Pennsylvania Family Estate Planning Guide

Categories : Estate Planning

October 22, 2019

In this guide, we provide information on the key aspects of estate planning for families in Pennsylvania, including the importance of estate planning. We’ll also provide guidance for developing a plan that meets your unique needs.

Whether you are just starting to think about estate planning for you and your family or in the process of developing a plan, our Pennsylvania estate planning guide is a valuable resource that can help you make informed decisions about your future.

How to Plan an Estate

Estate planning involves a variety of legal and financial strategies to manage your assets and ensure that they get distributed to loved ones or other beneficiaries according to your requests. The key components of estate planning typically include:

1. Wills and Trusts

Wills and trusts are two of the most common components of estate planning. Both of these legal documents are used to manage and distribute assets after a person’s death, but they operate in different ways and serve different purposes.

Wills: A will is a legal document that outlines how your assets will be distributed after your death and may also include instructions for appointing guardians for minor children and the administration of the estate. A will can be used to distribute both real and personal property, such as real estate, bank accounts, investments and personal belongings. A will must go through the probate process, which is the legal process of distributing your assets after death.
Trusts: A trust is a legal entity that holds assets for designated beneficiaries. A grantor creates the trust to transfer ownership of their assets to the trust, which is managed by a trustee. The trustee manages the assets in the trust and distributes them to the beneficiaries according to the terms. Trusts can be used for a variety of purposes, such as avoiding probate, reducing estate taxes, protecting assets from creditors, planning for disability and providing for the needs of beneficiaries who may be unable to manage their inheritance.

While both wills and trusts can be used to manage and distribute assets after your death, they have different advantages and disadvantages. A will is typically simpler and less expensive to create than a trust, but it must go through probate and is subject to public record. A trust can help avoid probate and provide greater flexibility and control over how assets are distributed, but it may be more expensive to create and maintain.

2. Durable POAs

A durable power of attorney (POA) is another important component of estate planning. A durable POA is a legal document that gives a designated agent the authority to make financial and legal decisions on behalf of the person who created the POA, known as the principal.

A durable POA is “durable” because it remains in effect even if you become incapacitated or unable to make decisions for yourself. This means that the agent appointed in the POA can continue to manage your finances and legal affairs even if you are unable to do so yourself.

Some key features of durable POAs as a component of estate planning include:

Flexibility: A durable POA can be customized to grant the agent broad or limited authority, depending on your needs and goals.
Avoidance of court-appointed guardianship: By appointing an agent to act on your behalf, you can help avoid the need for a court-appointed guardian if you become incapacitated.
Asset protection: A durable POA can help protect your assets by ensuring that someone is appointed to manage them in the event of incapacity.

A durable POA can provide peace of mind and help ensure that your financial and legal affairs are managed appropriately in the event of incapacity.

3. Medical or Health Care POA

A medical or health care power of attorney (POA) is another important component of estate planning. A medical POA is a legal document that designates an agent to make health care decisions on your behalf.

A medical POA is important because it allows you to choose someone you trust to make health care decisions for you in the event that you are unable to do so. This can include decisions about medical treatments, surgeries and end-of-life care.

Some key features of medical POAs as a component of estate planning include:

Communication: A medical POA can help ensure your health care wishes are communicated to medical professionals and followed, even if you are unable to communicate yourself.
Avoidance of disputes: By appointing an agent to make health care decisions, a medical POA can help avoid disputes among family members or caregivers about what medical treatments or care you would have wanted.
Privacy: A medical POA can help protect your privacy by ensuring that only the designated agent has access to your medical information and is authorized to make decisions on your behalf.

4. Living Wills and Advanced Directives for Medical Decisions

Living wills and advanced directives for medical decisions are also important components of estate planning, particularly when it comes to end-of-life care. These legal documents let you communicate your wishes regarding medical treatments and care in the event that you become unable to do so.

In Pennsylvania, health care forms include one that names a trusted person to take care of your health and related decisions if you can’t do so yourself. This is a durable health care POA.

Some key features of living wills and advanced directives for medical decisions as components of estate planning include having the power to make your own choices about care and treatment and peace of mind that your wishes will be respected.

