Most people have personal belongings or real estate when they pass away. What happens to those assets depends on whether that person planned accordingly through appropriate estate planning documents. The most commonly used is a will, a legal document that expresses a person’s wishes regarding their assets for when they pass away. To have a valid will means they will die testate, and that will is the controlling document regarding their individual assets. To die, intestate means there is no will, and one’s assets are distributed to one’s heirs according to the state’s probate code. It is important to note that retirement plans and life insurance policies generally have predetermined beneficiaries and can avoid the probate process. Retirement benefits, however, do not avoid inheritance taxes.
In Pennsylvania, if one were to pass away intestate, the statutes dictate the distribution of their individual assets based upon their marital status and living heirs. If there is a surviving spouse and no descendants or children, the spouse inherits everything. If there is a living spouse, and all the children are with that spouse, then the spouse inherits the first $30,000.00 from the estate, plus one-half of the remaining assets, and the remainder half is then distributed equally amongst the children. If there is no surviving spouse but there are children, then the children will inherit everything equally. In Pennsylvania, if a child were to predecease their parent, that child’s share of the parent’s estate is equally distributed to any living heirs that child may have.
Although some people find this an acceptable method of asset distribution, even if they do, it is highly recommended that they should still have a will. The will allows a person to state specifically what they want to happen upon their death, such as funeral and burial arrangements, and what will happen to their assets, both personal and real property. Without a will, your personal belongings go to your living heirs without following any prior expressed wishes regarding those belongings. There is no legal requirement that your verbal wishes made prior to death regarding specific personal and real property be followed. If heirs cannot agree, those belongings may be sold, and the proceeds are equally distributed to those heirs. This can include property such as cars, jewelry, houses, and everything else you may own. However, if, after your death, you want an asset to go to a specific person, you need it stated in a will. For example, if you want your motorcycle to go to your niece after you pass, you will need a will to ensure that your niece receives that motorcycle. Under the intestate code, your niece would only inherit from you if you had no living spouses, children, parents, or siblings – specifically that niece’s parent. The only way to ensure that your wish regarding that vehicle is followed is to have it stated in your will. Many people have family heirlooms that they worry will not stay in the family after they pass. To ensure that they do, put it in a will!
If you have minor children, it is essential that you have a plan in place just in case anything was to happen to you. This would include who you want to take care of your children and to ensure financial security for your children. Through proper estate planning, you can create a trust, whether testamentary (through your will), revocable, or irrevocable, based upon your specific situation and needs, that allows you to direct when and how your children receive funds from you.
A will also gives you the power to name who you want to be the executor/executrix of your estate. This is important because you want a person who you trust and is responsible and honest to handle your estate. This person is responsible for filing inheritance taxes, notifying your heirs of your estate, paying out any claims against your estate (or fighting them), and distributing your assets according to your will. Only you may know who would be best for the job, follow your wishes as you want, and properly take care of your estate. If no appointment of executor/executrix is stated in the will, or you die intestate, any person with an interest in your estate can seek to be appointed as your executor; this includes creditors. If a will does not appoint a testator, the statute dictating who receives your assets is followed to determine who has the right to serve as your administrator, which is usually the spouse, an adult child, or, if neither, a living parent.
An estate planning practitioner may also guide you in creating a Power of Attorney and a Healthcare Power of Attorney with a Living Will. The person you appoint as the Agent in your Power of Attorney will have the powers you give them in your drafted document, which normally includes the right to make financial decisions on your behalf and in your best interest if you cannot make those decisions yourself. The appointed Healthcare Agent of your Healthcare Power of Attorney will have the power to make medical decisions for you if you cannot make such decisions.
Although a morbid topic, our goal here is to inform you of some of your estate planning options and explain why it is so important to create your estate documents. If you have any questions or want to create your estate planning documents, please contact an experienced estate planning practitioner.
