Frequently Asked Questions about Estate Planning

The process for creating an estate plan in Pennsylvania involves several steps, including:

1. determining your assets and liabilities;
2. deciding who you want to inherit your assets and in what proportions;
3. selecting an executor or personal representative to manage your estate after your death;
4. choosing a guardian for any minor children or dependents;
5. choosing “agents” to handle your financial affairs and manage your health care for you if you are unable to do so;
6. properly executing a last will and testament, trust (in some cases), powers of attorney and living will.

A power of attorney is a legal document that allows you, the “principal,” to appoint someone to make decisions and manage your affairs for you if you are unable to make decisions or manage your affairs yourself due to accident, injury, illness or simply for convenience.  A power of attorney document is only valid during the principal’s lifetime.  It expires upon the principal’s death.

In Pennsylvania, there are two types of powers of attorney: a durable financial power of attorney and a durable health care power of attorney.

The Pennsylvania legislature changed the law that governs powers of attorney for its residents in 2008 and in 2014.  If you have not executed a power of attorney in recent years, you should engage an estate planning attorney to prepare new ones for you.

A living will and a durable health care power of attorney are two different documents that can be used to make decisions about your medical care in the event that you are unable to make decisions for yourself.

A durable health care power of attorney, also known as a health care proxy or durable power of attorney for health care, is a document that allows you to appoint someone else, known as a "health care agent," to make health care decisions on your behalf if you are unable to do so. The health care power of attorney also allows your agent to manage your health care for you and discuss your care with providers without the need to sign HIPAA waivers. This document is utilized for positive care and positive treatment when you are not at end of life.
A living will is a document that outlines your wishes for medical treatment in the event that you are in an end-state medical condition or permanently unconscious. It is a way for you to let your loved ones and health care providers know what types of treatment you do or do not want to receive when you are at end of life and unable to speak for yourself.

If you die without a will in Pennsylvania, your assets will be distributed according to the state's intestacy laws. This means that your assets will be divided among your spouse, children, and other next-of-kin in a predetermined order. If you have no surviving family members, your assets will be distributed to the state. Without a will, it will also be necessary to determine the right person/family member, etc., to serve as your personal representative.  To ensure that your assets are distributed according to your wishes, it is important to create a last will and testament.

Probate is the legal process of settling a deceased person's estate. This includes identifying and inventorying the deceased person's assets, paying debts and taxes, and distributing the remaining assets to the beneficiaries of the estate, along with other statutorily mandated requirements.  Probate is handled by an executor or personal representative who is named in the person's will or appointed by the court. The executor is responsible for overseeing the probate process and making sure that the terms of the will are carried out.
In some cases, probate can be a lengthy and complicated process, especially if there are disputes over the will or the assets of the estate. However, it is an important legal step that helps to ensure that a deceased person's assets are properly distributed according to their wishes.

No, probate ensures that a person's debts and taxes are paid before their assets are distributed to their heirs or beneficiaries. Probate is also beneficial in that it provides a legal process for determining the validity of a person's will. Also, probate can provide a level of transparency and oversight to the distribution of a person's assets. This can help prevent fraud or other wrongdoing in the handling of the estate.  Pennsylvania is a very probate-friendly state.

The probate process by its nature takes several months to complete in order to allow the following to occur:  first, to allow all creditors sufficient time to make a claim against the estate; second, to find all assets and determine the date of death values; third, to allow the Department of Revenue up to six months to approve the inheritance tax return; and, fourth, to make final distributions to beneficiaries.  While time-consuming, probate serves  to ensure that a person's wishes are carried out and their assets are distributed in a fair and orderly manner.

Many people think that they are doing the right thing when they add their children to the deed to their home, or when they transfer the property to their children during their lifetime, to “avoid probate.”  We generally do not recommend this without first consulting an estate planning attorney.  Doing so may not only result in adverse tax consequences for you, but it could also subject you/the home to loss through inheritance tax, debts, bankruptcies, divorces and/or lawsuits of any additional joint tenants. Put more simply, what if you transfer your home to your son, and then he gets divorced or sued, or he dies before you?    You would be at risk of having a lien placed on your home, facing foreclosure, losing the right to occupy your home, or needing to pay inheritance tax on its value.

Beneficiary designations are legal documents or designations that allow an individual (the "designator") to specify who should receive the assets or benefits of certain financial accounts or assets upon their death. These designations can be made on a variety of financial accounts, including life insurance policies, 401(k)s, IRAs, annuities and bank accounts.

