WILLS, PLANNING, ELDER LAW
Why do I need a will?
A will is a document in which you state your intentions of how you want your property distributed after you are dead. When you die, your property must pass to someone. Without a will, state law will determine how it is distributed. These laws are called the laws of intestacy. With a will, you are making the decision about how your property should be distributed. In addition, if you have minor children, you can make provisions for their care and support if you should die. Even if you have a trust, a will is necessary to cover all the property not a part of the trust.
What is a power of attorney?
A power of attorney gives legal rights and powers to someone who will act on your behalf in financial, business, or other matters when you cannot act for yourself. There is also a document called a Health Care Power of Attorney with Living Will.
What can someone holding power of attorney do?
The person holding power of attorney can withdraw money from bank accounts, trade stocks, pay bills, sign tax documents, sell real estate, and cash checks to the extent authorized in the power of attorney. The money must be used for your benefit. In Pennsylvania, the person receiving a power of attorney is called your "Agent." The Agent has a fiduciary responsibility.
Can the person with power of attorney give gifts of your money to himself or herself or to others in my family?
This depends on the wording in the power of attorney and on state laws. Some state statutes require gift-making powers to be specifically stated in the document. A well-drafted power of attorney will give the right to make gifts if you want to provide that privilege. The power of attorney may limit the amount of gifts or number of people who receive them. The agent acts in a fiduciary capacity and all actions under the power of attorney must be in your best interest.
Can the holder of a power of attorney be held liable for his or her actions?
Yes, but only if the person acts with willful misconduct or gross negligence. If the individual keeps your best interests in mind, he or she will not incur any liability.
Can I fire the person holding power of attorney?
Yes, you may revoke the power of attorney at any time by putting the revocation in writing and sending the writing to the agent. It can be just a simple letter. You need to do a new POA document as well.
What kind of records should be kept by the person holding power of attorney?
Accurate records of actions taken under the power of attorney should be kept in order to answer questions that may be raised in the future. The Agent’s funds must not be commingled with the person's funds.
What does it mean to be a fiduciary?
The person who has power of attorney serves as your fiduciary and must always act in your best interest and make decisions with your wishes in mind. The fiduciary shares control with you. An executor of a Will is also a fiduciary.
I need to get a power of attorney over a family member. I'm not sure the family member will give it. Can I get it anyway?
No, you can only have power of attorney if the person wants to give it and if the person is competent. You cannot just "take" power of attorney. If the person truly cannot handle his or her affairs and will not give a power of attorney to someone or is no longer competent to execute a power of attorney, a court guardianship proceeding may be needed.
What is a living will?
Living wills give instructions regarding treatment if the individual is in an end-stage medical condition or permanent unconsciousness and is unable to communicate his or her wishes. The living will states under what conditions life-sustaining treatment should be terminated. If an individual wants to avoid life-sustaining treatment when there is little or no chance of recovery, a living will should be drawn up which would take effect only when that person is incapacitated. It does not take effect if a person is not in these conditions and is just being treated. A living will is also called an Advance Directive. A Living Will or Advance Directive can be as simple or as complex as one wishes. A person may even state that they want "all possible treatments" even if there is little hope. The Law Office of Linda Luther-Veno combines their Living Will with a Health Care Power of Attorney. We have found that this makes the most sense for the client.
What is a health care proxy?
A health care proxy gives someone the authority to make health care decisions on another person's behalf when the individual is unable to communicate such decisions. Sometimes, it can be incorporated into the power of attorney. In some states the term health care proxy is synonymous with a Healthcare Power of Attorney.
What property is subject to probate?
The probate estate includes all property owned by the deceased in his or her own name at the time of death. Life insurance, annuities, IRAs, some other retirement benefits, and property owned jointly or in trust by the deceased is not part of the probate estate. Jointly owned bank accounts pass automatically to the surviving joint owners upon the death of one owner without going through probate. Non-probate property may still be part of the deceased person's taxable estate.
How is the probate process started?
A petition for probate of the will must be filed with the appropriate court with the original will and a certified copy of the death certificate. Notice must be mailed to all the deceased person's "heirs at law" and to those named as beneficiaries in the will. A notice also must be published in a local newspaper and sometimes in a legal publication. The notice advises people that the person has died and if anyone owes the decedent any money or is owed money by the decedent, they should come forward. Linda Luther-Veno advises that you do not start this process without a lawyer.
What does the executor do?
The executor gathers assets, pays estate debts, and pays the beneficiaries. Usually this is done through the attorney. The executor also files a state inheritance tax return. If the estate is worth more than the current minimum for federal estate tax, the executor also must file a federal estate tax return. The executor generally works with an attorney to settle the estate.
Can an individual probate an estate without help from an attorney?
Usually an attorney is needed. Most courts have rules familiar only to those who work with them regularly, and experienced attorneys know how to handle situations that may arise. In addition, an inheritance tax return is usually something that the lawyer would do. Linda Luther-Veno law firm takes these matters from start to finish. We do not become involved in the middle of the process.
What taxes are due?
State inheritance tax and sometimes federal estate tax must be paid. Your lawyer can explain what taxes, if any, may be owed on your estate. The Decedent’s final income tax return must be filed, and in many cases a "fiduciary" income tax return must also be filed.
Can probate be avoided?
