Estate planning

Despite the fact that no one likes to think about these things, the old adage about “nothing is certain but death and taxes” is never truer than when applied to estate planning. In particular, careful estate planning can save you and your loved ones a great deal of trouble, confusion, and money. By planning ahead, you have the ability to limit your taxes and ensure that your family and loved ones receive as much of your estate as possible in a timely way. Establishing a Last Will and Testament, and planning ahead to minimize the assets that will be subject to probate can accomplish this.

In Pennsylvania, upon death, your estate will most likely be subject to “probate.” This process involves the appointment of an Executor or Administrator of your estate, who will then gather all of your assets, pay your debts, pay inheritance taxes, and then finally, divide the remaining assets among your heirs. Pennsylvania is one of the few remaining states that has a state inheritance tax, which must be paid within nine months after the date of death. If Pennsylvania inheritance taxes are filed within three months of the date of death, a 5% discount is applied to the amount of tax due.

Depending upon the size of your estate, it may be subject to federal inheritance tax as well. However, with the passage of the American Tax Payer Relief Act (“ATRA”) in January 2013, your estate will not be subject to federal estate tax unless it is in excess of $5 million dollars.  Unfortunately, there is no exemption for Pennsylvania inheritance taxes; the amount owed is based upon the beneficiary’s relationship to the deceased, not the amount of the estate. 

Upon death, your estate will be considered either testate (meaning you died with a Will) or intestate (you did not have a Will). Whether or not you have a Will can determine who gets what in your estate. If you have a Will, you have control as to where your assets and possessions go. If you do not have a will, Pennsylvania has a law of intestacy, which provides for distribution to your heirs in an order defined by the intestacy statutes. In particular, if you wish to leave assets to a non-family member, including a domestic partner, you can only do so through a Will; Pennsylvania intestacy law recognizes only blood relatives and spouses. A Will does not need to be a formal document; Pennsylvania recognizes holographic Wills, which are handwritten statements, signed by the Testator. However, you do need to sign your Will in order for it to be valid.

In addition to a Will, estate planning may involve the creation of trusts, consideration of whether property is jointly owned, joint bank accounts and other financial planning tools that will help minimize inheritance taxes. By planning ahead, you can save your family and loved ones a great deal of confusion and stress, and, quite often, you can minimize family conflicts and prevent situations involving heirs fighting over your assets. For more comprehensive estate planning, you should contact an attorney. 

For more information as to the Allegheny County probate process, see: