Congratulations! You’ve just taken a big step in life. Whether you’ve recently married, started a family, or purchased a home, begin this new season of your life by protecting your family by writing a Will in case the worst happens.
What does a Will do?
Your Will sets forth who will receive your personal property and assets that are in your name alone when you die, and which do not have a beneficiary or transfer on death designation. Typically, these probate assets include items like your checking, savings, money market, stocks, bonds, mutual funds, and your personal residence. Your retirement assets, life insurance and annuities (non-probate assets) usually have a beneficiary listed. Non-probate assets pass outside of your Will and according to the beneficiary designation.
Children under the age of 18 – who are their guardians?
If you have children under the age of 18, you need to choose who will be the guardian of them if both you and their other parent are deceased. In your Will you name who will be the guardians for your minor children, meaning those trusted individuals you select to be your children’s caregivers and who will make day to day decisions for your children.  Many factors may weigh in this selection, such as proximity to the school district, extracurricular activities, friends, ability to stay in the family home, family member support, to name a few. It is not good for the children to have grandparents or other relatives “fighting” over custody, especially after the children have just lost their parents.
Who is in charge of the money for your children and for how long?
You choose a family member or a professional fiduciary like a bank or trust company to be the guardian of the assets for your children.
You also decide at what age and under what circumstances your children will receive the assets that have been left for them. For example, Pennsylvania allows a guardian account to be established under your Will until the age of 25. The guardian may purchase things for the use of the minor or child under age 25 for their health, education, maintenance, or support (“HEMS”), but at age 25, the money in the account must be given to the child.
If you want the inherited money or property to be held for your child beyond age 25, then you need to add a separate testamentary trust in your will, along with naming a trustee. Clients often chose a staggered distribution trust (a form of testamentary trust) which generates income their child beginning at age 18 and principal being distributed at certain ages, e.g., 1/3 of the principal at age 25, ½ of the principal at age 30 and the balance of the principal at age 35. Regardless of these ages, the trustee could have discretion to distribute principal earlier if the trustee determined it was necessary for HEMS. Consider that the person you choose as the trustee may have to say no to your child when they make an ask, and whether that will impact the relationship to the extent that a trust company makes more sense. For a full discussion on whether to choose a family member or a trust company, see Smaller Bank Based Trustees can offer many Advantages at Affordable Fees.
I have no children and my parents are older or deceased.
If you would like your assets like your first home to go to your parents, you should do that in your Will. Your parents’ age and possible health conditions which may necessitate later life nursing home care are factors to consider. You may be thinking that they cared for you, and you want to help them out if you would die unexpectedly before them. That is very admirable; however, an outright inheritance from you may cause our parents to lose potential government benefits through Medicaid or the Veterans Administration. This does not mean that you have to disinherit your parents; you just have to plan differently and have a testamentary supplemental needs trust (“SNT”) in your Will. The SNT is designed in such a way that the named trustee would give your parents income and principal during their lifetime, as long as the income and distribution does not cause them to lose benefits like Medicaid. Said another way, a properly worded SNT is to supplement and not replace government benefits.
If you would like your probate assets to go to a friend or a non-profit, do that through your Will. If you do leave assets to a qualified non-profit or charity, the inheritance tax rate is 0%; whereas, assets going to a friend are taxed at the highest inheritance tax rate of 15%.
What if I do not have a Will?
If you pass away without a Will in Pennsylvania, there are intestacy laws that govern who receives your hard-earned assets. Some or all of those recipients may not be who you would want to inherit your money and property. If you have a Will, you can disinherit certain individuals.
We have seen many celebrities die in the last decade without a Will. While her death was not in Pennsylvania, Aretha Franklin died without a Will and left the courts to decide; don’t be like Aretha.
More than a Will is needed.
Effective estate planning involves more than a will. Lifetime documents such as Financial and Health Care Powers of Attorney, Standby Guardianships for minor children, and Trusts are key. As with all estate planning, it is not a one-size-fits-all approach. For more on this topic, read How Soon Do I Need to Start Planning to Protect my Family? and ten good reasons for a will in Why Do I Need a Will?