Living Wills in PA

You should have a living will that establishes the different types of treatment you would or wouldn’t prefer to receive, depending on the situation. A living will outlines your preferences for medical treatments and end-of-life care. It typically includes instructions about whether you want life-sustaining treatments, such as artificial respiration or hydration, if you are terminally ill or in a persistent vegetative state. A living will ensures your wishes are respected, even if you can’t communicate them.

Advanced Directives in PA

When a durable health care POA form and living will are combined into a single document, it’s referred to as an advance directive.

An advanced directive for medical decisions is a legal document that appoints an agent to make medical decisions on your behalf if you become unable to do so. It can include instructions about medical treatments, care and end-of-life decisions. It can also be used to designate a person to make medical decisions on your behalf.

In Pennsylvania, an advance directive could include the medical POA, living will and other declarations regarding health care. This advance directive “package” can appoint someone to make those health-related decisions in the event that you can’t, outlining who your decision-maker should be.

5. Designations of Beneficiaries

Designations of beneficiaries are an important component of estate planning that involve naming individuals or organizations to receive your assets or benefits after your death. There are several different types of beneficiary designations that can be used in estate planning, including:

Retirement accounts: Retirement accounts, such as IRAs and 401(k)s, typically require the account holder to name a beneficiary to receive the account’s assets upon their death.
Life insurance policies: Life insurance policies also require the policyholder to name a beneficiary to receive the death benefit upon the insured individual’s passing.
Transfer-on-death (TOD) accounts: TOD accounts, such as bank accounts and investment accounts, allow the account holder to name a beneficiary who will receive the account’s assets upon their death.
Payable-on-death (POD) accounts: Similar to TOD accounts, POD accounts let the account holder name a beneficiary who will receive the account’s assets upon their death.

By naming beneficiaries, you can ensure your assets are distributed according to your wishes and help avoid disputes among family members or loved ones. Beneficiary designations are also useful because they can help assets pass outside of probate, which can save time and money.

It is important to review and update beneficiary designations regularly to ensure they still reflect your wishes and account for any changes in your life circumstances, such as the birth of a child or the death of a beneficiary. It is also important to coordinate beneficiary designations with other components of estate planning, such as wills and trusts, to ensure all assets are distributed according to your overall estate plan.

An experienced estate planning attorney can help ensure that beneficiary designations are customized to meet your unique needs and goals.

Pennsylvania-Specific Estate Planning Considerations

Below are some of the considerations to make when estate planning in PA.

PA Revocable Trusts

In Pennsylvania, revocable trusts are a common estate planning tool that can help individuals and families manage their assets and ensure that their wishes are carried out in the event of disability or after their death. A revocable trust, also known as a living trust, is a legal document that lets you transfer ownership of your assets to a trust while retaining control of those assets during your lifetime.

Some key features of revocable trusts in Pennsylvania include:

Flexibility: Revocable trusts can be amended or revoked at any time during your lifetime, providing flexibility to adapt to changes in circumstances.
Avoidance of probate: Assets held in a revocable trust do not go through the probate process, which can save time and money and provide greater privacy.
Control: You can retain control of the assets in the trust during your lifetime and specify how those assets will be managed and distributed after your death.
Asset protection: Revocable trusts can provide asset protection in certain circumstances, such as protecting assets from creditors or providing for the needs of beneficiaries who may be unable to manage their inheritance.
Tax planning: Revocable trusts can also be used for tax planning purposes, such as reducing estate taxes or protecting assets from the generation-skipping transfer tax.
Disability planning: A trust can often outline who will manage assets in the event the grantor becomes incapacitated. A revocable living trust lets you make decisions ahead of time, ensuring loved ones will be taken care of and any debts, liabilities or other financial obligations will continue being paid on your behalf.

While revocable trusts can offer many benefits, they may not be the best option for everyone. Consulting with an experienced estate planning attorney can help you determine whether a revocable trust is the right choice for you.

