Estate Planning

Disposition of Tangible Personal Property

Published on: February 13, 2013 | by Dessen, Moses & Rossitto

In a recent post, I discussed how to dispose of special items of personal property by giving them to a particular named person – these are called “specific bequests.” The specific bequests are usually the items that are most important or significant to the person making a Will – such as a stamp collection or jewelry that has been passed down through the generations to the oldest daughter, youngest son, etc. However, because most of us own many more items than the few we give away as specific bequests, this post will discuss how to dispose of the rest of the many items that you have acquired over the years.

In my standard Will, I define “Tangible personal property” to include all clothing, personal effects, jewelry, motor vehicles, household furniture and furnishings, household appliances, silverware, glassware, china, rugs, books, pictures and other works of art, stamp and coin collections, family memorabilia, and all other similar assets for personal or household use, which are owned at death, as well as the interest in casualty insurance policies insuring those assets against loss or liability. I specifically state that the term does not include any cash or securities (including common, preferred, and other classes of capital stock; warrants, options, or puts and calls; bonds, debentures, notes and other fixed income-bearing obligations, regardless of conversion privileges; and units of participation in common trust funds, investment trust stocks, and mutual fund shares) that are owned at death.

Most typical parents leave the personal property to the spouse and then to the children, to be divided among them as the children agree within a certain number of days (60-90 days is common) and if they can’t agree on who gets a few of the items, those articles in dispute are sold, and the proceeds added to the residuary estate. The distribution of personal property among a group of people can be difficult, because to some, photographs are priceless or worthless – and the same can be said of china, a piano, antiques, etc. As they say, beauty is in the eye of the beholder. While sometimes my clients say they want the items divided “equally” among the beneficiaries, this is of course impossible – you can’t chop up the desk into 3 equal parts to divide it equally among your three children.

Minority and Disability Trusts

Published on: February 7, 2013 | by Dessen, Moses & Rossitto

Minority and/or Disability Trusts are often added as a standard clause in a Will, providing that if any assets are left to a young or incapacitated person who is not receiving Supplemental Security Income (a Special Needs Trust is required if SSI is involved), those assets will be held in trust. Rarely do I prepare a Will that does not include either a Disability or a Minority and Disability Trust. It is easy to add such a Trust and it prevents the possibility that at the decedent’s death, a young adult will inherit a substantial sum of money, use that money to buy, buy, buy and then be virtually broke within a year or two. Believe me, I have seen this unfortunate occurrence on more than one occasion.

If there is no possibility that any beneficiary (including as yet unborn grandchildren) will be under age 25 at the decedent’s death, then I usually just add a Disability Trust. This normally provides that if any beneficiary is incapacitated at the time of death, then his or her share is held in trust, to be distributed by a trustee for the health, education, support, maintenance and/or emergency needs of the disabled beneficiary. A person is considered incapacitated if a court declares the incompetency in a court hearing. However, one can also be treated as being under legal disability, incompetent, or incapacitated if so certified in writing by his or her personal physician. If the person recovers and becomes competent, then the money is released to the beneficiary outright. If not, the money remains under the control of the trustee until the money is depleted or the beneficiary dies.

If any potential beneficiary is or may be under a given age (usually 25 or 30 years of age) at the time of death, then I usually add a generic Minority and Disability Trust – that combination allows money being left to anyone who is potentially too young to exercise good judgment or to anyone who is incapacitated to be held in trust. As with the regular Disability Trust, the money may be used for the beneficiary’s health, education, support, etc. The trustee invests the money and distributes it slowly over time for the benefit of the young or disabled person.

Organize Your Assets to Benefit Your Heirs

Published on: February 1, 2013 | by Dessen, Moses & Rossitto

Consolidate your bank accounts

I like many people, open bank accounts for the sole purpose of saving for something special. It might be a special vacation, a birthday party, a new car, or whatever. Then after the occasion has passed, I often leave the account open with a little bit of cash, always hoping to add to the account at a later date. While that never seems to happen, oftentimes the bank imposes a service charge because of the small balance, and I eventually lose the money.

