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Philadelphia PA Estate Planning Blog

Wednesday, August 25, 2010

Testamentary Trusts

Since probate avoidance is typically not a concern if you are a Pennsylvania resident and only have Pennsylvania property, a living trust is usually not recommended. Revocable living trusts are more expensive than a will, and are usually more complicated.

Revocable living trusts are useful in some situations, but they are not recommended simply to avoid probate, which is not burdensome in Pennsylvania.

Trusts can provide a controlled inheritance – give what you want, to whom you want, when you want – and protect your beneficiaries from themselves and others (think creditors, divorce, bankruptcy, high risk professions, spendthrift kids, etc.).

If our clients are interested in controlled inheritances, we can often write a trust in the will. This is called a testamentary trust. The trust is not actually established until you die. The instructions for the trust are written into your will, and once your will is probated, the assets that you direct go into the trust. At that point, your options are unlimited – perhaps you want to give a yearly percentage of assets to a child, or maybe provide only for their education and health.

Testamentary trusts are more economical than a living trust, and they often make sense for many clients.

To determine what type of trust is right for you, give us a call now at (215) 706-0200 or email info@jawatlaw.com. We can schedule your complementary consultation right now.


Tuesday, August 24, 2010

Can I Write My Will By Myself?

On first blush, writing a will seems easy enough... leave my stuff to my loved ones, and simply write that on paper.

Based on that misconception, we often get calls asking if we would advise someone to write their will themselves. We cannot advise someone whether to do this or not, but we definitely don't recommend it.

Services like LegalZoom are more prevalent than ever today, and services like these make estate planning seem easy, to the point where you can fill in a few blanks and have a perfect plan. I've seen Suze Orman's living trust sample forms used by some potential clients. They lived in Pennsylvania, but their trust was written for California law.

The problems with writing a will by yourself are numerous. Here are some reasons why writing your own will can be a problem:

  • An estate plan usually includes more than a will -- think powers of attorney, living wills, etc. which are often times more important than a will.
  • A will may be inappropriate in a few cases, and a living trust may make more sense.
  • No independent third party (the lawyer) to review and ensure your wishes on paper reflect both your actual wishes and reality of your family circumstances.
  • Over 50% of the time, clients we see that need a "simple estate plan" actually need quite a bit of customization, and a few will need more advanced planning based on their goals.
  • If you create a trust within a will (a testamentary trust), your will becomes more complicated. Fill-in-the-blank services cannot do an effective job building trusts for you.
  • Our firm builds relationships with each and every client. We make sure your estate plan stays updated at least every few years, which is crucial.
  • Today, many of your biggest assets probably won't be distributed through your will. IRA's, 401(k)'s, life insurance, etc. is all distributed through a beneficiary designation form. An attorney can help you plan your inheritance taking into account the entire estate.
  • A lawyer knows the law, and the minefield that exists with will challenges, capacity in writing a will, conflicts, etc... all the legal stuff that you probably don't want to worry about. A lawyer can ensure that when you write a will, it will be upheld if need be in any court.

These are just a few reasons why writing a will by yourself is not a good idea.

One more thing... if your estate plan is indeed a simple one, our firm's rates aren't much more expensive than LegalZoom, and the value you receive by seeing an attorney is so much greater.

To speak with our firm today, please give us a call at (215) 706-0200. We can conduct a complementary review your do-it-yourself will and estate plan. 


Monday, August 23, 2010

Comprehensive Estate and Retirement Planning

An estate plan completed by a law firm, by itself, is simply the legal documents that are drawn up to make sure your wishes are valid when you become incapacitated and when you die. 

However, an effective estate plan should be part of your overall retirement plan and wealth management plan. 

When our clients want to make sure their estate plan is seamless with their retirement plan, income plan and tax plan, we work with Franklin Retirement Solutions, a firm that specializes in retirement planning. Together, we can make sure all of the pieces of your plan fit together.

Here's just one of many examples of how a "piece meal" plan can go wrong: Client X has a financial advisor, who doesn't know the estate planning attorney. Client X has a special needs child. Client X asks attorney to protect assets for the special needs child, and attorney drafts both a will and sets up a special needs trust. Client X dies, and estate realizes that assets were not allocated properly (as a special needs child, putting assets directly into this child's name is a really bad idea). Client X's financial advisor was not aware of rules for special needs persons that are on public benefits. As a result, Client X's son almost lost his public benefits. 

By combining your financial planning and estate planning, your plan becomes a lot more effective. Most of our clients love having access to a financial planner, tax planner, Medicare supplement/Long-term care insurance specialist, and more.

To summarize, here are a few advantages of planning with this approach:

  • All parts of your plan work together
  • Ensures your plan will be reviewed and, if needed, updated more often
  • Provides a more seamless transition to your heirs, since your affairs are in order.

We find that this type of planning is extremely beneficial to middle class clients. To learn more about our comprehensive approach to estate and retirement planning, please give our office a call today at (215) 706-0200.


Wednesday, August 18, 2010

Technology and Estate Planning

In 2010, we have more machines than ever. Many of us are addicted to our Blackberry's, laptops, netbooks, iPads and more. We conduct more transactions "online" than ever before.


