Why You Should Never Name Minors as Your Beneficiaries.

Most parents want to pass their assets to their children or grandchildren but naming a minor as a
beneficiary can have unintended consequences. It is important to do some estate planning to
avoid leaving assets directly to a minor.

There are two main problems with naming a minor as the beneficiary of your will, life insurance
policy, annuity, IRA or retirement account. The first is that a large sum of money cannot be left
directly to a minor. Instead, a Pennsylvania Orphan’s court will likely have to appoint a
guardian over the estate of the minor to hold and manage the money. Your Estate will have to
pay attorney fees to handle the guardianship proceedings to appoint the guardian, and the
guardian may not be someone you want to oversee your children’s money. The Guardian of the
Estate will have to file annual accountings with the County Orphan’s court, generating more
costs and fees to your Estate.


The other problem with naming a minor as a beneficiary is that the minor will be entitled to the
funds from the Guardian when he or she reaches age 21. There are no limitations on what the
money can be used for, so while you may have wanted the money to go toward college or a
down payment on a house, your child may have other ideas. 


One way to get around these problems is to create a pour over trust in your will and name the
minor as beneficiary of the trust. A trust ensures that the funds are protected by the trustee until
a time when it makes sense to distribute them. Trusts are also flexible in terms of how they are
drafted. The trust can state any number of specifics on who receives property and when,
including allowing you to distribute the funds at a specific age or based on a specific event, such
as graduating from college. You can also spread out distributions over time to children and
grandchildren. 


If you do create a trust, remember to name the trust as beneficiary of all your life insurance, IRA,
annuity or retirement plans. For example if the minor’s name was John Smith, you would have
language that states “In Trust for John Smith under my will dated August 20, 2020, and as the
same which maybe superseded or amended by a later will.”
If you forget to take that step, the money will be distributed directly to the minor when he or she
turns 21, negating the work of creating the pour over trust in your will. If you have any
questions or need help with your estate plan, call Gregory J. Spadea at 610-521-0604.

Am I Paying Too Much Real Estate Tax on my Delaware County Home

Determining If Your Assessed Value Is Too High

First, look up your property’s current real estate tax assessment on the Delaware County Property Public Access website located at http://delcorealestate.co.delaware.pa.us/pt/forms/htmlframe.aspx?mode=content/home.htm

then enter your Parcel ID Number or address to get your assessed value.  You can also find the assessed value on your property tax bill.

Beginning this year Delaware County has moved to taxing 100% of the assessed value. Therefore, you need to compare the current fair market value to the current real estate tax assessment you just located on the Delaware County website above. If the current assessed value is higher than the current fair market value you should hire the law Offices of Spadea & Associates, LLC by July 26, 2021 to file an annual Real Estate Tax Assessment Appeal by August 1, 2021.

Tax Fees Involved                                                                                                                               

If you purchased the property after August 1, 2020 and have a HUD-1 settlement sheet (that is less than 12 months old) you can use the sales price from the HUD-1 as the Fair Market Value, and do not need an appraisal.  However, if you bought the property at a short sale or foreclosure, or bought it before August 1, 2020 (more than a year ago), you must have an Appraisal to appeal the property tax assessment.  The Cost of an Appraisal is about $400.  The filing fee is typically $50 and is made payable to “Delaware County Treasurer” but is waived this year.  The Law Offices of Spadea & Associates, LLC will help you file the application and attend the hearing on your behalf in late September.  You pay us nothing if we are unable to reduce your assessment.  There are two types of assessment appeals, one is the annual appeal and the other is the interim assessment appeal. 

Annual Appeals                                                                                                                             The annual appeal allows property owners to appeal their assessment once a year.  Annual appeals must be filed by August 1 of each year.  Remember, in the case of an annual appeal, the Board decision does not take effect until tax bills are issued the following tax year.  The Law Offices of Spadea & Associates, LLC will represent you at the hearing which is typically in late September and present evidence such as a recent appraisal with pictures.  The Board will determine the current fair market value for the property based on the appraisal and settlement sheet presented at the hearing.  The Board generally renders a decision within 10 weeks of the hearing date and notifies the property owner in writing.  If you do not agree with the Board’s findings you have the right to file an appeal within 30 days to the Court of Common Pleas. 

