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Pitfalls in Estate Planning

The following information was discussed by Attorney Whitney Hughes on the March 24, 2009 edition of Legal Briefs on KDKA's Pittsburgh Today Live.

Unfortunately we hear quite often of the problems encountered when making an estate plan. Most often it is an elderly friend or relative who has fallen into the hands of an unsavory character who takes advantage of the individual’s inexperience and trusting nature.

Below are some common misperceptions and pitfalls and how to avoid them as well as some helpful tips and information about an upcoming clinic on probate and living trusts.

What is a will?

A will is a legal document which details how your property will be distributed in the event of your death. It can also state who will care for your minor children. A will also states who is responsible for making sure that each of these wishes is carried out. This person is the executor.

Why should I have a will?

Many people are under the assumption that since they have limited assets or a small number of beneficiaries (people who stand to benefit once you die) that they really don't need a will. THIS IS NOT TRUE. Anyone who owns a home, has money in the bank, or has children should have a will. Once you've passed away, there is nothing you can do to make sure your wishes are adhered to. It's essential to have a written will to make sure these plans are carried out.

What happens if I don't have a will?

States use intestacy statutes to determine who will receive property when someone dies without a will. Many people are under the mistaken assumption that if a husband dies without a will, his wife will receive the entire estate. That is not true. In this situation, under most intestacy statutes, if there are no children, the wife would receive 1/2 to 1/3 of the estate and the remainder would go to the husband's parents. If there are children, the wife would take 1/2 to 1/3 and the children would get the rest - regardless of their age. This can be a problem if the children are young because they usually aren't prepared to receive a large sum of money and it is spent quickly.

I have heard a lot about trusts lately. What are they?

A trust is a method of distributing property and avoiding the probate process. It allows you to keep property within your control during your lifetime and then upon your death the property automatically passes to the person you've left it in trust for. Trusts can be a very valuable tool in estate planning, but there are different types of trusts and different implications to them, so you want to talk to an attorney to find out which one is best for you.

A living trust is a legal entity into which a person’s assets can be transferred and managed by either the person making the trust or to another person or corporation—a trustee. There is a trust document which then sets out all of the instructions for how the trustee will manage the trust. Unfortunately many problems arise when it is assumed that a trust is the best solution for everyone without knowing how it will affect you individually. In addition there are many people who will attempt to sell you a generic “trust document” for a significant fee which will not meet any of your needs.

What if I am sick or injured and can't make decisions for myself?

This is where a Power of Attorney and a Living Will are an absolute must. A Power of Attorney is a legal document in which you give another person the ability to make certain decisions for you in the event you are not able to do so. There are different types of Powers of Attorney: healthcare, financial, and general. You can have just one or all three.

A living will is a document in which you specifically state your wishes with respect to receiving life saving or life sustaining treatment. These can be very specific with respect to the treatment you are either accepting or refusing—for example breathing assistance or feeding tubes.

Keep in mind that even if you have a living will, it is essential that the person you appoint as your Power of Attorney have a copy of your living will.

My sibling has a Power of Attorney for my father but is making some questionable decisions with his finances. What can I do?

A Power of Attorney is a powerful document which unfortunately is easily abused if not drafted correctly. Powers of Attorney can be as specific or as general as you need them to be and can include clauses which require a third party to review and/or give his/her consent before any major financial or legal transactions take place.

If a Power of Attorney is being abused, it can be revoked. A document will have to be drafted by your father in which he revokes the power and then this document will have to be given to anyone that the Power of Attorney has dealt with on your father’s behalf. This is something that you will want to have an attorney handle to ensure that no further detrimental actions are taken.

Practical concerns about estate planning

There are some things to consider which are more practical considerations when talking about estate planning.

  1. Make sure you have made copies of your Power of Attorney forms and living will and give them to the person you are appointing.
  2. Make sure all of your beneficiary information is correct on your insurance policies. Policies will need to be updated in the event of the birth of a child or the death of a beneficiary.
  3. Make sure if you are living with someone (even a husband and wife situation) that both names are on the utility bills. Many times it is difficult to make changes to an existing account if your name is not on it.
  4. DO YOUR HOMEWORK!! Making an estate plan should involve doing a great deal of research before you make a final decision. Do not be swayed by smooth talking salesman or even attorneys that will try to talk you into an “easy solution.” Find out not only what all of your options are, but what they will cost both you and your beneficiaries in the long run. Don’t be afraid to ask questions, either. These are your assets which you have worked many years to acquire—don’t dispose of them lightly just because someone told you “this is the right thing to do”—make sure it really is.

THE ACBA OFFERS A FREE PUBLICATION, "The Truth About Probate," which is available by calling the main number at 412-261-6161.

FREE CLINIC

The Probate and Trust Law Section of the Allegheny County Bar Association along with the Pennsylvania Attorney General’s Office today announced that a free clinic discussing the important issues of probate and living trusts will be held March 31, 2009 from 6:30 p.m. to 8:30 p.m. at the Crowne Plaza Pittsburgh South Hotel, which is located across from South Hills Village. The clinic will feature a panel discussion of members of the bar association’s Probate and Trust Law Section in addition to the Honorable Frank J. Lucchino, Administrative Judge in the Orphans’ Court Division of the Allegheny County Court of Common Pleas, and John Abel, Senior Deputy Attorney General in the Bureau of Consumer Protection. The clinic will address issues and questions about revocable living trusts and probate and will help to address misinformation that is being distributed about these subjects. The clinic will also advise attendees on how to guard against living trust scams targeting senior citizens.

The clinic will be limited to 250 people, so reservations are required. Call 412-402-6651 to make a reservation.

As always, for any questions regarding estate planning, you may contact the Allegheny County Bar Association’s Lawyer Referral Service at 412-261-5555.