Understanding the New VA Requirements for Veterans Aid & Attendence Benefits

 

The Department of Veterans Affairs (VA) has finalized new rules that establish an asset limit, a look-back period, and asset transfer penalties for veterans applying for VA Aid & Attendance pension benefits. The Veterans Aid and Attendance Benefit pays a monthly pension to low-income veterans or their spouses who are in nursing homes or who need help at home with everyday tasks like eating, bathing, dressing, using the toilet or walking.

Veteran Estate Planning

Currently, to be eligible for Aid and Attendance a veteran or his spouse must meet certain income and asset limits. The asset limits aren’t specified, but the range is $40,000 to $80,000 depending on the age of the veteran. In the past there have been no penalties if an applicant divests himself of assets right before applying. That is, before now you could transfer assets over the VA’s limit to an Intentional Defective Grantor Trust or transfer them to your children before applying for benefits and the transfers would not affect eligibility. The new regulations prevent that by setting a net worth limit of $123,600, which coincidentally is the current maximum amount of assets in 2018 that a Medicaid applicant’s spouse is allowed to retain. But in the case of the VA, this number will include both the applicant’s assets and income. It will be indexed to inflation in the same way that Social Security increases. The good news is an applicant’s house (up to a two-acre lot) will not count as an asset even if the applicant is currently living in a nursing home. Applicants will also be able to deduct medical expenses including payments to assisted living facilities from their income.

The regulations also establish a three-year look-back provision. Applicants will have to disclose all financial transactions they were involved in for three years before applying for VA benefits. Applicants who transferred assets to put themselves below the net worth limit within three years of applying for benefits will be subject to a penalty period which can last as long as five years. This penalty is a period of time during which the person who transferred assets is not eligible for VA benefits. There are exceptions to the penalty period for fraudulent transfers and for transfers to a trust for a child who is unable to support him or herself.
Under the new rules, the VA will determine a penalty period in months by dividing the amount transferred that would have put the applicant over the net worth limit by the maximum annual pension rate (MAPR).

You will need the following information to apply for VA Aid & Attendance Benefits:
• Discharge or Separation Documents (DD 214)
• Form 21-4142: Authorization and Consent to Release Information to the Department of Veterans Affairs
• Physician Statement, VA Form 21-2680 or Nursing Home Statement, VA Form 21-0779
• Medical Expenses incurred, VA Form 21P-8416
• Marriage Certificate and Death Certificate (Surviving Spouses only)
• Asset Information (bank account statements, etc.)
• Verification of Income (social security award letter, pensions, IRAs or annuity statements)
• Proof of Medical Premiums (Insurance Statements, Medication or Medical bills that are not reimbursed by Medicare)

The new rules go into effect on October 18, 2018. The VA will disregard asset transfers made before that date. If you need estate planning assistance please contact Gregory J. Spadea at 610-521-0604. Mr. Spadea has been preparing free wills for Veterans since 2001 to thank them for their service.

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.

Who Are Your Legal Children under the Pennsylvania Laws of Intestacy

Paper chain family

If you die without a will in Pennsylvania, your children will receive an “intestate share” of your property. The size of each child’s share depends on how many children you have and whether or not you are married.

For children to inherit from you under the laws of intestacy, the Commonwealth of Pennsylvania must consider them your children, legally. For most families, this is not a confusing issue. But it’s not always clear. Here are some things to keep in mind.

