Last Will and Testament

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Your will is a legal document that directs what should happen to your belongings at the time of your death. A will can generally be changed during your lifetime. A new will can be drafted if there are substantial changes to your wishes. A codicil can be used to supplement your initial will if you are only making minor revisions. A will becomes irrevocable upon the death of the decedent. A will should identify who is responsible for carrying out the provisions of the will. That person is referred to as an Executor. The Executor would be responsible for producing the will to the appropriate court after death to begin the process of administration of the decedent’s estate.

Not every asset owned by a party at the time of death will pass under the direction of the will. It is important to understand the difference in how assets will pass to ensure proper estate planning. Probate assets, those passing through the will, are those for which there is no pre-existing designation as to who should get the asset. Examples of typical assets that will pass under the direction of your will 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, non-probate assets, as those accounts will pass to the beneficiary. Common non-probate assets include accounts with P.O.D./T.O.D. designation and retirement benefits or insurance policies with beneficiary designation.  By April M. Townsend

 

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Joint Property

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It is necessary to disclose joint property owned in part by the decedent at the time of his death. Often, joint accounts will provide for the surviving account owner to retain the account, however, these accounts must still be disclosed for purposes of assessing any applicable inheritance tax. Pennsylvania assesses an inheritance tax of 4.5% for lineal descendants, 12% for other relatives, and 15% for other third parties. There is no tax for assets passing to a spouse. An inheritance tax return should be filed with the Pennsylvania Department of Revenue within nine (9) months from the decedent’s death.

Schedule F of the inheritance tax return is for jointly-owned property with rights of survivorship. The list should include a complete description of the asset, date asset was placed into joint ownership, value at date of death and value of decedent’s taxable interest. The identity of the joint tenant(s) is also required along with address and relationship to decedent. Property held as tenants in common should not be included on Schedule F. Instead, those assets should be reported on the applicable schedule with the value of decedent’s interest only.  By April M. Townsend

 

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Inventory of Estate

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An inventory must be filed with the court in the course of administering an estate. This task would be the responsibility of the executor or administrator of the estate. The inventory should identify all probate assets of the decedent at the time of death. This may require some investigation by the executor/administrator. Ideally, the decedent would keep a list of all assets and debts along with their will. They make go a step further and include user name and passwords for their accounts along with this list since a majority of account maintenance and monitoring now happens electronically. If there is not a list provided, a good starting point is to monitor the decedent’s mail for evidence of statements for accounts.

The inventory filed with the court should include the value of the assets listed as of the decedent’s death. You can contact the respective institutions to request a date of death balance if not otherwise ascertainable by the statements available. 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.  By April M. Townsend

 

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Intestate Succession

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Chapter 21 of Title 20 outlines the order in which surviving relatives would inherit from a decedent. If the decedent was married and there is no surviving issue (child) or parent, the entire estate goes to the surviving spouse. If there is a surviving parent, the first $30,000 of the estate along with half of the balance would go to the surviving spouse. The other half of the balance would go to the parent(s). If there is surviving issue or children born to the decedent and the surviving spouse, the spouse gets the first $30,000 and the balance is split between the spouse and the children. If the surviving children are not born to decedent and surviving spouse, the entire estate is split between spouse and children.

If not married at the time of death, the decedent’s estate would pass in the following order: (1) surviving issue of the decedent; (2) parent(s) of the decedent; (3) brothers, sisters or their issue; (4) grandparents (half to paternal and half to maternal); (5) uncles, aunts and their issue; (6) the Commonwealth. The class to which the estate would pass is relevant for inheritance tax purposes. There is no inheritance tax for an estate passing to a spouse. There is a 4.5% tax for estate passing to lineal descendants (e.g. children or parents). There is a 12% tax for siblings and a 15% tax for all other relatives.

 

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Guardianship Changes

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Guardianship of an incapacitated person refers to the authority to make decisions on behalf of an adult individual who has been adjudicated as such by the court. The standard for incapacity involves an analysis of whether the individual can manage their financial resources and/or meet essential requirements for their own health and safety. The first step for a party interested in pursuing guardianship of someone is to file a petition with the court. At the time of filing the petition, the proposed guardian must now submit record of criminal background search from the Pennsylvania State Police. Additionally, if the incapacitated person suffers from mental health issues, a notice of mental health commitment form should be included.

The opinion of a medical expert regarding the extent of the incapacity and the potential necessity for a guardian is required. The Rules now provide for the expert to complete an expert report which may replace requirement of physical testimony in court. The Petitioner has the burden to prove incapacity by clear and convincing evidence. Notice of the hearing and a copy of the petition must be served on the individual for whom guardianship is sought (Respondent) explaining in plain language the possible ramifications of the forthcoming legal proceedings. Notice must also be given to additional interested parties such as family members.  By April M. Townsend

 

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How do you divide retirement assets in divorce?

