The 5 Most Important Estate Planning Documents

What are the 5 Most Important Estate Planning Documents?

Noted author and financial planner Suze Orman says, "Estate planning is an important and everlasting gift you can give your family." And she's right. But if you create one, you need to do it right. So first, talk with an estate attorney. Second, make sure your plan includes the five most important estate planning documents.

When it comes to those documents, the average person immediately thinks about a last will. And yes, that's one of the five most important estate planning documents. But unfortunately, the average person often stops at will creation.

A comprehensive estate plan considers these 5 essential documents:

  1. Last will and testament
  2. Durable power of attorney
  3. Medical power of attorney
  4. Revocable trust
  5. Living will

An estate planning attorney can assist you in drafting these crucial planning documents.

Beneficiary Designations

Another important factor when addressing estate planning is establishing who will get your assets and designating beneficiaries. Again, an estate attorney can guide you in selecting beneficiaries.

A beneficiary designation determines who will get life insurance policies, IRAs, 401(k)s, and other types of financial accounts upon your death. Once assigned, your executor or executrix, upon your death, ensures that your beneficiaries receive assets per your designations.

Beneficiaries may be different than those named in your last will and testament. You can also have multiple beneficiaries in your estate plan.

For example, assets can divide among more than one primary beneficiary. In addition, you can include multiple secondary beneficiaries if a primary beneficiary dies before you, can't be located, or refuses to accept the asset.

Beneficiaries fall into three categories:

  • Eligible designated beneficiaries (see below for types of EDBs)
  • Designated beneficiaries
  • Non-designated beneficiaries

In addition, eligible designated beneficiaries cover five individual types:

  1. The account owner's surviving spouse
  2. A child who is younger than 18 years of age
  3. A disabled individual
  4. A chronically ill individual
  5. A person not more than ten years younger than the deceased IRA owner

If a living person named as a retirement account beneficiary does not fall into these five categories, they are considered a designated beneficiary.

Now that you understand beneficiary designations, let's move on to the five most important estate planning documents.

1. Last Will and Testament

So, let's start with the most obvious document, your last will and testament. It states who receives your assets after death. It also assigns the person managing the will (an executor or executrix), your beneficiaries, and guardians for your minor children, if any. To that point, you need to take the time to determine your executor or executrix, as they will handle everything associated with your estate.

Where assets are concerned, your will determines where your assets will go. These assets can be money, real estate, possessions, or anything else you want to designate a beneficiary.

Your will also presents how your estate pays off debts. That relieves the burden on your loved ones. A common concern of clients during the initial estate planning process is what happens with debt from the estate. We've addressed that answer here.

Keep this in mind. Your will must be executed properly and based on state laws. It must also clearly state how you bequeath your assets. Otherwise, someone could contest your will, or your assets will wind up in probate court. So rather than taking the do-it-yourself approach with a web-based template, you might consider using a will lawyer or estate planning attorney.

2. Durable Power of Attorney

A durable power of attorney (POA) document, also referred to as financial power of attorney, assigns someone to manage your finances should you become incapacitated or suffer memory loss. Apart from finances, a POA designates someone to handle your legal and business matters.

The person you appoint is known as your agent or attorney-in-fact. They can be a friend or even an attorney. Your agent handles any number of affairs:

  1. Buying and selling property
  2. Managing finances, including bank accounts, bills, and investment
  3. Tax matters
  4. Applying for government benefits

A power of attorney document saves your family from petitioning the court to become your conservator. So, this simple estate planning document saves time, money, and hassles.

3. Medical Power of Attorney

Although a chief consideration of any estate plan focuses on your finances and assets, a good estate planning document addresses medical or healthcare decisions. A medical power of attorney document determines who makes medical care decisions on your behalf should you become incapacitated.

Typically, a healthcare POA gets created in conjunction with a living will. Indeed, they can be in the same document as both focus on your medical care. Both documents classify as advanced healthcare directives that address your medical care.

As with a POA, that person is known as an attorney-in-fact. Generally, you assign it to a family member such as your spouse or adult child. But you can elect to give it to anyone.

Similar to a durable power of attorney, without this estate planning document, your family faces court time and costs to petition for guardianship so that they can make medical decisions for you. Your estate planning attorney can ensure this document gets executed properly to address your wishes.

4. Living Will

A living will document presents another advanced healthcare directive that addresses your end-of-life treatment and care. Specifically, it outlines the procedures, medications, and treatments you want, or don't want, to prolong your life if you're incapable of addressing those issues with your doctor.

Your living will addresses numerous considerations:

  1. Tube Feeding: Do you want to be tube fed to prolong your life? If so, for how long?
  2. Resuscitation: What happens if your heart stops? Do you want medical staff to conduct CPR? Or do you want a do-not-resuscitate (DNR) order in your living will?
  3. Intubation: You can determine if and how long you want to be intubated and placed on a mechanical ventilator.
  4. Pain Management: Your living will presents what pain management and medications you want. You can also determine whether you wish to die at home.
  5. Organ Donation: You can elect to donate organs for transplant following your death in your living will.

Without this document, your loved ones will have to determine your treatment, which burdens them with difficult choices.

You can access living will templates on the web. But considering the importance of this document, it's worth talking with an estate planning attorney to ensure you capture all the details correctly. And that the document is legally sound.

5. Revocable Trust

That brings us to the last of the five most important estate planning documents – a revocable trust. Unfortunately, these documents can be a bit more complex.

