This article was originally published on PoconoRecord.com by Ralph Grauso on May 7, 2016
With the recent, unexpected passing of Prince, it was revealed that he did not have a will or an estate plan. While this surprised many, it was not surprising for me.
Yes, it does seem that when someone has a lot of money it would be natural for them to take care of their legacy, but you would be surprised how many do not. However, you do not need to be rich and famous or have millions of dollars to have a need to create an estate plan.
I have found that many individuals do not think it is necessary to have a will, trust or other estate planning documents, as they often choose not to think about death or think it is something that only the mega-wealthy need to do. This is far from the truth. Creating an estate plan is essential regardless of age, health and wealth.
First, keep in mind that if you have not made appropriate arrangements for your estate, state law controls your assets. Let’s use Prince as an example.
In his case, there is no known will, and he did not have a spouse when he died or children; therefore, 40 percent will go to federal taxes and a minimum of 16 percent will go to Minnesota through state taxes. His assets will then be divided among his siblings, even his step-siblings, as Minnesota does not distinguish between step siblings and full siblings. This will more than likely cause family conflict, which may not be what he wanted.
So, what can you do to help prepare you and your family? Whether you are married or single, have kids or not, here are the five main elements of an estate plan that should be considered by all.
A will is a legally binding statement directing who will receive your property at your death. If you do not have a will, your assets will be distributed according to the state laws where you have lived. Pennsylvania has developed a set of laws that guide the disposition of a person’s property if they die intestate (without a will) or if all of one’s assets are not accounted for in a will. These laws are called Intestate Succession in PA.
They follow specific guidelines designed to give the assets to whom would have likely received them. However, it may not be what you intended.
There are several different reasons for setting up a trust. There are many types of trusts, and the type you choose depends on your needs. If you establish a revocable living trust that terminates when you die, any property in the trust passes immediately to the beneficiaries. This can save time and money for the beneficiaries. There are also irrevocable trusts that can help limit exposure to estate taxes. Talk to a professional to find out which works best for you.
Power of Attorney
A power of attorney allows you to designate someone to step in and manage your finances should you become incapacitated. This document is especially important for singles as a spouse is often the person who serves in this role. If you are single and do not have a power of attorney designated, a court will decide your guardian and may select someone who you may not have wanted.
A medical directive is similar to a power of attorney but provides oversight for medical decisions. There are two main documents in this category: A living will, which contains instructions for your health care should you become incapacitated, and a health care proxy, which names a person who will make medical decisions on your behalf if you are unable. If your family members disagree about your care, it’s good to have these documents in place to ensure your wishes are carried out.
From simple wills to special needs trusts, our experienced estate planning attorney, Pat Kelley, can help you with your estate planning and long-term care plan needs. Mr. Kelley also represents clients who are involved in litigation over an estate.