  • Adopted children: Children you legally adopted will receive an intestate share, just as your biological children do.
  • Foster children and stepchildren: Foster children and stepchildren you never legally adopted will not automatically receive a share.
  • Children placed for adoption: Children you placed for adoption and who were legally adopted by another family will not receive a share. However, if your biological children were adopted by your spouse, that would not affect their intestate inheritance. (20 Pa. Cons. Stat. § 2108.)
  • Other relatives placed for adoption: A relative other than your child, for example, your grandchild who was legally adopted by another family may receive a share of your estate if the relative would otherwise be entitled to inherit from you and you have “maintained a family relationship.” (20 Pa. Cons. Stat. § 2108.)
  • Posthumous children: Children conceived by you but not born before your death will receive a share. (20 Pa. Cons. Stat. § 2104.)
  • Children born outside of marriage: If you were not married to your children’s mother when she gave birth to them, they will receive a share of your estate if (1) you and their mother get married later, (2) you acknowledged your paternity, or (3) your paternity is otherwise proved under Pennsylvania law. (20 Pa. Cons. Stat. § 2107.)
  • Children born during your marriage: Any child born to your wife during your marriage is assumed to be your child and will receive a share of your estate.
  • Grandchildren: Your grandchildren will receive a share only if their parent (your child) predeceases you.

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 Litigation.

Why Everyone Should Have a Power of Attorney

Power of Attorney
A Power of Attorney is a written document in which a competent adult individual (the “principal”) appoints another competent adult individual (the “agent”) to act on the principal’s behalf. In general, an agent may perform any legal function or task that the principal has a legal right to do for him or herself. You may wish to sign a Power of Attorney to give your spouse, children, or partner the power to handle your affairs if you become ill or disabled.

A Power of Attorney is an important part of estate planning because it gives one or more persons the power to act on your behalf if you become incapacitated. The power may be limited to a particular activity such as the sale of your home, or general in its application, empowering one or more persons to act on your behalf in a variety of situations. It may take effect immediately or only on the occurrence of a future event. The latter are “springing” powers of attorney. It may give temporary or continuous, permanent authority to act on your behalf. A Power of Attorney may be revoked, but Pennsylvania requires written notice of revocation to the person named to act for you.
The term “durable” in reference to a Power of Attorney means that the power remains in force for the lifetime of the principal, even if he or she becomes mentally incapacitated. The Power of Attorney can be effective immediately on signing or only on disability. A principal may cancel a Power of Attorney at any time for any reason. Powers granted in a Power of Attorney document can be very broad or very narrow in accordance with the needs of the principal. A durable Power of Attorney stays in effect even if someone becomes disabled.

Every adult has day-to-day affairs to manage, such as paying the bills. Many people are under the impression that, in the event of catastrophic illness or injury, a spouse or child can automatically act for them. Unfortunately, this is wrong, even when joint ownership situations exist. A Power of Attorney allows your partner or another person to administer your assets during your lifetime, either on disability or now.

With a valid Power of Attorney, your agent can take any action permitted in the document. Often your agent must present the actual document to invoke the power. For example, if another person is acting on your behalf to sell an automobile, the motor vehicles department generally will require that the Power of Attorney be presented before your agent’s authority to sign the title will be honored. Similarly, an agent who signs documents to buy or sell real property on your behalf must present the Power of Attorney to the title company. The same applies to sale of securities or opening and closing bank accounts.

What if you become incapacitated and do not have a Power of Attorney?

The lack of a properly prepared and executed Power of Attorney can cause extreme difficulties when an individual is stricken with severe illness or injury rendering him or her unable to make decisions or manage financial and medical affairs. In Pennsylvania you must follow the legal procedure to be appointed as a guardian. This means involvement of lawyers to prepare and file the guardianship petition and doctors to provide medical expert testimony regarding the mental incapacity of the subject of the action. The procedures also require the involvement of a temporary guardian to investigate, even intercede, in surrogate proceedings. This can be slow, costly, and very frustrating. In addition, the domestic partner can be challenged in a guardianship by the incapacitated person’s family members.
Advance preparation of the Power of Attorney could avoid the inconvenience and expense of guardianship proceedings. This needs to be done while the principal is competent, alert, and aware of the consequences of his or her decision. Once a serious problem occurs, it is usually too late.

How Should The Agent Sign?

Assume Keith Richards appoints his wife, Patty Hanson, as his agent in a written power of attorney. Patty, as agent, must sign as follows: Patty Hanson, POA for Keith Richards. Note that Patty would sign her name in her capacity as Keith’s agent and not Keith’s name.

