Do you have a question about Will & Estate Planning?
Our Firm Delivers Personalized Attention & Dedication
FAQs – Wills & Estates
Estate Administration Questions
What is probate?
How do you know who is entitled to receive the property when someone dies?
Does all of my property pass under the Will or in accordance with the intestate laws?
I have heard that it is impossible to leave property to someone other than your spouse. Is that true?
Why do I hear so much about the importance of avoiding probate with a Living Trust?
Life Planning Documents
What is a Will?
A Will is a document that governs the distribution of certain assets upon your death. It is critical to keep in mind that the Will does not govern all of your assets. It only governs so-called probate assets. For a more detailed discussion of what this means, please see the Estate Administration Section of this website. This easily is the most misunderstood concept when it comes to Wills.
What is a Power of Attorney?
A Power of Attorney is a document used to appoint someone (called an agent) to handle your finances for you. There are many different kinds of Powers of Attorney so you need to make sure that you have the one that is right for you. For example, there are General Powers of Attorney where you appoint someone to transact any kind of business. There are Limited Powers of Attorney where your agent only has the powers granted to him or her under the document, such as the power to conduct a specific real estate transaction. There are Springing Powers of Attorney where the agent’s powers are not effective unless certain conditions are met such as your disability. However, these are just a few examples of many different types. All of these documents make it possible for you to have a trusted adviser make decisions in your absence.
What is a Living Will and a Medical Care Power of Attorney?
A Living Will, or Advance Directive as it is sometimes called, gives you the right to decide what kinds of medical treatment you will receive. It is used in case you are not able to communicate the decision for yourself because of your medical condition. With a Living Will, you can appoint someone to make medical decisions for you under certain circumstances. That is called a Medical Care Power of Attorney. The idea is to set out your wishes regarding the kinds of medical treatment you will receive and to appoint someone to make medical decisions for you if you are not able.
Why do people use Trusts?
That is a difficult question to answer because there are so many different kinds of trusts so let’s separate it into the two main uses.
People use a Living Trust primarily to avoid probate. This is discussed in more detail above. People also establish Trusts in a Will. This is called a Testamentary Trust. This can be used to save some taxes, it can be used to make sure that money is not given to a young child or disabled person who is unable to manage the funds, or it can simply be used to allow someone who is deceased to exercise control over how his or her money is spent. By proceeding with this kind of trust, you can control how the money will be spent.
Why do people put life insurance in a Trust?
For many people, life insurance is an important asset because it represents a large portion of what will be left to family members. There are a few reasons people use Trusts to hold life insurance.
The primary reason is to save Federal Estate Tax. If life insurance is owned by an individual, the life insurance proceeds can be subject to Federal Estate Tax. If, on the other hand, the life insurance is owned by a properly drafted Irrevocable Trust and a very complicated set of rules is followed with respect to the Trust, the life insurance proceeds are not included in a person’s taxable estate when the person dies. Simply put, the life insurance will pass dollar for dollar to family members instead of being reduced by Federal Estate Tax.
Another reason to put life insurance into a Trust is to exercise some control over how the life insurance policy proceeds will be paid. If an individual beneficiary of the life insurance policy is named, the money will go to the beneficiary. This control is especially important where the beneficiary is a minor or disabled person.
Finally, by holding this significant asset in a Trust, it is possible to keep the proceeds away from creditors of the deceased. This is because creditors generally cannot get paid from money passing to the Trust.
What is a guardianship?
A guardianship is a court-supervised arrangement where someone is appointed by the court to manage the funds or the daily living arrangements of a minor, or a person who is incapacitated. Guardianships often result from a failure to plan ahead since most can be avoided. They can be avoided if there are alternatives such as a Will, Power of Attorney, or Living Will in place. In those cases where there is no advance planning, the courts must step in to appoint a guardian.
Nursing Home Planning
Is it true that Medicare does not pay for nursing home care?
Generally, yes. Medicare will cover nursing home care for a limited number of days and only under certain circumstances. Medicare generally does not cover long-term custodial care to assist with daily living tasks and needs if no skilled services are necessary. This is different from Medicaid, which may cover nursing home custodial care if income and asset requirements are met. As Medicaid essentially is a welfare program, the eligibility rules for Medicaid assistance are extremely complicated and are constantly changing.
What is Medicaid planning?
Medicaid Planning is the name commonly given to the process of planning to make someone eligible for Medicaid assistance for nursing home care. Medicaid is like a welfare program and there are complicated income and asset requirements to be met. There are steps you can take to qualify for Medicaid assistance but care must be taken because of the changing rules.
Can someone engage in Medicaid planning after being admitted into a nursing home?
Yes, it is possible to start planning even after someone enters a nursing home. It is a common myth that, once someone enters a nursing home, the facility is guaranteed a certain amount of money and nothing can be done. It is never too late to begin Medicaid planning. There are legitimate avenues available to preserve part or most of the assets of a nursing home resident, even if a loved one is already in a nursing home, or nursing home care is imminent.
Can a person who is in a nursing home or about to enter a nursing home transfer all of his or her assets to family members and then qualify for Medicaid assistance?
Generally, no. This is where Medicaid planning comes in. There are complex rules that examine any transfers made by someone seeking Medicaid assistance. All transfers made during the five year period prior to the Medicaid application are scrutinized. With proper planning, it is possible to make transfers and still qualify for Medicaid assistance; but, it generally is not possible to receive Medicaid assistance immediately after the transfers are made.
Death and Taxes
How does the Federal Estate tax work?
You may have read about the evils of the Federal Estate tax as it been the subject to a great deal of criticism. The truth of the matter is that the Federal Estate tax affects very few people because the tax is not a concern until a person has an amount equal to the “Federal applicable exemption amount.” In English, this is the amount a person is allowed to give away, free from Federal Estate tax. That amount currently is $11,000,000 but it constantly changes. If an estate is subject to this tax, the rates are steep. The current rate is 35% of the value of the estate.
What assets are subject to the Federal Estate Tax?
The Federal Estate Tax applies to all assets owned by someone who dies as well as certain assets over which the person had “incidents of ownership.” For example, even if you have transferred all of your assets into a Trust, the Trust assets are part of your estate if you are the Trustee or if you can revoke the Trust. Deductions are available for funeral expenses, unpaid debts of the person who has died, and the expenses of administering the estate.
How does the Pennsylvania Inheritance tax work?
The Pennsylvania Inheritance tax applies to all assets owned by someone who dies. It is important to note that the Pennsylvania Inheritance tax does not apply to life insurance proceeds. Also, there is no tax for amounts passing to a surviving spouse or a charity. For amounts passing to children and grandchildren, the tax rate is 4.5%. For amounts passing to siblings, the tax rate is 12% and for all other beneficiaries, the tax rate is 15%.
And now a word required by my legal malpractice insurance company:
Disclaimer: This website is intended for general information. I am not rendering legal advice for specific cases so please do not sue me for any information you received in this website. If you want legal advice for your situation, please meet with an attorney, preferably me of course.