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Estate Planning

Friday, August 9, 2013

Managing your Digital Assets

In a digital age, where everything is online, there has been a debate about what should happen with a person’s “digital assets,” or all of their accounts, websites, Microsoft and music files, etc.  Our online lives are almost as complicated and diverse as our offline lives, and they keep growing.  So how do we plan for digital assets when it comes to estate planning?
 
First, we should talk about what a digital asset is.  Digital assets and accounts include a wide variety of things, including:
Email accounts
Pictures (like Flickr and Instagram)
Videos (YouTube, Vimeo)
Documents (accounts such as Google docs and Scribd and files from Word, Excel, etc.)
Websites, domain names and blogs
Social Network Accounts (Facebook, Twitter, Linkedin)
Music (iTunes, Amazon)
Books (Kindles and e-books)
Devices, like your laptop, smartphone, tablet, etc. and their associated accounts
Frequent flier accounts (or something similar)
Shopping accounts and online businesses (Ebay, Amazon, Etsy)
Bill payment accounts (Bank, Paypal)
 
So what should you do with these accounts when it comes to estate planning?  You should consider who can access and control these upon your death or incapacity and how they would get access when the time comes.  Unfortunately, this can get tricky as the Terms of Service Agreements differ from company to company, and many have language buried in the depths of their unread words that allows the service provider to do whatever they want with your account should you abandon it due to death, disability or otherwise.
 
Although there is no perfect solution for what you can do with you digital assets, there are a few starting points I want to suggest.  First, make a list of all your digital accounts and assets.  This should include the website’s domain name, your username and password, security questions and answers, and other identifying information that will allow your successors to discover information.  Update this list frequently and make sure your designated successors have access to it when they need it.  This list can be anything from a basic spreadsheet to an online password storage service (there are a number out there, such as 1password, KeePass, and my-iWallet).  But, be sure that if you make this list you protect the privacy and security of it to avoid providing a roadmap for identity theft!  Whichever way you make this list, don’t include password information about it in your will because that becomes a public document.  Instead, write down where the list is, how to access it, and the password and store that information in a safe deposit box or with your attorney.
 
You can also ask to include a provision in you will and powers of attorney that cover the management and succession for accounts.  Will this work?  Maybe, but maybe not depending on the terms of service, which, like I said, varies from service provider to service provider.  Still, it can’t hurt to try and will let your estate planning attorney and executor know what you want done with your digital assets, even if later they are prevented from being carried out.

Friday, August 2, 2013

Preparing for the Start of School... and Emergencies

School will be starting up again soon, and while our kids may not be excited for it, it is coming.  When school starts again, every family should have a clear plan in case an emergency occurs during school hours.  With just a few simple steps, you can make sure that your child is taken care of if tragedy strikes.
 
First, you should name temporary guardians, people you give permission to care for your children should you and/or your spouse be unable to do so.  This individual should be someone who lives nearby and can comfort and aid your children in an emergency.  You can name a temporary guardian by completing a temporary guardianship agreement or authorization.
 
Make sure the temporary guardians are named on school emergency cards.  Some schools have these, authorizing certain people to pick up your child from school.  This way a guardian can take over immediately in the event of a true emergency.  Otherwise, your children may wind up in the custody of social services until a legal guardian or parent can be located.
 
Finally, make sure that your babysitter knows the plan if you don’t return home.  We don’t like thinking about it, but make sure you leave the information of who to call or what to do in case you are unexpectedly absent.  Without this information, babysitters will typically panic and call the police.
 
In time of tragedy, you don’t want your little ones to end up in social services, asking questions without answers.  Instead, leave them in the arms of a trusted friend by taking these simple steps.

Monday, July 29, 2013

Every New Parent Needs a Will

Every single parent needs a will.  It is the single most important thing you can do to make sure your child is cared for by the people you want to care for them, should anything happen to you.  In your will, you not only designate who gets your inheritance, but you also name a person to care for your children if you die before they become legal adults.  And you can choose a person to be guardian of the property or trustee to manage your money for your children until they reach adulthood.  One person can act in these roles, or you can choose separate people.
 
Without a will, there’s no guarantee that when you die your money will go where you want or that your children will be cared for by the person you believe will do the best job.  This may not seem like a problem as the Pennsylvania laws want to assure that a surviving spouse and children are taken care of, but it still doesn’t distribute the money exactly how you might want.  If you die, leaving your spouse and children, your spouse will get the first $30,000 plus half of the remaining estate.  Your children split the remainder of the estate, leaving your spouse to jump through legal hoops if he/she wanted access to that money to raise your children.  Additionally, if you and your spouse both pass without a will, the state decides who will look after your children.  This person may be the same person you would have named, but it also could be someone you aren’t comfortable leaving your children with.  You should create a will if only to name a guardian.
 