Beneficiary designations typically supersede any provisions made in a will or trust, so it is important for the designator to keep their beneficiary designations up to date. If a designator wishes to change the beneficiary of an account, they can typically do so by filling out a new beneficiary designation form with the financial institution or insurance company.

Beneficiary designations can be used to provide for loved ones or charitable organizations upon the designator's death. It is important for the designator to carefully consider their beneficiary designations and to ensure that they reflect their current wishes.

This is the most common form of asset ownership between spouses. Joint tenancy (or TBE) has the advantage of avoiding probate at the death of the first spouse. However, the surviving spouse should not add the names of other relatives to their assets. Doing so may subject their assets to loss through the debts, bankruptcies, divorces and/or lawsuits of any additional joint tenants. Joint tenancy planning also may result in unnecessary death taxes on the estate of a married couple.

The document a person signs to provide for the orderly disposition of assets after death. Wills do not avoid probate. Wills have no legal authority until the willmaker dies and the original will is delivered to the Probate Court. Still, everyone with minor children needs a will. It is the only way to appoint the new “parent” of an orphaned child. Special testamentary trust provisions in a will can provide for the management and distribution of assets for your heirs. Additionally, assets can be arranged and coordinated with provisions of the testamentary trusts to avoid death taxes.

Sometimes called an Advance Medical Directive, a living will allows you to state your wishes in advance regarding what types of medical life support measures you prefer to have, or have withheld/withdrawn if you are in a terminal condition (without reasonable hope of recovery) and cannot express your wishes yourself. Oftentimes a living will is executed along with a Durable Power of Attorney for Health care, which gives someone legal authority to make your health care decisions when you are unable to do so yourself.

If you die without even a Will (intestate), the legislature of your state has already determined who will inherit your assets and when they will inherit them. You may not agree with their plan, but roughly 70 percent of Americans currently use it.

You may avoid probate on the transfer of some assets at your death through the use of beneficiary designations. Laws regarding what assets may be transferred without probate (non-probate transfer laws) vary from state to state. Some common examples include life insurance death benefits and bank accounts.

These allow you to appoint someone you know and trust to make your personal health care and financial decisions even when you cannot. If you are incapacitated without these legal documents, then you and your family will be involved in a probate proceeding known as a guardianship and conservatorship. This is the court proceeding where a judge determines who should make these decisions for you under the ongoing supervision of the court.

A revocable living trust is a legal document that allows an individual (the "grantor" or "trustmaker") to transfer ownership of their assets to a trust, with the intention of managing and distributing those assets during their lifetime and upon their death. The grantor retains the ability to make changes to the trust or revoke it entirely during their lifetime.

A revocable living trust can be a useful tool for estate planning because it allows the grantor to specify how their assets should be managed and distributed after his/her death, without the need for probate. However the grantor would need to be sure to follow through carefully with all requirements of trust planning, including changing the name on all accounts and transferring all assets including real estate to the name of the trust.

Another purpose for a revocable trust is if a Pennsylvania resident owns real property in another state.  Owning the out-of-state/non-Pennsylvania property within a revocable trust may avoid probate in the other state and can reduce the need to hire an out-of-state attorney.

The grantor of a revocable living trust typically acts as the trustee, meaning they have the authority to manage and control the assets in the trust. The grantor may also name a successor trustee to manage the trust if they become incapacitated or upon their death. The trust will name beneficiaries, who are the individuals or entities who will receive the assets of the trust upon the grantor's death or at a specified time.

A revocable living trust is different from an irrevocable trust, which cannot be amended or revoked by the grantor once it is established.

Whether you are young or old, rich or poor, married or single, if you own titled assets such as a house and want your loved ones to avoid court interference at your death or incapacity, consider a revocable living trust. A trust allows you to bring all of your assets together under one plan.

There are several types of trusts recognized under Pennsylvania law for estate planning purposes, including revocable, irrevocable, testamentary and charitable trusts, to name a few.  There are many reasons to create a trust; and, depending upon the goal, a specific type of trust would be used.

