Estate planning has several purposes, which include:

• Having your wealth transferred to your heirs in the manner of your choosing;
• Planning for Taxation;
• Providing for the future care and needs of your children; and
• Planning for business succession.

Estate planning professionals who are familiar with your estate can help you fashion an estate plan which works to effect your wishes and goals. Most estate plans are structured around either a Will or a Trust, or a combination of the two.

What Happens If You Don't Have A Will or Estate Plan?

If you die intestate, there are laws of "intestate succession" which govern the distribution of your estate. In Pennsylvania, this means that if you do not have an estate plan your assets will be distributed to your spouse and children, or if none, to other members of your family. A common misnomer regarding estates is that your property will pass to the state if you do not have a Will. That is simply incorrect in Pennsylvania.

Even if you are young and have few assets, and thus have no real need for a detailed estate plan, it is wise to have a Will. This becomes even more true if you marry, or have children. You can never predict when you may come into additional and/or substantial assets throughout your lifetime. Having a Last Will and Testament will help ensure that your assets pass to the heirs of your choosing.

Additionally, most estate plans now include Power of Attorney forms, which provide for your designated "Agent" to attend to your financial and medical needs, and a Living Will, which sets forth procedures to follow in the event that you become permanently incapacitated. If you do not execute powers of attorney prior to becoming disabled by accident or illness, it may be necessary for your loved ones to go to court to get permission to manage your finances and health care and establish what is called a "Guardianship". Establishing a Guardianship is not always a simple procedure.

Probate and Estate Administration

In its narrowest sense, probate refers to the determination that your Will represents your final testamentary intentions. In its broader sense, probate is the process of putting the terms of your Will into effect, including the gathering of all of your assets and the payment of any outstanding debts and taxes, the payment of the expenses associated with the administration of your estate, and the distribution of bequests to your heirs. The Executor you named in your Will has the responsibility to manage this process. The Executor is entitled to a reasonable fee for performing these services.

In a formal probate in Pennsylvania, the Executor's actions are conducted under the oversight of what is called Orphans' Court. In an informal probate, the court may do little more than sign a final order approving the distribution of assets and closing the estate.

There is a popular perception that probate is something to be avoided, and living trusts are often sold with the notion that they will help people avoid probate. As probate laws vary between jurisdictions, the effect of the probate process on your estate will vary depending upon where you live. However most jurisdictions have updated their probate laws and processes to reduce the length and cost of the process, and a Will that is properly drafted and executed can remove many of the burdens of that process. Also, avoiding probate will not eliminate some of the more complex or time-consuming aspects of administering an estate, including the preparation and filing of final tax returns. As the cost of probate can vary significantly between jurisdictions, this is something you should discuss with an estate planning professional.

While challenges to Wills ("Will contests") are rare, they can happen. In Pennsylvania, the Testator is permitted to include a "no contest" clause, whereby if somebody unsuccessfully challenges a Will that person will be excluded as an heir.

Also, while it is typically permissible to disinherit certain people, such as one of your children, a court may modify your will if it appears you accidentally omitted mention of a person to whom you otherwise would have left money, such as a child who was born after you drafted your Will (a "pretermitted heir"). Thus, if you do intend to disinherit an heir, you should expressly state that intention in your Will.

Pennsylvania also has provisions to protect a spouse, which provide that they can choose between the bequest you have made and a share of your estate as defined by statute. If the spouse determines that their statutory share is larger than the bequest, they may "opt against the will" to take the larger share. Thus, if you intend to give your surviving spouse less than approximately half of your estate, you should consult with an estate planning professional to see if that is permitted.

Recall also that the probate process is a public process. It is possible for somebody to examine the court records to determine what assets you had and how they were distributed. If this concerns you, you should consider setting up a trust or implementing other estate planning measures that won't end up as part of a public court file.

Estate Taxes

Despite the hype associated with estate taxes, due to the size of the exemptions for federal estate taxes, few estates will owe taxes to the federal government. Federal estate taxes are scheduled to be phased out over the next few years; however, if you have a large estate you should anticipate the possibility that estate taxes will return in the future, and should plan for that possibility.

Also, every estate may be subject to certain other taxes, including state estate taxes, and state and federal income taxes. In Pennsylvania, any assets bequeathed to a surviving spouse are not subject to estate taxes. Assets bequeathed to a child or sibling are taxed at the rate of 4 1/2 percent. Assets bequeathed to a distantly related relative or a friend are taxed at the rate of 12 percent.

Revising Your Estate Plan

Certain events or changes in your life justify revisiting your estate plan. While an estate plan may anticipate the possibility that you will have children, it often will not contemplate divorce or remarriage. Similarly, as you get older, you may have cause to provide unequal shares of your estate to your children and grandchildren, or to provide for stepchildren. Also, you may acquire assets which are not described in an earlier estate plan.

You should periodically review your estate plan to make sure it is consistent with changes in your estate, and with your present desires.

Estate Planning is an important concept, one that every individual should consider regardless of age. Call Attorney Artim at (412) 823-8003 to schedule an appointment or to discuss any question that you may have regarding Wills or Estates. If you prefer, send an email to Attorney Greg Artim