Gifts of Assets

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Each individual is permitted to gift $15,000 in assets each year without tax implication. $15,000 is the annual cap for federal gift tax purposes. There is not a gift tax in Pennsylvania. Even individuals who gift above this yearly threshold, may not need to pay taxes. Amounts in excess of the yearly limit can be assessed against that individual’s lifetime gift tax exclusion. Presently, the lifetime gift tax exclusion is 11.18 million. Most individuals will not exceed that sum over the course of their lifetimes.

You should be aware that gifts made within a year of death may be subject to Pennsylvania inheritance tax depending on the amount and nature of the gift. There are some gifts that are non-taxable and do not count against your annual exclusion or lifetime exemption. Gifts between spouses can be unlimited. Payments for tuition or medical expenses paid directly to respective institution or facility on someone’s behalf are not taxable. Gifts to political organizations and charities are also under the umbrella of non-taxable gifts. Any individual making a taxable gift above the annual exclusion must complete Form 709, the Gift Tax Return. Filing of the return does not mean any taxes are due however if still within your lifetime exemption. Consult with an experienced estate planning attorney to make further understand your options in making gifts as part of your estate plan.  By April M. Townsend

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Family Settlement Agreement

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The family settlement agreement is a document that can be filed at the conclusion of administration of an estate wherein the beneficiaries accept their distributions and release the executor or administrator from any liability for their handling of the estate. Often, an informal accounting will accompany the settlement agreement so all interested parties can review the administration of the estate. The document would also clearly state the distributions of the net assets of the estate. With respect to cash assets, this may be accomplished by specific dollar amount or by percentage.

One of the benefits of finalizing estate administration by agreement is fewer filing fees and legal fees since less paperwork is filed with the court and a court hearing is not required. Executors or administrators should still publish notice of the estate for any potential creditors and wait one (1) year before distribution. It is possible to allow distributions prior to the one year mark from notice of the estate. In that scenario, it is important to include language that beneficiaries will return funds as needed if a valid creditor is subsequently identified and makes a timely claim against the estate.

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Self-Proving Will

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A last will and testament is a legal document that directs how your affairs should be handled after you pass away. The document allows you to specify who you will leave your assets to and in what amounts or shares. You can also designate an individual to be responsible for carrying out the terms of your last will and testament. This person called an executor, or if female, an executrix. Make sure your loved ones know where you will is stored to be able to access it at the appropriate time. Your original will is to be provided to your county’s Register of Wills or Surrogate Office to begin administration of the estate.

A self-proving will is one that has been witnessed and signed in the presence of a notary and includes an affidavit regarding the circumstances at the time of execution. Pennsylvania and New Jersey require at least two (2) witnesses. Prospective witnesses should be disinterested, meaning they are not beneficiaries of the will and have no individual interest. The affidavit acknowledges the presence of the witnesses at the time the will was signed, that the will was executed voluntarily and that to the best of their knowledge, the individual executing the will was of sound mind. Having a self-proved will can reduce the likelihood of will contests during estate administration and streamline the process in terms of not needing to further verify the will.  By April M. Townsend

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Refusing an Inheritance

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Being named as a beneficiary or being an heir at law does not mean that you have to accept what is designated to go to you. It is possible to decline to receive your inheritance. A disclaimer is the form that would be executed to refuse receipt of what was left to you. The result of a disclaimer is that you are treated as if you predeceased the decedent. A will or the laws of intestacy would dictate how your share would be distributed among other beneficiaries.

There are a number of requirements for a valid disclaimer. The disclaimer must be in writing. It must adequately identify the decedent and the asset or amount being disclaimed. It is possible to do a full disclaimer or a partial disclaimer where you only refuse certain assets or a certain amount. The disclaimer has to be served on the person handling the estate, such as the executor or administrator, and/or filed with the court. You may elect to refuse an inheritance to avoid tax consequences or to attempt to carry out the intentions of the decedent if they hadn’t drafted a will or you knew of other intentions. A disclaimer is irrevocable so be sure of your decision prior to executing the document.

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