Interim Assessment Appeals                                                                                                           The interim assessment represents the value difference (increase) attributable to any assessable improvement to the land and the resulting increase in land value, if any. Assessable improvements include, but are not limited to; new construction of a primary structure or the addition to any such structure and the construction of any ancillary, contributory improvements such as swimming pools, sheds, garages, etc.

If a property is subject to an interim assessment, a property owner will receive an “Interim Real Estate Assessment Notice.” This Notice will inform the property owner of the old assessment and new assessment. The bottom portion of the Notice contains an APPEAL REQUEST FORM. In order to perfect an appeal of an Interim Assessment, the property owner must return the bottom portion of the Interim Notice to the Assessment Office to request receipt of an Appeal Application within forty (40) days of the date of notification of the assessment change.  The appeal date will be noted on the Interim Real Estate Assessment Appeal Notice at the top right and bottom right or this notice.

To file either an interim or annual appeal, contact Gregory J. Spadea at the Law Offices of Spadea & Associates, LLC in Ridley Park, Pennsylvania at 610-521-0604.

Checklist of What Must be Done After Your Loved One Dies

Clipboard with checklist

  1. Locate original will, trust, insurance policies and deeds.
  2. Contact both the funeral home and church to make arrangements and publish obituary notice.
  3. Obtain 10 Certified Death Certificates from the Undertaker.
  4. Contact Social Security, the Veterans Administration, and any other payers of pensions to stop direct deposits.
  5. Contact life insurance company to determine death benefits.
  6. Contact utility companies, cable TV, cell phone, pest control and lawn care to cancel service or change billing status.
  7. Contact homeowners, auto and health insurance to cancel coverage or change policy.
  8. Remove your loved one’s name from the car registration if held jointly.
  9. Contact all three credit reporting agencies (Transunion, Experian and Equifax) and cancel all the credit cards in your loved one’s name.
  10. Cancel or change all memberships and magazine or newspaper subscriptions.
  11. Contact an attorney to see if probating the estate is necessary and bring a list of all the assets.
  12. Have the mail forwarded to the executor if needed.
  13. If probating the estate is not necessary, transfer title on all the jointly owned assets such as bank and brokerage accounts to the surviving owner and remove your loved one’s name and social security number. You may leave one joint account open for 8 months after the date of death in case you need to deposit a check in their name.
  14. Update your life insurance policy and retirement accounts to remove your loved one as beneficiary.
  15. If your spouse and yourself own any real property jointly you do not need to change the deeds but you will need their death certificate when the property is sold.

Feel free to contact Gregory J. Spadea, Esquire of Spadea & Associates, LLC online or at 610-521-0604 to help you probate your loved one’s estate.

Ten Exceptions Allowing You to Deduct 100% of Your Business Meals in 2018

Tax

Beginning in 2018 Entertainment is no longer deductible but business meals are still 50% deductible. Most clients are aware of the tax rule that disallows 50% of their business meals. What is not nearly as widely known is that there are ten exceptions to this 50% disallowance rule. When one of these exceptions applies, you get a 100% deduction for the business meal expense.

1. Meals Served on the Employer’s Premises
An employer may provide employees with meals at work and claim a full deduction without the employees having to report the value of the meals in their income. The key is the meals have to be provided (a) for a valid business reason, (b) on or near your businesses premises, and (c) primarily for the convenience of the employer rather than merely as an added fringe benefit for employees. An example would be a hospital providing meals to hospital staff so they are nearby if a patient needs immediate care.2. Employee’s reimbursed expenses
If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. The employer can deduct the expenses although it is subject to the 50% limit.

