Wealth Preservation, Trusts and Estates

The Answer May Not Always Be What You Expect

Simply “Probate” means at death an estate (the deceased person’s property) is administered and supervised by the court, often called probate court. The court will make sure the Last Will is administered correctly and if there is no will state law is followed by a court appointed administrator.

Many people ask us how they can “avoid probate” before they understand what it means and how long it will actually take. For example in Pennsylvania it is a fairly straightforward process, many cooperative families can “opt out” of much of the process, and it takes as few as several months and can be helpful in making sure the executor, the person who distributes the property, does what the Last Will says to do and that he or she is protected from subsequent claims and law suits.

Many people also do not know that most property transferred at death passes outside of probate through a non-probate mode of transfer. Here are some examples of things that do not go through the probate process and may not even be distributed according to the will.

1. Joint tenancy property both real and personal

The decedent’s (the person who has just died) interest ends at death. The survivor has the whole property.  Bank accounts, brokerage and mutual fund accounts, and real estate are often held in joint tenancy, particularly between married couples. At the death of the first, this property generally transfers directly to the surviving joint account holder or joint tenant on the deed no matter what the will says. These assets are still taxable for both State Inheritance Tax purposes and possibly for Federal Estate Tax purposes. And, who pays that tax is often a function of the tax clause in the will. Be sure to get good legal advise on this issue.

2. Life Insurance

Life insurance proceeds on the decedent’s life are paid by the insurance company to the beneficiary named in the insurance contract. However, while such policies are not taxed by Pennsylvania, they are taxed for Federal Estate Tax purposes.

3. Bonds & Contracts with payable on death (POD) provisions

Federal E and H Bonds, and pension plans often have survivor benefits as do tax-deferred investment plans such as IRA’s 401(k)’s, and brokerage accounts if there is a death beneficiary. While the beneficiary of such accounts receive the money directly, the proceeds may or may not be taxable for Income Tax and or Inheritance and Estate Tax Purposes.

4. Interests in Trust

When property is put in trust, the trustee holds the property for the named beneficiaries. The trustee in accordance with the terms of the trust instrument invests, holds and or distributes the trust property to the beneficiaries.

To read our trust guide How To Find The Right Trust For You click here.

Property in a testamentary trust does pass through the probate process but an inter vivos trust during the decedents’ life does not.  To read more about inter vivos gifts read Should I Make Gifts Now As Part Of My Estate Planning.Such trusts if revocable during your life are Taxable but irrevocable trusts may avoid taxation for Death Tax purposes.

Distribution of non-probate property does not involve a court proceeding.  The controlling contract, trust, or deed terms control the distribution of the property.

Distribution of probate property under a will or an intestate estate (someone who dies without a will) may require a court proceeding involving probate of a will or finding of intestacy followed by appointment of a personal representative to settle the probate estate.

Find out the best way to utilize both the probate and non-probate process in planning your comprehensive will and trust.

A successful comprehensive estate plan takes all of these factors into account when organizing your will or trust.

Whitney O’Reilly

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Federal Estate Tax Reform and Certainty Is Needed
by: David M. Frees III, Esquire

Congress failed, at the end of the year to enact any estate tax reform. As a result, the tax was eliminated for a one year period. This might seem like a blessing, but currently, many people’s documents no longer function as they were intended to work. To add insult to injury, in just a few more months it is scheduled to return with a vengeance.

On January 1, 2011, absent congressional action, the tax will return and American tax payers will only be able to shelter one million dollars. A couple could, with careful planning, shelter up to two million dollars but that would require the use of trusts prepared during the lifetime of each spouse. And, as if that is not bad enough, the tax rate is going up to a maximum rate of 55%.

However, since this tax includes retirement accounts, the value of a house and business, and life insurance proceeds, the one million dollars may not go as far as it might otherwise.

We need and deserve clarity on this issue.

Yet, just a few weeks ago, negotiations between Republicans and Democrats broke down and Estate Tax reform disappeared from the legislative agenda.

This is not a political or partisan column. And, for my money, both parties have failed to deal effectively with this issue. I simply believe that Congress owes certainty and clarity to the American people. Right now, careful and rational estate and tax planning for families with substantial assets is almost impossible.

