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Kennett Square Probate & Estate Law Blog

Life insurance trusts can be critical for special needs children

Families with special needs children are aware of the extra care and consideration that their children require. When the time comes to consider estate planning, families need to focus on structuring a plan that will ensure that the special needs child will be cared for throughout his or her life. Life insurance trusts are among the best options for Philadelphia families who are concerned about continuing care needs.

Families can purchase life insurance with a value that will ensure that a special needs child is properly cared for after the loss of both parents. The trust is then structured so that the trust itself owns the life insurance policy. That effectively removes the life insurance from the parent's taxable estate. Once the person named on the policy dies, the trust is also the beneficiary of the life insurance proceeds.

Pennsylvania estate planning terminology can be confusing

Some Pennsylvanians may procrastinate concerning their estate plans because of a lack of understanding of the documentation and the applicable terminology. There may be misconceptions that are holding people back. Consulting with an attorney may provide answers and eliminate confusion about estate planning.

Many are confused about the difference between a living will and a last will and testament. The last will is a legal document that declares how assets should be divided, also when and to whom. If a person should die without a will, state law will determine the distribution of the deceased person's assets. A living will declares the person's wishes in relation to health care in the event of incapacitation or terminal illness, and it can also indicate whether a person wants to be kept alive by extraordinary measures.

Inheritance dispute over billionaire's estate

Most people in the Philadelphia area want to leave some sort of legacy behind them when they pass away. In some cases, their legacy could be in the form of an inheritance left to loved ones. Unfortunately, if proper documents are not in place, an inheritance dispute could follow the loss of a loved one. Such a dispute has arisen over the estate of a deceased billionaire who lived out of state.

According to reports, the man passed away at the age of 98 without a will. His estate, valued at $1.8 billion, must be divided among his two children, three grandchildren and widow. Three people have requested that a court award them a larger portion of the estate. One is his daughter, who is set to receive $30 million. Although distribution of this amount was approved by the court, she claims that it is improper to distribute the funds while there is a challenge to the estate and questions a $7 million payment to its executor.

Wills are the best way to protect a surviving spouse

One of the most common choices that married couples make in regard to planning their estate is for each spouse to leave all assets to the other. Many couples feel that they have spent a lifetime working to build a base of assets and create financial stability, and they want that stability to pass directly to whichever partner survives the other. While this is an understandable approach, it is important the the proper steps are taken to ensure that this is the eventual outcome. Unfortunately, many Philadelphia families fail to create wills that would put their intention into writing.

In order to protect each other's financial security, married spouses must create clear and comprehensive wills that outline their final wishes. Otherwise, the rules of the state will dictate how assets are divided. This can mean that distant or even estranged relatives can end up with a significant portion of one's estate.

A shared goal within estate planning and prenuptial agreements

When a Philadelphia resident has amassed a considerable amount of wealth, handing those assets down to children and grandchildren is a source of pride. No one wants to envision a scenario in which an heir loses access to a chunk of his or her inheritance, but that is a risk that must be mitigated with proper planning. Fortunately, there is an estate planning approach that can help make sure that wealth passes down to the intended recipient.

One of the biggest financial risks that anyone takes is getting married. Statistics show that many marriages will eventually end in divorce. When that outcome occurs, marital wealth is divided between the parties. For those who have received an inheritance, it is possible to lose a significant portion of that wealth during the property division process.

Baby Boomers and durable powers of attorney

As the Baby Boomer generation enters retirement, these Americans will have a unique set of needs when it comes to estate planning. Many Boomers in Philadelphia have already set up their estate planning packages, but they may not be reviewing and revising those documents as their circumstances change. This is especially true in regard to durable powers of attorney.

Most married couples simply name each other as their designated proxy for health and financial matters. They assume that if one party becomes injured or ill, then the other will be the best equipped to know how to handle matters. This presumption is correct in most cases, but there are circumstances that can render both parties incapable of fulfilling that role.

Estate planning for both an inheritance and long-term care

No one knows exactly what the future might hold, which makes it difficult to plan ahead for every conceivable outcome. That said, everyone is aware that many people will require some type of long-term care as they age. Despite understanding the high probability that such a need might arise, many Philadelphia residents fail to plan for that outcome. Fortunately, there is an estate planning option that can address both the need for long term care coverage, as well as the desire to provide an inheritance for loved ones.

Life insurance can help an individual attain both goals. Certain policies (but not all) offer a long-term care rider that accompanies a life insurance policy. If the policyholder ends up requiring long term care at some point in his or her lifetime, the policy rider kicks in, and the death benefit is accelerated. That provides funding that can be used to cover the cost of care. The downside is that using the policy to pay for care needs means that there will be less money left that can be passed down to one's heirs.  

Estate planning law change could prompt review of plan

Many Philadelphia residents have worked hard to create plans for their estates that meet their specific financial goals. That is a major accomplishment and should bring about a sense of comfort in knowing that these important matters have been taken care of. Over time, estate planning rules and regulations will shift. That makes it crucial for individuals and families to make a periodic review of their existing plans to determine whether updates are needed.

An example lies in the recent move by Congress to increase the estate tax exemption amount to $5.45 million for the year 2016. That amount doubles for married couples, who will now have an exemption amount of $10.9 million. This means that any assets that fall below those thresholds can be passed down to heirs free from estate taxes.

Prince's presumed heirs in court just days after his death

Virtually no Philadelphia resident is unaware of the life and career of mega-star Prince. The musician recently passed away, and it appears that he may have had no estate plan in place to outline his wishes. His siblings (who are also his likely heirs) have filed court documents asking that a special administrator be assigned to the star's estate, which is the first steps in what is expected to be a long and arduous legal journey.

Prince was not only known for his musical talent; he was also among the earliest artists to demand the rights to his own artistic efforts. He battled with his record label for years, and felt strongly that holding the rights to his music was imperative. Ironically, if Prince did not create a solid estate plan, the rights to his life's work could become the center of a lengthy and expensive legal battle.

Estate planning for second and later marriages

Any time that a Philadelphia resident goes through a significant life event, there is a need to revise his or her existing estate plan. This is especially true when a second or subsequent marriage takes place. A new union not only creates new family ties, but it also serves as a reminder that it may be time to update or change previous estate planning measures.

In many cases, a spouse who marries a second time will already have children from a previous marriage. He or she often feels the need to create a plan that will provide for all surviving loved ones. That can be tricky when there is a blended family involved, and it will require careful estate planning measures.

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Larmore Scarlett LLP

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