Three benefits of estate plans for all income brackets
11/1/2016 | Articles & Alerts
Estate planning is beneficial to everyone, regardless of net worth. Issues that can be addressed with these plans include:
- Medical decisions. Estate plans address more than just assets. These plans may also include legal documents that help guide medical decisions if unconscious, incapacitated or otherwise unable to convey one’s wishes. This can include a living will, also known as an advance directive. This document provides instructions on the care that is desired.
- Process. These plans can also help determine what type of process is used to distribute assets. In some cases, estate plans can be used to help ensure that an estate does not go through probate, the court process used to distribute assets. The probate process adds time and costs to the distribution process. Use of beneficiary designations and trusts can avoid this system.
- Control. An estate plan also gives the creator control over assets. Instead of relying on the court system and state law to determine how assets are distributed, the creator makes these determinations.
These tips are beneficial to anyone. Additional tools are available for those who wish to reduce tax obligations.
Estate tax obligations for those in Pennsylvania
It is helpful to have a basic understanding of tax laws in order to determine if steps should be taken to avoid or reduce these obligations. These taxes can apply at both the state and federal level. Pennsylvania estate or inheritance taxes vary as follows:
- Spouse. A surviving spouse receives no tax on transfers.
- Children and direct descendants. Direct descendants are subject to a 4.5 percent tax on transfers.
- Siblings. Brothers and sisters receive a 12 percent tax on transfers.
- Others. Everyone else is subject to a 15 percent tax. Charitable organizations are exempt.
These taxes are time sensitive. Pennsylvania’s Department of Revenue notes that the payments are due at the death of the owner and considered late nine months post mortem.
Federal tax rates vary depending on the year the estate tax return is filed. Generally, in 2014 estates valued at or over $5,340,000 were taxed and in 2015 those at or over $5,430,000 were taxed. These levels general change year to year.
Legal counsel can help with estate plans
Navigating the nuances of estate plans can be an intimidating process. As a result, it is wise for those who are looking to update or put together an estate plan to seek the counsel of an experienced estate planning attorney. This legal professional will work to better ensure the estate plan is tailored to meet your needs.