Estate Planning
It is important to make sure that your money and property are distributed to your family, loved ones or favorite charity in the way you want when you die. It is also important to create an estate plan that minimizes taxes (such as estate and inheritance taxes) and minimizes costs and expenses.
Step 1- Make A List of All Your Assets
Create a confidential list of all your assets such as your home, other real estate, checking and savings accounts, investment accounts, life insurance, retirement accounts, etc. This list should include the contact information of any advisors, bankers, and those to contact in the event of your death. Keep this list in a safe place, but make sure a trusted family or friend knows where to find it.
Step 2- Designate Your Beneficiaries
Remember that in the event of your death, life insurance and retirement accounts are distributed to the beneficiaries that you name for these accounts. The money in these accounts does not pass under your Last Will. Make sure that the correct beneficiaries are listed on these accounts. It is also important to list contingent beneficiaries so that if the primary beneficiary dies, a contingent beneficiary is listed.
Step 3- Prepare Will, Power of Attorney, Healthcare Directive
You should work with your attorney to decide what estate planning documents are most important for your particular situation. But, the typical legal documents include:
Last Will and Testament– Having a Last Will is important for several reasons. First, you list the people who will receive your property upon your death. If you don’t have a Last Will, then the law designates who receives your property. Second, you list who you want as the Executor, who is the person that will handle distributing your property in accordance with your Last Will.
Power of Attorney– In the event that you become incapacitated and unable to physically or mentally manage your assets and bills, you can list in a Power of Attorney those people who you appoint to take care of your affairs. By law, your power of attorney has to act in accordance with your reasonable expectations, in your best interest, and in good faith.
Healthcare Directive– In this document, you are able to list those people who can make healthcare decisions on your behalf in the event that you are unable to communicate or otherwise unable to make those decisions. You can also describe specific medical care you do or do not want if you are incapacitated.
Step 4- Plan for Your Children’s Care
If you have minor children under 18, it is especially important to name one of more Guardians in your Last Will. A Guardian is responsible for the care and education of your child in the event of your death. Your Last Will can also create a Trust for your minor children. You can name a Trustee who will manage your property and use it for the benefit of the care and education of your minor children.
Step 5- Plan for Pennsylvania Inheritance Tax and Possible Estate Taxes
There is an Inheritance Tax that is payable on all of your estate property in Pennsylvania in the event of your death. The rate of tax depends on the relationship of the heir.
The rates for Pennsylvania inheritance tax are as follows:
- 0 percent on transfers to a surviving spouse or to a parent from a child aged 21 or younger
- 4.5 percent on transfers to direct descendants and lineal heirs
- 12 percent on transfers to siblings
- 15 percent on transfers to other heirs, except charitable organizations, exempt institutions and government entities exempt from tax
At the federal level, only very large estates are subject to estate tax. For 2022, up to $12.06 million is exempt. However, this current exemption is scheduled to end on December 31, 2025. After that, the exemption amount will drop back down to the prior law’s $5 million cap.
Step 6- Review the Estate Plan At Least Annually
Remind yourself to review your Estate Plan at least once a year. Review and update the list of your assets. Review and update any beneficiary designations. This is especially important if a beneficiary has died or if you have been divorced and need to remove your ex-spouse as a beneficiary. Review your Will and the listing of Guardians for your children. There are many changes in life, so it is important to reflect these changes in your Estate Plan.
For information and a consultation, call the attorneys of Supinka & Supinka PC
724- 349-6768