PENNSYLVANIA WILLS AND TRUSTS

FREQUENTLY ASKED QUESTIONS

 

In hindsight we can point to troublesome personal and/or financial situations either caused or compounded because someone dies without a will or trust. The problem is that one never knows whether a will or trust is absolutely necessary until after the fact - and then it is too late. The following discussion highlights some of the potential problems you can alleviate by taking a few moments to plan for your family's future.



Your spouse, heirs or next of kin apply to the Register of Wills to be appointed as the Administrator of your estate. The Administrator pays all debts and collects all assets. Whatever remains is distributed in percentage shares to relatives identified by Pennsylvania's "Intestate" Statute. The Administrator's decision to sell property or distribute property in kind can be challenged in court by hopeful heirs. Also, in the absence of a will, a court will determine who will care for your young children and their property if the other parent is unavailable or unfit.



With a will, you can select the person who administers your estate and the guardian of your minor children.



Any property titled in joint names will pass to the surviving joint tenant. Separately owned property is distributed by the administrator of your estate to your surviving spouse, if any, and to your heirs and next of kin according to a formula set forth by Pennsylvania's "Intestate" Statute.



For example, the "Intestate" Statute provides that if you are survived by a spouse and a child, your surviving spouse is entitled to the first $30,000 and 50% of the remainder and your child (or children) are entitled to the balance. (There are many variations to the formula)



If you are survived by a spouse and a parent, but no children, Pennsylvania law provides your surviving spouse is entitled to the first $30,000 and 50% of the remainder, and the balance to your parent.



The Pennsylvania "Intestate" formula does not match the intent we most commonly see for our will clients - most of whom leave all assets to the surviving spouse, outright or under trust.

 

If there is any question as to whether an individual is in fact a spouse or child, the "Intestate" Statute may be inadequate. If anyone can raise an question about their status, your should take precautions in your will and specifically spell out your preferences on who should inherit your property.



Joint tenancies might account for all your property if your spouse survives you; however, when the will is written, one often cannot know who will be the first to die. Also, you do not know what separate property, such as an inheritance, you will acquire prior to your death.



Since heirs, such as children from a former marriage, might dispute the existence of a common law marriage, it is advisable not to let the "Intestate" Statute take care of the disposition of your property. Instead, the better plan is to set forth your wishes in a will.



 

Simple wills cannot bind a surviving spouse to the particular distribution planned in a joint or reciprocal will. The surviving spouse is legally free to create a new will and dispose of inherited property in a different manner than set forth in an earlier will, leaving any remainder to different heirs, or perhaps a companion or a new spouse. In contrast, if your property is left in a trust, its disposition can be legally controlled and directed after your death. For instance, you can leave property in trust for the benefit of a surviving spouse for life, allowing the surviving spouse to use income and principal for support and maintenance, with the direction that the remainder be given outright to others when the surviving spouse dies. Trusts are also useful tools in reducing or eliminating Federal Estate Taxes, which for estates worth more than $675,000 can be substantial. (The $675,000 tax threshold in the year 2000 increases to $1 million in the year 2006. Federal Tax rates on property above the threshold starts at 37% and can quickly rise to 55%.)

For important news on the effect the Tax Act of 2001 has upon prior estate plans, see our Summer 2001 Newsletter or contact Attorney Carl Meyer of our office. 

 

Pennsylvania recently reduced some of its tax rates on inherited property following the tax reduction trend started several years ago when the tax rate on transfers by a surviving sponse was reduced from 6% to 0%. For estates of decedents dying after June 30, 2000, the rate on transfers to lineal relatives (parents/children) was reduced from 6% to 4.5%; however, if the decedent was a child age 21 or younger, the rate is 0% for transfers to a parent (and presumably the rate for transfers to a child are 4.5%). The 15% rate on transfers to all others remains unchanged, but a new classification for siblings with a 12% rate was created. Siblings are defined as those having at least one parent in common with the decedent related by blood or adoption. In making an estate plan it is always necessary to consider the fact that both federal and state legislatures can change the laws over time, decreasing or increasing tax rates both on estates and on capital gains. Often it is necessary to balance the effects of different tax situations to minimize the ultimate tax bite. If federal estate taxes are eliminated, it will be necessary to consider the fact that property which has greatly appreciated in value and is held by a decendent at the time of death receive a date-of-death stepup in basis, thereby eliminating a substantial capital gain and creating a saving which should be considered in balancing the tax consequences of any estate plan.

Wills and Trusts can be custom tailored to follow your specific intentions, with the exception that one cannot totally disinherit a spouse. A surviving spouse has a right under Pennsylvania law to elect to take an elective share of approximately 33.3% of the estate notwithstanding the provisions of a will or trust. Children can be disinherited, but if the will is not properly written, an effort to disinherit can be invalid. To avoid any legal battles after your death, if you decide to disinherit a child, or the child of a deceased child, this should be carefully stated in your will because an ambiguous provision might not be honored by a court.



A will which is not written by a lawyer could be valid, but as a practical matter, it is a dangerous and risky matter which can cause more trouble than you might imagine. An experienced lawyer will know how to avoid using ambiguous language which is susceptible to more than one meaning and can answer most of your "what if" questions and even suggest some questions you never even considered. Given the modest cost of a lawyer prepared will, a do-it-yourself will is not worth the trouble.



If your will is ambiguous, it is likely that your heirs could have different interpretations of what they are entitled to receive. The best protection against an ambiguous will is to avoid "do-it-yourself" wills. Hopeful heirs can have hopeful interpretations of the written word. They can pursue costly legal challenges. The best safeguard against this problem is to have an experienced attorney draft your will - one who knows how to avoid language susceptible of two or more conflicting meanings.



We have made special arrangements for participants in several groups for group sponsored discounted fees. If you are eligible, our fee for meeting with you and your spouse, discussing your estate plan, and drafting two simple wills is $125 ($100 for a single will). If you have your information organized, we can complete the process in one meeting. If you have a substantial estate, require tax planning, or require a Trust, a higher fee will be quoted before any work is performed. Feel free to call or e-mail us and ask about our fees.



Spend a few minutes completing our data sheet for simple estates. This form will guide you in organizing your information. Our first concern is whether a simple will is suitable for your estate. To help you decide, we need to have a projected dollar value of your estate for the near and distant future. Believe it or not, when many people project the future value of their home(s), pensions, 401(k) plans, savings, inheritances and insurance, they find their estates may rise to the Federal Tax threshold ($650,000 to $1,000,000). Therefore, to take advantage of the experience and advice of your attorney, you should have a listing and value of all your assets, with a description of any joint property rights which may apply. Also, list the names, addresses and phone numbers of all beneficiaries and persons who you wish to appoint to administer your estate or be guardian of your children. If you want a specific piece of property to be left to a specific person, write it down so it can be included in the will.



You should also consider your intentions regarding a Living Will, Advanced Medical Directive or a Medical/Financial Power of Attorney.

  IF YOU HAVE ANY QUESTIONS, CONTACT VIA E-MAIL IS
WSMOS@WSMOSlaw.com (General E-MAIL)