Clarity is essential and now requires congressional action.

Here is video of a recent statement on the Senate floor.

David M. Frees, III
is an attorney focusing his practice in the areas of trusts, estates, probate, and estate and asset protection planning. His firm, Unruh, Turner, Burke and Frees also offers elder law planning for families facing nursing home care and the related issues.

The firm maintains law offices that serve many local communities including Devon, Wayne, Malvern, Phoenixville and West Chester.

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It is very important that same sex couples review the estate planning and estate/inheritance tax issues they are confronting.  In Pennsylvania alone there will be a hefty tax consideration.  The

Pennsylvania Inheritance Tax rate on transfers to a surviving same sex partner at the death of the first partner will be 15%.  For transfers of jointly owned assets to the surviving partner there will be a 15% PA Inheritance Tax rate on one-half of the value of the asset.   Take a look at this article for detailed look at the PA Inheritance Tax system and the resulting tax to be paid by the surviving same sex partner. Without proper planning, a surviving same sex partner could find himself or herself with a significant financial burden and unprepared to pay for it.

Please feel free to contact Douglas L. Kaune, Esq. any time at 610-933-8069 or dkaune@utbf.com to discuss your particular Estate Planning matter to determine the appropriate planning for you and your loved ones.
Wills * Trusts * Elder Law * Probate * Asset Protection * Power of Attorney * Estate Planning
Unruh, Turner, Burke & Frees, P.C. is a full service law firm with offices located in Malvern, Phoenixville, West Chester and also serving Philadelphia and other towns in Chester County, Montgomery County, Delaware County, Bucks County, Berks County, Philadelphia County Pennsylvania (PA).

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By: David M Frees III One of the best planning techniques for those with estates of 1 million dollars or more, and especially those with appreciating assets, Short term GRATs, might be a thing of the past soon. House Bill 4849 just passed the US house of representatives on March 24th and would make the minimum term for Grantor Retained Annuity Trusts a minimum of ten years. However, short term GRATs are one of the most powerful and effective estate planning techniques currently available for American Families.

So, if this bill, or a similar bill passes the Senate, a very powerful technique for moving assets from one generation to another without estate or gift taxes will be lost to the American tax payer and to all Pennsylvania residents doing federal estate tax planning.

If you’re interested in GRATs, just search our site for the many articles and information that we have published on this topic. But, as a brief review, GRATs allow you to move a higly appreciating asset out of your estate without paying gift taxes. However, if you die during the GRAT term (which currently can be as little as two years) the assets come back into your estate and get taxed at their current value.

Congress believes that this technique is so effective for tax payers, that if they eliminate short term GRATs, that it could result in significant revenue generation through higher estate taxes.

According to a group called Citizens for Tax Justice, this provision of the bill would raise an estimated $4.5 billion in 10 years…” This group is a lobbying organization that describes its mission as “requiring the wealthy to pay their fair share.”

So, be aware that 2010 may be the last year for the short term GRAT.

If you need assistance in setting up a GRAT, or want to know more about the many advantages of a short term GRAT before they are eliminated by Congress, please feel free to visit this site or to call David M. Frees III at 610-933-8069 or by email at dfrees@utbf.com.

For a free book on GRAT techniques, from Bernstein’s research group, click here.
For a free telephone consultation or appointment for estate planning including GRATs call Donna, Denise or Beth to set up the appointment and mention offer code: GRAT

David Frees and Unruh, Turner, Burke and Frees maintain law offices in Malvern, Phoenixville, and West Chester Pennsylvania and serve many surrounding communities including Wayne, Devon, Berwyn, Radnor, Exton, Chester Springs, and others.