Creating a will also gives you options on how to leave property to children, especially children who are still minors.  Some of the most common ways include property guardianship, a custodial account (known as Uniform Transfer to Minors Act, or UTMA), or a trust fund.  Talking with an estate planning attorney, who knows all the available options and how your state treats each of them, will provide you with the best way to leave your property to your children.

Friday, July 26, 2013

Perilous Joint Ownership

There are many reasons to add another person’s name to the titles of your property, but typically, except between spouses, joint ownership is usually a bad idea.
 
Once you name someone as a joint owner, both owners have full rights to make withdrawals from the account.  In most cases, naming your child as a joint owner seems as if it would make your life simpler, however if you find that money is mysteriously being withdrawn from the account, technically your child has that right, even if it wasn’t your intention by naming him or her as joint owner.
 
Additionally, if a person is added to the title of property, it can only be undone with his or her consent.  So, if after adding your child’s name to the title of your house, you can’t take it off unless your child agrees to remove his or her name.
 
Moreso, any property jointly titled is subject to claim’s by each joint owner’s creditors.  If the person you name as joint owner is in debt, your property could be up for grabs simply because their name is on the title.
 
And finally, having property that is jointly owned will make it so that it does not pass through the estate at the time of death.  A key example of this occurred recently, when a client died and left all of her property to her three kids.  Most of her estate lied in a bank account that was titled jointly with her one daughter.  She initially put her daughter on the joint account out of convenience, especially because this daughter lived nearby.  However, at the client’s death, instead of the account being included in her estate and divided among her children equally, the daughter was given the entire account as she was now the owner.  Her siblings, on the other hand, got very little inheritance from the estate.
 
Luckily, there are other options to naming a joint owner on your accounts.  Talk to your local attorney, or give us a call at (717) 560-4966, to find out your options.

Monday, July 15, 2013

The Dangers of DIY Wills

Do-it-yourself wills are becoming increasingly popular as a cheap way to create an estate plan.  The number of online and DIY legal providers is continuing to grow, and their seductive ads draw people in.  Additionally, people think their estates aren’t complicated so filling out a simple form will take care of everything.
 
Unfortunately, these DIY wills don’t take into account the complexities of life.  Issues like step families and divorces, as well as planning for contingencies (that is, what would happen if one of your beneficiaries dies before you) need to be carefully considered.  DIY wills never go that far, often leading to nightmare scenarios for the executors and attorneys handling the estate years later.
 
Most professionals know that DIY estate plans are dangerous, and that a single mistake can cause complications that only come to light after the person has died.  The person is no longer there to explain his or her wishes, so all the heirs have to go by is the will.  A will written incorrectly, even so much as using a word in the wrong place, can leave heirs disappointed and confused, and they could end up paying much more to lawyers as they try to sort things out, more than having a will written initially would have costed.
 
If you do decide to use a DIY will, you should have it reviewed by a local attorney.  Since the laws are different in every state, you don’t know what may work on your DIY will in one state but cause huge problems where you live.  Almost every time a lawyer does a review of a DIY will, he or she finds an error somewhere on the form.
 
And if you are worried about the costs of estate planning, let your attorney know in the first place.  We are always willing to work with a client to keep the costs as low as possible.

Friday, July 12, 2013

Making Gifts to Minors

On January 1, 2013, the annual exclusion from the gift tax rose to $14,000.  This means that a person may give up to $14,000 to as many recipients as he or she wishes, meaning if you have 2 children and 8 grandchildren, you can make ten tax-free gifts of $14,000.  If you’re married, both you and your spouse can make a gift of $14,000.  The reason for most people making these gifts is to reduce the size of their estate.
 
But what if you want to give this gift money to a child.  A single gift of $14,000 is a lot to give a child, not to mention $28,000.  It’s too much to be used as spending money, and you don’t want this money to be left in the hands of your 16 year old grandson.  And this money would belong to your grandson; his parents have no control over it.  The law treats the minor as a separate person, and control of his or her property is governed by laws to protect the minor.  One way to handle this money is to create a Trust and appoint a Trustee, but there is another way.
 
Pennsylvania’s Uniform Transfers to Minors Act (UTMA) allows individuals to give property to a minor while restricting the minor’s access to that property until a certain age (usually 21, but there are exceptions which require distribution at 18 or 25).  With an UTMA account, the donor appoints a custodian to manage and invest the property until the minor reaches majority age.  The minor’s access to the account is restricted, but the custodian may use the property for the minor’s benefit, similar to the duties and authority of a trustee.  Unlike a trustee, the custodian does not need to provide regular accountings to the court of all activity, but he or she still must maintain accurate records of account activity.
 
