The purpose of this Memorandum is to enable you to properly prepare for our meeting. Estate planning and administration is what we do at Danyi Law; I don't handle divorces or criminal cases. My ability to give you good legal advice depends on you giving me accurate information.
ESTATE PLANNING IS NOT “WILL PLANNING”
While your will is certainly an important part of your estate plan, and may have been sufficient in the past, many of your assets may be in what are called “non-probate assets”. This means that these assets are not controlled by your will, although most of these assets are subject to inheritance tax and other taxes.
Typical examples of non-probate assets are Individual Retirement Accounts (IRAs), life insurance, annuities, joint assets, tenants by the entireties assets, POD or TOD accounts, and trusts.
I want to ensure that I have a complete picture of your financial situation so that every base is covered and your assets pass to the right people upon your death. I will explain this clearly when we meet, will diagram how everything works for you, and will answer whatever question you may have.
WHY SPEND TIME AND MONEY ON THIS?
Plainly stated, if you do not plan your estate, the government will plan it for you. The government also steps in if you are unable to manage your own affairs during your life. Nursing homes are quick to petition the court to have people declared legally incapacitated. Failure to take care of your affairs privately leads to direct control of your life by strangers appointed by a judge, not to mention potentially higher taxes, administration costs, as well as potentially serious financial problems and headaches for your loved ones.
Your long-term care (“LTC”) is another consideration. Medicare covers only part of the first 100 days of LTC. After that, unless you have specific LTC insurance, you are on your own and the average cost for long-term nursing care in Pennsylvania is $12,000/month. Qualification for Medical Assistance/Medicaid requires meeting financial tests that allow for minimal assets and income. Transferring assets to relatives in order to qualify will result in disqualification and, in some cases, may be fraudulent.
Finally, while the federal estate tax exemption is presently over $5 million, there are other tax considerations, including inheritance tax and income tax, which may apply to your situation.
TO DO: GATHER &BRING DOCUMENTS
It is important to bring actual financial documents so that we don't have to guess. We call this the “original source rule”. You may think that a document means something based upon your own conclusions or what someone else told you, but I need to see the actual document to know exactly what it is.
Proper estate planning involves a detailed review of your assets and liabilities. You should review your ownership documents and bring them to my office. This includes things like:
- Most recent statements for bank accounts, brokerage accounts, IRAs, and 401(k)s
- Annuity contracts and annual statements
- Life insurance policies
- 401(k) statement
- Existing trusts (if applicable)
- Documents showing beneficiary designations on life insurance, annuities, IRAs, 401(k)s, TODs, etc.
SOME QUESTIONS TO THINK ABOUT AND ANSWER
- Are you a joint tenant with right of survivorship (JTROS) with any person on any asset or is that person only an agent or POA on the account? This typically happens with bank accounts when an elderly person puts an adult child’s name on the account. This could cause it to be jointly owned or it may just be an internal bank power of attorney, meaning that the other person doesn’t have ownership rights but may write checks and manage the account for you.
- What is the approximate fair market value of each asset you own?
- Are there any mortgages, home equity loans, or other liens against your house? What is the balance due on these?
- How are you going to pay if you have to go into a nursing home or assisted living facility?
- What kind of retirement plan(s) do you have?
- What assets are IRA assets? An IRA is a tax designation, not an investment. You can have all sorts of assets in IRAs, including CDs, stocks, mutual funds, bonds, etc. (see additional questions, below).
- Have you ever created a trust for anyone, including yourself?
- Have you or your parents changed the title on any assets or made any gifts? For example, have your parents put their house in your name for $1.00?
- Who do you think would be most capable of handling your finances if you are unable to do so yourself?
- Who do you think would be most capable of making medical decisions if you can't make them for yourself?
- Who will your executor be? The executor is the person who handles the settlement of your estate after you die.
- Bring the full names and addresses for the people whom you are naming as your executor and agent, as well as the alternate people for these positions.
- Bring the full names and addresses for the people whom you are naming as your beneficiaries.
- Are any of your children receiving government benefits for any special needs? An outright inheritance may cause the child to become ineligible for those benefits.
After our first meeting, I will draft your will, power of attorney, and healthcare power of attorney/living will. These are the minimum legal documents that every person should have. I will send drafts of these documents to you so that you can review them and make sure that everything is as you want it to be. We will then meet again so that these important documents can be properly executed according to Pennsylvania law.
Basic estate planning is done on a flat-fee basis according to our fee schedule. More advanced projects, such as trusts, are done on an hourly basis.
For flat-fee projects, payment is required prior to the commencement of legal work for you. For hourly-fee project, I will prepare a Representation Agreement with the scope of the project and fees.
I look forward to the opportunity to advise you in this important matter.
Kevin F. Danyi