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Kennett Square Probate & Estate Law Blog

Proposed IRS changes could impact estate planning

In early August, the Internal Revenue Service released proposed regulations that could have a major impact on the estate plans of many Philadelphia residents. The proposed changes would serve to limit the benefit of certain discounts that are made available through the transfer of interests in certain family-controlled businesses between family members. If the regulations are finalized, many families will need to take a different estate planning approach.

Currently, family members are able to enjoy a number of valuation discounts when transferring interest in a family-controlled business from one person to another. The value of the interests is calculated differently because the recipient will have limited control over the business. The value is also lowered due to the assumption that there is a limited market for selling shares that are limited in nature.

Estate planning may require family communication

A recent survey by an investment corporation revealed that many parents and their adult children are not communicating well when it comes to retirement and end-of-life issues. Often after parents have done careful estate planning, they may not inform their children of the decisions, even if those choices directly involve the children. Retirement advisors encourage those in Pennsylvania and across the country to begin having serious conversations about their wishes and plans before it is too late.

One family established the habit of gathering weekly to review plans and schedules when the children were still young. That practice evolved to an annual meeting as the children became adults and moved away. The family now discusses changes in the estate and stays up to date with the needs and concerns of their parents. According to the survey, this is a rare occurrence. In fact, more than 50 percent of adult children report that they have never discussed wills or estate plans with their parents.

A minor's power of attorney is an estate planning option

When most Philadelphia residents consider making plans for their estates, they think about issues related to their own eventual death and how to provide for loved ones that will be left behind. However, there are other aspects of estate planning that also deserve consideration, some of which are highly specific to certain circumstances. An example involves a minor's power of attorney, which is a legal document that many people may have never considered at all.

A power of attorney for a minor is a legal document that authorizes a designated individual to make medical decisions for an underage child. This is important because medical professionals are bound by strict rules when it comes to providing treatment for a child who does not have a parent present. For families who regularly invite their child's friends along on vacations or other trips, having a minor's power of attorney is a topic worth discussing.

Hillary and Bill Clinton make use of residence trusts

Part of running for the office of President involves disclosing the details of one's personal finances. When Democratic Presidential Nominee Hillary Clinton recently turned in that documentation, the public became aware of some of the Clintons' estate planning measures. Part of their estate plan is the use of residence trusts, which could be a good fit for many Philadelphia residents.

A residence trust is a great way to shelter a home's appreciated value from taxation. When the trust is created and the home is placed into the trust, a gift tax is assessed at the home's value at that particular point in time. After the home is within the trust, any further appreciation is protected from taxation. This creates the ability to pass on a significant asset to one's chosen heirs without incurring a hefty tax bill because the home is removed from the owner's taxable estate.

Trusts offer a variety of protections for accumulated wealth

When thinking about how to best pass on a lifetime of accumulated assets, many Pennsylvania residents consider taking shortcuts to make things easier for their children or grandchildren to inherit property or wealth. In many cases, however, these shortcuts can result in financial devastation. When it comes to protecting assets and passing down wealth, trusts are a solid choice.

Consider, for example, a parent who wants her two adult children to inherit her home, which is fully paid off. She places the kids on the deed to the property and discusses the matter with them in depth. However, when her son later goes through a divorce, his wife is entitled to a share of his interest in the home. That can leave the son in serious financial straits. In the worst case scenario, such an event could force the sale of the home, leaving the mother with no place of residence and both children with a depleted inheritance.

Estate planning for Pennsylvania equestrians

Horse lovers throughout the state of Pennsylvania know how important it is to ensure that their animals are properly cared for. That task is a major commitment and can go on for many years. Few equestrians, however, think about what would happen to their horses in the event that the owner passes away. Including these issues into one's estate planning is important and can make a world of difference in the lives of horses that survive their owners.

Horses are more than just assets; they are loved animals that deserve compassionate care. When a horse owner's family members are not involved in the care of the animals, an issue can arise in the event the owner suddenly dies. While surviving family members may have the best of intentions, the decisions that they make might not be in line with the needs of the animals. This can result in a highly trained and accomplished show horse being put out to pasture in the belief that such a choice offers the animal a comfortable sort of retirement from the show circuit. In reality, a horse that has grown accustomed to the grooming, training and care required for showing would likely find such a transition jarring.

The role of residency in estate planning efforts

When a Philadelphia resident is making provisions for his or her estate plan, residency is not often part of the conversation. In reality, however, where a person establishes residency can have a great deal of impact on how his or her estate planning efforts will play out. There are cases in which one state's laws can be more beneficial to a family than another, which is why residency should be discussed during the planning phase.

One way that estate planning can differ from one state to another is in terms of varying state taxation. Some states impose a higher estate tax than others, which can take a bigger bite out of the assets that are handed down to loved ones. Another issue involves end-of-life planning. Certain states have laws that allow individuals to maintain a high degree of control over how their medical care is handled during the last stages of their life.

Can estate administration be simplified by online storage?

In today's increasingly wired world, there seems to be a app or software program for everything. In terms of estate planning, there are multiple companies that offer to store documents online, which can assist loved ones when the time comes to handle estate administration. That said, the online realm is also subject to attack from cyber thieves. Many in Philadelphia are concerned about the security of these documents, and the risk that they or their loved ones could be the victim of theft if their estate plan is accessed by the wrong parties.

One answer lies in creating a comprehensive estate plan that will be stored in both online and offline versions, and limiting the sensitive information that is contained in the online format. The reason that many people seek online document storage is to protect against the loss of estate planning paperwork and to make sure that the right people can access the plan when the time comes. However, there is no need to include many of the details that attract cyber thieves, such as Social Security Numbers, credit card and bank account numbers.

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.

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Larmore Scarlett LLP

Larmore Scarlett, LLP
123 E. Linden Street,
P.O. Box 384

Kennett Square, PA 19348

Phone: 610-444-3737
Fax: 610-444-9532
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