At its core, a revocable trust allows you to pass your assets over time. Best of all, a trust avoids probate. Equally important, because it's revocable, you can change or terminate the trust anytime.

You become a grantor, trustor, or settlor by creating the trust. As the grantor, you are also the trustee and primary beneficiary during your lifetime. Although it offers no tax benefits, it does accomplish several things:

  1. Privacy: As mentioned above, the primary purpose of a revocable trust is to avoid probate, where our assets get distributed at death. However, the probate process is public. So, by avoiding probate, you maintain privacy.
  2. Aligns with Your Wishes: Similar to a will, a revocable trust distributes assets. But you can amend limitlessly. So, you can change your asset distribution at any time.
  3. Beneficiary Protection: A revocable trust provides creditor protection as long as the assets remain in the trust upon death.
  4. Estate Tax: A revocable trust may reduce state estate taxes if you live in a state with an additional estate tax. Fortunately, Pennsylvania has no extra state tax.

Estate Planning isn't Easy

Creating an effective estate plan is complex. That's why you should enlist the support of an estate planning attorney. They'll ensure you have the proper documents, that each gets appropriately executed, and that each complies with state laws.

High Swartz has experienced estate attorneys versed in advanced healthcare directives, inheritance tax, probate, estate litigation, and more. We have law offices in Bucks County and Montgomery County, PA.

We'll make sure your estate plan covers all the bases, so you know all your wishes will be met.

What is Estate Planning?

Let’s start by understanding what estate planning is before moving on to why it’s essential. But hopefully, after reading through this, you’ll feel comfortable reaching out to an estate attorney near you to begin planning your estate.

What is an Estate?

To answer the question of what is estate planning, let's first begin with defining an estate. Webster defines estate as “the degree, quality, nature, and extent of one’s interest in land or other property.” More specifically, your estate comprises all the property you own, including real estate, cars, possessions, cash, investments, life insurance, furniture, and any other assets in which you own or have a controlling interest.

Now, here’s the question. What happens to that estate after your death? It really doesn’t matter if you’re net worth reaches billion dollars or more down-to-earth figures. What matters is what you want to do with those assets when you’re gone.

So, what is Estate Planning?

And that answers the question about what estate planning is. An estate plan gives you a say in how you confer your assets to your family, organizations, charities, or whatever. An estate plan leaves a written record of your intentions and presents how you want your property and other belongings distributed.

Beyond allocation of assets, however, an estate planning designates who carries out your wishes at death or even if you become incapacitated. And that’s why it’s best to speak with an estate attorney to make sure that the estate plan is ironclad. Unfortunately, many people fail to recognize the importance of estate planning.

Make Sure You Have These 5 Critical Documents

If you’re working with an estate planning attorney, you’ll want to focus on executing these critical documents.

1. Will

Your will represents a foundation document or any estate plan. You can elect to use an online service to create your own will. Or you can work with a will lawyer at an estate planning law firm. Either way, your will names your executor who administers distributing your assets per your wishes.
But will does more than that. It allows you to determine what happens to your possessions. Plus, it lets you designate guardians for anyone under your care. Moreover, it presents funeral provisions, if you so choose.
Sans a will, your property becomes subject to intestate law in Pennsylvania. Intestate law distributes your assets for you based on how the average person might have created a will when estate planning. That’s why it’s essential to work with an estate attorney to avoid this scenario.
Note that wills do not control the distribution of all assets. For example, they can’t control the distribution of life insurance, living trusts, or assets in joint title.

2. Durable Power of Attorney

What happens if you can’t make decisions on your behalf? That’s when a POA document becomes a vital component of estate planning.
A power of attorney appoints an agent to manage your affairs, preferably someone close to you that’s trustworthy. That individual makes decisions about financial and legal matters on your behalf. For example, if you’re injured and comatose, your agent manages your affairs.
You can activate a POA only if you become incapacitated. By the same token, you can use it to have your agent make a decision if you’re out of town, for example.

3. Healthcare Power of Attorney

Unlike a durable power of attorney that focuses on financial or legal concerns, a healthcare POA appoints someone to make medical decisions for you if you can’t. Often, people appoint spouses as their healthcare power of attorney.
As part of your estate plan, healthcare directives eliminate having your family members make impossible decisions about your treatment without knowing your wishes.

4. Advanced Healthcare Directive

Otherwise known as a living will, an advanced healthcare directive nominates an agent to make healthcare decisions for you if you’re unable. Without one, Pennsylvania law dictates who makes those decisions. Talk to an estate planning attorney about details surrounding this document.
Your living will spells out what treatment you want or don’t want—for instance, ventilators, feeding tubes, and resuscitation.

5. Trusts

By placing assets in a trust, they become the legal property of that trust. So when you die, those assets avoid probate court proceedings. Instead, your trustee distributes the assets based on your wishes.
Trusts come in two forms. First, a revocable trust retains control of assets with the freedom to alter the terms at any time. Your assets transfer to your beneficiary upon death and avoid probate.
Second, an irrevocable trust transfers assets to your beneficiary. As a result, you cannot change the trust without their consent. You generally create this form of trust to minimize your estate taxes or protect assets from creditors.

Numerous trust options exist. It’s best to talk with a trust and estate attorney to determine which works best for your needs.

An estate planning attorney can support you with creating each of these documents.

