May 27, 2017

Definition of Estate Planning and Probate Terms in Pennsylvania

Administrator is a person appointed to administer an estate if there is no will.

Estate Administration consists of four (4) procedures:

    1. Collection of assets
    2. Payment of debts and expenses of the decedent
    3. Preparation of the Pennsylvania inheritance tax and federal estate tax returns
    4. Distribution of property to heirs and beneficiaries

Estate Tax was enacted by the federal government and only applies to estates with assets in excess of $5 million (as of 2011). The federal estate tax starts at 35 percent and goes up to 50 percent of the “gross estate,” which may be different than the “probate estate.” The gross estate may include property interests that the decedent did not own at the time of death, for example, life insurance benefits and annuities. For assets left to a spouse or a charity, the tax usually does not apply.

Estate Planning is a term to describe the process of planning in advance for the disposition of an estate’s assets and the minimization of taxes after death.

Executor is a person or entity named in a will as the responsible party to administer an estate in probate.

Guardianship is a legal status whereby a person can make decision on behalf of someone who has been adjudicated to be incapacitated (for reasons of diminished mental capacity or under age). A guardianship can be “plenary,” which means for all purposes, or a person can be named a guardian for a limited purpose, such as for the handling of finances or for medical decisions.

Inheritance Tax was enacted by the Commonwealth of Pennsylvania. The rate of the tax is based upon the relationship of the beneficiary to the decedent, not the size of the estate. For example, the rate between a parent and a child or a grandparent and grandchild is 4.5 percent. The rate of tax on an estate bequeathed between brothers and sisters is 12 percent. All other inheritors are taxed at a 15 percent rate.

Intestacy is the term used to describe the situation when a person dies without a legally valid will. Money and possessions in the estate will be distributed by the administrator appointed to handle the estate as defined by state inheritance law.

Letters Testamentary is a document issued by the Register of Wills to prove that a party has been declared executor of an estate.

Letters of Administration is a document issued by the Register of Wills to prove that a party has been named administrator to an estate for which there was no will.

Living Will is a declaration of one’s wishes regarding end-of-life care. It provides guidance to medical care providers and family members making medical decision as to the ill person’s wishes regarding artificial life support and aggressive medical care should there be little or no hope of regaining normal functioning.

Long-Term Care Planning is a term to describe the process of planning in advance for the potential need for nursing home or in-home care of a senior or disabled person. It can also refer to the orderly reduction of an estate in order to meet the spend-down requirements to qualify for Medicaid.

Medicaid is the medical component of public assistance (welfare). Medicaid pays for nursing home care for those who cannot afford to pay for it themselves. Medicaid is a state-funded, not federal-funded health care program.

Orphan’s Court is the division of Pennsylvania court that handles estates and probate, guardianships and other matters. It is the oldest court in the country and was originally the Orphan’s Court of the City of London.

Power of Attorney is a written document that gives another person the right to act on your behalf if you are unable to make medical or financial decisions. In essence, it is an agency contract whereby you are appointing another person to act as your agent in order to make necessary decisions.

Probate begins with the filing of the will of a deceased person with the Register of Wills. Probate fees are based on the size of the estate. For example, the probate fee on an estate worth between $200,000 and $300,000 would be $250. At that time, the executor of the estate takes an oath that he or she will obey the law with respect to the payment of Pennsylvania inheritance tax.

Register of Wills is the government department that handles probate and collects inheritance tax.

“Short” Certificates are issued along with the Letters of Testamentary and Administration as further proof of appointment of the executor or administrator.

Trust is a document that changes legal ownership of and decision-making authority over a property. Placement of property or assets into a trust may be revocable (changeable) or irrevocable (unchangeable), depending upon the terms of the trust. A trust is managed for the benefit of its beneficiaries. Management of the trust is by a trustee, who may be the owner of the assets or may be another party or parties.

A Living Trust is a revocable trust whereby the person setting up the trust (also called the grantor) is also the trustee managing the trust.

Will is a legal document that helps put your affairs in order after your death.
Your will identifies who will administer your estate, how your assets will be divided, who will serve as guardian to your minor children and other issues that are important enough for you to provide specific instructions.

Halligan & Keaton are located in Media, PA and serve Delaware County, Montgomery County and Chester County including the communities of Media, Springfield, Havertown, West Chester, Ardmore, Upper Darby, Blue Bell, Plymouth Meeting, King of Prussia and Lansdowne.