Yes, in certain situations. Probate involves only the court process of transferring property. For example, if a husband and wife own everything jointly, the jointly owned property would go to the surviving spouse and no probate is necessary. This is the same for other joint owners of property. Property in a trust would go to the beneficiaries outside of probate. Life insurance proceeds and some retirement benefits go to the named beneficiary. Even when property does not pass through probate, if a tax return is required, similar work to administering an estate must be done.
Should I get a living trust? What about the living trust "kits" sold to avoid probate?
There are some good reasons to have a living trust, which your lawyer can explain. Many times, people who are in the business of producing living trusts portray the probate process as something to dread. It is not. In some states, probate can be time-consuming. In other states, it is not so time-consuming. Although probate can take some time, usually most of the estate can be distributed to the beneficiaries in the meantime. In addition, a trust does not prevent taxes from being owed. People who feel they want to avoid probate should consult an attorney before deciding to use a living trust kit or a non-attorney-drawn living trust.
Can I transfer assets and still become eligible for Medicaid? Will my family or I have a legal problem if I do?
Laws concerning asset transfers are very strict. Those considering applying for Medicaid should contact an elder-law attorney well before the need arises so the attorney can properly advise them. Even if a nursing home admission is imminent, an elder law attorney should be consulted to determine what assets, if any can be protected, if the elder wants to do this, and that their needs are met.
What is Probate?
Probate is the process by which the person named as executor of a decedent’s Will submits the original Will (along with a death certificate and petition) to the Register of Wills for his appointment as executor of the decedent’s estate. If the will has been duly proved (witnessed and notarized) and there is no contest with respect to the validity of the will (see "Will Contest" below), the Register of Wills will issue Letters Testamentary to the named executor.
What is Intestacy?
Intestacy is death without a will. Intestacy can also occur when a decedent has not fully disposed of his or her assets by a Will or other beneficiary designation. In these instances, the decedent’s property will not pass under a will and instead will pass under Pennsylvania’s Intestate Succession Act. The person appointed by the Register of Wills to handle the estate of an intestate decedent will receive Letters of Administration and is referred to as the Administrator. The Orphans’ Court has jurisdiction over all matters of intestate succession.
How Long Will the Administration Take?
This is one of the most commonly asked questions. The length of the administration depends upon the involvement and cooperation of the client and the complexity of assets. If information is exchanged in a timely and accurate manner, the administration process is much more efficient. Given these factors, the average estate or trust administration can take up to one year to complete. Some estates take less; some may take longer to complete. This may also depend upon the executor or administrator.
Pennsylvania Inheritance Tax
The Pennsylvania inheritance tax return and payment of tax are due nine (9) months from the date of death. A small discount may be taken if a prepayment is made within three (3) months of the date of death. Pennsylvania inheritance tax is payable on all assets except for life insurance. Currently the inheritance tax rates are as follows: 0% to surviving spouse; 4.5% to lineal heirs (children, grandchildren and parents); 12% to siblings; 15% to non-relatives; 0% to qualified charities.
The executor/administrator or trustee is responsible for filing the decedent’s current year income tax return for the year preceding death and decedent’s final income tax returns for the period of January 1 of the year the decedent died to the date of death. The executor/administrator or trustee is also responsible for filing the fiduciary income tax returns for the estate and/or trust for each year the estate and/or trust is active.
Any aggrieved party can contest a will: the surviving spouse who would have received a larger share under another will, a trustee whose trust estate is prejudiced; the decedent’s intestate heirs; beneficiaries under a prior will; persons who would take in the default of the exercise of a power of appointment; the Commonwealth as a statutory heir if it is questionable whether decedent had close relatives. Grounds for a will contest include: Lack of testamentary capacity, undue influence, fraud, forgery, mistake in the identity of document executed by decedent; testamentary intent; and, improper execution.
An incapacitated person is an adult whose ability to receive and evaluate information effectively and to communicate decisions in any way is impaired to such a significant extent that he is partially or totally unable to manage his financial resources or to meet essential requirements for his physical health and safety.
Limited and Plenary Guardians
Whenever the Orphans’ Court determines that an adult individual is incapacitated, it can appoint a guardian for his person (health care, where he or she lives, and other non-financial issues) and/or his/her estate (real estate, investments, paying bills, and other financial issues). If the Orphans’ Court determines that the individual is totally incapacitated, then it will appoint a plenary guardian with the full powers authorized by law. If the Orphans’ Court determines that the individual is only partially incapacitated, then it will appoint a limited guardian with specific powers described in the court order.
Guardianship proceedings can be costly and there is yearly paperwork to file. A guardian is responsible to the Orphans’ Court and must file annual reports documenting the financial and personal status of the incapacitated individual. A guardian has less flexibility than an Agent under a Power of Attorney, and a guardian must obtain court approval to perform estate planning on behalf of the incapacitated individual. However, when there is no alternative, a Guardianship must be obtained.
When parents die, a guardian can be named for the minor children in the parents’ wills. Although this is not binding on the Orphans’ Court, the court typically follows the parents’ wishes unless there are compelling reasons not to do so. A guardian is not the same as a trustee. The guardian cares for the personal affairs of the minor children while the trustee manages the investments held for the minor children. The same person can serve as both guardian and trustee for minor children, but they don’t need to be the same person. Many times, courts prefer that these roles be held by two different people to avoid conflicts of interest.