Why is Estate Planning Important?

Not surprisingly, your estate becomes most relevant at death. As mentioned, estate planning lets you determine how and where you want your assets distributed. As a result, it gives you control and a way to ensure your wishes get carried out as you intended.

But an estate plan affords other benefits. As you’ve learned, estate planning goes well beyond executing a will with your estate attorney. It includes:

  • Determining a POA to make financial or healthcare decisions
  • Medical directives that outline what treatment you want or don’t want
  • Beneficiary designations for who receives your money for life insurance, retirement accounts, annuities, and other financial assets
  • Trusts to pass your property to heirs that carry potential tax benefits

Estate planning is essential for even more reasons.

Estate Planning Reduces Taxes

Federal estate taxes impact the wealthy. For example, the federal estate tax exemption will be $12.06 million in 2022. However, six states impose an inheritance tax. And yes, Pennsylvania is one of those states. So, immediate family members pay 4.5 percent. But that rate climbs to 15 percent to non-immediate family members.

Estate planning offers a means to reduce your tax implications. You can work with an estate attorney to avoid taxes using one or more of these options:

  1. Spending down your assets
  2. Gifts to family
  3. Irrevocable life insurance trust
  4. Charitable donations
  5. Establishing a family limited partnership
  6. Funding a qualified personal residence trust

Work with a financial advisor or estate planning attorney to determine the best route for your situation.

An Estate Plan Avoids Probate

As mentioned, without a will, your assets fall under intestate laws, which determine what happens to your assets and who distributes them. The probate court assigns that agent.

Unfortunately, your assets effectively become frozen. The courts must sort through your estate, apply state laws, and decide how to allocate your assets.

Equally important, probate can take months or even years to complete. So you not only lose time, but you’ll wind up spending legal fees for a probate lawyer. Estate planning avoids all these delays and costs by creating the appropriate documents to manage the process of asset distribution.

Estate Planning Protects Your Children

What happens to your children if you die without a surviving spouse? Probate courts appoint a legal guardian such as a family member or grandparent without an estate plan. In addition, a third party can petition the court to become the guardian.
Most importantly, if no one steps forward and your child is under 18, they could become a ward of the state and enter foster care. But you can control who cares for your children by identifying a guardian in your will.

Ready to Start Planning?

You’ve gained some valuable insight into what is estate planning and why it’s crucial. So how do you get started?

Start by determining your net worth. Create a list of your financial assets, personal property, life insurance, and liabilities. Then select the beneficiaries for those assets. Equally important, determine your agent(s) to execute your wishes.

Finally, consult with an estate planning attorney near you. Our local law firm has offices in Doylestown and Norristown, PA. Our estate attorneys can talk with you and draft the essential documents for your estate plan.

So what are you waiting for? There’s no time like the present to plan your estate.

17 High Swartz Attorneys Named Main Line Today Top Lawyers for 2021

We are pleased to announce that 17 attorneys have been included in the 2021 Main Line Today Top Lawyers Around the Main Line and Western Suburbs List.

Main Line Today is a Southeastern Pennsylvania regional magazine focusing on the communities of the western suburbs of Philadelphia and surrounding Counties. The Best Lawyers of Chester County, Delaware County and Montgomery County are nominated through peer balloting then vetted through Main Line Today's editorial process.

2021 sees the addition of 3 High Swartz attorneys to the Top Lawyers list. New attorneys include family lawyers Chelsey A. Christiansen and Michael B. Prasad for Divorce and Family Law and Stephen M. Zaffuto for Real Estate Law. Congratulations to all winners!

Below is the full list of High Swartz Top Lawyers from Main Line Today in 2021.

  • Joel D. Rosen - Business Law
  • Kevin Cornish - Civil Litigation
  • Mark Fischer - Civil Litigation
  • Melissa Boyd - Divorce & Family
  • Mary Doherty - Divorce & Family
  • Elizabeth Early - Divorce & Family
  • Chelsey Christiansen - Divorce & Family
  • Michael Prasad - Divorce & Family
  • Thomas Rees - Employment Law
  • James B. Shrimp - Employment Law
  • David Brooman - Municipal Law
  • Gilbert High - Municipal Law
  • William Kerr - Municipal Law
  • Richard Sokorai - Personal Injury
  • Arn Heller - Real Estate Law
  • Stephen Zaffuto - Real Estate Law
  • Thomas Panzer - Workers’ Compensation

If you're looking for lawyers near you in Norristown, Doylestown, and the Greater Philadelphia area, get in touch with our law office. Our attorneys and lawyers are some of the best you'll find to handle all your legal concerns.

What Happens to A Deceased Relative's Debt When They Die?

A common concern of clients during the initial estate planning process is what happens to debt when you die. This is a valid concern for next of kin and estate beneficiaries, and we'll delve into it below.

Who is responsible for paying off the debts of a loved one? Can the debt of the deceased be forgiven? What happens if the deceased estate does not have enough money to pay the debts? The answers to these questions can be found in case law, the Internal Revenue Code & Regulations and Pennsylvania statutory laws. To make it easier to understand what happens to debt when you die, let’s look at a hypothetical estate. And remember, it's in your interest to have an estate attorney to support you with any estate planning concerns.

Ester, a Pennsylvania resident, died with $50,000 in credit card debt, medical expenses from her final illness, and various utility expenses associated with her West Chester Borough home. Ester’s assets are her home, and funds of $25,000 held in her checking and savings accounts. Ester’s children are the beneficiaries of her residuary estate per her Will.