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PA Case Tells Us To Review Tax Clause To Insure that the Correct Party Pays the Inheritance Tax on the assets In Your Estate.  In Re Estate Of Thomas P. Allen, 2008 PA Super 260 Atlantic: 960 A.2d 470 the decedent had a will and the will contained a Tax

Clause intended to determine whether the estate or each individual beneficiary would pay related estate or inheritance taxes.   However, the Tax Clause was poorly drafted and deemed “ambiguous.”  Therefore, the Court chose to rely on PA statutory law 72 P.S. § 9144(f) which requires each beneficiary of both probate and non probate assets to individually pay the tax on what they inherit.  This statutory provision is frequently contrary to the testator’s intent and should not be relied on.  This case further demonstrates the importance of every clause in your will and, in particular, the need to review and revise documents with experienced legal counsel.  Experienced counsel will help insure that your wishes are carried out.

Please feel free to contact Douglas L. Kaune, Esq. any time at 610-933-8069 or dkaune@utbf.com to discuss your particular Estate Planning or Probate matter to determine the appropriate planning for you and your family.
Unruh, Turner, Burke & Frees is a full service law firm with offices located in Malvern, Phoenixville, West Chester, PA.
Wills * Trusts * Elder Law * Probate * Asset Protection * Power of Attorney * Estate Planning

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Wills * Trusts * Elder Law * Probate * Asset Protection * Power of Attorney * Estate Planning                                   Douglas Kaune, Esquire Attends 11th Annual Pennsylvania (PA) Elder Law and Estate Planning Symposium.  It is great to get an update regarding the law changes, new cases and politics that shape Elder Law, Estate Planning, Trust Planning and Probate.  Here is a link to this Pennsylvania Bar Institute (PBI) course and the interesting topics covered.  I will be providing much of the interesting information in upcoming Unruh, Turner, Burke & Frees Estate and Elder Law Blog postings.  

Stay tuned for updated information on the following topics and more: 1. How to make sure joint accounts actually pass to the person you intend.  2.  How to insure the tax clause in your last will actually confers tax lability on the correct beneficiary or your estate.  3.  How to make use of annuities to protect assets in Medicaid and Nursing Home Planning.  4.  How to take advantage of the Medicaid Gifting exceptions to allow assets to pass to certain loved ones and family members.  5.   How to properly plan your estate in a second marriage or where there are children from different relationships.   6.  Is a Special Needs Trust right for you or for a member of family, if so how can we make sure it properly protects assets and government benefits?

Please feel free to contact Douglas L. Kaune, Esq. any time at 610-933-8069 or dkaune@utbf.com to discuss your particular Estate Planning, Probate, Trust, Asset Protection or Elder law case to determine the appropriate steps for you and your family. Unruh, Truner, Burke & Frees, P.C. is a full service law firm with offices in Phoenixville, West Chester and Malvern and providing legal representation in the Chester County, Montgomery County, Delaware County, Bucks County, Berks County and Philadelphia County. Among the many towns served are Phoenixvile, Malvern, West Chester, Royersford, Collegeville and King of Prussia.

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Avoid Probate With A Revocable Living Trust In Pennsylvania (PA). I want to remind everyone to consider a combination of a pour over will and revocable living trust to help avoid probate for your estate. Read here to learn more about the mechanics of a revocable living trust. There are many people who choose to use a revocable living trust because they want to save some time and expense for their beneficiaries by avoiding probate.  Here is a great link to David Frees, Esquire’s review of the probate avoidance debate.  The will and trust themselves are only the first step, you must also properly title all of your assets into the name of the revocable trust during your lifetime in order to fully avoid probate. We often work with clients to prepare the pour over will, revocable living trust and also to retitle bank accounts, stock accounts, real estate and other assets into the revocable trust name. This is likely to have a higher upfront cost for the consumer, but it will likely serve to provide a savings of time and money for the beneficiaries of an estate. The revocable living trust is not an estate planning tool for everyone and it certainly makes more sense for some than others. Using a will alone or a will and a revocable trust is a personal choice that clients make when deciding the best way to accomplish their family estate planning goals. Read here to learn more about the revocable living trust pros and cons.
Please feel free to contact Douglas L. Kaune, Esquire any time at 610-933-8069 or dkaune@utbf.com to discuss your particular estate plan and determine if the revocable living trust is right for you.
Wills * Trusts * Elder Law * Probate * Asset Protection * Power of Attorney * Estate Planning
Malvern, Phoenixville, West Chester Offices Chester County Montgomery County, Delaware County, Bucks County, Berks County, Philadelphia County Law Practice Locations.

