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Preparing a Will
 
Copyright © 2004 Zegarelli Law Group. All rights reserved.
Written by Gregg R. Zegarelli, Esq.

 


 
  First and foremost, a "Will," the statement of intention for the disposition of assets at death, is a matter of state law.  The applicable state is usually where the residence is at the date of death, often with minimum residency term requirements.  Thus, you always need to check your state law.

There are three very important estate-related documents: 1) the Power of Attorney; 2) the Living Will; and 3) the Last Will and Testament, aka, the Will.

Each of the those documents is relevant at different times in the asset management process. 

  • The Power of Attorney applies when you are alive.  However, you are physically and/or mentally incapacitated and you need someone to handle your affairs.  If a power of attorney continued to apply even if you are mentally incapacitated, it is called a "durable" power of attorney.  If the power of attorney does not become effective until certain events occur, such as determination of incapacity by an attending physician, then it is called a "springing" power of attorney.  Thus, a power of attorney that is signed today, but not enforceable by the person receiving the power to act (the "attorney-in-fact") until three physicians certify mental incapacity, then that power of attorney would be a durable springing power of attorney.  Also, powers of attorney can be special or general.  A special power of attorney gives power to do a specific thing, like manage one parcel of real estate, a general power gives power to act in a person's entire stead.
     
  • The Living Will applies when you are alive, but, generally speaking, in a vegetative state.  Sometimes this is a statutory form for the purpose of creating reliability and stability for the attending physician.  A living will specifies whether to, for lack of a more simple way to say it, pull the plug.  A living will specifies whether certain circumstances will require maintenance of life and other circumstances directing to terminate life.
     
  • The Last Will and Testament applies when you have passed.  It specifies to whom you want your assets to be distributed.  There is an underlying premise for Wills that many people do not realize: a Will is only applicable to the extent that the legal title to the asset would not otherwise specify to whom the asset should be distributed.  Thus:
     
    • When assets are jointly owned, with right of survivorship, if one person dies the other person owns the asset by operation of law.  This property does not flow through probate because it is unnecessary: there is no reason to probate property that automatically goes to someone by operation of law.
       
    • When assets are in a trust, since legal title is not in the decedent, those assets do not flow through the probate process.
       
    • Generally speaking, only assets which you personally own will pass through probate.  (When an asset is owned by two or more persons, the asset can be owned "jointly with right of survivorship" or "jointly as tenants in common."  In the former, if a party dies, the other party owns the decedent's interest automatically.  In the latter, if a party dies, the interest is passed through the estate.  Titling assets is important.)

    Another common misunderstanding is that when a married person dies, any interest passes to the spouse.  Not in Pennsylvania.  In Pennsylvania, the surviving spouse receives the first $35,000 plus 1/2 of any excess of the estate, with the other 1/2 descending to children.

    Some things to think about:

    A Last Will can be completely tailored to your needs. Following are discussion points:

    Gifts:

    Specific Gifts. Identify to whom you will give any specific gifts; identify the person and the gift. E.g., I want to give my Rolex watch to Jane Doe. If the gift is destroyed, does the person get the value? E.g., if the watch is destroyed in event of the death, e.g., the accident, do you want to give the value of the watch?

    After giving the specific gifts:

    Personal Effects. Identify to whom, if anyone, will receive your personal effects. "Personal effects" are personal items, such as rings, watches, hair brushes, clothing. Often a person gives personal effects to the spouse, if the spouse survives, otherwise to any living children. This is called a "per capita" gift, because it is, literally, a "head count" of living persons.

    Residue. Whatever remains after specific gifts and gifts of personal effects is called "residue." Reside is often given to the spouse, if the spouse survives, otherwise, to children on a "per stirpes" basis. "Per stirpes" means that, if a child is predeceased, then any children of that deceased child takes the parent's share.

    For example, after specific gifts and gifts of personal effects, there is residue of $400,000 in the form of stocks and bonds. The decedent, John Doe, had four children, but one of the children, Jane, died before John Doe. Jane has two living children (John's grandchildren.) If the gift is on a per capita basis, the residue is split in three equal shares of $133,333.33 among John's living children; Jane's children receive nothing. If the gift is on a per stirpes basis, the residue is split in four equal shares of $100,000: each living child takes one share, and the two grandchildren "step up" into Jane, their parent's, quarter share, each receiving $50,000.

    Simple Trusts:

    Children can take an inheritance at 18 years of age. With larger inheritances, many parents believe that 18 is too young to inherit money or property, and tend to prefer mid-twenties and thirties.

    Usually a Will has a provision for a "testamentary trust," which is simply saying that a beneficiary (the person receiving the gift) will need to be of a certain age, such as 26 years old.

    With multiple minor children, there is always a question of when to divide the potential inheritance into shares, and how to handle a need of one child, e.g., medical emergency, beyond the presume equal share split.

    Trustees and Guardians:

    Whenever children are minors at the time of death, they require a guardian. There are two "estates": one for the person of the child and one for the inheritance. That is, you can nominate a guardian to care for the children, but not give that same guardian care of the money. You can have a separate guardian for the estate of the child and estate of the money. For example, if Aunt Florence is loving but not good with money, then you could nominate Aunt Florence as guardian for the estate of the children only. Then you could appoint Joe Cpa, as guardian for the estate of the money. Aunt Florence would then need to ask Joe Cpa for disbursements for care of the children.

    Once children reach the age of majority, 18 years of age in Pennsylvania, they are adults and do not need guardians for their care or care of the inheritance. However, as stated for trusts, above, you can establish a higher age before which the children cannot take the inheritance. (You cannot prevent the "emancipation" of a child, however, as to their own care upon reaching the age of majority--you can only prevent access to the money.)

    For any period of time after the child reaches the age of majority, the inheritance is held in trust, by the trustee, pursuant to the terms in the Will. For example, the Will might provide that the trustee is to pay education expenses for the child.

    Any guardian and any trustee can be the same person. It is recommended policy to have two alternates.

    Executor:

    The Executor handles the administration of the estate. Paying taxes, filing the forms, and making sure the beneficiaries receive their inheritance. When there is a guardianship or trust, the Executor distributes to those persons for the beneficiary.

    The Executor, any guardian and any trustee may be the same person. It is recommended policy to have two alternate Executors.

    You can have alternate individual executors, trustees and guardians, but you need to consider complications upon disagreements.

    Please think about these issues, and contact us.  Our office regularly assists our business client owners with structuring their estates, including for succession.

 

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