Pennsylvania law, 20 Pa.C.S.A. Section 3381, states that Ester’s debts don’t just disappear at her death. If the debts don’t disappear, who pays? Only Ester’s Estate is responsible for payment of her debts unless a third-party (family member, neighbor, etc.) co-signed a loan or credit card with Ester.

For now, let’s assume no one co-signed any loans with Ester. Ester’s credit card debt, her final medical expenses and her various utility expenses will be paid by her estate from the assets that pass pursuant to the terms of her Will. These assets are Ester’s home and the $25,000 funds from her checking and savings accounts. Ester’s Executor will need to sell the home and use the proceeds from the sale to pay off the credit card debt, final medical expenses and utility bills.

It's possible that Ester’s estate could fail to pay her credit card debts due to insolvency (inability to pay one's debts). And it's possible that the Executor's attempts to have the credit card discharged fail as well.

What happens if the estate can't pay the debts?

If you recall, Ester has used her credit cards to purchase items worth $50,000. The borrowed funds used to purchase items are not included in Ester’s gross income because at the time Ester borrowed the funds, she also created a corresponding liability to pay back the funds to the credit card companies. Ester’s overall net worth has not increased. Courts have consistently held that borrowed funds are not included in taxpayer’s income. The IRS has consistently agreed with this treatment.

Do credit card companies forgive the debt when someone dies?

It would be logical to think that if the credit card companies forgive the debt, the debt should disappear, right? WRONG! The general rule under the IRS Rules & Regulations states that the cancellation of a debt for less than adequate consideration causes the debtor to recognize ordinary income in the amount of debt that was forgiven.  Section 61(a)(12) of the Internal Revenue Code states that gross income includes “[i]ncome from the discharge of indebtedness.”  No matter how you slice it or dice it… “cancellation of indebtedness”, “cancellation of debt”, “discharge of debt”, and “forgiveness of debt” converts to ordinary income!

The credit card companies report the forgiveness of deceased debt to the IRS by using a 1099-C – Cancellation of Debt form. Even if the credit card company fails to issue a 1099-C form, the cancellation of debt income is still reportable on the estate fiduciary income tax return. An estate attorney can support you with any questions regarding taxes.

The $50,000 of credit card debt has been converted into income, which must be reported on the estate’s federal fiduciary income tax return, Form 1041 – US Income Tax Return for Estate and Trusts. Here, at the very least, Ester’s estate has $50,000 in reportable income to the IRS. If an estate has reportable income, it likely has income tax to pay unless the estate’s deductions wipe out income.

But what if Ester’s estate is insolvent (unable to pay the taxes)? Section 108 of the IRS Code provides exceptions for which Ester’s estate may be eligible. Section 108(a)(1)(B) excludes from gross income the cancellation of indebtedness of an insolvent debtor, but only to the extent of the amount of the debtor’s insolvency immediately before the debt was forgiven. Section 108(a)(3). So if Ester’s estate is insolvent prior to the debt being forgiven, the estate may exclude the cancellation of debt using IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness.  

It’s important to note that only assets that pass through probate are considered for determining insolvency. Recall probate assets are those assets that pass pursuant to the terms of a decedent’s Will. Here, probate assets would be Ester’s West Chester Borough home and the funds held in the checking and savings accounts. An estate with cancellation of debt  (COD) income and very few probate assets will be insolvent if all assets pass directly to beneficiaries through beneficiary designations (life insurance, IRAs, 401(k)). Designated beneficiaries who receive these kinds of assets are not liable for paying a decedent's debts.

So who is responsible for paying the debt?

In the end it falls on the estate to pay the decedent’s debt. If the debt is forgiven, it becomes ordinary income reportable on the estate’s fiduciary income return regardless if a Form 1099-C was issued by the creditor.  If the estate is insolvent, it may be able to exclude the cancellation of debt under Section 108(a)(3) of the IRC.

Before undertaking an estate administration without an estate lawyer, remember the law is complex because:

  1. there are usually exceptions to the rules,
  2. the law changes frequently, and
  3. multiple areas of law can impact an estate, such as IRS Rules & Regulations, Pennsylvania statutory and case law.

Talk to Our Estate Planning Lawyers

With any estate planning matters, it's best to have an experienced estate planning lawyer on hand. They can support you with any number of concerns, including power of attorney, wills, advanced healthcare directives, and more.

Reach to our local estate planning law firm here. We have law offices in Doylestown and Norristown, PA.

How to Access the Digital Assets, logins, and passwords of Someone who Has Died

Accessing the digital assets of a loved one after they have passed can be difficult. Below are some tips to make it easier for everyone.

In the age of Covid-19, most of us do everything electronically. Banking, communicating, paying bills, shopping, storing important papers, photos and contacts, filing taxes, keeping a calendar and reminders, sports betting, dating….the list goes on. But where does all of that electronic content go and who can access it for me? What happens if I go on an “extended vacation” - physically, mentally or permanently? Well, things can get messy if you’re not prepared. An estate attorney can support you, however, with your efforts.