Any adult can be a custodian, but the donor should not name himself or herself as custodian.  Additionally, any earned income on the custodial property is reportable on the minor’s income tax return.  While the tax is owed by the child, the rate of tax is determined by the parents’ tax bracket if the child received more than $1,900 or unearned income (this is known as the “kiddie tax”).
 
So how do you open an UTMA account?  All you have to do is transfer any type of property to an individual “as custodian for (the minor) under the Pennsylvania Uniform Transfers to Minors Act.”  Once the account is created using this language, the property belongs to the minor and cannot be revoked.  And remember to use the child’s social security number on the account.

Wednesday, July 10, 2013

Preparing to Meet your Estate Planning Attorney

We understand that taking the steps to go see an estate planning attorney can be a difficult one.  I mean, who wants to think about the possibility of dying?  No one.  However, taking this first step can protect your family and make it easier on them.  Once you have made this step, we want to make things as easy as possible.  Before you come, you should gather the following information, and you will be completely prepared for your appointment.
  • Family Information.  You will want the names, birth dates, and current addresses for all immediate family members or anyone that may be included in your will or power of attorney.  If any of your children have special needs, you should also bring information relating to their lifetime financial needs.
  • Property Information.  Do you own a piece of land?  A second house?  Any information you can provide about real estate property, including their values and address, should be brought with you.  Also, if you have an personal objects, such as vehicles, jewelery, coins, antiques, etc., you should make a list of them.  Include a description, a physical location and any other important information in your list.
  • Business Information.  Like properties, if you own a business bring in information about this and think about who it should be passed to.
  • Financial Information.  Compile a list of all financial accounts (checking, savings, investments, stocks and bonds, like insurance policies, pensions, IRAs, etc.).  Make sure you have account names, numbers, current balances, and designated beneficiaries.  Oftentimes your lawyer will need proof of this information, so consider bringing your most recent financial statements to your appointment.
  • Old Documents.  If you already have a will, power of attorney, or trust, bring these old documents in with you.
While gathering this information, you might want to start thinking about thsee questions.  You don’t need to have answers ready for your appointment, but some of these questions can be complex and you may want to think through the issues before your appointment.
  • Who will be beneficiaries to your property?
  • Do you want bequeath to a specific item(s) to a specific individual(s)?
  • Is there anyone you do not want to be a beneficiary to your property?
  • Do you plan on making bequests to any nonprofit organizations?
  • Who do you want to act as executor of your will?  What about as trustee of a trust, if you establish any?  Or as guardians for any minors?
During your initial consultation, your estate planning attorney will review all of these things, as well as discuss your wishes, answer your questions, and suggest strategies to protect you and your family.
 

Friday, July 5, 2013

Single? You still need an Estate Plan!

Many people think that if they are single, they don't need a will or other estate planning documents.  However, this idea is wrong!  Estate planning is just as important for single people as it is for couples and families.

Estate planning ensures that your property will go to the people you want to inherit it, in the way you want and when you want.  Without a will to let the state and your loved ones know your preferences, the state will decide who gets your property.  Most states leave your estate to your children or other living relatives if you have no children, but there is no guarantee.  If you have no living relatives, all of your property is given to the state, and not to the friends or charities you feel should get something.  Without a will, you have no way of directing where your property goes.

  Additionally, without a power of attorney, the state can decide who will make your healthcare and financial decisions if you become incapacitated.  The person you name as power of attorney, your agent, will be able to step in and act in your place in financial decisions and healthcare decisions should you become incapacitated.  By creating a power of attorney, you can name separate people as agents and decide their powers.  Unlike married individuals, unmarried partners and friends usually cannot make healthcare decisions without signed authorization.  Should you become incapacitated without one, no one can represent you unless the court appoints someone.  This process is timely and costly, and it does not give you the option of choosing.

Whether you are married or single, estate planning documents are key to ensuring your wishes are met when you cannot make them known.  To find out what estate planning documents you need, contact us today at (717) 560-4966 or questions@piersonelderlaw.com


Thursday, June 27, 2013

DOMA and Pennsylvania's Estate Planning

Yesterday, the Supreme Court overturned Section 3 of the Defense of Marriage Act provision barring same-sex married couples from federal benefits.  Now the issue is kicked to the state politicians, and the high court’s ruling doesn’t touch the issue of having state’s recognize same-sex marriages performed outside their borders.