3. Reimbursed Expenses Treated as Compensation to the Employee
If the employer does not have an accountable plan and the employer includes the reimbursed expenses in the employee’s wages the expenses are not subject to the 50% limit for the employer. A reimbursement or expense allowance arrangement is an “accountable plan” if it satisfies the requirements of business connection, substantiation, and requires the employee to return amounts in excess of the substantiated expenses.

4. Meals and Entertainment Expenses for Employees
Employers can deduct the full cost of providing food and beverages at recreational, social, or entertainment gatherings primarily for the benefit of rank and file employees. Examples include company golf outings, Christmas parties, or other gathering for employees and their guests.

5. Items Available to the Public
Expenses incurred for meals available to the general public are 100% deductible. Examples include free food at concerts hosted by a Cable Company, free dinners for potential restaurant customers, free hot dogs at a Furniture store promotion, free wine and food at an exhibition sponsored by a winery, and free brownies furnished by a realtor at an open house.

6. Meals and Entertainment Sold to Customers
When services are provided to a client the service provider can deduct 100% of job-related meal and entertainment expenses by billing the client separately for these costs. However the client is then stuck with the 50% disallowance limit. If separate billing doesn’t occur, the 50% disallowance rule applies to the service provider. For example, many of our clients adequately account for meal and entertainment expenses to a client who reimburses them for these expenses. They are not subject to the directly-related or associated test, nor are they subject to the 50% limit. If the client can deduct the expenses, that client is subject to the 50% limit.

7. Sale of meals or entertainment to the Public
You are not subject to the 50% limit if you actually sell meals, entertainment and services. For example, if you run a nightclub, your expense for the food and entertainment you furnish to your customers is not subject to the 50% limit.

8. Meals Provided to Raise money for Charity Through Sports Events
The allowable deduction for the cost of a ticket to a qualifying charity sports event isn’t reduced by the 50% meal disallowance rule even when meals are included. The ticket package must include admission to the event, but it can also include meals and refreshments. To qualify, the charitable event must give 100% of its net proceeds to a charity and use volunteers to do almost all the work. The classic example is a charity golf tournament with a meal included in the deal.

9. Meeting of Business Leagues Exempt under Internal Revenue Code Section 501(c)(6)
Section 501(c)(6) of the Internal Revenue Code provides for the exemption of business leagues, chambers of commerce, real estate boards, boards of trade and professional football leagues, which are not organized for profit to deduct the entire cost of meals provided to members at meetings.

10. Department of Transportation Hours of Service Limitations are 80% Deductible
In lieu of the regular 50% disallowance, individuals whose work is subject to the hours of service limitations of the Department of Transportation (e.g., interstate truck drivers, certain air transportation employees, certain railroad employees) can deduct 80% of their business food and beverage expenses.

As you can see, there are enough exceptions to the 50% disallowance rule that most businesses can meet at least one, if not more of them. If you have any questions please contact Gregory J. Spadea at (610) 521-0604.

Determining How Much State Income Tax To Be Withheld From Your Retirement Plan Distributions

TaxThe Law Offices of Spadea & Associates assists clients with their taxes from all over the country. From time to time our clients need help determining how much state income tax should be withheld from their pension or retirement account distributions. Listed below are the sixteen states that tax pensions and retirement accounts. Obviously, if you do not reside in one of the states listed below you should not have any state income tax withheld from your pension distribution. However if you do live in one of the 16 states listed below, when you fill in IRS form W-4P, you should have state income tax withheld at the following rates:

State Name Income Tax Withholding Percentage of Gross Distribution
 Arkansas  5%
 California  9%
 District of Columbia  8.95%
 Delaware  5%
 Georgia  6%
 Iowa  5%
 Kansas  4.50%
 Massachusetts  5.10%
 Maine  5%
Michigan  4.25%
North Carolina  4%
Nebraska  5%
Oklahoma  5%
Oregon  8%
Virginia  4%
Vermont  9%

 

You can find a W-4P on my website resource page under IRS Tax Forms. If you have any questions or need help with your taxes call Gregory J. Spadea at 610-521-0604.