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Pensions, as well as other retirement plans, are often one of the assets up for division in a divorce. The court will equitably divide the marital portion of a pension plan after considering all the relevant factors in equitable distribution. The marital portion of a plan would be the portion that accrued from the date of marriage through the date of separation. In some cases, the entire pension will be marital depending on the timing of the marriage alongside the start date of the pension plan. A qualified domestic relations order, or QDRO for short, is a document used to effectuate division of certain retirement benefits.

A QDRO can facilitate a tax-free transfer of retirement benefits from one party to their new or soon-to-be ex-spouse. The receiving spouse would then be taxed as they withdraw the money as the tax laws provide. The exact nuances of how the plan/benefit is split and what options are available will vary based on the type of plan. It is always advisable to review the procedures for the specific plan you may need distributed to understand what their rules and policies are when it comes to splitting a participant’s benefits via QDRO in the context of a divorce. You will also benefit from having an experienced family law attorney review the terms of the QDRO before you sign off on it and submit it to the Plan Administrator for implementation. Finally, most plans have very specific requirements as far as how the language of the QDRO is to be worded in order for it to be accepted and processed. At a minimum, a QDRO should identify the parties, the plan at issue, and the amount going to the receiving party either as a lump sum or a percentage of the total benefit. It is wise to enlist the services of an expert that routinely drafts QDROs to ensure the language is correct and all requirements are met.   By April M. Townsend

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How to Place a Child for Adoption

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There are two options to place a child for adoption. The first option is to surrender the child to the appropriate agency. This can include the county social services agency or private adoption agency. Under 23 Pa C.S. 2501, written notice of intent to give custody of the child to the agency should be presented to the agency. The natural parents should also cooperate in petitioning the court for permission to voluntarily relinquish their parental rights to the child. The agency must consent to accept custody of the child. To the extent the natural parents are under 18, the consent of their parent(s) is not required.

Natural parents may also elect to surrender the child to an individual. The individual(s) accepting custody of the child will need to file a report of intent to adopt as well as sign a consent accepting custody of the child. They will also need to follow the other procedures for adoption which include getting necessary clearances as well as getting a home study, where applicable. Again, the natural parents should cooperate in petitioning the court for voluntary relinquishment of their parental rights. Alternatively, if the natural parents are consenting to the adoption, a petition for confirmation of consent can be filed instead. The court will schedule a hearing following receipt of petition for voluntary relinquishment or confirmation of consent. Notice of the hearing date must be served on natural parents as well as their parent(s) if they are still minors at the time. The natural parents should appear at the hearing. The court may enter a final decree of termination of parental rights after the hearing.  By April M. Townsend

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Guardianship of a Minor Child

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A guardian can be appointed to make decisions on behalf of a minor child. Temporary guardianships can be put in place without a court hearing. The guardianship would transfer the authority to make decisions for a minor child from the existing parent/guardian to another person for a limited time. A written agreement is required to identify exactly what authority is being transferred under the guardianship. Ideally, the agreement should be notarized in addition to being signed by all parties. The parties need to be of sound mind when signing the agreement.

Temporary guardianships can be revoked at any time.  For this reason, it is important to work towards other legally enforceable means for retaining custody of the minor if that is the goal. Temporary guardianships can be used so that prospective adoptive parents can take care of the intended adoptee while the adoption hearing is pending. This would enable the adoptive parents to make any medical decisions, enroll the child for school, etc.  Once parental rights are terminated, custody of the child is put with the prospective adoptive parents by court order. Once an adoption is approved, the prospective parents have final custodial rights over the child just as if they were the natural parents.  By April M. Townsend

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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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Foreign Adoption Decree

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A foreign adoption decree is a decree issued from another country regarding adoption that took place abroad. If you have adopted a child from abroad, you can take steps to register that foreign adoption here in the United States. Pennsylvania discusses the applicable steps in 23 Pa. C.S. Section 2908. The adoptive parents can file a properly authenticated copy of the foreign adoption decree along with copy of child’s via and birth certificate in the county where the adoptive parents reside. The adoption decree should be translated into English where applicable. If there is no birth certificate or other birth record for the adoptee, the parents may submit an affidavit instead.

The court is to supply a foreign adoption registration form for adoptive parents to use. The form should include information on how to obtain an adoption decree from the Commonwealth. Where the court is satisfied that a full and final foreign adoption was completed, they would enter the decree on the docket and issue a certificate of adoption to the parents. If the court is not satisfied that a full and final adoption took place, instructions regarding re-adoption are to be provided to the parents. All records submitted to the court to register a foreign adoption are maintained by the court and sealed. Filing fees may be assessed by the county for this procedure.  By April M. Townsend

 

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