At your death, your Personal Representative, known as your executor or administrator (or if female, your executrix or administratrix) is required to obtain written information about each of your bank accounts, including how it was titled, when it was opened, and to find out the value at the date of your death. If you have several accounts with small amounts of money, obtaining this information can be a significant burden for your Personal Representative and a significant expense to your Estate. If your Personal Representative is a professional, your beneficiaries will be paying for his or her time as well as the costs in obtaining all of the account information.

It is very easy to avoid this problem and minimize the expense to the Estate – just sit down and make an inventory of all your small bank accounts. Take all of these piggy bank savings and consolidate them into one account, either new or existing. The same theory works with more substantial accounts. Just make sure the balances do not exceed the current maximums for FDIC (government backed) insurance on bank accounts. This amount changes periodically so you need to review the current regulations.

Check Your Beneficiary Designations

Check each life insurance policy, retirement plan and annuity to make sure each has a specific beneficiary so that the gift is actually received by your intended loved one. If there is no named beneficiary, the money will become part of your Estate, and will go according to your Will or according to the laws of the state in which you reside at death. If you have named a beneficiary who is alive at your death, the assets will go directly to that named beneficiary, and there will be no need to probate those assets. One added benefit for having a named beneficiary on your life insurance policy is that there will be no Pennsylvania inheritance tax on the proceeds of the policy.

Tell your Personal Representative Where you have Assets

Over our lifetimes we accumulate many things. It often happens that when someone dies, his or her Personal Representative does not know the full extent of the decedent’s possessions and has to spend considerable time and expense gathering that information. To alleviate this problem, you should consider preparing a Statement of Guidance.

Can I Give Money to Charities in my Will?

Published on: January 28, 2013 | by Dessen, Moses & Rossitto

Yes, definitely. Many of our clients want to leave some of their money to one or more charities at their death. Usually these gifts are made by way of a “specific bequest” – a gift of a specific amount of money to a particular charity upon your death or, if you die before your spouse or partner, at his or her death. For example, as a breast cancer survivor, if I wanted to give money to a local charity involved in the fight against breast cancer, my Will might state: “I give and bequeath the sum of Five Thousand Dollars ($5,000) to the Philadelphia Affiliate of Susan G. Komen for the Cure, presently located at 125 S. 9th Street, Suite 202, Philadelphia, Pennsylvania 19107.” Or if my husband and I want to give a total of $5,000 to the same charity, in each of our Wills we could write: “If my spouse predeceases me, I give and bequeath the sum of $5,000 to the…”

In some circumstances, it makes more sense to define the gift as a percentage of your total estate instead of as a specific dollar amount. In that case, I could provide that 10% of my residuary estate would go to the Philadelphia Affiliate of Susan G. Komen for the Cure and the balance of my estate to my children.

Other clients only want to leave some or all of their money to charity if their entire family, spouse or partner and children die at the same time. I often add such a “wipe out” clause to a Will, especially when the family members travel together frequently.

What Charities Should I Choose?

When choosing the charities to leave your money to, give to the causes that you are most passionate about, reflecting on what makes you unique or what brings you the most joy or what has shaped your life. My passions include Girls Inc. of Greater Philadelphia and Southern New Jersey. I am one of three daughters, and my husband and I have two daughters and a granddaughter. Girls Inc. helps local girls strive to be strong, smart and bold – what an incredible mission! Another passion is the Philadelphia Jewish Archives Center – a group that archives the history of the Jewish people in our local area. While our Jewish heritage is important to my husband and me, even more significant is the impact of Jews on the local history of greater Philadelphia, where my husband and I have both lived for our entire lives. Another passion is the Jenkintown Library – I am an avid reader and a Montgomery County resident who has enjoyed borrowing books from there. As you can tell, our charitable interests make clear the things that are of great import to us – females, the greater Philadelphia area, religion, history and books.

Why Make a Will?

Published on: October 22, 2012 | by Dessen, Moses & Rossitto

Assume for the moment that you live in Pennsylvania and have reached that stage in your life where you are married, have two young children, a dog and two cars. You both work, have life insurance and some IRA retirement money. You believe your biggest asset is your house, which has a hefty mortgage balance. Why bother preparing a Will at all?