What Every Trustee Should Know About Making the Election To Use the 65 Day Rule

2 people looking over documents.

If you are serving as the trustee of a complex trust, it’s not too late to take action that may reduce the total taxes paid by both the trust and the beneficiaries in 2018. A “complex trust” is a trust that retains current income in the trust, or distributes trust principal, or has a charitable organization as a beneficiary. A “simple trust” is a trust that is required to distribute all of its annual income to the beneficiaries, but no principal may be distributed. Income of the trust is taxable to the beneficiary in the year received.

Trusts pay the highest federal income tax rate of 37% which starts at $12,500 as opposed to $500,000 for a single individual in 2018. Most trust beneficiaries have a lower tax rate than the trust; therefore, income that is distributed to the beneficiaries is then taxed to the beneficiaries instead of to the trust which ultimately results in a tax savings between the trust and the beneficiaries.

One of the tax planning tools available to trustees of estates and complex trusts is the IRC Section 663(b) election, also known as the “65-day rule.” Simply put, a 663(b) election allows distributions made to beneficiaries within 65 days of year-end to be counted as prior-year distributions.

Sometimes a trustee realizes there is excess income remaining after accounting for all expenses and distributions made in the prior year. In addition trustees must wait until February to receive the 1099s to determine if a distribution under IRC 663(b) is beneficial. To manage the tax burden IRC Section 663(b) allows trustees to elect to make distributions to trust beneficiaries in the first 65 days of the new calendar year. Therefore the trustee of a trust that has a tax year ending on December 31, 2018 has until March 6, 2019 to make distributions that count toward 2018. Keep in mind the 65-Day Rule applies only to estates and complex trusts, because by definition, a simple trust’s income is already taxed to the beneficiary at the beneficiary’s presumably lower tax rate.

In order to use the 65-Day Rule, the trustee must make the 663(b) election by checking the box on line 6 under other information on page two of IRS Form 1041, the trust’s fiduciary income tax return. To be valid, the election must be made by filing form 1041 by its due date, including extensions. Once made, the election is irrevocable. If you have any questions or need help preparing an estate or trust income tax return, call Gregory J. Spadea at 610-521-0604.

What Services Are Subject to Pennsylvania Sales Tax?

Calculator and the word tax

Most of my clients understand what goods are subject to Pennsylvania sales tax but may not realize there are also some services that are also subject to sales tax in Pennsylvania. Therefore here is a list of services subject to Pennsylvania sales tax:

  1. Printing or imprinting of tangible personal property of another.
  2. Washing, cleaning, waxing, polishing or lubricating of motor vehicles.
  3. Inspecting motor vehicles as required by law.
  4. Repairing, altering, mending, pressing, fitting, dyeing, laundering, dry-cleaning or cleaning tangible personal property other than wearing apparel or shoes.
  5. Applying or installing tangible personal property as a repair or replacement part of
    other tangible personal property.
  6. Lobbying services.
  7. Adjustment services, collection services or credit reporting services.
  8. Secretarial or editing services.
  9. Disinfecting or pest control services.
  10. Building maintenance or cleaning services.
  11. Employment agency services or help supply services.
  12. Lawn care services.
  13. Self-storage services.
  14. Mobile telecommunications services.
  15. Premium cable and video programming services including streaming of videos.
  16. Non-residential electric, steam, and gas services.
  17. Intrastate and interstate telecommunications services billed to PA service addresses except subscriber line charges and basic local residential phone service for residential use and payphone service.

You can also find additional information about Pennsylvania taxable and non-taxable sales tax items by reading the Retailers Information Guide Pennsylvania REV-717 which is on my website resource page. Feel free to contact Gregory J. Spadea at 610-521-0604, if you have any questions or need help with a Pennsylvania Sales Tax Audit.