If you need a Power of Attorney please call Gregory J. Spadea at 610-521-0604 of the Law Offices Spadea & Associates, LLC.

2014 Changes to Reverse Mortgages


Several changes have been made to the federally insured Home Equity Conversion Mortgage (HECM) reverse mortgage program to shore up the viability of the program. The changes are generally designed to improve the odds that homeowners taking out a reverse mortgage will be able to meet their obligations and not become a burden on the program. The changes are generally effective for new reverse mortgages after September 30, 2013. Additional financial assessment and set-aside requirements take effect January 13, 2014.

Initial disbursements limited

One change generally restricts the amount that can be disbursed to you within one year of your obtaining the reverse mortgage. Under the new rules, the maximum amount that can be disbursed to you at closing or during the first 12-month disbursement period is equal to the greater of (a) 60% of the principal limit or (b) the sum of your mandatory obligations plus 10% of the principal limit (not to exceed 100% of the principal limit). Mandatory obligations include items such as the initial mortgage insurance premium, the loan origination fee, recording fees and taxes, credit reports, a survey, a title examination, title insurance, a property appraisal fee, fees for warranties or inspections, funds to pay any required repairs, and amounts used to discharge liens, debt, and taxes. Except in the case of a single disbursement lump-sum payment option, additional amounts can be disbursed in later years, up to 100% of the available principal limit.

New mortgage insurance premium rates

Another change increases the basic initial mortgage insurance premium, and applies an even higher rate if more than 60% of the principal limit can be disbursed to you in the first year. Under the new rules, an initial mortgage insurance premium fee of 0.5% of the maximum claim amount will generally be charged. The initial fee is increased to 2.5% of the maximum claim amount if required or available disbursements to you at closing or during the first 12-month disbursement period are greater than 60% of the principal amount. In either case, there is also an annual fee equal to 1.25% of the mortgage balance.

Financial assessment and set-asides

Finally, changes are made to improve the odds that you will be able to meet certain of your obligations under the reverse mortgage. For reverse mortgages assigned on or after January 13, 2014, you must undergo a financial assessment prior to approval and closing on a reverse mortgage. Based on your assessment and as a condition of loan approval, you may be required to use proceeds from the reverse mortgage to fund a lifetime expectancy set-aside for payment of property charges or authorize the mortgagee to pay property charges from your monthly payments or your line of credit. Property charges include property taxes, hazard insurance, and flood insurance.

If you are considering a reverse mortgage please contact Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley Park Pennsylvania.

7 Questions to Ask Before Agreeing to Be a Pennsylvania Trustee

Man at desk thinking
If you are asked to serve as a trustee it means the person asking you trusts your judgment and is willing to put the welfare of the trust beneficiaries in your hands. Before you agree to serve as the trustee of the trust you should ask the following seven questions before agreeing to serve as a trustee:

  1. Q: May I read the trust?
    A:
    The trust document is your instruction manual. It tells you what you should do with the funds or other property you will be entrusted to manage. Make sure you read it and understand it and do not be afraid to ask the drafting attorney any questions you may have.
  2. Q: What are the goals of the grantor who is the person who created the trust? A: Unfortunately, most trusts say little or nothing about their purpose. They give the trustee considerable discretion about how to spend trust funds with little or no guidance. Often the trusts say that the trustee may distribute principal for the benefit of the surviving spouse or children for their “health, education, maintenance and support.” Is this a limitation, meaning you can’t pay for a yacht (despite arguments from the son that he needs it for his mental health)? Or is it a mandate that you pay to support the surviving spouse even if she could work and it means depleting the funds before they pass to the next generation? How are you to balance the needs of current and future beneficiaries? It is important that you ask the grantor while you can. It may even be useful if the trust’s grantor can put his intentions on paper in the form of a letter addressed to you.
  3. Q: How much help will I receive?
    A:
    As trustee, will you be on your own or working with a co-trustee? If working with one or more co-trustees, how will you divvy up the duties? If the co-trustee is a professional or an institution, such as a bank or trust company, will it take charge of investments, accounting and tax issues, and simply consult with you on questions about distributions? If you do not have a professional co-trustee, can you hire attorneys, accountants and investment advisors as needed to make sure you operate the trust properly?
  4. Q: How long will my responsibilities last?
    A:
    Are you being asked to take this duty on until the youngest minor child reaches age 25, in other words for a clearly limited amount of time, or for an indefinite period that could last the rest of your life? In either case, under what terms can you resign? Do you name your successor trustee or does someone else?
  5. Q: What is my liability?
    A:
    Generally trustees are relieved of liability in the trust document unless they are grossly negligent or intentionally violate their responsibilities. In addition, professional trustees are generally held to a higher standard than family members or friends. What this means is that you won’t be held liable if for instance you get professional help with the trust investments and the investments happen to drop in value. However, if you use your neighbor who is a financial planner as your adviser without checking to see if he has run afoul of the applicable licensing agencies, and he pockets the trust funds, you may be held liable. So, be careful and read what the trust says in terms of relieving you of personal liability.
  6. Will I Have to post a bond?
    A:
    You may be required to post a bond if you do not serve with a professional co-trustee such as an attorney or bank. The purpose of the bond is to protect the trust assets due to your malfeasance. The insurance company that issues the bond may require you to file and annual report. Therefore it is important to read the trust to see whether you are required to purchase one.
  7. Q: Will I be compensated?
    A:
    Often family members and friends serve as trustees without compensation. However, if the duties are especially demanding, it is not inappropriate for trustees to be paid something. The question then is how much. Professionals generally charge an annual fee of 1 percent of assets in the trust. Often, professionals charge a higher percentage of smaller trusts and a lower percentage of larger trusts. If you are doing all of the work for a trust, including investments, distributions and accounting, it would not be inappropriate to charge a similar fee. However, if you are paying others to perform these functions or are acting as co-trustee with a professional trustee, charging this much may be seen as inappropriate. A typical fee in such a case is a quarter of what the professional trustee charges, or .25 percent (often referred to by financial professionals as 25 basis points). In any case, it’s important for you to read what the trust says about trustee compensation and discuss the issue with the grantor.

If you have any questions about serving as a trustee call Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

2015 Estates and Trusts Income Tax Rates

House, money, calculator and forms
The applicable table set forth below shows the 2015 Income tax rates on estates and trusts:

Tax Rate Limit
15% on Taxable Income to: $2,500
25% on next Taxable Income to: $5,900
28% on next Taxable Income to: $9,050
33% on next Taxable Income to: $12,300
39.6% on next Taxable Income above: $12,300

Trusts and estates are also subject to the increase in capital gains tax rates from 15 to 20 percent as well as the 3.8 percent surtax on investment income. Note, however, that the new rates apply only to non-grantor trusts and estates that accumulate income. Trusts and estates are allowed a deduction for income distributed to beneficiaries, who are then taxed in the year of distribution. Grantor trusts, by definition, do not pay income taxes since all income of a grantor trust is reportable by the grantor on his individual 1040 income tax return.

The challenge posed by the new tax law is how much of and when to distribute income to beneficiaries of non-grantor, complex trusts which are trusts that are not required by their terms to annually distribute all income to their beneficiaries. Distributing income today lowers trust taxation, and may, depending on the income enjoyed by beneficiaries, reduce the overall tax burden.

Given that trust income in excess of only $12,300 is taxed at the maximum rate of 39.6 percent, while much larger amounts of income are required ($464,850 for a married couple filing jointly, $413,200 for a single filer) before the maximum rate kicks on individuals, trustees may need to reallocate and rebalance trust portfolios to obtain an overall better tax result. Trustees will also need to pay close attention to the varying needs of beneficiaries and their individual tax rates. Given the wide disparity in rates and bracket amounts between individuals and trusts, trustees must consider not only the needs of current beneficiaries, but also those of future generations of beneficiaries. If you have any questions about trust taxation contact Gregory J. Spadea at 610-521-0604 of the Law Offices of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Understanding Your Rights as Trust Beneficiary

Understanding Your Rights as Trust Beneficiary

As a trust beneficiary, you may have rights, depending on both the type of trust and the type of beneficiary you are, to ensure the trust is properly managed.