As you grow older and the chance you become disabled or die increase, I worry more about your agent, executor and/or trustee having access to crucial online account data.

Let me take a step back... For the most part, a properly named executor will be able to access most online accounts that he or she is aware of.

The problem is that there are online accounts that the executor may have no idea about!

As an estate planning attorney, I can help you make the burden on your executor easier. First, I always provide my clients with a "vital document/account locator" which allows them to list this type of information in an orderly way. Second, we offer a service called LegalVault that allows our clients a secure way to store their estate planning documents online, as well as confidential online account information. All of this information can only be accessed once the principal is deceased or incapacitated.

This is one of several value-added services we offer all of our estate planning clients. For a complementary estate planning appointment, please call (215) 706-0200.


Tuesday, August 17, 2010

Check out our events

We keep our Workshops list updated, and we have some great events coming up in the next couple of months. 

Please register today for a class on managing your wealth/retirement planning, or one of our more informal Lunch 'n Learn events held in our comfortable offices.

Seating is limited for all events, so register today. Here is the link for our events: Workshops.

We discuss retirement planning, estate planning, tax planning and our comprehensive approach to retirement, among other regularly discussed topics.


Wednesday, August 11, 2010

Paying PA Inheritance Tax is Not Optional

 

No one likes taxes, especially “death taxes” – many people fundamentally disagree with a system that taxes a dead person’s belongings that pass on to their loved ones. However, if you are a resident of Pennsylvania, and due to your death you pass property onto others, your estate and/or your heirs are responsible for paying Pennsylvania Inheritance Tax.

The vast majority of property passed on is subject to PA Inheritance Tax. Most property owned by the decedent is taxable at rates that have been pretty steady. The Pennsylvania inheritance tax rates in 2010 are:

  • 0% for spouses,
  • 4.5% to kids, grandkids and parents,
  • 12% to siblings and
  • 15% to all others. 

There is no common law marriage in PA or domestic partnership laws. Therefore, property passing from one person to another in a type of relationship listed right above is subject to the 15% rate.

Inheritance taxes are due 9 months after the person dies. Paying within 3 months rewards the taxpayer with a 5% discount off the total tax bill.

Quite a few estates, on paper, are plush with assets. However, many estates have a high majority of assets that aren’t liquid – think about retirement accounts, real property, etc. That makes paying inheritance taxes difficult at times. I recommend that you plan in advance with a qualified estate planning attorney. Our firm can assist you in making sure your estate is setup properly to ensure your loved ones can pay the inheritance tax without dipping into their own assets.

Inheritance taxes must be paid. You cannot simply avoid paying the tax bill if you are an executor, personal representative, or someone receiving an inheritance. The state may very well eventually catch up with you if you fail to pay the taxes. If you are caught, you will be faced with severe penalties and interest.

No one likes to pay taxes, but paying Pennsylvania inheritance taxes are not optional. We recommend that an executor or personal representative of an estate hire a qualified estate planning/estate administration attorney to assist in all matters relating to the estate, including the filing of the PA inheritance tax. An executor does not need to hire an attorney, but it is highly recommended, even for estates that seem fairly basic.

If you have any questions about estate administration or inheritance tax issues, please contact our firm today at (215) 706-0200. We offer complementary initial consultations.


Thursday, August 5, 2010

What's up with the Federal Estate Tax?

2010 has been quite a year already... The U.S. Congress has failed miserably at giving us direction on what the tax landscape will look like come 2011. Folks, we're only five months away from 2011, believe it or not. And in 2011, the federal estate tax comes back with a roar. If Congress does nothing, many more people will potentially be effected by the tax. For married couples, you will be able to pass on about $2 Million to your heirs, estate tax free. If your estate is worth more than $2 Million, every dollar past the $2 Million mark will be taxed at a 55% rate. $2.5 million estate? Count on your heirs paying Uncle Sam $275,000.

Congress has not stepped up to the plate at this point, and there have been no meaningful committee votes or full member votes on any estate tax fix. A couple of senators and house members have spoken up, but that's not enough when you have 535 such members. Therefore, I am not optimstic right now that there will be a fix come 2011. If you think your estate is worth around $1 million or more if you're single, or $2 million or more if you're married, you need to start thinking about planning now. There are things we can do to minimize the estate tax if you were effected by it.

Here are a couple of great articles I've found this morning on the federal estate tax.

The best time to plan is now. Please do not hesitate to reach out to my firm to get started on planning. Call us at (215) 706-0200.


Monday, August 2, 2010

Estate planning in the uncertain economy

Proper estate planning during the challenging economic times we face is essential. Sure, proper estate planning does come at a cost. However, the cost of not planning is potentially much greater for your family.

Estate planning is for everyone, regarding of income and asset levels. The belief by some that estate planning is only for millionaires is simply not reality.

What are the benefits of estate planning during uncertain times?

