Everyone needs an estate plan.  Estate planning is a process for ensuring your wishes are carried out at the time of incapacity or death.  Since we cannot predict our future, it is necessary to plan so that our family members are not burdened with additional tasks and responsibilities that could have been prevented with careful planning.  Many people think estate planning only applies to older individuals or those with a lot of money.  Estate planning is an important way for even young individuals and families to prepare for difficult, complicated and emotional events and circumstances.

Pennsylvania Estate Planning Overview

Estate planning generally involves the following:

  • Transferring assets upon death
  • Designating beneficiaries
  • Setting up a legal document such as a Will or a Trust
  • Appointment of Guardians for minor children
  • Providing for children with special needs
  • Asset protection
  • Disability and long-term care
  • Business transfers
  • Minimizing the impact of taxes
  • Appointing agents under a power of attorney
  • Appointing an attorney-in-fact to make health care decisions

Pennsylvania Estate Planning for Death

Probate v. Non-Probate Assets. 

Non-probate assets are assets that have a beneficiary designation or assets that have a joint owner with survivorship rights.  Common assets with beneficiary designations include life insurance, 401(K) plans, IRAs, and other qualified retirement plans.  Married couples often title assets in their joint names such as the home, bank accounts, brokerage accounts, etc.  When an individual dies the non-probate asset will pass to the named beneficiary or the surviving joint owner.  These assets will not pass through the terms of the Will or Trust.  Therefore, it is important to make sure that beneficiary designations are updated.  In the Will or Trust, beneficiaries are designated to receive the probate assets.  Since estate assets can pass in a number of ways, proper estate planning requires the identification of assets and the coordination of who shall receive each of the assets.

Will v. Revocable Trust. 

A legal document is necessary for the distribution of probate non-probate assets.  The two common legal documents are the Will and the Revocable Trust.  The Revocable Trust is often referred to as a Living Trust.  In Pennsylvania, most estate planning attorneys recommend a Will since the Will is easy to create and does not require re-titling of assets in order to effectuate its purpose.  The Revocable Trust on the other hand is more complex, requires transferring of assets into the Trust, and is more expensive to set up.  Attorney’s fees for a Revocable Trust could be as much as three times the costs to create a Will.  Deciding on a Will or a Revocable Trust should involve the advice and guidance of an experienced estate planning attorney.

Irrevocable Trust. 

A trust is a document that creates a separate legal entity for holding and investing property.  The Trustee is the person who is appointed to manage the Trust and administer the Trust pursuant to the Trust terms.  The Trustee is a fiduciary who is responsible to the Trust beneficiaries.  Trust beneficiaries are those who have the equitable or beneficial Trust interest.  Using a Trust, instead of a Will, is a determination that should only be made with the advice and guidance of an experienced Pennsylvania estate planning attorney.  Trusts can offer unique advantages that a Will cannot provide.  Most of the advantages that a Trust offers arise from the use of an Irrevocable Trust as opposed to the Revocable Trust. Irrevocable trusts are often used to mitigate Federal Estate Tax exposure.  Irrevocable Trusts are often used for incapacity planning and Medicaid planning.  If the Irrevocable Trust is properly drafted, another advantage of trusts is their continuing effectiveness even if the donor dies or becomes incapacitated.

Supplemental Needs Trust. 

A Supplemental Needs Trust often referred to as a Special Needs Trust (SNT) can be created by a parent to enable him or her to provide for the continuing care of a disabled spouse, child, relative or friend. The beneficiary of a well-drafted Supplemental Needs Trust will have access to the trust assets for purposes other than those provided by public benefits programs.  The SNT provides supplemental income to the beneficiary while preserving the beneficiary’s right to benefits such as Supplemental Security Income, Medicaid and low-income housing.

Transfer on Death (TOD) and Payable on Death (POD). 

In addition to these types of transfers, another option available in Pennsylvania is the Transfer on Death or “TOD” designation.   Pennsylvania has adopted the Uniform NonProbate Transfers on Death Act.  Assets subject to the Act can be designated as “TOD.”  The Act does not apply to real estate and is often used for bank accounts.  Pennsylvania has also adopted the Uniform Transfer On Death Security Registration Act, which allows for securities to be labeled as transfer on death (“TOD”) or payable on death (“POD”).  Upon the death of the owner of an account or security with a TOD or POD designation, ownership passes to the named beneficiaries directly.  This has the same effect of an asset passing to a joint tenant or an asset with a beneficiary designation.  Using TOD or POD designations is a simple way to transfer bank accounts or securities upon death; however, without proper Pennsylvania estate planning, there could be problems.  For example, if a person wishes to transfer all his assets to his two children equally, the person could create a Will naming both children as equal beneficiaries.  If the person registers his or her stocks in TOD with just one child, then the other child will not receive half of the stocks, even though the decedent intended for both children to split the stocks equally.

Minor Children. 

