Monday, January 31, 2011

Estate Planning Mistakes - Number Twenty-Four

Do Not Fail To Plan for Federal Estate Tax. For the next 2 years, 2011 and 2012, those whose estates are under 5 Million Dollars (10 Million for married couples) will not be subject to the Federal Estate Tax. This could be stay the same, be raised or reduced in 2013. It would be a mistake not to address the potential exposure your estate might have to the Federal Estate Tax. This tax currently would be 35% of the estate. It was even higher in the past so it is not a tax to be taken lightly.

So, make sure your estate planner explains your potential exposure. If your estate is close to the amount or over, you want to make sure you have a Credit Shelter/ By-Trust in place. This type of Trust will allow you to avoid and in some cases eliminate the Federal Estate Tax.

Contact us at for expert estate planning advice that will save you money on taxes and preserve your estate for distribution in accordance with your wishes.

Friday, January 28, 2011

Estate Planning Mistakes - Number Twenty-Three

Estate planning is not just doing a Will. There are documents that everyone should have to address what happens if you are incapacitated or disabled. You want to make sure you have documents that take care of you while you are living.

Everyone should have a General (Durable) Power of Attorney, Healthcare Power of Attorney (to deal with physical as well as mental health) and Living Will. If you fail to have these documents and you become incapacitated or disabled, a legal guardian will have to be appointed. This is a legal process which will require a guardianship hearing before the court. You can avoid this sometime lengthy and expensive process with advance planning.

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Wednesday, January 26, 2011

Estate Planning Mistakes - Number Twenty-Two

If you have a business, then you should have a buy-sell agreement or a business succession plan. Business succession planning, including ownership succession and management succession, is critical to business owners. Will the business be transferred to family members, a key employee or other purchaser?

The buy-sell agreement is often an integral part of such planning. There are three basic types of buy-sell agreements: First, stock redemption agreements where the company agrees to purchase the departing owner’s interest; second, cross purchase agreements where the other owners agree to purchase the departing owner’s interest themselves; third, hybrid agreements that combine elements of the other two.

A buy-sell agreement protects each owner’s interest, preserves value, and prevents later disputes when an event of transfer occurs. A transition event could be a voluntary departure, disability, retirement or death. What happens if one of the owners gets a divorce? Without a buy-sell agreement to address these issues and assure orderly transition, the resulting chaos could be financially devastating for any business owner.

Critical Note:
How do you value your business? Once a value is established, how do you fund a buy-sell agreement? Business valuation is one of the most problematic issues surrounding the buy-sell agreement. There are several business valuation methods. A few of the common methods include determining value with reference to (1) book value, (2) capitalizing the earning of the company over a fixed period of time, (3) setting the value by independent appraisal, or (4) periodically setting a fixed value by mutual agreement of the owners of the company. Experience shows that having the owners periodically determine the value is seldom satisfactory; they seldom get around to doing it and the value gets stale. A backup, such as determining the value by appraisal if the owners haven’t set the value in the last year or two is an important provision of a buy-sell agreement. Choosing the appropriate valuation method to implement is critical.

As pertains to funding, there are generally three ways to fund a buy-sell agreement. They are a cash sale which requires savings; a financed sale whereby part of the sales price is represented by a promissory note usually secured by a pledge of the stock being transferred; or if a cash or financed sale is not feasible, a sale funded by life insurance may best address the funding of a buy-sell agreement.

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Thursday, January 20, 2011

Estate Planning Mistakes - Number Twenty-One

Does someone who is not related to you live with you? Is there someone living with you whose name is not on the deed to the house? What happens to that person if you die before he or she does? This is when you want to consider whether you need to preserve a life estate for that person.

What is a life estate? A life estate permits a person who is not on the deed to continue to live in the house for his or her lifetime. Upon his or her death, the house could go to whomever you choose. You want to make sure your Will has a provision similar to the following:

I devise and bequeath my house at ________ together with all household goods and furnishings therein, and all policies of insurance on said real and personal property, to my ________ for life so long as she/he desires to use such premises as a home and pays all costs of maintenance thereof, including taxes, assessments, insurance and ordinary repairs, said property to be insured in a reasonable amount insuring the interest of the remaindermen as well as herself/himself.
Upon the death of _________ or at such prior time as she/he no longer uses said premises as a home for herself/himself, I direct my Executor to sell said real and personal property and distribute the net proceeds thereof to _________.

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Wednesday, January 19, 2011

Estate Planning Mistakes - Number Twenty

Do not fail to plan for "non-probate" assets. Most people do not understand what is a probate asset or what is a non-probate asset. Probate assets are those assets that pass under a person's Will because the asset is only in the name of that person.

Non-probate assets are those assets that pass outside of a person's Will because the distribution is NOT govern by the Will but is governed by another document. As a result of someone's death, money can be distributed from a life insurance policy, from a jointly held bank account or from assets held under a Trust.

