What is the difference between a will, power-of-attorney and a living will?
Under Pennsylvania law, all three documents serve different purposes. A will is a document that addresses issues regarding your estate once you are deceased. It does not control matters of importance while you are alive. Property management (business) and health care power-of-attorney are documents that govern how your legal and health related affairs will be handled while you are alive. If you are not able to make the necessary decisions regarding your legal and/or health care related affairs, it is critical to have a person appointed to handle those matters for you. A living will is a document that allows you to make certain health related decisions if you are in an end stage medical condition.
Can I wait to have a power-of-attorney prepared?
The answer to that question can best be illustrated by my personal example. My wife and I went out to dinner several years ago and were in a terrible automobile accident caused by a drunk driver. If I had waited to have prepared a power-of-attorney, my wife would not have been able to have handled matters that required her attention on my behalf while I was in critical condition. Another example is that if a person has a debilitating medical condition such as a major stroke, that person may have waited too long to have executed a power-of-attorney because Pennsylvania law requires that the person must be competent at the time they sign a power-of-attorney. If a person is not competent to execute the power-of-attorney, the only alternative is to have a guardian appointed and that process is lengthy and very costly.
What if I do not have a will and pass away?
Under Pennsylvania law, the state has passed laws that controls how your estate will be distributed if you do not have a will. That law does not take into consideration what the decedent may have wanted to have done, who he/she wanted to receive a portion of the decedent's estate or what church or charitable organizations the decedent may have wanted to benefit.
What assets do Pennsylvania tax when a person passes away, and how much tax is owed?
Pennsylvania does not have a threshold. By that I mean that Pennsylvania taxes all reportable assets less certain allowable deductions. In Pennsylvania we have four rates of tax and they are dependent upon the relationship between the decedent and the beneficiary. Transfers to a spouse, church or qualifying charitable organization are taxed at the rate of 0%. Transfers to parents, children and grandchildren are taxed at the rate of 4.5%. Transfers to a decedent's siblings are taxed at the rate of 12% and transfers to anyone else are taxed at the rate of 15%.
What types of assets are not subject to Pennsylvania inheritance taxes?
In Pennsylvania there are very few exceptions to what is taxable. Life insurance proceeds are not subject to inheritance tax. Gifts that were made by the decedent at least one year prior to the date of death are also not subject to Pennsylvania inheritance tax. IRA's and 529 accounts are also not subject to Pennsylvania inheritance tax under some circumstances. Property owned jointly with another individual is partially exempt from inheritance tax. If a person transfers his/her property but keeps a life estate, the retained life estate is fully taxable under most circumstances.