health Care Directive in place), the Court will often defer to family members rather than individuals who are cohabitating with the alleged incapacitated individual. While this is certainly not set in stone, my experience personally is that the Court will defer to family and blood rather than a significant other relationship in appointing a guardian.

It is certainly a person’s choice to not get married and not to take the next step for one reason or the other, but we highly encourage those individuals to make sure that they have, at a minimum, in place a financial Power of Attorney and Health Care Directive and strongly suggest having a Last Will and Testament as Well so that your wishes are known and can be carried out.  This will at least save some heartache in the end.

If you would like to learn more about avoiding estate complications, please give us a call at 717-845-5390.


How Do I Collect as the Sole Beneficiary for a Family Member Who Lives Out-of-State?

Question markNJ.com’s recent article, “Inheriting money from out-of-state relative,” explains that with a power of attorney, you will be able to manage the family member's affairs during his lifetime, if he or she is unable to do so. However, a power of attorney stops at the death of the principal.

When considering the tax ramifications, there are two distinct types of taxes that may be imposed by a state where the person is a resident at the time of their death. An estate tax may be imposed on the estate of an individual before the property is transferred to the beneficiary. There is also the inheritance tax. This tax is imposed on certain individuals who inherit property from an estate. Whether a state estate tax or inheritance tax must be paid, is dependent on the laws of the state where the person was a resident at the time of death, not the state where the beneficiary lives.

The estate of a person who is a resident of New York and dies between April 1, 2017 and Dec. 31, 2018 is subject to a New York estate tax, only if the value of the estate exceeds $5.25 million. On January 1, 2019, the New York estate tax exemption will equal the federal estate tax exemption. It is anticipated to be about $5.9 million.

In some states, the relationship between the testator and the heirs may make them subject to an inheritance tax.

If the relative, for example, owns real property in New Jersey, there’s an inheritance tax of 15% imposed by the state on the value of that real property. When a person inherits the estate assets, there would be a step-up in basis for any appreciated assets. This means that there shouldn’t be any capital gains tax on those assets, if they’re disposed of for the date of death values.

Talk to a qualified estate planning attorney to understand the consequences for you and your family member's estate.

Reference: NJ.com (June 6, 2017) “Inheriting money from out-of-state relative”


Estate Planning with No Heirs

Old lady gardeningSome people have a somewhat unique estate planning challenge: they’re childless and not sure what should happen to the assets they leave behind or whom to appoint as their proxy decision-maker.

CNBC’s recent article, “Planning your estate when you've got no children or heirs,” says there may be no close family members, resulting in questions of who they should leave their estate to. These folks also often don't know who to name as executor of their will or who to trust to make decisions for them, in the event that they become incapacitated.

Studies show that most childless people don’t make out a will. The issue with having no will (or “dying intestate”) is that the state will decides who gets your assets. Therefore, it is recommended that for those with no family ties or close friends, to focus on your interests and tie them to charitable giving. You can immediately establish your legacy and enjoy it, while still living.

Another tough decision is choosing someone to have medical power of attorney, which allows that person to make important health-care decisions if you’re unable to do so. Usually married couples will name each other as their health-care proxy, but after the death of one spouse, the other with no children has the challenge of naming someone else. The same is true for childless singles who never married.

Likewise, a living will details your wishes if you’re on life support or suffer from a terminal illness.  It also instructs your proxy's decision making. You also should give someone durable power of attorney to act as your agent, if you’re unable to handle your finances. You can designate different people to handle healthcare and financial decisions.

You also need to designate someone to be the executor for your estate. This can be challenging for those without any family. The executor or “personal representative” has the legal authority to handle your estate. It should be someone you trust and someone who has the bandwidth to take on this responsibility.

If you can’t think of a person to name, your bank's trust division may be willing to serve as executor. You may also consider setting up a trust. Remember that some assets have beneficiaries, like 401(k) plans and life insurance policies. These accounts don’t pass through the will.

Doing something is better than doing nothing. Speak with an experienced estate planning attorney to get help with making these decisions and creating a plan.