PA Wills

In Pennsylvania, wills are an important component of estate planning. Here are some key features of Pennsylvania wills for estate planning:

Testamentary capacity: To create a valid will in Pennsylvania, you must have testamentary capacity, which means you must be of sound mind and understand the nature and consequences of creating a will.
Will execution requirements: In Pennsylvania, a will must be in writing. When you sign it, there should be two witnesses who are not beneficiaries or heirs under the will.
Beneficiary designations: A will can be used to name beneficiaries to receive your assets upon their death, including real estate, personal property and financial accounts.
Executor appointment: A will can be used to name an executor who will be responsible for managing the estate and carrying out the preferences and directives outlined in the will. The executor may need to obtain court approval before distributing assets to beneficiaries.
Guardianship appointment: A will can also be used to appoint a guardian for minor children, who will be responsible for the children’s care and upbringing in the event of the parent’s death.
Probate process: In Pennsylvania, wills must be probated, which means the court will oversee the distribution of assets and ensure that the will is carried out according to your wishes. Probate can be a complex and time-consuming process, so it is important to work with an experienced estate planning attorney to ensure that the will is properly drafted and executed.

PA Inheritance Taxes

In Pennsylvania, there is an inheritance tax that is imposed on the transfer of assets from a deceased person’s estate to their beneficiaries. The tax rate varies depending on the relationship between the deceased person and the beneficiary.

Here are some key features of Pennsylvania inheritance taxes:

Exclusions: Certain assets are excluded from the inheritance tax, including life insurance proceeds, retirement accounts and assets held in a trust.
Filing requirements: The executor or administrator of your estate is responsible for filing a Pennsylvania inheritance tax return and paying any tax owed. The tax is due even if the estate is not required to go through probate.
Planning opportunities: There are several strategies that can be used to minimize Pennsylvania inheritance taxes, such as making gifts during one’s lifetime or setting up trusts to hold assets. An experienced estate planning attorney can help identify planning opportunities and create a plan that minimizes taxes while achieving your goals.

Pennsylvania inheritance taxes can be a burden on your estate, but with careful planning and the help of an experienced attorney, it is possible to minimize the tax impact and ensure that assets are distributed according to your wishes.

Pennsylvania Probate Process

In Pennsylvania, the probate process is a court-supervised process that is used to distribute a deceased person’s assets to their beneficiaries and heirs. The probate process can be complex and time-consuming, so you may want to work with an experienced attorney to ensure the process is completed efficiently and in compliance with Pennsylvania law.

Here are some key features of the Pennsylvania probate process:

Filing the will: If the deceased person left a will, the executor must file it in the county where the deceased person lived. If there isn’t a will, a family member or other interested party may file a petition to open an estate.
Appointment of executor: Once the will is filed, the Register of Wills will issue letters of testamentary, which give the executor the legal authority to manage the estate.
Inventory and appraisal: The executor must create an inventory of the deceased person’s assets and have them valued to determine their value as of the date of death.
Payment of debts and taxes: The executor must use the assets of the estate to pay the deceased’s outstanding financial obligations, such as debts owed or tax payments, if applicable.
Distribution of assets: Once the appropriate parties have paid all remaining financial obligations, the designated executor will distribute any remaining assets to the will’s named beneficiaries.
Probate court oversight: The probate court oversees the entire process to ensure that it is completed in compliance with Pennsylvania law. The court may require the executor to provide regular updates and may review and approve the executor’s actions.

Your PA Estate Planning Checklist Overview

Follow the overview below to perform estate planning in Pennsylvania:

Understand the implications of directives regarding financial and medical decisions.
Ensure you have a full picture of your assets and obligations.
Familiarize yourself with federal and state tax law.
Consider leveraging the assistance of an estate planning attorney.
Be prepared to make adjustments to your plan throughout life.

Get Estate Planning Guidance From MPL Law

At MPL Law, we focus on Pennsylvania estate planning, along with other areas of law. When you work with us for estate planning, you can benefit from our years of experience. We can tailor our services to your unique circumstances and provide personalized advice based on your assets, family situation and wishes. We can help you avoid costly estate planning mistakes and give you the peace of mind you need.

Contact MPL Law today to get professional estate planning guidance.

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Pennsylvania Family Estate Planning Guide