Pennsylvania’s definition of marriage goes back to 1996, and it defines marriage as between a man and a woman.  This is to say that Pennsylvania doesn’t recognize same-sex marriages, even if they take place outside state borders.  So what does this mean in terms of estate planning for same-sex couples?

Well, estate planning is done on a state-by-state basis because the laws vary by state.  For example, the probate process in Pennsylvania is quick and painless, however in Florida you want to avoid probate at all costs.  The tax-inheritance laws are different, too.  In Pennsylvania, the rate for inheritance tax between married couples is 0%, so a $1,000,000.00 estate transferred between a husband and wife would have a $0 tax.  The rate of inheritance tax between unrelated persons is 15%, leaving a same-sex couple, married in a different state,f to pay a tax of $150,000.

Additionally, some federal agencies base their recognition on the rules where marriages are officiated, but others rely on the rules of the state where the couple lives. Since Pennsylvania doesn’t recognize same-sex marriages, neither will the Social Security Administration or the IRS, and benefits won’t be extended to Pennsylvania residents.

Right now this is where Pennsylvania stands, although with the changing public opinion you should be sure to keep an eye out on the state politicians.  We could have a flurry of same-sex marriage legislation coming our way.


Monday, January 21, 2013

What's Fair in a Second Marriage?

Deciding who to leave your legacy to can be tricky business, but when you are dealing with a second marriage it can be even trickier.  Take this example: a husband and his wife have two children, but the husband also has two children from a previous marriage.  What's a fair estate plan and how can he make sure everyone is treated fairly?


Thursday, January 17, 2013

The Death/Disability Book

Guess what, we all have a 100% chance of dying.  It's not the most pleasant topic, but it's bound to happen at some point.  Now, what about become disabled, what's the probability of that?  At the age of 25, a person has an 18 percent chance of being disabled.  Those over 85 have a 50% chance of having some type of dementia.  What happens if you become disabled?  Will your loved ones be left in the dark, without critical information that they don't know but should have?

That's where the idea of a Death/Disability Book comes into play.  We originally read about it in an article in the Pittsburgh Post Gazette and thought that it was worthy of sharing.  So grab yourself a colorful 2 inch and start looking for the following information to include!

Emergency Information

  • Emergency Contacts - whoever you want to be contacted in case of an emergency.  Their names, addresses, phone numbers and email addresses.  You can also list your professional advisors hear (financial planner, accountant, lawyer, etc).
  • Health Information - your healthcare providers, copies of health insurance information and cards, all your medications, your medical history

Estate Information

  • Will - the original will is the most important document to keep on hand because it dictates how your assets will be distributed.  If your family can't find the original document, your assets may not go where you want them.
  • Healthcare and Financial Power of Attorney - these documents give someone else (your agents) permission to make healthcare and money decisions for you should you become incapacitated.
  • Trust Documents - if you set up a trust, these must be included.
  • Funeral Arrangements - have you made them?  It makes it a lot easier on your family members if it's done in advance, just make sure they know where to find the relevant information to carry out your wishes.
  • A letter of instruction - while not vital, if you have any other requests or other information that family members should know, you can write a letter telling them

Financial Information

  • Taxes - do you keep a copy of last years' tax returns?  Show where these are located to make it easier to reconstruct your financial affairs.
  • Insurance Policies - a summary list of all your policies, including auto, disability, homeowners, umbrella coverage, life, and long-term care.  Include the name of the carrier and contact information for the agents.
  • Bank Information - again, have a summary of all of your accounts, with the institutions, types of accounts, account numbers, owners, safe deposit box numbers and keys included
  • Credit Cards - note the account numbers and providers.  You can also include any membership cards to a specific store.
  • Stock and Bonds - these are important assets even if they seem small!

Miscellaneous Items

  • Other documents - you should consider including copies of your marriage license, birth certificate, passport, and social security card
  • Passwords - a list of passwords and their corresponding accounts is crucial, especially in today's age with accounts for everything and a variety of requirements for the passwords
  • Personal Effects - do you have any collectible items?  Put a list of them in this binder.  If you want, you can even include pictures of them, either in the binder or in another place that someone knows about.
  • Anything else - this is your binder, include in it anything else you might think is necessary!!

Once you've created this binder, make sure a trusted individual knows where it is.  And while it does seem to be a daunting task,  imagine what the job would be like if someone else had to find all this information.  As with any major project, take it in bits and pieces over a defined period of time to lighten the load.  Anything you do, even if it isn't as exhaustive as this, will be helpful.  And your family will be eternally grateful for all the help you've given them.



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