Inventory for an Estate

An inventory of probate assets will need to be filed with the court in the process of probating the will. The first step for the executor or administrator is to gather information on what assets exist. For real estate, ownership should be confirmed first via review of deed or a title search. If the home is not promptly sold, it should be appraised to obtain an accurate value. Be sure to inventory the contents of the home as well. This is particularly important if the will provides for specific bequests of personal property such as jewelry, collections or automobiles. For bank accounts and securities, statements should be obtained from the financial institution or broker.

For retirement-type accounts, a good place to start is with the prior employer if documentation cannot be found otherwise. Same rule applies for life insurance policies as they may have been offered as a benefit of employment as well. You will need documentation to support the date of death values for all probate assets. The inventory should be filed within nine (9) months of the death of the decedent. An inventory provides useful in preparing the inheritance tax return which is also due within nine (9) months. Finally, the inventory comes in handy in closing out the estate and preparing an accounting if necessary.

by

Annuities

An annuity is an investment of a resource in order to receive a fixed payment. Once the investment is annuitized, the original investment cannot be returned. At that point, the characterization of the investment is changed from an asset to income. An annuity is considered marital property and subject to division in the event of divorce. Parties should be careful to review the terms of the annuity contract in determining the best way to split this asset. The goal should be to minimize any tax implications or penalties in dividing the asset. The best option may be off-setting the value of the annuity with another asset in the divorce such as a marital residence.

An annuity may be desirable in terms of long term care planning. Specifically, if a party is looking to qualify for Medicaid and they are over the limit for resources, they may consider changing a resource to an annuity and thereby having it count as income instead. Parties should be careful since there are also income limits for qualifying for Medicaid. Other requirements include naming Medicaid as a second beneficiary for the annuity and electing a period certain annuity as opposed to a life annuity.

by

Inheritance Taxes

Pennsylvania does apply a tax on assets passed through probate or intestacy. The amount of tax depends on the value of the estate as well as the relationship of the beneficiaries to the decedent. There is no tax imposed for assets passing to a surviving spouse or to a child under 21 years old. There is a 4.5% tax for assets passing to children over 21, parents or grandparents. There is a 12% tax for assets passing to siblings. There is a 15% tax for all other transfers including to aunts, uncles, nieces, nephews, cousins or persons of no relation. There are some institutions exempt from the inheritance tax including certain government entities and charitable organizations.

Inheritance taxes are to be paid within nine months from the date of death of the decedent to avoid any penalty. A 5% discount on the tax is extended for returns filed within three months from date of death. Assets passing outside of the will or the rules of intestacy are not subject to the inheritance tax. Popular examples of assets passing outside of the will are life insurance policies, retirement plans and other assets with a designated beneficiary. Additionally, assets jointly owned with rights of survivorship will automatically pass to the surviving owner.

by

Medicaid Planning

Medicaid is a need-based health care program. It is a federal program that is administered on a state level. Elderly persons needing long-term care often try to utilize Medicaid to assist with the expenses. Appropriate estate planning can assist in this regard. Since Medicaid is for low-income individuals, there are limits on the amount of income and assets a party can have. An individual should plan ahead to make sure any countable assets and income are structured so as not to affect any future applications for Medicaid. Medicaid can look back five years from the date of an application so it is important to do any relevant estate planning well in advance.

Certain assets are not countable in terms of eligibility for Medicaid. One of the big exemptions is your home. Current federal law allows one residence to be exempt with a cap of $560,000 for the total equity of the home. Even if the home is above that amount of equity, it may still be exempt if a spouse, child under 18 or permanently disabled child is still residing in the home. A party seeking Medicaid cannot have more than $2,000 per month income. There are additional rules as far as assets your spouse can keep under the anti-impoverishment provision. It is important to plan for the potential of long term care well before the need for it arises to protect your assets.

Click here to read more about estate planning.

by

After Your Divorce, Make These Changes Immediately

,

The process of getting divorced can be hard to move through.  When you are finally divorced you will probably want a break from making decisions and taking care of legal matters.  However, it is crucial to immediately update a few important areas of your life including your will, life insurance beneficiaries, and other estate planning documents.  

Your divorce agreement may include some estate planning language as it pertains to your children, including how life insurance beneficiaries must be maintained.  It is critical to not only follow these agreements, but to ensure that the other pieces of your estate are changed so your ex-spouse is removed and can no longer control your life or handle any of your affairs should something happen to you.  

Your Will

If your last will includes your former spouse, then you will need to update that information so your final arrangements, distribution of personal items, and your financial matters are handled according to your wishes.  Remove your former spouse as your executor and ensure that they are no longer the recipient of any of your personal property.  Additionally, should anything happen to you or your ex-spouse, you should name a guardian for your children.  

Beneficiaries on Financial Accounts


Beneficiaries on your life insurance policies as well as investment and bank accounts need to be changed according to the policies and procedures established by each institution.  Clearly stating your wishes in your will that you want your children to inherit your money is not enough.  Each company is going to have a different form that needs to be correctly filled out to properly change your beneficiaries.  If it is not done correctly the previous beneficiary stands, and your ex-spouse may wind up with a significant amount of money.  Click here to read more about changing your life insurance policies.

Other Estate Planning Docs

 

Power of Attorney documents should be updated.  In the event that you are rendered incapacitated, you want a trusted relative or friend to have the authority to make decisions for you.  This includes matters related to your health as well as your financial matters.  

When we work with clients we always work through these issues to ensure that your best interests are protected through your divorce and into your new adult life.  Taking the time to ensure your will is properly updated after your divorce will give you peace of mind as you will know your final wishes are clearly stated.  