A trust is a written agreement whereby a person called a settlor or grantor designates someone called a trustee to be responsible for managing their assets or property. The trustee holds legal title to the assets for another person, called a beneficiary. The rights of a trust beneficiary depend on the type of trust and the type of beneficiary.

If the trust is a revocable trust, the person who set up the trust can change it or revoke it at any time so the trust beneficiaries other than the grantor have very few rights. Because the grantor can change the trust at any time, he can also change the beneficiaries at any time. Often a trust is revocable until the grantor dies and then it becomes irrevocable. An irrevocable trust is a trust that cannot be changed except in rare cases by court order.

Beneficiaries of an irrevocable trust have rights to information about the trust and to make sure the trustee is acting properly. The scope of those rights depends on the type of beneficiary. Current beneficiaries are beneficiaries who are currently entitled to income from the trust. Remainder or contingent beneficiaries have an interest in the trust after the current beneficiaries’ interest is over. For example, a wife may set up a trust that leaves income to her husband for life making him the current beneficiary, and then the remainder of the property to her children who are the remainder beneficiaries.

The terms of the trust determine exactly what rights a beneficiary has, but following five common rights given to beneficiaries of irrevocable trusts:

  • 1. Payment. Current beneficiaries have the right to distributions as set forth in the trust document.
  • 2. Right to information. Current and remainder beneficiaries have the right to be provided enough information about the trust and its administration to know how to enforce their rights. This usually means given access to the trust document and the year-end bank or brokerage statements.
  • 3. Right to an accounting. Current beneficiaries are entitled to an accounting. An accounting is a detailed report of all income, expenses, and distributions from the trust. Usually trustees are required to provide an accounting annually, depending on the terms of the trust. Beneficiaries may waive the accounting if they are satisfied with the handling of the trust assets by the trustee.
  • 4. Remove the trustee. Current and remainder beneficiaries have the right to petition the court for the removal of the trustee if they believe the trustee is not acting in their best interest. Trustees have an obligation to balance the needs of the current beneficiary with the needs of the remainder beneficiaries, which can be difficult to manage. For example if the trustee does not make necessary repairs to real estate that the current beneficiary has a life estate in, and that will pass to the remainder beneficiaries or not following the intent of the trust. If the reason for removing the trustee is because of large losses of principal, the Court may order the trustee to repay the trust.
  • 5. Terminate the trust. In some circumstances, if all the current and remainder beneficiaries agree, they can petition the court to terminate the trust. Usually, the purpose of the trust or the intent of the grantor must have been fulfilled or it is impossible to fulfill.

If you need a trust or are a trust beneficiary with questions call Gregory J. Spadea of the Law Offices of Spadea & Associates, LLC at 610-521-0604.

Understanding Pennsylvania Commercial Real Estate Tax Appeals

Upscale Shopping Center

If your Pennsylvania commercial property was built in the last 15 years in Montgomery, Chester or Delaware counties, there is a good chance the value of your property is over-assessed. Before deciding whether to do a real estate tax appeal, you should first speak with a commercial appraiser to do a preliminary analysis using one or more of the three valuation methods.

  1. The Income Approach to value is a method of converting your anticipated monthly rental income into present value by capitalizing net operating income by a market derived capitalization rate. Essentially, a capitalization rate is a rate of return on investment. Capitalization rates are taken from sales of similar investment properties and applied to the net income of the property to determine the market value of your property.