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Remember to Review The Tax Allocation Clause In Your Will or Trust. by Douglas L. Kaune, Esquire. Most people do not realize that they can choose which beneficiaries will be responsible for paying the PA inheritance tax and federal estate tax on their taxable estate. Many wills are written automatically and sometimes incorrectly to say that the taxes are to be paid from the residue of the probate estate. Therefore, you could unexpectedly lay the entire tax burden on the shoulders of the people who are beneficiares under the will where there are beneficiaries of specific assets in the will, joint accounts or beneficiaries named on an IRA or 401K or stock account outside of the probate estate. The PA inheritance and federal estate taxes could be tens or hundreds of thousands of dollars so you should be careful to structure the tax clause, if desired, to make the beneficiaries of specific gifts or nonprobate assets responsible for paying the tax on what they receive. Review this article for a closer look at the tax clause issue and specific examples of where it might be important to adjust the clause to insure a fair allocation of the taxes in your estate.
Please feel free to contact us at any time at 610-933-8069 or dkaune@utbf.com to discuss your particular case to determine the appropriate tax clause in your estate planning documents.
Wills * Trusts * Elder Law * Probate * Asset Protection * Power of Attorney * Estate Planning
Malvern, Phoenixville, West Chester Offices Chester County Montgomery County, Delaware County, Bucks County, Berks County, Philadelphia County Law Practice Locations.

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Roth IRA Conversion Might Equal Estate Tax and PA Inheritance Tax Savings. Many individuals are considering whether or not to take advantage the new Roth IRA conversion rules. Read this Smart Money article for some of the issues to consider for Roth conversions. This decision will require an in depth analysis of each individual’s circumstances and goals. That being said, the Roth IRA conversion is likely to create a PA Inheritance and Federal Estate Tax savings in estates where thoses taxes apply. Generally speaking, paying the income tax associated with your IRA now will serve to reduce the overall size/value of your estate. This will theotically reduce the assets subject to estate and inheritance tax at death and help avoid the possible “double or tripple taxation” of your IRA at death. The possible estate and inheritance tax savings are not the sole determining factors, but can likely be placed in the positive column when making the overall assessment to conert your traditional IRA or not.
Please feel free to contact us any time at 610-933-8069 or dkaune@utbf.com to discuss your particular estate/probate case to determine the appropriate fee structure for an attorney or executor.
Wills * Trusts * Elder Law * Probate * Asset Protection * Power of Attorney * Estate Planning
Malvern, Phoenixville, West Chester Offices Chester County Montgomery County, Delaware County, Bucks County, Berks County, Philadelphia County Law Practice Locations

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Beneficiaries can use a qualified disclaimer to change distribution under a last will and testament after date of death and after probate in Pennsylvania (PA) and other states. 
A beneficiary can actually refuse all or a portion of his or her share of a decedent’s probate or non probate assets.  Click here for the technical requirements for a proper qualified disclaimer.  You might wonder, why would someone in their right mind refuse an inheritance?  There are actually great estate tax, inheritance tax and asset protection motives for discaiming assets in PA and throughout the U.S.  For example, if a wealthy individual is the beneficiary of his parents’ estate, he might choose to disclaim his interest so long as the contingent beneficiaries under the will are his own children.  This would allow for the estate assets to be distributed directly from grandparents to grandchildren and thereby skipping the son’s generation of estate and inheritance tax!!  This could result in tens of thousands or hundreds of thousands of dollars of tax savings.  I do not want to oversimplify this issue because there are many important considerations including, but not limited to, 1.  Making sure the contingent beneficiaries named or through intestacy are the desired recipients, and 2.  there is no generation skipping tax that results. This is an important post mortem estate planning option that should be discussed with your estate and probate lawyer in PA and other localities. Please call Douglas L. Kaune, PA Lawyer 610-933-8069 for additional information and consultation.
Wills * Trusts * Probate * Elder Law * Estates * Estate Planning * Asset Protection Planning
Malvern, Phoenixville, and West Chester Law Offices Chester, Montgomery, Delaware, Philadelphia, Berks and Bucks County PA

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