Reference: CNBC (May 31. 2017) “Planning your estate when you've got no children or heirs”


Advice for Blended Families and Estate Planning

Biracial familyDid you know that about 1,300 new stepfamilies are created every day? That’s from the Stepfamily Foundation, and the Pew Research Center says 41% of all Americans have at least one step-relative.

The Miami (OK) New-Record’s recent article, “4 tips to resolve financial concerns in stepfamilies,” provides some tips and answers for issues within stepfamilies.

  1. Types of accounts should be defined. A major issue for stepfamilies can be how to split finances into “yours,” “mine” or “ours.” Any combination of accounts can be just fine, but spouses should clarify the rules at the start to avoid confusion. Financial circumstances can change, so couples should review their program regularly to make sure that they have the best approach for their situation.
  2. Keep documents up-to-date. After remarrying, review the beneficiaries of life insurance, pensions, and other financial accounts. It is also important to create or update a durable power of attorney, living will or a healthcare proxy to name a person to make decisions, in case of incapacity.
  3. Modify your will. Inheritance issues can make children and spouses concerned about their financial futures. With that reality, a newly remarried couple should draft wills and revise any existing wills to address important estate planning issues. Wills must state, as specifically as possible, what each beneficiary will inherit. This helps minimize potential squabbles among siblings and also between the surviving spouse and children from an earlier marriage. Step-children aren’t usually considered your legal heirs, so they may not inherit if you pass away without a will containing specific provisions for them.
  4. Speak to professionals. A CPA and an experienced estate planning attorney can show you the best options for your circumstances. This may include life insurance or a trust to ensure that the needs of all beneficiaries are met.

Reference: Miami (OK) New-Record (May 20, 2017) “4 tips to resolve financial concerns in stepfamilies”


Why Does a First Responder Need a Living Will?

TelephoneAlthough first responders experience illness, injuries and death every day, they still can be hesitant to create a living will for themselves. Nonetheless, it’s important.

EMS1.com recently posted a story, “Why EMS providers need living wills.” It explains that a living will—contrary to most other estate planning documents—has no authority after the creator of the document passes away. A living will or advance directive provides instructions about your end-of-life care. It can include as much or as little direction as you want, such as the use of pain-relieving treatments, do not resuscitate (DNR) orders, life support and organ donation.

A living will helps your family members carry out your wishes.  However, it often doesn’t cover everything. For instance, if you don’t specify whether you’d want certain life-saving treatments like emergency surgery in the living will, you should have a trusted agent to act in your best interests and help you to carry out your wishes.

First responders need both a health care power of attorney and a living will. Due to the high risk of serious injury that comes with a first responders’ duties, it is even more imperative to have this advanced planning in place. In many states, the health care power of attorney is part of the living will. The agent or the “health care proxy” has the authority to act on behalf of the incapacitated first responder, if the first responder is incapable of making decisions on his or her own.

But why do I need a living will?

Be in control of your end-of-life decisions. Without a living will, the decisions to carry out your last wishes could be made by the court. In this situation, state law takes effect and dictates who will have a say in your well-being. A living will lets you control how decisions are made and who will make them.

Protect your life partner. Without a living will, the law will place the health care power of attorney in the hands of your spouse, and then your family. If you have a long-time partner, but are unmarried, your partner would have no say in any end-of-life decisions.

Select one of your children to assist. With a health care power of attorney, you eliminate confusion as to which of your children will make the decisions to enforce your living will and decisions on end-of-life care.

Peace of mind. A living will gives you and your loved ones comfort and peace of mind. This is a stressful time, and a living will helps smooth out the logistics and questions that will arise.

Organ donation. You can state your instructions for organ donations in a living will.

Without a living will, decisions can become difficult for family when a loved one is in a terminal state. Families are left wondering whether they made the right decision. Your living will lets you approve and announce your health care decisions beforehand, avoiding confusion and fighting.

Reference: EMS1.com (May 6, 2017) “Why EMS providers need living wills”

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