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The basics of estate planning

by | Jul 3, 2020 | Probate & Estate Planning |

Pennsylvania residents who own any kind of assets should consider creating an estate plan. Estate planning can involve creating a will or a trust and taking out a life insurance policy so that loved ones are not left high and dry in the event of someone’s death. Individuals with children should name someone to be the guardian of their children in the event that both parents pass away. Without an estate plan containing these types of instructions, a court would have to appoint a guardian for the children.

Estate planning can also help some people avoid having their assets go through probate after they pass. Probate is the process by which the government oversees the distribution of a person’s assets, and it can take years to complete and can cost a fair amount in taxes and court costs, although the probate process in Pennsylvania is cheaper and less complicated than in other states. Assets go through probate if a person dies without an estate plan as well as if a person has a will. Though a will provides instructions on how property should be distributed, it does not automatically effectuate this distribution.

Some trusts, on the other hand, can avoid probate, but perhaps not inheritance taxes. Trust funds are managed by an appointed trustee for the benefit of others named in the trust. A person can choose to have assets remain in the trust under the control of the trustee until a certain time, such as when beneficiary children turn 18, or even beyond.

There are multiple types of trusts that a person can create. A revocable trust can be changed throughout the maker’s lifetime, such as to add an additional beneficiary. Irrevocable trusts cannot be changed but may have some additional tax benefits to the settlor during his or her lifetime. An estate planning attorney will help clients pick the best estate planning strategies for them based on the types of assets they have and what their plans are for the assets.