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Estate planning in Pennsylvania involves arranging for the use, management, investment, conservation, and transfer of an individual’s property during their lifetime or after death. The legal instruments involved in estate planning vary depending on the individual’s circumstances, family needs, estate size, and personal wishes. Common tools include wills, trusts, powers of attorney, and advance health care directives.
What is a will?
A will is a document in which a person, known as the testator, directs the distribution of his or her probate estate upon death. If someone does not create a will, their property passes through what is called intestate succession.
Intestate Succession. When a person dies without leaving a valid will, the law sets out an order of inheritance, known as intestate succession, pursuant to which a decedent’s probate property (known as the “intestate estate” for this purpose) is divided among his or her immediate family or more remote relatives. The intestate estate passes according to the following division of assets:
- If there is a surviving spouse: The surviving spouse takes the entire intestate estate if the decedent has no surviving issue or surviving parent. Note that, generally speaking, for purposes of intestate succession a legally adopted child is considered the issue of his or her adoptive parent or parents and not the issue of his or her natural parents.
If there is no surviving issue, but a parent of the decedent is surviving, then the spouse takes only the first $30,000 plus half of the balance of the intestate estate.
If there are surviving issue of the decedent who are also issue of the surviving spouse, then the spouse takes the first $30,000 plus half of the balance of the intestate estate.
If there are surviving issue of the decedent, one or more of whom is not issue of the surviving spouse, then only half of the intestate estate passes to the spouse.
If there is no surviving spouse:
- The entire intestate estate goes to the decedent’s issue.
- If there is no issue, then the entire intestate estate goes to the decedent’s parents.
- If there are no surviving parents, then the entire intestate estate goes to the decedent’s siblings.
- If there are no surviving siblings, then the entire intestate estate goes to the decedent’s living grandparents and their surviving issue.
If any of the above scenarios are not desirous, a will can be executed to alter or change how property is distributed upon death. Alternatively, a trust can be created to disburse property.
What is a trust?
A trust is a device that assigns legal title of property to a trustee, a fiduciary who holds title to the property for the benefit of a third-party beneficiary. A trust settlor or trustor may create a trust by will or other written instrument, but in either case bifurcation of property ownership is the sine qua non of trust creation. See Pennsylvania Transaction Guide–Legal Forms § 84.20.
Reasons for Creating a Trust
- Avoidance of probate
- Creditor protection
- Paternalism
- Management and disposition of assets
- Estate planning
- Special needs and Medicaid planning
- Protection of assets and trust beneficiaries
- The legal avoidance of death taxes, including estate, inheritance, gift, generation-skipping transfer, and income taxes
Types of Trusts
Revocable Trust. Revocable trusts (also known as living trusts) are intended to act as a will substitute. These trusts are generally unnecessary for most Pennsylvania residents. Both a will and a living trust have the same primary purpose—the distribution of your assets after death.
Irrevocable Trusts. Irrevocable trusts may also be used in order to achieve tax and other estate planning objectives. The most common irrevocable trusts used for estate planning purposes include Irrevocable Life Insurance Trusts, Grantor Retained Annuity Trusts (GRATs), Qualified Personal Residence Trusts, and so-called Intentionally Defective Grantor Trusts.
What is a Power of Attorney?
A power of attorney (POA) under Pennsylvania law is a legal instrument through which a principal authorizes an agent to act on their behalf to perform specified acts. The Pennsylvania statutes governing powers of attorney, particularly 20 Pa.C.S. 5601, outline the requirements and scope of such instruments.
A POA must be in writing, dated, and signed by the principal, and it must comply with specific formalities, such as acknowledgment before a notary public and witnessing by two individuals who meet statutory requirements
The scope of authority granted to the agent is determined by the language of the POA document and the provisions of the Pennsylvania POA Act, which allows the principal to empower the agent to perform various acts, including real property transactions, financial transactions, and litigation, among others.
What is an Advanced Health Care Directive?
In Pennsylvania, an advance health care directive is a written document that allows an individual (the principal) to express their wishes regarding medical treatment in the event they become unable to make or communicate decisions. It may include a health care power of attorney, a living will, or a combination of both. These directives can be combined into a single document, and while statutory forms are available, they are not mandatory. The document must be signed and witnessed to be valid.
Please contact Henderson Law Offices at 724-887-4544. You can also contact us online to set up your free initial consultation with our lawyer in our Scottdale office.