Estate Planning

A Last Will and Testament (also called a “Will”) directs how your “probate” assets are distributed at your death. “Probate” assets are real estate or personal property, such as bank accounts or vehicles, that are in your name only. Assets that have a beneficiary designation or joint owner are considered “non-probate” and are not distributed through your Will. Assets which are owned by a Trust are also “non-probate” because the Trust document will name the beneficiaries to receive those assets. A Will must be signed by you and two witnesses. Ideally, a Will is “self-proving” which means both your signature and the witnesses’ signatures are notarized by a notary public.

Yes, you can change your Will anytime so long as you are of sound mind and understand the document you are signing. An amendment to an existing Will is called a “Codicil”. You can also revoke your current Will and sign an entirely new Will – this will make the old Will null and void.

A Trust is a fiduciary relationship where one party (the “Grantor”) transfers ownership of assets to another party (the “Trustee”). The Trustee controls and manages the Trust assets for the benefit of the “Beneficiaries”, who are named in the Trust document. The Trust document gives specific details as to how the Trustee can use Trust assets and how or when the Trust assets are distributed to the Beneficiaries. There are many types of Trusts. The most common type of Trust is a “Revocable Trust” also sometimes called a “Living Trust.” In a Living Trust, the Grantor and the Trustee are usually the same. The Grantor is also the Beneficiary of the Trust during his or her life. After the Grantor’s death (or at another triggering event), the Trust assets are distributed to the next set of Beneficiaries. A Living Trust can be revoked or amended by the Grantor at any time.

The short answer is no. A Living Trust is a great tool to avoid a probate estate administration. It can also be very useful when planning for blended families or for special circumstances, such as minor children or a loved one who battles substance abuse addiction. The assets in a Living Trust are typically viewed as the Grantor’s personal assets. Therefore, there are no tax benefits and no asset protection for the Trust assets. For example, if the Grantor/Beneficiary requires long-term care, the Trust assets are exposed to paying for the nursing home costs.

Unlike a Revocable or Living Trust, an Irrevocable Trust cannot be easily amended or revoked. In fact, court approval is often needed to make changes to or terminate an Irrevocable Trust. An Irrevocable Trust may provide some tax benefits and asset protection, depending on the terms of the Trust. To achieve those objectives, the Grantor must be willing to relinquish all control and access to the Trust assets. Therefore, the Grantor should not be the Trustee of an Irrevocable Trust. The Grantor also should not be the lifetime Beneficiary, aside from possibly receiving income earned by the Trust assets. For example, Tom and Mary establish an Irrevocable Trust to protect assets from future nursing home costs. Their son John is the Trustee and they fund the Trust with $100,000. John invests the $100,000 and earns an annual return of 10%. Tom and Mary can receive distributions of the income, but have no access to their original $100,000 investment. The Trust document will name Beneficiaries who will inherit the Trust assets after both Tom and Mary have died. An Irrevocable Trust designed to protect assets from long term care costs is sometimes called an “Asset Protection Trust”. Asset Protection Trusts are a specialized type of Trust that require involved planning and consultation with your attorney and financial advisor.

Durable Powers of Attorney for Finances and Healthcare are essential parts of any estate plan. A Durable Power of Attorney appoints trusted individuals (called “agents”) to make decisions or take actions on your behalf if you become incapacitated. Your agents may be family members, close friends, or, in some cases, a professional fiduciary such as a bank or guardianship agency. A Durable Power of Attorney is a powerful document – it typically gives your agent access to your financial assets such as bank accounts, retirement accounts or investments, as well as the ability to pay your bills. It may also give your agent authority to sell your real estate. Your agent should also have ability to make decisions concerning your medical care or personal needs, such as placement in a nursing home. If you become incapacitated and do not have a Durable Power of Attorney, your loved ones may be unable to assist you with these important issues and court intervention (through a guardianship) may be necessary.

Yes. The Pennsylvania Power of Attorney rules changed drastically in 2000 and again in 2015. Most Powers of Attorney prepared before 2000 are no longer valid. This is especially true for Durable Financial Powers of Attorney. It is imperative that you have your Powers of Attorney reviewed on a periodic basis to stay on top of any legal changes that may require amendments to your documents.