Who Inherits Your Pennsylvania Estate When You Die Without a Will (Intestate)

Signing Last Will and Testament

It is important to remember that a Will only covers assets in your name alone which are called probate assets. A Will does not cover assets with a named beneficiary or assets titled jointly. Those assets are called non-probate assets and pass by operation of law.

In Pennsylvania, if you are married and you die without a Will, what your spouse gets depends on whether or not you have living parents or children or grandchildren. If you don’t have living parents or children, then your spouse inherits all of your intestate property. But if you do, they and your spouse will share your intestate property as follows:

If you die with a surviving spouse and parents but no children. Your surviving spouse inherits the first $30,000 of your intestate property, plus 1/2 of the balance.
Example: Charles is married to Lisa, and his father is still alive. Charles owns a house in joint tenancy with Lisa, and Lisa is also the named beneficiary of Charles retirement account. When Charles dies, Lisa automatically inherits the house and any remaining retirement funds; those things are not probate property. Charles also has $350,000 worth of additional property that would have passed under a Will if he had made one. Lisa inherits $190,000 worth of that property – that is, $30,000 plus $160,000 worth of the remaining $320,000. Charles parents inherit the remaining half or $160,000.

If you die with children from your surviving spouse. Your surviving spouse inherits the first $30,000 of your intestate property, plus half of the balance. Your children with that spouse inherit the remaining half.

Example: Sam is married to Jane, and they have two grown children. Sam and Jane own a large bank account in joint tenancy, and Bill took out a life insurance policy naming Jane as the beneficiary. When Bill dies, Jane receives the life insurance policy proceeds and inherits the bank account outright. Bill also owns $450,000 worth of property that would have passed under a will, so Karen inherits $240,000 worth of that property – that is, $30,000 plus $210,000 of the remaining $420,000. Their two children inherit the remaining half $210,000 or $105,000 each.

If you die with children who are not the descendants of your surviving spouse. Your spouse inherits 1/2 of your intestate property, and your children inherit the other half.
Example: Tom is married to Kim and also has a 12-year-old daughter, Sara from a previous marriage. Tom owns a house in joint tenancy with Kim, plus $200,000 worth of additional assets that would have passed under a Will if Tom had one. When Tom dies, Kim inherits the house outright and $100,000 worth of Tom’s probate property. Tom’s daughter Sara inherits the remaining half or $100,000 of Tom’s probate property.

These rules do not apply if you are separated from your spouse and your spouse has willfully neglected you or refused to physically, financially or emotionally support you for at least one year. They also do not apply if you die in the state of Pennsylvania during divorce proceedings from your spouse.

If you die without a Will and don’t have any family, your property will “escheat” to the Commonwealth of Pennsylvania after remaining unclaimed for 7 years. However, this rarely happens because the laws are designed to get your property to anyone who was even remotely related to you. For example, your property won’t go to the state if you leave a spouse, children, grandchildren, parents, grandparents, siblings, nieces, nephews, or cousins.

If you have any questions regarding Pennsylvania Intestacy Laws contact Gregory J. Spadea at 610-521-0604. The Law Offices of Spadea & Associates, LLC specializes in Probate, Estate Administration and Estate and Tax Litigation.

How Pennsylvania Students Can Avoid Criminal Convictions For Disorderly Conduct and DUI on Their College and Job Application

Applicant Filling Up the Online Job Application

I have represented many high school and college students who were charged with criminal offenses like:

  • Disorderly conduct
  • Underage drinking
  • Driving Under the Influence (DUI)

The student’s parents are not only concerned about the immediate consequences of these minor offenses, but their long term effect on their child’s academic and professional careers.

Most employer applications often require a minimum degree of education and in many cases background checks. These background checks are not only concerned with criminal convictions but also focus on any type of contact with law enforcement which would include arrest and citations.