Some common reasons include:

1. Asset protection: An irrevocable trust can help an individual safeguard his or her assets and preserve them for the next generation, while allowing that person to qualify for Medicaid.  A trust can help protect a person's assets from creditors, lawsuits, and other potential legal liabilities.
2. Estate planning: A testamentary trust which is language that is contained within a will that creates a trust upon the testator’s death, can be an important tool for estate planning, as it allows the individual who creates the trust to retain a form of control over his/her assets even after his/her death. The testator can specify who should manage the trust and how assets should be invested or expended throughout the trust beneficiary’s lifetime.
3. Avoid Inheritance Tax:  Another type of an irrevocable trust (a completed gift trust), when funded by the grantor and, if the grantor survives one year from the date of funding, will save the inheritance tax that would otherwise be due if the grantor died owning the same funds.
4. Tax benefits: Trusts can offer tax benefits, such as achieving optimal capital gains tax consequences in some cases and reducing inheritance taxes in other cases.
5. Planning for disabled or minor beneficiaries: For a client who cares for minor children or disabled family members, a trust can be used to provide for that loved one’s needs after the client passes away.  This is particularly important for a beneficiary who is disabled and may be receiving government or public assistance.  In those situations, a supplemental needs trust should be considered to preserve assets for the beneficiary, while assuring the beneficiary maintains his/her eligibility for government or public assistance.
6. Charitable giving: A trust can be used to make charitable donations in a tax-efficient manner.

The look-back period for qualification for Medicaid in Pennsylvania is currently 60 months, or five years. This means that the Department of Human Services will review all financial transactions made by an applicant during the previous 60 months to determine if the applicant is eligible for Medicaid benefits. If the applicant has made any gifts or uncompensated transfers of assets during this period, he/she may be subject to a penalty period during which they will not be eligible for Medicaid benefits. The length of the penalty period will depend on the value of the gifts or transfers made during the look-back period.

An elder law attorney can advise you on the best strategies for preserving your assets.  At Curran Estate & Elder Law, we can help you with the following aspects of asset protection:

- understanding the different options available, such as creating a trust or transferring assets to a loved one;

- helping you navigate the Medicaid eligibility rules and filing a Medicaid application for you or your loved one;

- drafting legal documents such as a power of attorney or health care power of attorney, which can ensure that your loved ones have the authority to transfer your assets and safeguard them appropriately.

Tenancy by the entireties is a form of ownership in Pennsylvania and other states by which a married couple holds property together as a single entity. This means that both spouses have an equal right to use and possess the property, and neither spouse can sell or transfer their interest in the property without the consent of the other.

Tenancy by the entireties provides certain protections for the spouses, as their ownership interests in the property cannot be seized or attached by creditors of only one spouse. This means that if one spouse has debts or judgments against them, the creditor cannot take the couple's jointly owned property to satisfy those debts.

Tenancy by the entireties is only available to married couples, and it is automatically created when a married couple acquires property together. It is not necessary for the couple to specifically declare that they are holding the property as tenants by the entireties, as this form of ownership is presumed under Pennsylvania law.

When one spouse dies, the property is automatically considered the property of the surviving spouse by operation of law.

Joint tenancy with the right of survivorship is a form of co-ownership of property in which multiple individuals (called "joint tenants") own an undivided interest in the property. The key characteristic of joint tenancy with the right of survivorship is that if one of the joint tenants dies, their interest in the property passes to the surviving joint tenants, rather than to the deceased person's estate or heirs. This is known as the "right of survivorship."In order for joint tenancy with the right of survivorship to be established, there must be four unities present:

1. Unity of possession: all joint tenants must have equal and undivided possession of the property.
2. Unity of interest: all joint tenants must have the same type and extent of ownership interest in the property.
3. Unity of title: all joint tenants must have acquired their ownership interest in the property through the same instrument (e.g., a deed).
4. Unity of time: all joint tenants must have acquired their ownership interest at the same time.

If any of these unities is absent, joint tenancy with the right of survivorship cannot be established.

Joint tenancy with the right of survivorship is often used as a way for co-owners to avoid the time and expense of probate, as the surviving joint tenant(s) can take immediate possession of the property upon the death of a co-owner. It is important to note, however, that joint tenancy with the right of survivorship can be terminated by one of the joint tenants transferring their interest in the property to someone else or by the joint tenancy being severed (e.g., through the sale of the property).

Tenancy in common is a type of co-ownership of real property in which each owner has a separate and undivided interest in the property and the right to use and possess the whole property. Each tenant in common owns a specific share of the property, which can be equal or unequal, and has the right to sell or transfer their share of the property to someone else. Tenants in common do not have the right of survivorship, which means that their share of the property does not automatically pass to the surviving tenant(s) in common upon their death. Instead, the share of a deceased tenant in common passes to their heirs or beneficiaries according to their will or the laws of intestate succession.