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Incorrect Beneficiary Designations Will Frustrate Your Estate Plan

Nightmare #1: You’re happily remarried and have established a fine life with your new spouse, then die unexpectedly and your life insurance policy pays out—to your ex-wife.

Nightmare #2: Your grandchild develops a debilitating illness and now has to rely on disability payments and Medicaid to supply his needs.  Upon your death, one of your life insurance policies is paid to him—and he loses all government assistance.

Nightmare #3: Most of your assets are in a sizeable IRA, which you are counting on to support your spouse should you pass away.  Upon your death, the IRA is paid out to your estate and is not only divided up among all the residuary beneficiaries in your will, but must also be paid out—and taxed—within five years of your death instead of providing for your spouse for the rest of her life.

All of these scenarios could have been easily prevented by paying proper attention to the beneficiary designations of your insurance policies, bank accounts, IRAs and investment accounts. Many people overlook the importance of keeping these designations current and making sure they coordinate with the provisions of their wills.

The problem is this: beneficiary designations override the provisions of your will, regardless of whether they reflect your current wishes. The solution is to exercise mindful control over them.

Marriage, divorce, changes in health, changing family dynamics, deaths of loved ones, and changing financial circumstances can all affect what you wish to be done with your assets upon your passing.

Make sure you understand the beneficiary policies of the companies you deal with. If a beneficiary predeceases you, do you want his share to be split among the remaining beneficiaries or to pass on to his children? What if one of your beneficiaries cannot be located? You may be able to control what happens; you may not. It depends on the policies of the company. Make no assumptions about what will happen. Ask.

Are any of your beneficiaries minors?  If so, do you want them to be paid outright, or to have the funds held in trust for them until they mature?

If one of your beneficiaries is receiving government disability or health benefits, even a small payout may render her ineligible for benefits. In this case, a special needs trust may be necessary.

While beneficiary designations are often simple, some circumstances can require careful consideration.

We recommend you review your estate planning every three to five years or upon any significant changes in your life. We stand ready to discuss your situation and determine the best possible avenue to carry out your wishes and achieve your goals.

Challenge to “In Loco Parentis Standing” – Use it or Lose It!

Sued for custody of your child by someone other than the your child’s other parent?  Beware!  Under Pennsylvania Law a person other than a parent has standing to sue for custody in very limited circumstances.  Standing is a legal concept.  Standing refers to the right of a particular person to file a case in court.  If you don’t challenge standing in time you forfeit the right to challenge standing forever!

In the recent case of M.G. v. L.D., decided on February 8, 2017, the Pennsylvania Superior Court reiterated prior guidance that Pennsylvania Rule of Civil Procedure 1915.5(a) requires a challenge to standing to be filed within 20 days of the date the custody complaint was served on the defendant.  If no challenge is made to standing within that time, the right challenge standing is waived.  Forever!

Standing in child custody cases is controlled by two statutes: 23 Pa.C.S.A. 5324 and 23 Pa.C.S.A. 5325.  Many of the statutory sections are easily understood.  An example is 5325(1) which authorizes a grandparent to sue for partial custody where one of the child’s parents has died.

Less well understood is 23 Pa.C.S.A. 5324(2) .  This statute allows any person to sue for any form of custody custody when that person stands “in loco parentis” to the child.  The phrase in “loco parentis” refers to a person who assumes the obligations of a parent without going through the formality of legal adoption.  This statute applies to grandparents and non-grandparents alike.  It is increasingly being used by grandparents suing a parent for custody of a grandchild as a result of recent changes in the law relating to standing.

If you don’t know whether or not the opposing party stands “in loco parentis” to your child, you are not alone.  The phrase is not precisely defined in the custody statutes or in the reported cases.  Determining whether or not a particular person stands “in loco parentis” is done on a case by case basis and is based on a large number of factors.  It is often unclear whether or not a particular person has achieved the status of “in loco parentis” until a judge decides that he or she has.  Or has not.

What remains clear, however, is that if you are a parent who has been served with a complaint for custody by someone claiming to stand “in loco parentis” and you want to challenge that claim, you have to file your challenge within 20 days of being served with a copy of the complaint.  Or lose the right to challenge that claim forever.  Because of the short time to file an challenge to standing, it is critical to have standing evaluated by an attorney as soon as the complaint is served.



Help for potential guardians of minor children

For parents, a key component of estate planning is often selecting potential guardians for minor children should something tragic happen to one or both parents. These considerations can be double-sided emotionally and difficult to face. On the one hand, who would ever take care of your children just like you would? Facing such a decision also brings to light many fears and concerns. On the other hand, making the decision can be freeing in a way, because you know your children will be cared for if something happens.

