Philadelphia PA Estate Planning Blog

What if we told you that there is a financial product available that does the following:

• Transfers wealth tax-free to your spouse and/or your heirs (that includes Pennsylvania inheritance tax, federal estate tax, federal income tax and state income tax).
• Ensures that any income loss as a result of your death does not affect your spouse or family negatively.
• Provide safety of investment from market risk or market loss.
• Provide you with long term care coverage if you need it.

Certain life insurance policies can achieve all of those goals! Yes, not everyone can get covered or is eligible, but you'd be surprised how insurance companies are rapidly changing and covering more individuals under these types of policies.

One of the greatest benefits of these policies is providing you with long term care coverage if you ever require it. Your death benefit would be used towards your long term care costs. That means no traditional long term care policy is needed, and your estate won't be diminished if you need care, leaving nothing for your family.

Interested in learning more about this type of life insurance? Call us today at (215) 706-0200 to schedule your complimentary consultation. 

Huguette Clark passed away in 2011 at the age of 104, leaving in her will $300 million of her estate to charities, her nurse, her hospital, attorney and accountant. The last known picture of her was from 1930, and she lived a reclusive life as an heir to a family fortune.

Now, Ms. Clark's estate is embroiled in litigation with no end in sight. She had no close family members, only distant relatives. She wrote two wills, only a couple of months apart. The first one left part of her estate to the distant relatives, and the second will cut out the relatives.

Although Ms. Clark left a large estate of $300 million, we can all learn from the mistakes she made. For more information about the estate planning mistakes she made, check out this New York Times article here.

Top 5 Reasons To Consider a Trust For Your IRA

Why worry about putting your IRA into a trust? More and more families are putting in place a Retirement Asset Protection Trust today, and we give you a few reasons why here.

5 – IRA’s are Valuable: Your IRA’s may be a significant portion of your estate. If you protect other portions of your estate, why would not consider protecting your IRA?

4 – IRA’s are Tricky: You can’t put an IRA into an ordinary living trust. IRA’s work differently, and for your heirs to take advantage of the special tax benefits, you must use a special trust, the Retirement Asset Protection Trust.

3 – Stretch-Out: IRA’s can grow tax-deferred or tax-free. That means you get more compounding and less principal withdrawal. This works the same when your heirs inherit the IRA. The younger the beneficiary, the less required minimum distribution they have to withdraw annually. The benefits of stretch-out over many years is astounding and can provide a pension for life for your beneficiaries.

2 – Control From The Grave: You can ensure that the IRA is spent the way you want it to be spent, and given to whom you want it to be given to. For instance, if you pass your IRA down to your children, and they eventually pass, would you rather the IRA go to your favorite son-in-law or daughter-in-law, or directly to your grandchildren? Without a trust, you have no say in what happens to the IRA.

1 – Asset Protection: Without a trust, your beneficiary and his or her inherited IRA is not protected from divorce proceedings, creditor problems, lawsuits, bankruptcy and a beneficiary’s own spendthrift habits. A trust can provide a shield of asset protection to such an important asset.

The top five reasons to use a trust for your IRA is just scratching the surface. If you’d like our special report on the Retirement Asset Protection Trust, email us at info@jawatlaw.com today.

Our pets are like family, right? Some of us are guilty of spending more money on our pets than we'd like to admit! But according to the ASPCA, only 17% of dog and cat owners have completed an estate plan that takes into account their pet.

Our firm can help create a "Protect Your Pet" plan, a pet trust, or make pet planning part of your Last Will & Testament or Living Trust. We can ensure your pets are taken care of, given the proper treatment, food, etc. Also, it is important to designate responsible guardians for your pet.

Many people think they will outlive their pet, but with pets being such an important part of our lives, why take the risk? Make sure your estate plan includes your pet. At our firm, we can help you achieve this goal.

Whether you have no estate plan, or have an old estate plan, this article is for you.

Ever wonder what your legacy will be when you pass on? Having a well-drafted estate plan can ensure you leave a positive legacy.

Here are a few reasons why you need to put an estate plan in place:

1. Without a will or trust, the government will dictate what happens to your assets, real estate and personal belongings.

2. If you become incapacitated, you need to ensure that you appoint a person you trust to manage your affairs and make health care decisions for you.

3. Protecting your kids, grandkids or others from their own bad habits (spendthrifts, etc.) and external problems (creditors, divorcing spouses, bankruptcy, lawsuits) is more important than ever today. Do you really want your heirs to squander the inheritance you leave them?

4. You must have an Executor or Trustee appointed to manage your estate when you pass on. If you do not name an Executor, the state will appoint one for you.

5. By putting a plan in place, you may be able to reduce taxes and fees for your estate.

6. You can reduce or avoid conflicts in your family by having a well-crafted estate plan.

7. You can create trusts for your kids or grandkids to ensure the inheritance is spent as you wish, such as for college, a new house, etc.

8. An estate plan helps organize your affairs, accounts, and belongings, making it easier for your family to determine how to distribute your estate.

If your plan is not up to date, or you do not have a plan, please give us a call at (215) 706-0200 to schedule your consultation with Your Estate Planning Attorney Jeremy A. Wechsler.

Last night's CBS 60 Minutes program featured a piece on Michael Jackson's estate. If you missed the tv program, check out the story by clicking the link below. Michael Jackson set up a trust for his mother to care for her during her lifetime, but the bulk of the estate will go to his three surviving children. Michael Jackson, now deceased, has made more money in the last few years than any living celebrity. Wow!

https://www.cbsnews.com/8301-18560_162-57585140/michael-jacksons-lucrative-legacy/

Spring Cleaning is a great time to clean up your estate plan! Here are a few tips to consider in reviewing your plan:

• Five Year Rule: Has it been more than 5 years since you've reviewed your will, powers of attorney and trust? If so, it is time to crack that binder open and review whether any changes need to be made.
  