Disorderly Conduct

If your child is charged with disorderly conduct the prosecution will need to establish beyond a reasonable doubt that he or she created a public disturbance which ultimately lead to his or her arrest. If your son or daughter was charged with disorderly conduct it is important that your defense attorney negotiate a favorable non-trial disposition such as Accelerated Remedial Disposition (ARD). ARD provides for the expungement of the criminal record after completing the program. If your defense attorney isn’t able to negotiate such a non-trial disposition, he should never have your child plead guilty to this charge. Again, disorderly conduct isn’t a serious offense but many employers and colleges often deny applicants based on withdrawn charges or arrests even without a conviction. That is why it is critical to have your child’s record expunged before they apply for college or an internship.

Underage Drinking

In Pennsylvania, underage drinking for a first time offender can result in a 90 day license suspension. This driver’s license suspension will not only increase car insurance rates but it can also limit college internships as many colleges require their students to have a driver’s license in order to travel to and from different locations.

Again, a student should never simply plead guilty to an underage drinking charge but rather your defense attorney should either negotiate a favorable non-trial disposition or contest the charges. Contesting the charges means forcing the prosecution to prove each element of underage drinking beyond a reasonable doubt. This may be difficult especially if the prosecution’s case relies on non-government witnesses such as bartenders or waitresses who are often transient and unwilling to come to court, even with a subpoena, because they are not being paid for their time outside of work

DUI

In Pennsylvania, a minor (who is under the age of 21) commits a DUI when his or her BAC is .02. This is an extremely low blood alcohol content so practically any alcohol consumption will result in a BAC of this level. Minors, can still receive programs such as ARD which would only result in a 90 day license suspension as opposed to a one year license suspension for a first time offense. If a minor doesn’t accept ARD or isn’t eligible for it because of some prior offense, the mandatory minimum is 2 days in jail, a 1 year license suspension, and a $500.00 fine.

If your son or daughter is charged with a criminal offense please contact the Law Offices of Spadea & Associates, LLC at 610-521-0604.

7 Ways to Use Impeachment Against Criminal Trial Witnesses in Pennsylvania

Witness taking an oath in the court room

A proper defense must always consider calling a defense witness or even the accused if the prosecution has presented compelling evidence. Calling a defense witness, however, isn’t an easy decision because this person will have to face cross examination by the prosecution. While a good defense attorney can protect the witness with objections, a judge may overrule those objections and require the witness to answer.

Before any attorney calls a witness to testify, he must thoroughly review their background to make sure that this decision doesn’t ultimately hurt the case more than it helps. While an accused’s character is never admissible at trial unless the defense offers it into evidence, there are separate rules that cover the impeachment of a witness’s credibility including the accused.

The Pennsylvania rules of evidence allow the prosecution and the defense to impeach the credibility of any witness.

Impeachment can expose a witness’s partiality, motive, prior convictions, character for untruthfulness, prior inconsistent statements, and a witness’s inability to recall certain facts. Here are the seven most common forms of impeachment:

  1. Competency – a witness’s ability to communicate, understand the consequences of lying, recalling facts and understanding what is occurring;
  2. Partiality – a witness’s bias, prejudice, financial interest, or corruption;
  3. Motive – a reason explaining a witness’s testimony;
  4. Prior inconsistent statements – a witness’s earlier statements that are inconsistent with the witness’s trial testimony;
  5. Prior convictions – a witness’s convictions for crimes of dishonesty and false statements that help prove the witness’s untruthfulness;
  6. Untruthful character – a witness’s reputation for untruthfulness which may be based on their previous acts;
  7. Contradiction – a witness’s testimony may be contradicted by physical evidence, other witness accounts, or by witness’s own inconsistent conduct.

Even if a witness has credibility issues the defense can still call this witness but needs to be prepared to rehabilitate the witness after the prosecution attacks their credibility. If you have any questions about impeachment or are charged with a crime call Gregory J. Spadea of the Law Offices of Spadea & Associates, LLC at 610-521-0604.

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