Our firm understands the struggle that parents might face when dealing with such a decision, and we also understand the concerns that a potential guardian faces if the actual appointed time comes to pass. Many people agree to be named as legal guardians without ever really thinking the situation will occur where they will have to take charge of the children. That doesn’t mean they don’t love the kids or want this responsibility, but when the time comes, a guardian can be suddenly overwhelmed with the reality of the responsibility. Continue reading “Help for potential guardians of minor children”

Don’t forget the tax man

If you are in a fiduciary relationship as an executor of an estate or a trustee of a trust, then you have to think about the wishes and needs of others. A fiduciary must make decisions that are in keeping with the law, the wishes of the deceased and the needs of the beneficiary. But you have to be careful not to forget other obligations, including taxes.

Many estates don’t pass the threshold for the federal estate tax, so you might think taxes aren’t a common concern for those in such positions. Just because you don’t have to worry about paying estate taxes doesn’t mean you don’t have to file any paperwork, though, and almost any estate will have to concern itself with at least one more income tax return.

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Seek assistance contesting questionable wills

Last week, we talked about what you might do if a loved one dies without a will and how various factors could impact your actions. What if your loved one did leave a will, but you don’t think that will is valid? In such cases, you might have to legally contest the will in probate.

While there are many reasons someone might contest a will, some legal arguments for will invalidation are going to stand above others. Perhaps one of the easiest ways to argue that a will is not valid is to produce a valid will that was signed after the will that was originally presented. This means that the will you produce was created by the deceased person when they were of sound mind and that they signed it in the presence of witnesses in keeping with state laws.

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What do you do if your loved one died without a will?

If you believe you are a legal heir to someone’s estate, but that person has died without estate planning documents such as a will, you might not know what steps to take to claim your inheritance. The requirements for receiving assets or money that are left to you in such an estate depend on the laws of the state, whether there are other potential heirs and whether any assets are linked to beneficiary designations.

When someone dies without leaving a will or other estate documents, then the person is considered to have died intestate. Basically, that’s just a term for “without a will,” and intestacy estates are probated under the general laws of the state in question. Intestacy laws usually ensure that primary heirs, such as surviving spouses or children of the deceased, receive an inheritance under the estate. Depending on the situation, other family members such as step-children, grandchildren and siblings might also inherit something from an intestate process — especially if no other closer heirs are found.

Continue reading “What do you do if your loved one died without a will?”

What is a fiduciary relationship?

A fiduciary relationship exists when one person in a relationship has a legal obligation associated with the management of another person’s assets or money. An accountant, for example, has a fiduciary responsibility to his or her clients. The law expects that an accountant will not purposely make poor decisions regarding a client’s assets and will work with due diligence and professional skill to protect or grow those assets as desired by the client.

If you are involved in a person’s estate, then you might be involved in a fiduciary relationship. If you have been asked to be the executor of a person’s will, then you have a fiduciary responsibility to the estate. While genuinely innocent mistakes do happen, the law expects you to make an honest attempt to use the resources at your disposal to handle the estate. That means following the estate plan and will to distribute assets as the decedent desired.

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Are your estate plans good for your family?

May 15 is listed as International Day of Families, so we think there’s no better time than this month to talk about how your estate plans — or lack thereof — can impact your loved ones. This May is a great time to ask yourself if your estate plans are good for your family, and will they help hold your heirs and beneficiaries together if a tragedy should occur?

In answering that question, it’s a good idea to confront some common estate planning myths. For example, estate planning is not just an activity the wealthy should consider. Estate planning, including creating a will, is important for anyone. A will can help your loved ones find closure in knowing that your final wishes were addressed, but it also provides you peace of mind. You can address how assets will be distributed, but you can also address wishes for your legacy or your children.

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Understanding irrevocable and revocable trusts

Revocable and irrevocable trusts are two type of legal estate vehicles that are often used to protect, manage and pass on assets. The reasons you might use a trust include protecting assets against creditors or ensuring your wishes are maintained with regard to use of assets even when you are no longer able to make such wishes known.

A revocable trust is one that you can create and then revoke or change during your life. Sometimes these are referred to as living trusts because you can manage them while you are still living. Usually, the person who creates the trust acts as the first trustee for the trust – that means you would maintain access to and control over the assets transferred into the trust in keeping with the rules of the trust that you set up.

Continue reading “Understanding irrevocable and revocable trusts”

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