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Four probate and estate legal facts you might not know that may save you money

by | Mar 13, 2024 | Probate

As an elder law attorney, I help my clients every day regarding probate and estate related questions. Together we work and take legal steps to protect or save their hard earned money or inheritance. Legal issues almost always have bottom line monetary results.

Here are four things you may not have known about common probate and estate related legal issues and principles that may either save you or cost you money.

Joint and transfer on death accounts are not controlled by the will

Sometimes people confuse what is controlled by the Will and its terms and provisions, and what is not. Remember that TOD, POD and In Trust for accounts go directly to the named beneficiaries, as part of your signed written contract with the bank or financial institution, without regard to the Will at all, and without probate requirements. So what passes under the Will? Anything that you own and leave behind in your name only, without having named any beneficiary. Also, don’t make the mistake of listing dollar amount bequests in your Will that won’t be paid because too many of your assets pass outside the scope of the Will, to TOD or POD beneficiaries, to fund those bequests.

Joint and transfer on death accounts are taxable in PA

Many people think that because such accounts go directly to a beneficiary while avoiding probate that they are not taxed.  Not so! TOD and POD accounts, which are owned completely by the decedent at death, are fully taxable for PA Inheritance Tax. A joint account, on the other hand, or actual joint ownership of real estate for example, established more than a year before death, only results in tax on the part that’s inherited from the decedent by the survivors, e.g. one half on an account with two names, one quarter on an account with four names, and so on.

Life insurance death benefit proceeds do skip past the tax man in Harrisburg

PA Inheritance Tax applies to most of what you may leave behind. One notable exception is life insurance death benefit proceeds on the life of the decedent.  It’s not included for Pa inheritance tax. (Another exception is for IRA or qualified retirement money for someone less than age 59 ½.).  For someone with millions and millions, life insurance is taxable for Federal estate tax.

An estate itself may be a separate taxpayer that also owes income tax

In addition to the decedent’s final personal tax return, the Executor and the estate itself as a separate legal entity may have to file “Fiduciary Income Tax Returns,” especially if you sold real estate through the estate or had other gains from e.g. sales of securities.  The estate may or may not actually owe additional tax, but fling the return may be required anyway – and sometimes even generates deductions the individual beneficiaries can use to reduce their own personal income tax.

At Marks Elder Law,  we handle these problems and issues every day. Call to see if we can assist you. 412-415-7586