A lot of people I talk to in this or a reasonably similar situation ask, “Why should I make a Will? Won’t my spouse get everything when I die and then, won’t my kids get whatever is left?” The answer is that Pennsylvania, like all states, has a set of laws that determines what will happen if you don’t have a Will. Do you really want Pennsylvania making these important decisions for you?

Do you really want…

Although the laws in each state are different, in Pennsylvania, if you die without a Will, your spouse gets the first $30,000 from your estate and one-half of the rest of your estate. Your children will get the rest of your estate at age 18! Assume your estate is composed of some cash and investments, jewelry and other personal property, and a car and is worth $200,000 at the time of your death. That means that when your children turn 18, they will get a check for around $85,000 less the inheritance taxes of about $4,000. If you and your spouse both die and all of your chips get cashed in, it is even worse – you do the math – do you really want a check written to your 18 year old children for the total value of all the assets you and your husband own – with no one overseeing how it is spent? I don’t know how much you know about 18-year olds and their financial acuity – but they are usually not graced with the greatest financial wisdom. To the contrary, as my husband says, they lean toward spending their money on sex, drugs or rock and roll – and hopefully, not all three!

Making a Will Avoids These Calamities.

Instead of leaving the disposition of your estate to the politicians in the Pennsylvania legislature, grab control! First, the jewelry!

The wives in my practice usually leave their jewelry to their daughters (instead of to the bimbettes that their husbands or sons may marry after their death). Sometimes, but not often, the husband will leave particular items to his sons. Then the rest of the personal property (the pictures, furniture, books, etc.) is usually left to the surviving spouse and then to the children, to be divided between them. If they can’t agree on how to divide the things within 60 days, the articles that the children are arguing about get sold and the proceeds are added to the residuary estate. If the children are minors, the executor usually decides what is appropriate to keep and the rest is sold.

The money and other property without a listed beneficiary is usually left to the survivor. I often suggest that at the death of the survivor, the residuary estate should go to a “common trust” to be used for either child’s health, education, medical needs, etc. During the time the common trust is in place (until the youngest becomes 25 or even 30), the money is doled out in the same way that a parent of more than one child handles the family finances – fairly, not equally. For example, if one child needs a winter coat, you don’t buy two coats – you just buy one. The trustee will dole out the money separately to your two children, based on their individual needs. Then at the time the trust ends, whatever is left will be divided equally between the two children.

Specific Bequests in Wills

Published on: October 17, 2012 | by Dessen, Moses & Rossitto

Most of us prepare a Will to dispose of our money and house after we die. But sometimes a gift of a particular item is of great importance, for those of us who deep down believe that tangible items are often more valuable than money. Others of us want to leave a person or charity a specific dollar amount. A specific bequest, with a clear description of the item or amount being given and to whom, is the way to accomplish this. You can then dispose of the rest of your estate (called “the residuary estate“) however you wish.

What to do with the jewelry?

When I am interviewing a married couple, the initial question I ask the wife is “Who gets your jewelry – the bimbette your husband marries after your death or your daughters?” I guess you know the answer. Wives are really not at all interested in the next wife wearing her jewelry. It often seems that the less jewelry there is, the more important it is that the next wife never wear the first wife’s jewelry. Interestingly, if there are no daughters, the wife usually chooses not to leave her jewelry to her sons – after all, the sons might marry their own bimbettes some day. At least the wife knows that her husband has good taste – he married her, didn’t he?

Who gets a family heirloom?

If you received a special gift or inherited items from your now deceased relatives, you may want those items to “stay in the family” and not go to your spouse at your death. Often these items are not valuable in monetary terms but are incredibly precious in sentimental value. For example, my long deceased paternal grandfather personally sanded and caned a rocking chair for me. I probably could not get more than $50 if I sold it – but it is worth millions to me because I know he did the work on it by his own hand, over the course of many months. As much as I love my husband, there is no way that any woman he marries after I die will ever get her hands on that rocker so she can toss it out as trash.

How about money?

Grandparents often want to leave a sum of money to their grandchildren – usually for college. If you want to do this, specify that the gift only is made at the death of both you and your spouse – otherwise, the grandchild will get money at the death of the first to die, and then the same amount at the death of the second of you to die. Also, make sure that it is held in trust for the grandchild, so that a trustee doles it out carefully, considering the grandchild’s needs. Otherwise, the result may be like that of one of my clients – after her death, an IRA went directly to her grandchild who inherited $70,000 at age 20. Before he reached 21, he had blown all the money on what most of us would consider junk! It is hard to imagine that this young man “had” to make these purchases instead of saving the money – or even saving part of it – but that is precisely what he did.