I used to tell my partner (half-jokingly) if anything happened to me, to keep my thumb so he could open my phone and computer, to gain access to my accounts/passwords (digital assets) with my fingerprint. Unfortunately, that plan won’t work with the upgrade to facial recognition security, unless he wants to face some tough questioning by the police. And not to mention, the Criminal Fraudulent Access Act prohibits the impersonation of a decedent. So what is he supposed to do when clues of assets and liabilities no longer come through the mail and there is no way to do a global search of assets?

In comes the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), effective January 19, 2021, with a default rule, to help address the frequent challenges fiduciaries (trustees) encounter in accessing the digital assets of a Ward or Decedent.

What is a digital asset?

A digital asset is defined as an electronic record that an individual has a right to or interest in, but not the underlying asset itself (unless we are talking about Bitcoin and the like). For instance, my online bank statement is a digital asset, but the money in the account is not.

The default rule under RUFUDAA, provides methods for a fiduciary to access a catalog of electronic communications and other types of digital assets, but not the content.

What is a catalogue of electronic communication?

A catalog of electronic communication “identifies” the person communicating and the electronic address, along with the date and time of the communication. The substance of the communication is not accessible under RUFUDAA.

How can you access a catalogue of electronic communication of a decedent?

In order for a fiduciary to access the content of electronic communications (documents, photos, emails, basically any information concerning the meaning of the communication stored electronically), the user must specifically do so by an online tool (Facebook and Google have these tools) or in an estate planning document.

What if the online tool and estate documents don’t match?

If the online designations conflict with the estate planning documents, the online designation controls. More importantly, the Custodian’s Terms of Service will control what the fiduciary may or may not do with your digital assets.

Tips for legacy planning of your online accounts

Google.

For accounts that have legacy planning, like Google and Facebook, designate a person who can access your data. You can customize the information you want to share, with up to 10 people, if your account is inactive for a designated period of time (3-18 months).

Facebook.

Under memorialization settlings, you can designate a legacy contact who can manage your account after you pass away.

Financial Powers of Attorney.

Have your Financial Powers of Attorney updated to provide your Agent with authority to specifically access digital asset content.

Wills and/or Trusts.

Update these documents to provide your fiduciary with authority to specifically access digital asset content.

  • If you find yourself in Orphans’ Court on a guardianship matter, make sure to include language requesting Custodians of digital assets to disclose a catalogue of electronic communications and digital content to the Guardian of the Estate of the Incapacitated Person, in the proposed Order.

Write it down.

As an estate attorney, I give all of my clients the same homework assignment- which always starts off with “Make a binder with the below outline in mind. Identify automatic debits and payments and keep an inventory of digital and cybersecurity assets. Keep a hard copy and a digital copy, and give your estate planning attorney a copy to secure in the law firm’s vault.

The binder should include:

  • A list of logins and passwords for each of your devices (phone, tablet, watch etc.)
  • A list of all online accounts with user names and passwords
    Banks (brick & mortar and online banks)
  • Social media
    • Facebook
    • Pinterest
    • LinkedIn
    • Twitter
    • Snapchat
    • TikTok
  • Email addresses
  • Online shopping sites
  • Online Bill Pay
    • Utilities
    • Phone
    • Internet
  • Payment Services
    • Paypal
    • Venmo
    • Google Pay
    • Stripe
    • Square

Talk to Our Estate Planning Attorneys

Estate planning is an essential task regardless of your assets. Our estate planning attorneys are here to help. We can work with you to draft critical estate plan documents like a POA, will, living will, and more. Give our local law offices a call. We represent clients in Bucks, Montgomery, and Philadelphia counties.

College-Bound Kids? Why a POA for Teens is More Important Than Ever

With the possibility of students returning to school during a pandemic, making sure they make the right decisions regarding their health is paramount. Talk to an estate attorney about a POA for teens.

Colleges and universities across the country are releasing their return-to-school plans in an effort to address the uncertainty for students and staff. Will in-class teaching be available? Will every student be able to attend? What about safety practices and social distancing? All of these questions will need to be addressed before any decision can be made. And with the unpredictability of the coronavirus, those plans could change in an instant. That's why you should talk with an estate planning attorney about a POA for teens.

Whether your child is a freshman or returning senior, the most important question you’ll ask yourself is whether it will be a safe place for them. What will happen if my child gets sick or hurt? For this reason, more importantly, it is also time for them to consider a Medical Power of Attorney and Durable Power of Attorney for your teens.

Why do I need a medical POA for my college-bound teen?

Doctors, hospitals and even the college they are attending are limited in what information can be shared with parents or other adults. Without a Medical Power of Attorney, a parent, even one paying their tuition, covering their health insurance, and claiming them as a dependent on their tax return, could be helpless to aid their adult child if an emergency arises. A Power of Attorney for medical and financial matters allows your college-bound child to appoint someone to handle these matters for them if they are unable or unavailable to handle them themselves.

You cannot rely on documents executed through the school since they are limited to accessing school records and in limited circumstances, to medical treatment at the school only. To assist your student or any young adult, a POA for teens, which includes access to medical records and treatment must be executed. It is best to have these documents drafted by an estate planning attorney and not rely on forms downloaded from the internet as they may not meet all of the necessary legal requirements.

Proper planning is essential

Proper planning can allow your young adult to appoint the person or persons they trust to handle financial and medical matters for them. If they have a serious illness or accident, having these documents in place can save the family time and significant costs by avoiding the immediate need to seek a court-appointed guardian. If they are traveling abroad and need assistance with matters at home, a Durable POA for your teen allows their agent to handle banking transactions, sign tax returns, and many other types of matters for them.