  • Make sure that if you become disabled or incapacitated (over 50% of us do at some point in our lives), we have a plan ready so that no guardianship proceedings are needed
  • Understand exactly what your estate is worth -- many families find this extremely valuable
  • We can assist you in coordinating your last wishes with a retirement plan that will ensure you do not run out of money as long as you live
  • Although the times are uncertain, you will feel better knowing that you have a plan that is certain to work for your family when it needs to be executed.

We do not believe estate planning has to be expensive, but we do believe each plan must be effective. Contact us today at (215) 706-0200 to set up your complementary consultation today.


Friday, July 30, 2010

Ten Common Estate Planning Mistakes

As heard on our radio show on July 31, 2010.

  1. Discounting the importance of your plan. Many people think they only need a “simple will”, Period. Every family requires an attorney who will carefully analyze their situation.
     
  2. Not hiring a “specialist” – letting a general practice attorney handle your estate plan.
     
  3. Thinking that you can break the rules and get away with it – for example, not probating a will or not paying inheritance taxes.
     
  4. Not planning at all.
     
  5. Avoiding dealing with conflict within family that could effect the plan later on.
     
  6. Joint ownership to avoid probate.
     
  7. Using a revocable living trust to avoid taxes. Living trusts do NOT help you avoid taxes.
     
  8. Waiting until you are in poor health to complete your estate plan.
     
  9. Not reviewing your estate plan at least every few years.
     
  10. Assuming “things will work out” or your kids will “do the right thing.”


If you need estate planning assistance, please do not hesitate to give our firm a call at (215) 706-0200 or email us.


Tuesday, July 27, 2010

Should I Transfer My Home To My Kids Now?

Have you heard advice that you should sell your house to your kids now for $1? We advise you to schedule an appointment with us before you re-title property in your children's names.

Here are the reasons why you should reconsider this option and consider alternatives:

* Inheritance Taxes: Many people are under the impression that Pennsylvania Inheritance Taxes are more than they really are. Upon your death, property that is transferred to your lineal heirs (children) is taxed at a minimal 4.5% rate, that has remained steady for years and is not expected to change. 

* Step Up In Basis: By gifting your property to your children for $1, you could potentially be giving them more of a tax burden if they end up selling the property later. Be careful.

* Your Children Will Own The Property: Let me repeat that. Once you gift your home to your children, your children will own the property. Even if you are a joint owner with your children, they will still own a share. The question becomes.... What if your child gets in trouble... What if your child gets divorced... What if your child goes through bankruptcy... If you don't think it could happen to your family, you are playing the odds.

There are other reasons why you should re-consider jointly titling property.

If you are seeking to avoid probate, you may want to set up a revocable living trust, which is a way to avoid probate. Keep in mind that probate is relatively simple in Pennsylvania and not as costly for the most part. If you are not concerned about probate (and you probably shouldn't be), then using a will to convey your house is a good option.

If you have multiple homes (i.e., home in Pennsylvania, vacation home in New Jersey or Florida), you should strongly consider setting up a living trust. This will avoid ancillary probate (probate in other states), which could be a real hassle.

Remember: Your estate plan is important, and there is no "simple" estate plan. Make sure you consult with our firm before you deed your property to your kids. Let us help you explore your options. To schedule your complementary consultation, call our office at (215) 706-0200 or email us at info@jawatlaw.com 


Monday, July 26, 2010

Having a Will is Essential

If you don't have a Last Will & Testament (or a Living Trust), you are leaving your estate in the hands of the government to determine who will manage it, and who will receive it. Sometimes, this works out okay. But more often, this opens up unresolved family conflicts, battles and arguments.

Why is that the case? Here's an example. You die and leave a $500,000 estate (house, IRA, bank accounts, etc.) without a will (dying without a will is called "intestate"). You have three children. One child has been helping you with your medical care more than others and he thinks he is entitled to more of your estate. He helps himself to more than his fair share of your estate after you die. Your two other children are furious, and they challenge this--in court. If it sounds messy, it is messy.

Creating a will and mapping out your estate plan is the perfect antidote to dilemmas like the one above. By making your wishes clear, and putting one person in charge of your affairs, you have hampered most possible will challenges. Further, by discussing your plan openly with your family (letting them know who the executor will be, why you chose to divide your estate the way you did, etc) will greatly help quash any possible future conflict.

Please call our office today to schedule a complementary estate planning consultation at (215) 706-0200. Don't forget to listen to us on the radio every Saturday at 8:30 AM on AM 1340 WHAT (and listen online at www.am1340what.com).


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The Law Offices of Jeremy A. Wechsler assist clients with Estate Planning matters in Willow Grove, PA as well as Abington, Hatboro, Dresher, Horsham, Bryn Athyn, Huntingdon Valley, Fort Washington, Jenkintown, Glenside, Oreland, Warminister, Wyncote, Ambler, Elkins Park, Flourtown, Philadelphia, Warrington, Cheltenham, Gwynedd Valley, Jamison, Feasterville Trevose, Richboro, North Wales, Blue Bell, Lafayette Hill, King of Prussia, Collegeville, Oaks, Phoenixville, Oxford Valley, Langhorne, Penndel, Bristol, Fairless Hills, Bensalem, Plymouth Meeting, Furlong, Philadelphia County, Bucks County and Montgomery County.

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