Wills and Estates
Having a will means avoiding probate: It’s actually the opposite. Anything passing under will means it does go through probate, a legal/clerical paperwork process for the authorities to make sure that it estate is handled right. An inheritance most often avoid probate because a beneficiary is named on a specific asset.
The Reading of the Will: I’ve never done it and never seen it happen. It’s a Hollywood tradition only – or possibly an English custom, or from old British movies. Can you picture Cary Grant in that scene?
An inheritance will affect my income tax: The principal value of inherited assets is usually not earned income and therefore not subject to income tax. Ordinarily only portions of an inherited asset may be taxable income, such as the earned interest part of a bank account. IRAs are an exception: all the funds in an IRA or other qualified retirement account are untaxed taxable income (except to a charity).
I am the Executor because I’m named in the Will: Not so fast! You may be named to become the executor, but you are not actually the Executor until you file the right paperwork and appear at the courthouse to be appointed and swear the oath.
An Executor can’t pass out any of the money till the very end of the estate: Although that’s the safest and best practice, it is possible for an Executor or Administrator to make a preliminary distribution before the very end, known as an “at-risk distribution.” If he or she messes it up and doesn’t keep enough money to pay the bills and bequests, he or she is personally at risk to make up the shortfall.
I’m not allowed to give away more than $14,000 at a time: You’re safe. That limitation is part of the Federal Gift and Estate Tax rules, which right now only affect multi-, multimillionaires. Unless that’s you, there’s no tax limit on the amount that you can gift. Making gifts may impact your eligibility for Medicaid for long-term care for five years afterward, and you might be required to file a gift tax return, but the rule, called the “annual exclusion amount,” doesn’t forbid you from making larger gifts, and for most people has no real tax impact. Plus, that number is out of date. For 2022 it’s $16,000 per person per year, when it does apply.
The Executor is personally responsible to personally pay the estate expenses: Nope. Estate expenses are almost always paid by the Executor from the estate itself, before distributing the net estate, or what’s left over after the bills are paid, to the beneficiaries or heirs.
All of the family’s travel expenses to attend the funeral are deductible for PA inheritance tax: Sorry. Only those traveling to carry out business of the estate, like the Executor or Administrator, can deduct their travel expenses for inheritance tax purposes. (Family members can agree to reimburse or pay those expenses, though.)
Power of Attorney
Giving someone else Power of Attorney mean you can’t act on your own any more: Not at all. You still retain the right to make your own decisions. Your Agent under Power Of Attorney is like an authorized second signer, but doesn’t take your place.
Power of attorney is only for old people: and NOT making Power of Attorney is only for gamblers! Power of attorney is just as important as making a Will. Before someone becomes deceased they may become disabled. Anyone under age 35 has a 1 in 3 chance of being disabled for at least six months during their working career. An illness or accident will keep 1 in 5 workers out of work for at least a year before the age of 65.
Guardianship is a ready method to help someone: Not true. Guardianship is an involved litigation before a Judge in court, with testimony, evidence, etc. It costs more, takes longer, and it’s a lot less flexible to go forward under court-supervised guardianship requirements afterward, than under private Power of Attorney. Also, Pennsylvania law requires judges to be more restrictive than ever in imposing Guardianship, a severe restriction on someone’s personal freedom.
Downloading an online form for Power Of Attorney Is good enough: Not if you’re serious about protecting yourself, your family and everything you’ve ever worked and saved for. With all that’s at stake, do it right, with your lawyer. An online form might work out for you, but it’s not worth the risk of being tripped up over a legal error that an attorney can spot and avoid.
Your Power of Attorney person can do whatever they want with your stuff: Disagree. Your Agent under Power Of Attorney has very strong legal obligations – “fiduciary duties” – to act on your behalf and in your best interests, and to avoid conflict of interest and self-dealing. The Court, the police or an administrative agency like Allegheny County Adult Protective Services will act to protect you from someone acting badly under your Power of Attorney.