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Tag Archives: Inheritance

estate plans -Top Rated Estate Planning Attorneys in Bucks County, Pennsylvania. The L:aw Offices of Michael Kuldiner, P.C.

First Line of Defense is Offense- Estate Planning to Take Control of Your Affairs

There are many financial decisions you can control to maximize your estate for your heirs after you pass.  Now more than ever, it is crucial to make sure your affairs are in order.  Pennsylvania is one of several states that still has an inheritance tax.

The tax rate for Pennsylvania Inheritance Tax is 4.5% for transfers to direct descendants, your lineal heirs that includes children, adoptive children, stepchildren, grandchildren, and parents. The tax rate jumps to 12% for transfers to siblings, and 15% for transfers to other heirs, except charitable organizations, exempt institutions, and government entities that are exempt from tax. Property owned jointly between husband and wife is exempt from inheritance tax, while property inherited from a spouse, or from a child aged 21 or younger by a parent, is taxed a rate of 0%.

Thus, the biggest decision and tax saving method is deciding who will inherit from your estate.  Your spouse will pay nothing, your children or grand children will pay 4.5%, brothers and sisters, 12%, and your neighbor and friend will pay the most tax at 15%.  If you have no direct heirs or spouse and will be giving your estate to an unrelated party, you should speak with an attorney or accountant to minimize the Inheritance Tax due in Pennsylvania.

It is also very important, especially if you have a large estate, that your Pennsylvania Inheritance Tax Return is filed timely.  Pennsylvania Inheritance Tax Return is due nine months from the date of death.  Interest accrues by the day for any return not timely filed.  If you are inheriting from an estate and/or are the executor/executrix, be mindful of the Pennsylvania deadlines.  It is very helpful to have an attorney probate an estate for you.

            There are some assets that are exempt from Pennsylvania Inheritance Tax.  These include life insurance and certain retirement accounts.  Maximizing your contributions to these assets can save thousands for your heirs.

Most importantly, it is also necessary to have a living will should you find yourself unable to make important medical decisions.  A Pennsylvania living will is also known as an advance directive. Your living will lets you state your wishes about health care in the event that you can no longer make your own health care decisions, you are permanently unconscious or have an end-stage medical condition.  A Pennsylvania living will also names an agent who will make medical decisions on your behalf. There are state laws that explain who can and can't be named as your agent. A Pennsylvania living will must be signed by two witnesses.  While the law provides competent adults with the legal right to make their healthcare decisions in advance of becoming incapacitated, it also provides physicians and other healthcare providers with the right to notify who you appoint if they cannot comply with the directive in good conscience.

Who you appoint to make these critical decisions about your health and assets lets you take control of your affairs for your loved ones.   Estate planning is also critical in protecting your heirs from Pennsylvania Inheritance Tax.  Additionally, estate planning minimizes the chances of family strife and ugly legal battles.  Nothing is more upsetting then siblings fighting over money, racking up legal fees and draining an estate. The bottom line is if you want your assets and your loved ones protected when you are no longer here, you will need an estate plan. Without one, your heirs could face huge tax burdens, and the courts could designate how your assets are divided.  Taking control of your affairs now can protect your assets and loved ones for decades to come.

What happens to inheritance in divorce?

Defining and distributing inheritance in divorce


Divorce clients often fear complete loss or reduction of their inheritance during equitable distribution. The question as to whether or not this asset is a marital property may change the conditions surrounding the inheritance and its role in the divorce. Determining whether or not an inheritance is marital property is the key to understanding the outcome of inheritance in divorce.

When conditions are met for the asset to be considered "marital property," inheritance in divorce may be divisible in E.D. (equitable distribution) and a spouse may be entitled to a portion. Pennsylvania divorce statutes provide certain conditions for the equitable distribution of property. Not to be confused with “equal”, the court considers various conditions in its division process. To be as fair as possible, the court defines first what is considered a “marital” asset, and what is considered a “non-marital” asset.

A marital asset is the only property subject to division in divorce. What constitutes marital property is anything acquired by either spouse during the marriage. The increase in value of non-marital property during the marriage is also considered marital.

What does this mean for your divorce?

Fortunately, when an inheritance is left to you only, it will not be up for equitable distribution as it would not constitute as marital property. Regardless of when it was received, this would not be considered marital. Beware that any funds co-mingled with joint accounts or used for mutual benefit of both spouses may qualify as marital and therefore subject to E.D. Additionally, the inheritance may be considered marital if a spouse makes contributions to payment of inheritance taxes. If taxes on the inheritance have been paid with marital funds, this could also change the disposition of the funds.

Inheritance is not always cash, but can be property such as real estate. Difficult to keep separate while married, any inheritance presents unique hurdles during divorce. Valuation of the property or asset may be necessary and can present varying opinions for the court to evaluate pursuant to the statutes.

Because inheritance is not always cash, our Bucks County divorce attorneys can apply years of experience to analyzing a particular situation. As it is not always simple to explain to a spouse that you want to keep the inheritance money separate, there are a few possibilities when it comes to protecting an inheritance in divorce.

If the inheritance is real property such as a home, you and your attorney should closely review the deed. To maintain the property separately and keep it free from claims during E.D., the deed must not include your spouse's name, or the name of any other party for that matter. However, if a spouse has made contributions to the maintenance and subsequent increase in value of the real property, it may be subject to equitable distribution. The maintenance of the property, including payment of taxes, with marital funds may also render it marital and subject to equitable distribution.

Discussion of "who gets what" is always difficult - especially where inheritances are involved. Large sums of money or property can raise the stakes when a couple splits. Being proactive to protect an inheritance is key but can present difficulties between spouses. To discuss inheritance in divorce, or other divorce matters, speak with the experienced family lawyers at the Law Offices of Michael Kuldiner, P.C. by calling (215) 942-2100. Call or submit an inquiry form to schedule a consultation.

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