    There are several ways to estimate value using capitalization. The method used depends upon several factors such as the timing and regularity of the cash flows, period of time the investment is held, whether or not long term leases are involved. Direct capitalization is the most widely used and simplest approach to apply because it does not require explicit projections of income and assumes that expectations for future income are similar for all the properties compared. It is used when income is not expected to vary significantly over time. Direct capitalization typically involves an average of several years’ income. The net operating income is then capitalized by an overall capitalization rate to arrive at market value.

  2. The Sales Comparison Approach to value looks at comparable commercial properties that have similar use and square footage that were sold in the area in the last year. This is the same method used in residential tax appeals.
  3. The Cost Approach is typically used for vacant land or property that does not generate income. The cost approach is performed by valuing the land at its highest and best use. The fundamental premise of the cost approach is that a potential user of the property would not pay more for the property than it would cost to build an equivalent property. The value of the land plus the depreciated cost of the improvements should equal the total market value estimate.

    The appraiser would take an average of all methods that apply to arrive at the fair market value and multiply it by the common level ratio to arrive at the correct assessed value. If that correct assessed value is less than the actual assessed value of your property you should contact Gregory J. Spadea at 610-521-0604 or online of Spadea & Associates, LLC. The deadline to file an annual real estate tax appeal is August 1. Keep in mind the appraiser may need four to six weeks to complete an appraisal so you need to contact the appraiser in May or June to meet the August 1, filing deadline.

Five Reasons Why Joint Accounts May Be a Poor Estate Plan

Writing A Check

Many people view joint ownership of bank or brokerage accounts as an easy and inexpensive way to avoid probate since joint property passes automatically to the joint owner at death. Joint ownership can also be an easy way to plan for incapacity since the joint owner of accounts can pay bills and manage investments if the primary owner gets sick or becomes incapacitated. Although joint accounts make sense for some assets like a primary residence for married couples, there are five drawbacks as well such as:

  1. Creditor Risk. Joint owners of accounts have complete access and the ability to use the funds for their own purposes. In addition, the funds are available to the creditors of all joint owners. If a senior applies for Medicaid or other public benefits half the joint account could be considered as belonging to them as well as the other joint owners.
  2. Inequity Regarding Other Beneficiaries. If a parent has one child on certain accounts, but not all children, at death that one child may end up inheriting more than the others. While the parent may expect that all of the children will share equally, and often they do in such circumstances, there’s no guarantee.
  3. Unexpected Death of Joint Owner. A system based on joint accounts can fail if a child passes away before the parent. Then it may be necessary to set up a trust to manage the funds or they may ultimately pass to the surviving siblings with nothing or only a small portion going to the deceased child’s family. For example, a mother put her house in joint ownership with her son to avoid probate and Medicaid’s estate recovery claim. When the son died unexpectedly, her daughter-in-law was left high and dry despite having devoted the prior four years to caring for her husband’s mother.
  4. Loss of Control. If a parent adds a child to an account making it a joint account, that parent may lose control over the account and decisions may be made without his consent. The problem with that is the child can withdraw all of the money, regardless of their contribution to the account.
  5. Income Tax Considerations. The beneficiaries do not get the full stepped up basis for income tax purposes when they inherit jointly owned real estate. Therefore if they later
    sell the house they will have to pay federal and state income taxes on the capital gain which is 14% to 19% higher than Pennsylvania inheritance taxes.

Joint accounts do work well in two situations. First, if you have only one child and want everything to go to him or her, joint accounts can be a simple way to provide for succession. It has some of the risks described above, but for most people the risks are outweighed by the convenience of joint accounts. Second, if you put one or more children on your primary checking account to allow them pay the recurring monthly bills and have access to funds in the event of incapacity or death. However, for the rest of your assets, wills, trusts and durable powers of attorney are much better planning tools. They do not put your assets at risk. They provide that the estate will be distributed according to your wishes or in the event of a child’s incapacity or death. In addition they provide for asset management in the event you become incapacitated. If you do not have these documents or have any questions please contact Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

© 2018 The Law Offices of Spadea & Associates. All Rights Reserved. Sitemap | Disclaimer | Privacy Policy Concept, design, and hosting by GetLegal.com Website Services