Additional Resources: https://www.reviews.com/life-insurance/

by

Inventory of Probate Assets

An inventory must be filed with the court in administering an estate. The inventory should identify all probate assets of the decedent at the time of death. This may require some investigation by the executor. A good starting point is to monitor the decedent’s mail for evidence of statements for accounts. In an increasingly electronic society, however, access to digital accounts may be more productive as more and more parties elect for email correspondence over hard copies in the mail.

The inventory should include the value of the assets listed as of the decedent’s death. The inventory is to be filed with the court within nine (9) months from the date of death unless an extension is granted.

If additional assets are discovered after filing the initial inventory a supplemental inventory should be filed with the court. The amount of tax due depends on the value of the estate. Accordingly, the inventory and inheritance tax return are usually filed together. There is a form available for use in Pennsylvania on the Unified Judicial System website. Alternatively, items on Schedule A – E of the inheritance tax return can serve as the list of assets for the inventory.

Click here to read more about the probate process.

by

Probate Assets

Not every asset owned by a party at the time of death will be subject to the probate process or pass under the direction of the will. Probate assets are those for which there is no pre-existing designation as to who should get the asset. Examples of typical assets that will be subject to probate include individually owned bank accounts, cars, personal property, business interest, real property held as tenants in common, cash, and life insurance with no beneficiary. These types of assets should be distinguished from any account with a beneficiary designation as those accounts will pass to the beneficiary. Also, joint accounts will usually go to the other party whose name is on the account.

Assets that are put into joint names within a year of date of death can still be subject to inheritance tax on the full amount of the account though ultimately a non-probate asset. If assets have been put into joint names over a year from date of death then only 50% of the account would be taxed. Ideally, you should plan for how those taxes will be apportioned. Business interests may also end up being non-probate if there is a partnership agreement spelling out what happens in the event of death. If there is a buy-out of the decedent’s interest, that is taxable and should be listed on the inheritance tax return. Where the decedent’s interest is just assumed by the remaining partners in the business then there is no tax and no need to do probate.

Click here to read more about estates.

by

Role of Executor

The executor of your will is the person designated to be responsible for the administration of your estate. They are required to act in a fiduciary capacity and carry out the wishes as stated in the will. It is a good idea to talk to your executor about your desires regarding your assets and debts as stated in the will. Your executor or other trustworthy party should know where the original will is kept as well. The executor will need to take the will to the Register of Wills to open the estate and be formally recognized as the party authorized to handle the estate. From there, the executor will need to identify all the assets and debts the decedent had at the time of death. An inventory will need to be filed with the court.

The executor should also notify social security, employer(s), banks, insurance companies, retirement plans, etc. regarding the death of the decedent. The executor is responsible for safekeeping and/or maintenance of the estate until the time of distribution. The executor should review the will to identify all possible beneficiaries as they will need to be notified. The executor will usually open an estate bank account to consolidate assets and be able to pay necessary bills and taxes. The last income tax return for the decedent needs to be filed as well as an inheritance tax return. The executor must keep detailed records of all transactions that occur as an accounting is usually part of the final process of distributing and closing the estate. Executors may receive financial compensation for their services. An executor may also elect to retain an attorney to ensure the proper administration of the state in lieu of undertaking the responsibility on their own.

Click here to read more about probate of an estate.

by

Self-Proving Wills

One of the first steps to take after a loved one dies is to find out if they had a will. If there was a will, the second step is to make sure the will is valid. There are a few requirements for a valid will in Pennsylvania. First, the will must be signed by the deceased party or decedent. Ideally, there will also be signatures of two witnesses. A self-proved will includes an additional affidavit signed by the decedent and the witnesses that the signatures on the preceding will were valid and that the decedent signed the will knowingly and voluntarily. This affidavit can be signed simultaneously with the will or at a subsequent date so long as the testator and witnesses are available to sign. Sample language for an acknowledgment and affidavit is below.

We, the Testator and the witnesses respectively, whose names are signed to the attached or foregoing instrument, being first duly sworn, do hereby declare to the undersigned authority that the Testator signed and executed said instrument as their last will and testament in the presence and hearing of the witnesses, and that they had signed willingly, and that they executed it as their free and voluntary act and deed for the purposes therein expressed, and that each of the witnesses at the request of the Testator, in the presence and hearing of the Testator and each other, signed the will as witness, and that to the best of his or her knowledge the Testator was at the time at least eighteen years of age, of sound mind and under no constraint, duress, fraud or undue influence. Click here to read more about wills.

by

Formal Probate Administration

Formal administration involves handling the entire process through the courts. After the short certificate, the executor or administrator needs to notify all possible beneficiaries. They will also need to notify all possible debtors by publishing notice in the local law reporter as well as a local newspaper of general circulation. The executor or administrator should also notify social security, employer(s), banks, insurance companies, retirement plans, etc. regarding the death of the decedent.

Within three months of the date of death, the executor or administrator should pay estimated taxes on the estate to get a discount. Taxes for the estate will depend on the size of the estate. It is best to underestimate and potentially have to supplement later on than to overpay and risk not being able to get that money back from the government. A federal estate identification number should be obtained. The executor or administrator needs to make sure the final individual tax return for the decedent is prepared and filed in addition to the inheritance tax return. An inventory of the estate should be filed with the court along with a detailed accounting of all expenses of the estate and a proposed distribution of the remainder of the estate to close it out. Distributions should generally not be made until approx. a year after notice to allow creditors to make any valid claims against the estate prior to disbursement.

Click here to read more about probate of an estate.

by