Estate Planning for Same-Sex and Otherwise Unmarried Couples

Published on: September 28, 2012 | by Dessen, Moses & Rossitto

Because Pennsylvania defines marriage as between one man and one woman, there are challenges for same gender couples and other unmarried couples that must be considered when planning estates for either of these real-life situations.

Similarly, the Defense of Marriage Act, (DOMA) which is a federal law, defines marriage as only a legal union between a man as husband and a woman as wife. DOMA permits states to deny marriage “type” relationships to same sex couples even though the relationship is recognized in other states. Not even the Constitution can protect a relationship which is legal in one state but not legal in another. A multitude of federal rights are afforded to opposite sex married couples that are denied to same sex couples, including estate and gift tax exclusions, social security benefits, benefits from certain immigration laws, access to federal civilian and veteran benefits, etc.

When considering financial issues, including estate planning, whether you are a same sex couple or an unmarried opposite sex couple, it is important to realize that your relationship does not have the legal impact of marriage in a variety of ways. Therefore, you may want to comingle your assets differently than a married couple.
For instance, utilize a joint checking account for mutual and shared bills, while maintaining separate checking accounts for individual or personal needs. Before purchasing a home, a car or even an investment property, figure out the best way to title the property so that you understand who gets the property if you or your partner die.

When deciding on your estate plan, consider preparing a Will. For same sex and unmarried couples, the intestacy laws will not protect the property interests of the surviving partner, so you have to put your wishes into writing if you wish for your partner to inherit.

Some of the issues that unmarried couples may want to approach in Estate planning include:

Choosing the Person to Handle Your Estate: What Does the Personal Representative Do and How Do I Choose the Right One?

Published on: September 5, 2012 | by Dessen, Moses & Rossitto

When you meet with an attorney to draft your estate planning documents, the attorney will ask you for the names of people to serve in various roles. Among these is the role of “Personal Representative,” who is called an “Executor” if a male and an “Executrix” if a female. The Personal Representative gathers the decedent’s assets, pays valid debts, pays any Estate or Inheritancetaxes that may be due and distributes the remaining assets to the heirs as directed by the Will.

While many people believe that deciding who gets what items and who should inherit your money is all that needs to be decided in preparing your Last Will and Testament, the choice of your Personal Representative is also quite important, since until the Personal Representative properly completes the job, your heirs won’t get their money and problems may arise with the taxing authorities and other entities. So choose your personal representative wisely!

What does the Personal Representative do?

The Personal Representative’s job starts right after death, when he or she goes to the Register of Wills office in the county of your death to “probate” your Will. Tell your Personal Representative knows where your original will is located so there is no delay in getting it filed with the Register of Wills. Although the whole concept of probating a Will has gotten a lot of bad press in recent years, the process, at least in Pennsylvania, is relatively painless and not very expensive. The Personal Representative usually has to appear in person at the Register of Wills office to formally start the process.

At the Register of Wills, the Personal Representative will take an oath of office and then be given (or mailed within a few days) documents called “Shorts,” which is an abbreviation for “Short Certificate.” These are just pieces of paper to be given to each financial institution or holder of assets in order to get the assets from that place into an “Estate Account.” The Personal Representative will use the Estate Account to first pay off the decedent’s debts, and, after the debts are paid, distribute the balance to the heirs in accordance with the Will.

Who should I choose to be my Personal Representative?

When deciding who should be your Personal Representative, choose someone who is extremely organized. Our firm has represented clients with many bank and brokerage accounts (in some cases 20 or more), who own one or more houses with mortgage loans, have a number of credit cards and have named several people to get various percentages of their estate. The Personal Representative has to write to each institution requesting the date of death value of the account, and then keep track of the documents received from the various institutions. The Personal Representative also has to contact each creditor, verify the debts are owed, and ultimately deal with the beneficiaries. The amount of work involved can be tedious, burdensome and frankly, overwhelming.