A young adult, or any adult for that matter, should take the time to be sure these documents are in place before they become necessary. Please call one of our estate planning attorneys for more information.

If you have any questions about a Medical Power of Attorney or Durable Power of Attorney, please contact the estate planning attorneys at High Swartz at 610-275-0700 or via our contact form.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

Guardianship Tracking System (GTS) Online Workshops for Spring 2020

The Administrative Office of Pennsylvania Courts (AOPC) is offering a series of online workshops that educate guardians that are court-appointed on how to navigate the newly-created GTS or Guardianship Tracking System. The GTS allows the guardians of incapacitated adults to file annual reports and inventory online.

The workshops are accessed online and conducted through an application called WebEx. Guardians are welcome to attend any session but registration is required.

Guardianship Workshop Topics:

  • Overview of the Guardianship Tracking System
  • How to log in to the GTS
  • How to Navigate the GTS Dashboard
  • How to submit reports online
  • How to determine the court accepted a report
  • Discussion of additional support for submission to the GTS

Online Schedule

  1. April 8, 2020, 10am
  2. April 24, 1pm
  3. May 4, 9am
  4. May 21, 2pm
  5. June 2, 8am
  6. June 18, 5pm

Registration is completed through WebEx and you must bring your own laptop that has is internet-accessible.

Click Here for Registration Instructions.

Ancillary Probate and How To Avoid It

Just when you thought you were done with the fine print of a dead loved one's will, you find an "ancillary" problem, in another state.

In the following paragraphs, we offer a brief understanding of probate, ancillary probate, and how one can avoid this sometimes tricky situation. Talk to an estate lawyer for more insights.

What is ancillary probate?

Ancillary probate is a second probate proceeding necessary when a decedent (the person who has died) has a property to transfer in a state other than the one handling their estate.

To fully understand ancillary probate, you first need to understand probate.

What is probate?

Basically, probate is a court-supervised process in which the decedent’s Will is authenticated, the decedent’s debts are paid and the remaining assets are distributed to beneficiaries. That is the short version.

The long-form definition of probate is that petitions are filed, notices are published, executors/administrators are appointed, lawyers and accountants are hired, income, estate, and inheritance tax returns are prepared, etc. Like any other process, it can be smooth and efficient, or long, expensive, and complicated. We take a deeper dive into probate in another article found here.

In either event, it is a process that occurs in the state where the decedent resided, and with the exception of federal estate and income taxes, that state’s law governs the proceedings. Make sure you work with an estate lawyer conversant in your state laws.

When is "regular" probate not enough?

The potential problem arises because each state court’s power or jurisdiction extends only to real property within that state.

So, if you’re a Pennsylvania resident, your estate would be probated in Pennsylvania, under Pennsylvania law. But only your real property in Pennsylvania and all tangible personal property would be subject to those proceedings.

So, the question is, what happens when a decedent resides in one state but owns real property in another state? The answer is, a second, or ancillary, probate proceeding must be held in the other state. If the decedent owned property in three or four different states, well, you can see where this is going.

Is this necessarily a problem?

Well, not if you are one of those rare individuals who enjoy a lot of court proceedings. All kidding aside, multiple court proceedings result in multiple fees and court costs. It may mean multiple estate attorneys, ancillary executors, and accountants, and of course their fees. It may even lead to additional travel and time.

Above all, it means adding another level of complexity to a process that may already be complicated.

How can I avoid ancillary probate?

So, if you are a resident of Pennsylvania and own a winter home in Florida or some other sunny state, what can you do to avoid the added cost, time, and complexity of ancillary probate? We have the answers below.

Lifetime gifts

You could consider lifetime gifts, which basically consist of retitling your property, adding your children as co-owners with a right of survivorship. This consists of joint ownership, and the surviving owner absorbs the full ownership when the other owner dies.

For example, if you own a Florida vacation home that you intend to leave to your children, you could lifetime gift the home to them, and upon your death—as a matter of law—the property will pass to your children without the need for any court proceeding.

Life estate

You could also gift the home outright to your children while retaining a “life estate” in the property. Your children would own the property, but as long as you lived, you would have the right to use the property and have the responsibility for maintaining it.

Great, so what are the downsides?

These are simple solutions that would make ancillary probate unnecessary. But they do have their drawbacks. Such lifetime transfers may have tax or Medicaid consequences. The transfers may subject your property to the debts and liabilities of your children. Such transfers also limit or prohibit your ability to sell the property should the need or desire arise.

Living trust

Another more flexible solution is placing your property in a “living trust”. A living trust is a fully revocable trust which becomes irrevocable upon your death. The trust, rather than you, actually owns the property. You, as the trustee of the trust, would retain full control of the property. Upon your death, the trustee would distribute the assets owned by the trust to the beneficiaries named in the trust documents, avoiding the need for probate or ancillary probate.

The benefit of a living trust is again, its flexibility. As a trustee, you have total control over the trust property. As settlor and trustee, you control and can change how and to whom the trust assets are paid. Finally, if circumstances change, you retain the right to revoke the trust altogether and have the property returned to you, personally.

These are some simple solutions for simple problems. For even more complex issues, like business or investment properties in other states, you can structure your ownership interests, through stocks, partnerships, and LLCs in ways that those out-of-state interests pass in-state through your will or outside of probate altogether. A trust and estate attorney can determine what works best for you.

