McClellan Legal LLC Estate Planning & Tax Assessment Blog

Tuesday, December 10, 2013

No Will... Big Problems

What happens if you die without a will in Pennsylvania?  Like all other states, Pennsylvania has “intestate” laws that govern the distribution of your assets to your closest family members.  While most of us know that, few know what specific assets pass via the intestate laws and in what ratios to our family members. 

Before we discuss who will receive your assets, we first must determine which assets will pass through the probate process via PA intestate laws.  Probate is an administrative process of inventorying your assets, paying your debts/taxes, and then distributing your assets.  Many assets will pass directly to your beneficiaries via a beneficiary or Pay on Death  (POD) designation outside of the probate process. 

Assets Passing Outside of Probate

Non-probate assets include: most retirement accounts (e.g., 401k, IRA, etc.), life insurance, pay on death accounts (e.g., bank accounts), transfer on death accounts (e.g., securities), and real property that you own with someone else in joint tenancy or tenancy by the entirety (e.g., typically how a married couple owns their home).  These non-probate assets will pass directly to the beneficiary or co-owner without going through the probate process.  If fact, even if you had a will, these assets would also pass outside of the will.

Who Gets Your Assets

So here’s where we run into potential problems.  Do the default intestate laws regarding the distribution of your assets to your family members align with your wishes.  In almost every situation, my clients say No.  Here are the mostly likely intestate succession scenarios:

  • If you leave with children, but no spouse, then your children inherit everything (4.5% tax). 
  • If you leave a spouse, but no children or parents, then your spouse inherits everything (tax free).
  • If you leave a spouse and children, then your surviving spouse inherits the first $30,000 of your probate property and half of everything else; your children receive the balance.
  • If you leave a spouse and no children, then your then your surviving spouse inherits the first $30,000 of your probate property and half of everything else; your parents receive the balance (4.5% tax).
  • If you leave parents and no spouse or children, then your parents inherit everything.
  • If you leave siblings and no parents, spouse, or children, then your siblings inherit everything (12% tax).

Only in very rare situations when you leave no family members, will the Commonwealth receive your estate.

The Potential Problems

Here are a few issues that many people have with PA’s intestate laws:

  • Do you want your parents to inherit nearly half of your estate if your spouse is still living?
  • Do you want your children to inherit nearly half your estate if your spouse is still living?
  • Do you want your children to receive their inheritance outright as soon as they reach the age of majority?
  • Would you like to provide to a non-family member (e.g., a charity or close friend)?
  • What happens if you are in long-term committed relationship, but not married?

There are many additional reasons why PA’s default intestate laws are ripe with potential problems.  It will be our pleasure at the Law Offices of James S. McClellan to discuss your specific circumstances and design/implement an estate plan that aligns exactly with your goals.

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McClellan Legal LLC is located in Kennett Square and serves clients throughout the areas of Avondale, Chadds Ford, Coatesville, Downingtown, Landenberg, Oxford, Phoenixville, Pottstown, West Chester, & West Grove.

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113 South Broad Street, Kennett Square, PA 19348
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