Everyone should review their beneficiary designation forms under a life insurance policy or a retirement account to make sure you have "appropriately" named someone. For example, if you name your children and something happens to a child do you want your grandchildren to get that child's share? Your beneficiary designation form should be reviewed to make sure your intent is clear.

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Wednesday, January 12, 2011

Estate Planning Mistakes - Number Nineteen

It is important the original Will is maintained in a secure place. If my clients keep the original, it must be either in a safety deposit box or a fireproof safe at their home. Otherwise, the attorney preparing the Will may maintain it. The original is needed at the time of death.

BUT, what happens if the original Will can not be found. You have to overcome the court's presumption that the Will was intentionally destroyed by the deceased. You would have to show that the original was not with the deceased. Further, you would have to present a photocopy is available and have person who wrote the Will, the attorney, available to testify as to the contents of the Will.

SO, you DO NOT want to misplace the original Will. It will cost you if you do. Contact us so that we can guide you through the estate planning process.

Tuesday, January 11, 2011

Estate Planning Mistakes - Number Eighteen

Do not fail to amend your Will after a birth or adoption. Under Pennsylvania law, you can disinherit your children. Unlike a spouse, you are not required to leave your children anything. However, in order to avoid the inadvertent disinheritance of a child, Pennsylvania law provides for certain rights to children.

If your child is born or adopted after you made your Will then such child will stay be able to inherit. It may not be fully what you intended. That is why it is important for you to avoid these pitfalls/mistakes.

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Monday, January 10, 2011

Estate Planning Mistakes - Number Seventeen

There are a number of triggering events that should have you making a Will or updating a current Will. One such event is marriage. Do not fail to amend your Will after you get married.

If you marry after making a Will (with no mention of a current or future spouse) and do not change it before you die, then your surviving spouse will receive the share of the estate to which a spouse would be entitled if you died without making a Will. This may or may not meet with your intent. It is always better to make your own plan then having the State's plan imposed upon you.

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Friday, January 7, 2011

Estate Planning Mistakes - Number Sixteen

Do not forget to make sure your documents address Divorce. Pennsylvania law provides that if you are divorces after making a Will any provision in the Will favoring or relating to the former spouse becomes ineffective for all puposes unless it appears from the wording in the Will that the provision was intended to survive the divorce. Just to be sure, it is even better to be proactive and change your Will when you get a divorce.

Furthermore, if you have any irrevocable documents, the law does not change those provisions upon divorce. Therefore, it is imperative that your irrevocable documents address divorce in the document when the document is drafted.

Make sure you have expert estate planning advice. Contact us at

Thursday, January 6, 2011

Estate Planning Mistakes - Number Fifteen

What about Fido? Do not forget about your dogs, cats, horses or other family pets. You want to make provisions for your pets in your Will or you can even have a Pet Trust established for the benefit of your furry friends.

A Trust might cover (1) designation of the caretaker (2) the fee to be paid a caretaker (3) name the trustee (4) standard of care for the pet and (5) the amount to be left in Trust for the pet.

You want your estate plan/Will to be comprehensive. Therefore, make sure you contact us at

Wednesday, January 5, 2011

Estate Planning Mistakes - Number Fourteen

Many people do provide burial instructions in their Will. It is also important to communicate funeral instructions to family members to make sure your wishes are followed. If the instructions only appear in the Will and the Will is not immediately assessible, no one will know your preference if you did not communicate the instructions to anyone. Do not let this mistake happen to you.

The following burial instructions can be provided in the Will: Burial plot number; Cremation, if desired; location of services; how funeral expenses are to be covered; program; guest preference; and, the list goes on.

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Tuesday, January 4, 2011

Estate Planning Mistakes - Number Thirteen

Do not appoint the wrong Trustee. A Trustee is a person or institution that manages assets placed in a Trust for the benefit of named beneficiaries. Unlike an Executor whose role ends after probate has been finalized, the Trustee's role continues for the term of the Trust which could be for a period years or until the assets have all been expended.

In order to remove a Trustee, the Court must believe that removal would be in the best interest of the beneficiaries and would not be inconsistent with the material purpose of the trust. Further, a Trustee can be removed if a serious breach of trust has been committed by the Trustee; there has been a substantial change of circumstances; incompetence of the Trustee; and any other violation which can be presented and substantiated before the Court.

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Monday, January 3, 2011

Estate Planning Mistakes - Number Twelve

Do not appoint the wrong Executor. An Executor is the person who handles assets and other matters when a person dies. Generally one might name the surviving spouse as the primary Executor and an older child (at least 18 years old) as the alternate Executor.

You want the assets of the estate protected. Make sure your Executor either has experience or knows how to hire the right professionals to assist with taking care of the assets. It is not always wise to name an institution unless you understand the fee structure and give an individual the authority to hire and fire institutions to manage your estate.
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