There is no “one size fits all” solution to guarantee an orderly, efficient transfer of your property to your beneficiaries upon death. Each solution has its own pros and cons, some of which may or may not be relevant to your situation.

The attorneys at High Swartz can help you tailor your estate planning to ensure that your assets go where and how you want them, as simply, quickly, and efficiently as possible, hopefully avoiding the need for any ancillary probate proceedings. Please call us at 1-833-LAW-1914 or visit our Estate Planning page for individual estate lawyers and email addresses.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances. The content of this information is not meant to be considered as legal advice or a substitute for legal representation.

11 High Swartz Attorneys named to PA Super Lawyers and Rising Stars lists

High Swartz is pleased to announce that 11 of its attorneys have been named among Pennsylvania’s 2019 Super Lawyers and Rising Stars. Among the highlights are two inclusions on the 50 Top Female Lawyers in Pennsylvania list going to Melissa M. Boyd and Mary Cushing Doherty of the High Swartz Domestic Relations practice.

2019 High Swartz Super Lawyers Melissa Boyd David Brooman Mary Cushing Doherty Mark Fischer Gilbert High, Thomas Panzer Thomas Rees Joel Rosen
2019 High Swartz attorneys added to the Super Lawyers List

What is Super Lawyers?

The Super Lawyers list recognizes no more than 5 percent of attorneys in each state. The Super Lawyers Rising Stars list recognizes no more than 2.5 percent of attorneys in each state. To be eligible for inclusion in Rising Stars, a candidate must be either 40 years old or younger, or in practice for 10 years or less. High Swartz 2019 Super Lawyers and Rising Stars are listed below in alphabetical order.

Melissa M. Boyd: Has been nominated to her 5th consecutive Super lawyer list preceded by 6 Rising Star distinctions. On top of her streak, Missy has been nominated to 3 Super Lawyers Top Lists in Pennsylvania. Those accolades are 100 Top Lawyers in Pennsylvania, 100 Top Lawyers in Philadelphia and 50 Top Female Attorneys in Pennsylvania. Missy is a partner and family law attorney with High Swartz and advocates in various areas including divorce, prenuptial and postnuptial agreements, child custody and child support, equitable distribution, alimony, adoptions, protection from abuse and juvenile law.

David J. Brooman: 2019 marks the return to the Super Lawyers list for David. This is his 10th selection. As a land development and litigation attorney, David J. Brooman has more than three decades experience in zoning and land use development, as well as environmental law.

Mary Cushing Doherty: This will be Mary’s 16th consecutive selection to the Super Lawyers list. Along with her distinction, she’ll join the 50 Top Female Lawyers in Pennsylvania list. With a distinguished record of professional and community service, Mary Cushing Doherty has more than 35 years of legal experience as a family law lawyer. She concentrates her practice on all aspects of marital dissolution and family law issues including divorce, child support, custody, spousal support and alimony, premarital agreement asset protection, complex property division, and is the chair of High Swartz’s Family Law practice.

Mark R. Fischer: Mark has been nominated to his second consecutive Super Lawyer designation. He focuses his practice primarily on representing businesses in breach of contract, payment collection, construction defect, and consumer protection disputes throughout Pennsylvania and New Jersey.

Gilbert P. High, Jr.: This will be Gil’s 14 section in a row. Gil’s impressive career is devoted primarily to the practice of municipal and Real Estate and Land Use Law. He regularly speaks on issues pertaining to municipal liability, particularly regarding the maintenance of the Urban Forest, a subject on which he has lectured nationally.

Thomas E. Panzer: This is Tom’s first and much-deserved selection to the Super Lawyers’ list. Thomas E. Panzer, a workers’ compensation attorney, joined High Swartz in 2016 as a result of a merger with McNamara, Bolla & Panzer, Attorneys at Law, a firm for which he served as Managing Partner. Mr. Panzer is active in his community and is currently the Bucks County, Pennsylvania Treasurer.

Thomas D. Rees: Elected to his 14th Super Lawyers list, Tom heads the firm’s Litigation and Employment Practice. He focuses his practice primarily on employment law and private education law. In the education area, Tom represents a number of independent schools in the Philadelphia area, handling employment, student discipline, contract, and governance matters.

Joel D. Rosen: As High Swartz’s Managing partner, Joel has been a Super Lawyer since 2017. With more than 30 years of legal experience as a corporate law attorney, Joel Rosen’s areas of practice include franchise law, business and commercial law, employment law, trademark/copyright law and commercial leasing.

list of 2019 high swartz super lawyers rising stars
2019 Rising Stars attorneys from High Swartz

Kevin Cornish: Recently elected as a partner at High Swartz, Kevin receives his 8th Super Lawyers Rising Star selection. Kevin focuses his practice on commercial, civil, and contract & multi-state litigation support. His clients include individuals as well as local, regional, and national businesses up and down the east coast.

Elizabeth Early: has been nominated to her third consecutive Rising Star selection. Her areas of specialization include divorce, custody, support, equitable distribution, pre and post-nuptial agreements, parenting coordination and abuse matters. Liz also serves as court-appointed counsel and guardian for minor children.

Brittany M. Yurchyk: High Swartz congratulates Brittany’s first nomination to the Super Lawyers’ list as a Rising Star. Specializing in alternative dispute resolution, Brittany concentrates her family law practice on equitable distribution, child custody, child and spousal support, abuse and domestic relations.