  
• Beneficiary Forms: Along with your wills and trusts, it is essential to review all of your beneficiary designation forms for any policies and accounts. Typically, these include IRA's, annuities, life insurance and other financial accounts.
  
  
• Life Insurance: Life insurance can be a great tool for estate planning. It potentially provides asset protection, tax free wealth transfer, a death benefit, and perhaps cash value. Also, certain life insurance policies can include long-term care coverage! Consider life insurance solutions with our firm. Contact us today to learn more.

Pennsylvania Inheritance Tax Basics
 
When you die in the Commonwealth of Pennsylvania, any property or assets that you leave to other people is subject to the Pennsylvania Inheritance Tax. This is in addition to possible federal estate taxes. Currently, in 2013, the federal estate tax exemption is over $5 million per person, so most people are not affected by the federal estate tax.

Typically, but not always, the Executor or Administrator of the estate pays the inheritance tax on behalf of all beneficiaries of the estate before any of the property is distributed to beneficiaries.

ARE YOU AN EXECUTOR AND NEED ASSISTANCE WITH INHERITANCE TAXES? CONTACT US TODAY.

Pennsylvania mandates that inheritance tax be paid nine months after the decedent dies.

The estate can receive a discount if the Executor pays within 3 months.

Extensions can be granted, but interest starts to run after 9 months.

The PA Inheritance Tax rates for 2013 and beyond (at least as of now) are:

• 0%:    Legally married spouses (No common law marriage), Charities
• 4.5%: Children, Grandchildren (Direct Descendants)
• 12%:  Siblings
• 15%:  All others (Includes domestic partners, friends, etc.)

MAKE SURE YOU FILE YOUR INHERITANCE TAXES CORRECTLY THE FIRST TIME. CONTACT OUR FIRM TODAY FOR ASSISTANCE.

Most property is subject to inheritance tax.

Jointly owned property is taxed at the share the person owned (i.e., if a person owned 50% of a property, that 50% share would be taxable).

One way to avoid inheritance tax in PA is to establish an irrevocable trust, or simply gift assets (unconditional giving, no strings attached) to someone. You must outlive them at least one year in order for the gift or trust to be complete so that no inheritance tax is due on that property. Be careful what you gift to someone and do not make gifts without the advice of an attorney and financial professional. If you gift someone a house, and you still want to live in it while he or she owns it, you could be making a risky move, especially if that person gets in trouble.

Also, life insurance is typically inheritance tax free. Life insurance is a great wealth transfer tool, and our firm regularly helps individuals and families with their life insurance needs.

We would advise you not to do any inheritance tax planning without the assistance of a qualified estate planning attorney.  Please call our office today at 215-706-0200 or email us to schedule a complimentary appointment.

Why are individuals using trusts for guns today? Are they legal, and do they help individuals get around gun laws and exploit loopholes? The New York Times has an interesting article out this today about the use of gun trusts. Check it out here: https://www.nytimes.com/2013/02/26/us/in-gun-trusts-a-legal-loophole-for-restricted-firearms.html?pagewanted=all&_r=1&

Reasons for Conflicts with Your Estate - Make sure you see an attorney to help ensure there will not be any possible will challenges or conflicts with your estate! Here are ten reasons why conflicts often occur:

1.     Your will is unclear, ambiguous and not written properly.

2.     You don’t have a will at all or it has not been updated recently.

3.     Your Power of Attorney was poorly written, you have a bad agent and/or the powers are abused by the agent.

4.     You do not communicate with your family despite knowing there is a potential or current conflict in the family.

5.     You fail to explain the reasoning for choosing one child as Executor, or explain other major decisions you have made.

6.     You make unequal distributions to children without any explanation to them.

7.     Your new will and previous will(s) contradict each other.

8.     Your will is written while you are incompetent.

9.     If you want to disinherit a child, the disinheritance clause isn’t clear or doesn’t exist in your will.

10. There are conflicts in a trust between current beneficiaries (how much they can spend) and what’s left for the contingent beneficiaries (the ones who get what’s left). Clear rules need to be written into the trust to make sure that does not happen.

Thinking about making a gift in 2013? The rules have changed a bit since 2012 and years past. Each person has an annual gifting exemption and a lifetime gifting exemption. 

Annual Gifting Exemption: $14,000/Per Year

• Each year, you can give $14,000 to an individual, tax-free to you and the individual. 
• You can give to multiple people per year, so for instance, with 3 kids, you can give $42,000 total to the three.
• If you're married, you can double your gifts. Therefore, you and a spouse can give $28,000 to each child.
• For example, with three children, you could gift $84,000 total per year under the annual gifting exemption.

Lifetime Gifting Exemption: $5 Million/Lifetime

• You can give OVER $14,000 per person.
• Hwever, any gift over that amount would trigger an IRS filing (Form 709) and the amount above $14,000 would count towards your $5 million lifetime exemption.
• Just to be clear, the gifts of $14,000 or under do not count towards that lifetime exemption, so you have a LOT of opportunity for tax-free gift-making.

Income Tax Liability on Gifts: 

• There is no income tax liability to the kids for the gifts.
• Obviously, what the person receiving gifts does with those gifts could generate taxes if they invest it, etc.

Contact us today at (215) 706-0200 for more gifting help.