We all plan constantly, every day. We make plans both big and small. But planning for the future is an imperfect exercise. We can’t anticipate everything that might happen, and mistakes happen
But sometimes even the brightest and most capable among us simply neglect to safeguard ourselves, our families and our wealth in the event of disability or death.
Here are some essential steps to take for personal legal planning. (This is not an exhaustive list.)
Don’t wait or procrastinate. Sooner is better than later. Unless you can predict with certainty the moment of your future disability or death, be prepared before you need legal planning. We carry a spare tire in our cars in case we get a flat tire.
Get professional help and avoid doing it yourself. An estate planning attorney will raise issues and ask questions that you might not think of. What’s at stake is everything you’ve ever worked and saved for, and the family you love. Don’t be penny wise and pound foolish. Do it right.
Choose your fiduciaries (helpers) carefully. A fiduciary is someone who serves legally for the benefit of another, such as an Executor, Trustee or Guardian. The best choice is not always the oldest child or the child who lives closest.
Plan for contingencies and choose successors to help you when the first choice is not available. Who will inherit someone’s share if they die before you and are not alive to inherit themselves? Who will serve as the backup or substitute Executor or Trustee? You can also almost always name two people to serve together, when two heads are better than one (but not if they don’t get along!).
Make Powers of Attorney in case you need help during your lifetime. Your Will only comes into effect after you die to say who will wind up your affairs, and how. Powers of Attorney are just as important because before somebody becomes deceased, they may become disabled. In your Powers of Attorney you can specify who you choose to help you, and how, if you become unable and need assistance during your lifetime. Otherwise your family might need to litigate a guardianship case in court, and someone may end up in charge of you who you really didn’t want.
Pay careful attention to designating beneficiaries on qualified retirement accounts such as IRAs. There are opportunities to get extra beneficial after-tax results, but making a mistake means that the beneficiaries of an inherited IRA may pay more tax than they need to, reducing its value.
Create Special Needs Trusts for anyone, young or old, with a disability or who may need to rely on public benefits such as Medicaid. If you leave an inheritance outright to someone with a disability, or a senior in a nursing home on Medicaid, your bequest won’t necessarily add value for them. A Special Needs Trust lets you have your cake and eat it too: your beneficiaries retain eligibility for basic benefits, AND the inheritance from you adds supplemental value to improve their lives.
Communicate now, during your lifetime, with your family and successors and those who are important to you, or who will make decisions for you. Tell the people who love you what you want now, while you can, in addition to writing it down and signing it for later. Late night conversations around the kitchen table really help to let others know what you want and don’t want.
But also: put in writing, put in writing, put it in writing. All of estate planning, Wills, Powers of Attorney, trusts, etc., is about you making your choices, writing it down and signing it to make it stick later. It’s not hard to do with the right help.
Gather and organize information that others can use to help you in an emergency. Financial records, funeral arrangements, lists of contacts to call, where to find your estate planning documents, car titles, IOUs, etc. will assist those whom you will ask to help you when needed.
After someone has died, protect the dependents – children, pets, even plants – and secure the house.
Even when probate is not necessary, remember to file and pay Pennsylvania Inheritance Tax. Though you may not need to probate a Will or be officially appointed as an Executor or Administrator, almost everyone in Pennsylvania owes Inheritance Tax on what they left behind, even when it all goes to joint owners or beneficiaries. Generally only bequests to a surviving spouse or a charity, and life insurance death benefit proceeds, avoid inheritance tax completely.