How were the High Swartz Super Lawyers selected to the list?

Super Lawyers nominates the best attorneys using a unique selection process. Peer evaluations and nominations are combined with independent research. Nominees are evaluated on 12 indicators from professional achievement through peer nominations. Nominations are made on an annual, state-by-state basis. The Super Lawyers objective is to create a credible, comprehensive and diverse listing of outstanding attorneys on a national level that can be used as a resource for attorneys and consumers searching for legal counsel. As an aid to those selecting a lawyer, Super Lawyers only selects outstanding local lawyers who are able to be retained by the public.

Is Crowdfunding Taxed?

An elderly man beaten with a brick on July 4th in Los Angeles is in critical condition. A German Shepherd is beaten and shot while protecting his young owner during a burglary. Then, there is the little girl born prematurely who needs tests, treatments, doctors and surgeries to survive. In each of these situations, the individuals received financial assistance by using the donation-based crowdfunding platform GoFundMe.


Crowdfunding isn't a new concept

In their paper, a Brief History of Crowdfunding, David M. Freedman and Matthew R. Nutting define crowdfunding as “a method of collecting many small contributions, by means of an online platform, to finance or capitalize a popular enterprise.” The internet has allowed crowdfunding to reach an unlimited number of potential donations, but crowdfunding is not new. One famous example of pre-internet crowdfunding was the fundraising campaign for the Statue of Liberty’s pedestal.

When the Statute of Liberty sailed from France in 1885, there was no pedestal for her. She remained in crates on Bedloe’s Island for over a year until Joseph Pulitzer, owner of “The World” opened up his newspaper’s editorial pages to support the effort. Similar to a GoFundMe page, Pulitzer proposed to print the name of every individual who donated to the construction of the pedestal on the front page of The World, no matter how small the amount. His idea worked. By the fall of 1885 over 120,000 people had donated over $100,000, enough funds to complete the project.


Income Tax Implications

It’s unlikely that an individual who sets up a crowdfunding page considers the income tax implications of their fundraising efforts. In fact, Section 61 of the IRS Code states that "gross income means all income from whatever source derived," unless a specific statutory exception exists. So, based on Section 61, the general rule is revenue raised from crowdfunding is includible in income unless specifically excluded elsewhere. However, a statutory exception does exist that may exclude crowdfunding revenue from an individual’s gross income. That exception arises under IRC 102(a), which is commonly known as the gift and bequest exclusion.

If a GoFundMe page is established correctly, the amounts raised may qualify for the gift and bequest exclusion under IRC 102(a). But when does a donation qualify as a gift rather than income under IRS Code Section & Regulations? The U.S. Supreme Court has defined a gift as given from " 'detached and disinterested generosity,' … 'out of affection, respect, admiration, charity, or like impulses,' " and not from " 'any moral or legal duty,' or from 'the incentive of anticipated benefit,'" or "in return for services rendered" (Duberstein, 363 U.S. 278, 285 (1960)). So, generous donors who make payments to GoFundMe pages should be giving based on a “detached and disinterested generosity” and should not receive any services or goods or “quid pro quo” for their donation.


Keep a paper trail

Remember the burden is upon the GoFundMe campaigner to prove the funds received qualify for the gift and bequest exclusion under IRC 102(a). Therefore, it is important to keep a paper trail and document everything in case the IRS comes knocking upon your door.

Essential steps in the paper trail include the following:

  1. Keep a list of the donors to the GoFundMe campaign; include their name, date of donation, and amount donated, and any contact information provided by GoFundMe.
  2. Clearly identify the recipient of the funds on the GoFundMe page.
  3. If the campaign is set up by someone other than the beneficiary, be sure to clearly indicate on the GOFUNDME page that the creator is acting on behalf of the beneficiary.
  4. Be sure the campaign website clearly states that donations or gifts are solicited. If possible and appropriate, the website should also state that donors will receive nothing in return for their donations.
  5. Print and keep a copy of the campaign website to show to the IRS. By the time the IRS issues a notice of deficiency, the campaign website may no longer be available and the taxpayer (whether an agent or a beneficiary) has no way of showing the IRS the information used to solicit donations.
  6. Keep documentation of all monetary transfers of the funds to the beneficiary or spent on behalf of the beneficiary. A clear paper trail or accounting should exist showing that the funds were spent as indicated on the website. Receipts, invoices and copies of checks should be maintained as well.

In the examples used above (the premature birth, the elderly man, and the German Shepherd), the funds raised are for necessities (i.e., medical treatment and care), and the donors did not receive any services or goods in return. Once donation based crowdfunding moves to patronage-oriented endeavors such as creative or artistic endeavors, where a backer receives something in exchange for their payment, or equity-based crowdfunding, where backers received equity for their payment, the funds donated no longer qualify for the IRC 102(a) gift and bequest exclusion. Instead, the crowdfunding campaign has clearly moved into the realm of generating revenue that is reportable income to the IRS.

If you have any questions about the legalities of crowdfunding, please contact us at main@highswartz.com or call (215) 345-8888. Or contact any of our estate attorneys in Bucks or Montgomery Counties. Our Wills, Trusts & Estates attorneys provide comprehensive legal services to assist in all of these matters.

The information above is general: we recommend that you consult an attorney regarding your specific circumstances.  The content of this information is not meant to be considered as legal advice or a substitute for legal representation.