For most young families, creating a Will has more to do about making sure minor children are provided for.  In the Will or Revocable Trust, assets can be distributed to minors with specific instructions about how the money is to be used.  Parents can name an individual to manage the funds for the minor children and specify that the funds can only be used for children’s health, maintenance, support and education.  In addition, parents can also specify at what age or ages the children will receive the balance of their inheritance.  For example, the parent may provide that the child or children can receive half their share at the age of 25 and the remainder at the age of 30.  This helps ensure that the needs of the children are met and at the same time, making sure that the children are older and presumably more responsible before receiving the entire estate. 


A Will or Trust can also name a Personal Guardian for the children. The Personal Guardian is legally responsible for raising your children and making the important parental decisions, such as medical and educational decisions, until they become adults. This is extremely important, as it gives you the opportunity to make an informed decision on who to name as the Guardian – someone who has the same priorities and ideals as you, and allows you to name someone who you fully trust to raise your children.

Pennsylvania Death Taxes

Pennsylvania Inheritance Tax. 

Pennsylvania estate planning involves tax analysis.  The Pennsylvania inheritance tax applies to estates of decedents.  An inheritance tax return (REV-1500) must be filed for every decedent who has property which is or may be subject to tax.   The personal representative (Executor or Administrator) of the decedent’s estate is the person responsible for filing the return and disclosing property of the decedent that the personal representative has or acquires knowledge of.  The transferee or recipient of property must file the return if the personal representative does not file a return or if the personal representative files a return but does not include the subject property.  The REV-1500 must be filed within 9 months of the decedent’s death, unless an extension is granted.  Valuation of property is based on the market value on the date of the decedent’s death.  Deductions for funeral expenses, administrative costs, and debts owed by the decedent at the time of death are allowed.  The tax rates are as follows:  Spousal Rate = 0%; Lineal Rate (grandparent, parent, child, grandchild, etc.) = 4.5%; Sibling Rate = 12%; and all others = 15%.

Federal Estate Tax. 

The Federal Estate Tax is a tax on your right to transfer property at your death.  Most simple estates do not require the filing of an estate tax return (IRS Form 706).  A filing is required for estates with combined gross assets and prior taxable gifts exceeding

  • $11,180,000 in 2018
  • $11,400,000 in 2019
  • $11,580,000 in 2020
  • $11,700,000 in 2021

Federal and Pennsylvania Fiduciary Returns. 

Income and gains attributable to an estate or trust until final distribution of assets is subject to tax at the state and federal level.  The personal representative is responsible for filing a Federal fiduciary return (IRS Form 1041) and the Pennsylvania fiduciary return (PA-41).

Decedent’s Final Income Tax Returns. 

Generally, income attributable to a decedent up to the time of death is included in the decedent’s final individual tax returns.

Pennsylvania Estate Planning for Incapacity

Durable Power of Attorney

A Durable Power of Attorney is a legal document that allows you to appoint a person, usually a spouse or family member, to handle important legal and financial issues on your behalf at any time. Some examples include: applying for work-related disability or income continuation benefits and public benefits such as Social Security disability; accessing or changing retirement plans; filing insurance claims or appealing denials; signing tax forms; selling a home to move somewhere more accessible; contracting for health care services; and hiring accountants or lawyers. This could become especially useful if there’s an ongoing legal situation that requires action very quickly or in situations where you are unavailable and need someone to be able to act on your behalf.  The earlier you choose to create a Durable Power of Attorney, the better.  If you become incapacitated or are otherwise unable to competently sign a legal document, you have lost the opportunity to create the document and it may be necessary for your family to ask a Court to appoint a guardian for you.  This takes time and can be a cumbersome, public, and expensive process. By taking the time and properly doing your Pennsylvania estate planning early, this document can already be in place, just in case it is ever needed.

Medical Power of Attorney. 

A Medical Power of Attorney is a legal document that you create to designate an individual to make your health care decisions in the event you become incapacitated or incompetent.  This individual has the legal authority to make any decisions regarding your medical care, including medical treatment, surgical procedures and medications.

Living Will or Advance Health Care Directive. 

A Living Will often referred to as an Advance Health Care Directive is another legal document in which you give written instructions for how you want to be treated in the event you suffer from an  “end stage medical condition” or if you are “permanently unconscious.”  You can decide, in advance, whether you want to initiate, continue, withhold or withdraw all forms of life-sustaining treatment that serve only to prolong the process of dying. Many individuals do not want to remain on artificial life support and this document will ensure that the wishes are carried out.  Without a Living Will, these decisions are usually made by family members, which can lead to significant conflict over what others believe your wishes may have been. This may result in feelings of anger, guilt, or regret by the decider, as well as potentially place an extremely large financial burden on your family and your estate.


As you can see, establishing a cohesive estate plan early can save you and your family much heartache, aggravation, and expense. Too often, individuals try to create their own Will using an online source or legal software without considering other matters.  Therefore, it is always recommended to work with an estate planning attorney who can review and discuss your goals and objectives.  Then, the decision can be made as to how to accomplish the goals.  It is never too early or too late to start.  Contact The Martin Law Firm today to speak with an estate planning attorney.  You can call us at 215-646-3980.

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