Hollidaysburg Pennsylvania Legal Blog

Do I really need an estate plan as a new parent?

Now that you are a new parent, you probably have many people offering you advice. Family members and well-meaning friends may have strong opinions about car seats, feeding schedules, pediatricians and sleeping positions. Undoubtedly, there is some advice you trust more than others and some that just makes sense no matter what the source.

If someone offers you advice about making a will, it may seem like an inappropriate suggestion for this time in your life. However, this may be among the wisest guidance you receive if your loved one recommends that now is the time to begin your estate planning journey.

The benefits of a special needs trust

Pennsylvania residents can think of a trust as a relationship between three entities. There's the donor, who puts the funds into the trust; the trustee, who looks after the assets in the trust; and the beneficiary, who benefits from the assets in the trust. With that being said, a special needs trust is a unique type of estate planning tool that caters to people with disabilities who also receive benefits from the government.

Special needs trusts can be classified into one of three types: a first-party trust, third-party trust or pooled trust. Even though all of these types ensure that the person with special needs is the beneficiary and that the government benefits are not interfered with, there are slight differences between these trusts, especially when it comes to who the donor of the trust is as well as how the government treats the assets in the trust after the beneficiary passes.

Divorce may necessitate estate planning revision

Pennsylvania couples who are getting divorced sometimes overlook a key item on the separation to-do list: updating their estate plans. Spouses are often named as beneficiaries of life insurance policies and in wills. These documents should be updated to reflect that the couple is no longer together, and new beneficiaries should be named. There are some other estate planning issues to consider in connection with divorce.

Many spouses designate powers of attorney during the course of the marriage, potentially granting access to assets and accounts. In the event of divorce, any such powers of attorney should be revoked.

The importance of reviewing beneficiary designations

When a Pennsylvania resident gets divorced, they should consider changing the beneficiary on their life insurance policy. If an ex-spouse is still listed as the beneficiary, they may be entitled to any death benefit associated with that policy. However, this may not be the case if a divorce decree contains language saying that the beneficiary designation is withdrawn as part of the settlement.

There is legal precedent for the terms of a divorce decree overruling the terms of a life insurance contract. In 2017, a court ruled for a deceased man's daughter who was named the beneficiary of the policy in the divorce decree. This was despite the fact that the man's uncle was listed as the beneficiary on the policy itself. It was not clear in that case whether the uncle or the insurance company repaid the money.

Most child support is collected through payroll deductions

Most noncustodial parents in Pennsylvania and around the country have their child support payments deducted electronically from their paychecks. Payroll deductions accounted for $24.4 billion of the $32.4 billion in child support collected in 2017 according to the Office of Child Support Enforcement. The federal agency oversees child support collection in the United States and coordinates with local, state and tribal authorities to encourage responsible parenting and ensure that the financial needs of children are met.

Payroll deductions are set up when the OCSE notifies employers that a new worker has child support obligations. Employers are required to submit new hire reports to the OCSE whenever workers are taken on, and they can also use the agency's online portal to report any lump-sum payments in excess of their normal compensation. The OCSE says that it received more than 67 million new hire reports in 2017.

Taking steps to end your marriage

Whether it is something you have considered for a long time or you are facing a traumatic event in your marriage, the decision to divorce is seldom an easy one to make. If you and your spouse have children, you may be especially troubled about the difficulties in your marriage and the possibility that those troubles could bring your union to an end.

If you feel divorce is inevitable, your first move should be learning everything you can about the divorce process and the laws of Pennsylvania. An attorney can answer your questions for you and help you take the appropriate steps to ensure your best interests are protected throughout the process of property division and child custody arrangements.

Protecting the future with estate planning documents

A survey conducted by Wells Fargo found that many Americans do not have critical estate planning documents put in place. In fact, the data shows that as many as 40 percent of older people in Pennsylvania may not have the documents they need to protect themselves and loved ones in case of incapacity or death. An estate plan can work to protect one's wishes for health care and provide protection from financial abuse and exploitation.

Financial abuse of older Americans is a significant issue. In fact, around 20 percent of all people over 65 will face some form of financial exploitation; although, only 10 percent see themselves as facing this risk. By having key estate planning documents in place, seniors can protect themselves from potential abuse before they are incapacitated and have little opportunity to reclaim control of their lives. Experts note that there are four key documents that everyone should have -- a will, a financial power of attorney, an advance health care directive and a health care power of attorney.

Passing on valuable collectibles in your estate plan

Traditionally families build net worth through the accumulation of currency and property, but many individuals, whether they're aware of it or not, also own rare collectibles that can be worth a lot of money. Passing on these items to heirs doesn't cross the mind of many collectors, but accounting for these valuables in an estate plan is important. Deciding how to distribute collectibles will likely prevent disputes in the family later.

According to the IRS, collectibles include things like paintings, sculptures, antiques, rugs, gems, stamps, coins, and other items with some exceptions. Tax law will apply to these belongings whether someone decides to donate them to charity or divide them among family members. Ignoring the law can result in high taxes and penalties that could be easily avoided.

Transfer of assets for divorcing couples produces tax savings

Couples considering divorcing in 2018 may want to get an agreement in place before the new year. The Tax Cuts and Jobs Act will eliminate deductions for those responsible for paying alimony for a high asset divorce. The changes affect family law matters for divorce in Pennsylvania.

Couples divorcing in 2018 can still utilize tax deductions for alimony payments. Starting in 2019, couples will no longer have the benefit of claiming a tax deduction for alimony. Properties may still be transferred under property division protocols, but the transfers won't be eligible for tax deduction. However, divorcing couples will be able to leverage retirement savings accounts for potential tax benefits. The new measure affects all family law proceedings for 2019 and later.

Selecting the right executor in Pennsylvania

One of the most important parts of estate planning is choosing the right executor. This person will have the legal responsibility to manage the estate. Duties may include filing all necessary tax documents, consulting with attorneys, obtaining valuations for estate assets and possibly resolving family disputes.

An executor can expect to be responsible for an estate for at least two years. The time may actually be longer and comes to an end when all expenses and liabilities have been resolved, estate assets have been distributed and the appropriate tax authorities have accepted all final tax documents.



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