Frequently Asked Questions About Probate

What Happens if I Die Without A Will?

If you die without a will, you have died “intestate”, and Pennsylvania’s intestacy statutes will control who receives your property. The distribution would usually go first to your surviving spouse and children, or if none, to other family members. Writing a will allows you to create an estate plan to suit your personal preferences.

What is Non-probate Property?

Certain types of assets, called non-probate property, pass by operation of law or contract at the time of your death. These assets are not controlled by your will. For example, real estate and other assets owned with another person as joint tenants with rights of survivorship pass automatically to the surviving owner. Real estate titled with your spouse as a tenant by the entireties will pass automatically to your surviving spouse.

Property you have placed in a Trust is not a probate asset, but passes to the beneficiaries named in the trust document.

An IRA, retirement plan, annuity or insurance policy payable to a named beneficiary also passes outside the will directly to the named beneficiary. (Keep in mind, however, that these assets are still part of your taxable estate.)

How Will My Retirement Account and My IRA Be Distributed After I Die?

You may be entitled to receive some type of retirement benefit under an employee benefit plan offered by your employer or you may have an Individual Retirement Account (IRA). Typically, a deferred compensation or retirement benefit plan will provide for the payment of certain benefits to beneficiaries designated by the employee in the event of the employee’s death before retirement age. After retirement, the employee may elect a benefit option that will continue payments after his or her death to one or more of the designated beneficiaries.

Certain spousal annuities are mandated by law and may be waived only with the spouse’s properly witnessed signed consent. The various payment options will be treated differently for tax purposes.

If you are entitled to retirement benefits, you should be sure you understand the payment options available under your plan. You should also discuss the tax consequences of each payment option with your estate planning attorney or your financial advisor or accountant.

How Will the Proceeds from My Life Insurance Policies Be Distributed When I Die?

If you own life insurance on your own life, you may either
(a) designate one or more beneficiaries to receive the insurance proceeds upon your death, or
(b) make the proceeds payable to your probate estate or to a trust created by you during your lifetime or by your will.

If the insurance proceeds are payable to your estate, they will be distributed as part of the general estate in accordance with the terms of your will or, if you die without a will, the distribution will be according to the applicable laws of intestate succession.

If the proceeds are payable to a trust, they will be held and distributed in the same manner as other trust assets.

If you plan to leave life insurance proceeds to a minor child, you should talk to your estate planning attorney about the best way to handle this.

Should I Title Assets Jointly With My Child or Grandchild to Avoid Probate?

It is not uncommon for older people to add the name of one or more children or grandchildren as joint tenants with right of survivorship on their bank accounts or securities. This may be done simply as a matter of convenience to give the joint tenant access to accounts to pay bills for their elderly relative.

Titling property this way may lead to unexpected or unwanted results–even litigation in court–if the surviving joint tenant claims the amount in the account was meant to be a gift to that person and was not done merely for convenience.

The same kind of problem may arise when accounts are titled with “pay on death” forms of ownership.

It is important to talk to your estate planning attorney before adding the name of another joint owner to any account or making any account “payable on death” to any person.

How much money can I pass to my heirs at my death without incurring a federal estate tax?

Under current law, the amount of assets you can pass after your death without incurring estate tax (known as the estate tax exemption amount) varies depending upon the year of your death. In 2009, the threshold amount is $3.5 million.

Estate Tax Exemption Amounts:

Calendar Year Estate Tax Excemption
Tax repealed

The estate tax exemption amount is reduced if you’ve used all or part of the gift tax credit during your lifetime.

The repeal of the federal estate tax is effective only for the year 2010. In late December, 2010, Congress extended the estate tax exemption to as set forth in the chart below. Unless Congress takes further action before the end of calendar year 2012, the estate tax will be reinstated and the exemption amount will revert back to $1 million.

Keep in mind that Pennsylvania also imposes an inheritance tax, which does not have the same threshold asset amount as the federal Estate tax.

Nearly everything you own is subject to the Pennsylvania Inheritance tax, including your home, investments, insurance proceeds, retirement plans, jewelry and collectibles. When you add up the value of these assets, you may be surprised at the size of your estate.

You should talk to your estate planning attorney to learn more about the Pennsylvania tax rates.

Should I add my Children's Names to the Deed to my Home?

Clients often ask me if they should put their children’s names on the deed to their home. This question usually comes up after the death of the first spouse. Just like adding a new owner to a bank or investment account, adding a new owner to real estate can raise complex problems down the road. For example, if one of the children dies before the parent, that child’s share of the real estate will pass under his or her will. The parent and other siblings may have to pay inheritance tax on the real estate, even though they already own it. There may also be serious capital gains tax consequences when the surviving children sell the home after the parent dies. It is important to talk to your estate planning attorney so you understand all these issues before adding the names of children or other family members to the title to your real estate.