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Kennett Square Probate & Estate Law Blog

"Modern Family" provides estate planning viewpoints

The hit television series "Modern Family" is a favorite among viewers and critics alike. Many in Philadelphia tune in every week to watch the antics of the Dunphy family. A recent article used the family dynamics at play on the show to illustrate the various estate planning options that many modern families face in the real world.

The patriarch of the family is married to a much younger woman. She has a child from a previous marriage, while he has two adult children from a previous marriage. In terms of estate planning needs, this couple would likely focus on long-term care planning, as it is likely that the wife will long outlive her husband. As for inheritance matters, things become more complex, as the husband likely wishes to provide for both his new wife and his adult children.

How to decide on estate administration duties

Once an estate plan has been crafted and is nearing completion, Philadelphia families must turn their attention to determining who will be responsible for carrying out the tasks outlined within the plan. These decisions are just as important as those laid out within the estate plan itself, as estate administration is a crucial part of turning one's intentions into reality. Not everyone is well-suited to handle the administration of an estate, and the best candidates are not always the ones that immediately come to mind.

For example, many people assume that they should name their spouse as the party authorized to handle all matters related to the estate. However, there are many cases in which a surviving spouse is unsuited for that role. An example lies in a spouse who is played little to no role in the daily management of family finances. He or she may have the best of intent, but may lack the financial acumen needed to handle the multitude of tasks associated with estate administration.

Weighing the pros and cons of trusts and annuities

For some Philadelphia families, estate planning is not a simple matter. In cases where one child is struggling while his or her siblings are thriving, it can be difficult to know how to best pass on an inheritance. Some families consider annuities and trusts as estate planning options but are unsure of which path to follow.

In the case of annuities, an adult child who has addiction issues or who struggles with financial irresponsibility would not receive the full value of his or her inheritance at any one given time. The annuity would pay out over the course of many years. This ensures that the beneficiary will always have access to a source of funds. However, annuities are inflexible and cannot be reversed once annuitized.

Easing the process of gathering assets following a loss

For many Philadelphia families, the focus of estate planning efforts is on achieving a smooth transfer of wealth from one generation to the next. However, it is also important to give some consideration to the tasks that will be required of the person who is handling the estate. Gathering assets and distributing wealth to the designated heirs can be a stressful process, but families can take steps to make the task easier to accomplish.

One of the most important considerations when structuring an inheritance is to create a comprehensive list of personal property. This includes items both large and small, as items of seemingly little worth are often highly valued by loved ones. Creating a list of all items of personal property can help the person handling the administration of the estate know which items should go to which heirs.

How to take steps to protect against probate litigation

Philadelphia residents often spent considerable time and effort creating an estate plan that reflects their sincere intentions. Having those plans altered by probate litigation is often not something that individuals or families think about, although there is a risk that many of the provisions laid out within an estate plan could change during the course of a legal challenge. There are a number of steps that individuals can take to help ensure that the stipulations laid out within their estate plan will endure a challenge in probate court.

One of the most powerful things that can be done to reduce the risk of a contested will is a very simply step, yet one that is so often overlooked. Taking care to use clear language within a will and other estate planning documents can make a world of difference if the matter ever goes before a court of law. This begins with naming each and every heir and outlining which assets that person can expect to receive from the estate.

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.

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Larmore Scarlett LLP

Larmore Scarlett, LLP
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P.O. Box 384

Kennett Square, PA 19348

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