Estate Planning . Wills . Living Wills . Durable Power of Attorney . Inheritance Taxes . Federal Estate Taxes
Why do I need a Will? Regardless of whether you have a small estate or a very large estate, if you are 18 years of age or older you need a Will, at the very least to direct to whom your property will pass after your death and to select a personal representative (an executor) to administer your estate and pay debts and inheritance taxes. If you have minor children, a Will names your desired guardians for your children and can provide for a trust to hold and distribute your money for the children’s care. For larger estates, Wills, along with other estate planning tools, can be effective tools for minimizing federal estate tax.
What is a Durable Power of Attorney? A Durable Power of Attorney is a document that you create and sign while you are healthy that gives another person authority to act on your behalf even if you become incompetent or incapacitated. Such authority can be limited or very broad. A Durable Power of Attorney is a very powerful document and to avoid abuses, considerable thought should go into who should be the Agent and what powers should be given. Protections do exist under State law. A Durable Power of Attorney is a necessary part of estate planning because it gives you, not the court, the ability to choose who will act on your behalf should you become incapacitated and it is in place should such incapacity be sudden and unexpected.
Why do I need a Living Will or Advance Health Care Directive? A Living Will sets forth your personal choices for your medical and life sustaining treatment should you become incapacitated. This is a personal document and should reflect your beliefs and desires. An Advance Health Care Directive can authorize another person to make medical decisions on your behalf and allows them to communicate freely with health care professionals. These documents not only make your choices clear, they take away the burden on loved ones of making difficult decisions.
Will my estate be subject to federal or state estate or inheritance taxes? This is a tricky question at every level. Currently there is a federal estate tax, however a tax credit is available effectively eliminating the tax for smaller estates – estates under 2 million in 2008 and under 3.5 million in 2009. The future of federal estate tax law, however, is uncertain after 2009. Under the law today, the credit is significantly reduced in 2011. This uncertainty makes it difficult to plan without professional legal advice. Other credits and deductions may apply, such as the marital deduction, effectively eliminating estate taxes. However, particularly in the case of the marital deduction, the assets will be taxed upon the death of the second spouse and couples will want to be sure to maximize the use of their combined estate tax credits. States vary as to whether or not there are estate and inheritance taxes. In Pennsylvania there is no longer an estate tax, but there is an inheritance tax. The rate of the tax depends on the classification of the beneficiary. Generally, there is no tax on transfers to a spouse, 4½% tax on transfers to children, 12% on transfers to siblings and 15% on transfers to other beneficiaries. New Jersey has both estate and inheritance taxes. New Jersey inheritance taxes apply to transfers of property of $500 or more to persons other than a spouse. New Jersey estate taxes apply to estates over $650,000.