Estate Planning: What You Need

Estate planning. It may not be something we care to think about when we’re healthy, building our careers, and enjoying family life, but that’s exactly when we should be thinking about it. By being proactive now, we can ease the burden our loved ones may face in the future. There are three important documents that most of us need in estate planning. Theresa M. Hinton, Esq., CTFA, Vice President & Trust Officer at Fidelity Bank, gives us an overview of what those documents are, why they’re so important, and how your bank can help.

Document #1: Durable Power of Attorney (DPOA)

What it is.

A durable power of attorney (DPOA) is a legal document in which you give someone else the right to act on your behalf now, while you’re alive, continuing through periods of incapacity.

For example, if you are in a car accident, if you undergo surgery, or you’re taking medication and these circumstances cause you to be incapacitated, the durable power of attorney continues. It goes into effect now, while you have the capacity to make decisions, and it ceases upon death. (At that point, your will goes into effect and the executor/executrix will settle your estate).

Why it’s important.

If you don’t have a durable power of attorney and something happens to you, and your family or friend needs to access your accounts to, for example, pay your bills, they won’t have any legal documentation proving that they are permitted to act on your behalf. They will have to request the court appoint a guardian to handle these matters. If you don’t want to burden your loved ones in this way, choose someone you truly trust to act on your behalf, and then work with an attorney to draft a durable power of attorney.

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Document #2: Will.

What it is.

A will is a legal document that clearly states how you want your assets to be distributed after death. It’s a set of instructions to your family and to the Commonwealth of Pennsylvania.

Your will is your set of instructions on how you want your property to be distributed upon death. You can stipulate that you want your bills to be paid, and leave specific bequests of money or items (jewelry, cars, furniture, collections, etc.) to specific people.

Your will also includes directives regarding the residue (items that are left after all gifts have been distributed) of your estate. Most people leave the remainder of their estates to family members. Some people opt to give the residue to charity.

Your will includes assets that will go through probate (the legal process that occurs following death). Not all of your assets will be part of your probate estate. Assets that may not be included in probate include:

• Life insurance proceeds
• Trust account (Scroll down to Trust Department for more information)
• In-trust-for-account
• Property that you owned jointly with rights of survivorship
• Property that you owned as tenancy by the entireties (this refers to concurrent ownership of a property that applies to married couples)

Why it’s important.

If you die without a will, it means you have died “intestate,” leaving the distribution of your assets up to the discretion of the state or commonwealth.

Intestate Succession

Pennsylvania law has an intestacy statute that stipulates if someone dies intestate (without a will), the legislature of the Commonwealth of Pennsylvania will decide how their assets are distributed among surviving family members. (In this case, family refers to a spouse, children, grandchildren, parents, grandparents, siblings, nieces, nephews, aunts, uncles, or cousins). Of course, every situation is unique, but here are two common examples of what may unfold when a person dies intestate:

Scenario #1: There is a surviving spouse and children, but there is no will.

It’s natural to assume that in this case, all the assets would transfer to the surviving spouse, but that’s not necessarily true in every case:

• If you die with a spouse, but no children and no parents, your spouse inherits everything.
• If you die with children, but no spouse, the children inherit everything.
• If you die with a spouse and you and your spouse had children together, your spouse only inherits the first $30,000 of your property plus one-half of the balance of the intestate estate. The children inherit the remaining assets.
• If you die with a spouse and children from another marriage, your spouse inherits only half of your intestate estate. The children inherit the remaining assets.
• If you die with parents, but no spouse or descendants, your parents inherit everything.

Scenario #2: There are no surviving family members, and there is no will.

If you die without a will and you don’t have any surviving family members (spouse, children, parents, brothers, sisters, nieces, nephews, uncles, aunts, cousins or grandchildren), your property will escheat (revert back) to the Commonwealth of Pennsylvania and go into the state coffers.

The Bottom Line

• Write a will. It’s the best way to protect your assets and make sure that everything you’ve acquired in your lifetime is inherited by the people you choose.
• Consult an attorney. Although Pennsylvania is one of a handful of states that recognizes holographic (handwritten) wills, and you could write your own, most people find it best to consult with an attorney to ensure their document is written and filed properly. There are always caveats, and every situation is unique. Consulting an attorney, and establishing a relationship with your bank’s trust department, will help you navigate through this process.

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Document #3: Living Will.

What it is.

A living will, also called an advance directive, is a set of instructions detailing your preferences for end-of-life medical care if you are terminally ill and there is no chance of recovery. For example, you may state your preference about receiving blood products, artificial resuscitations, antibiotics, or life support. This document is not legally binding on your family or physicians, but it does state explicitly what your wishes were when you were happy, healthy, and cognizant.

Why it’s important.

Even though a living will isn’t legally binding on family or physicians, it can certainly help to reduce the emotional burden family members will face in making extremely difficult decisions about your end-of-life care. It’s an important step worth taking while you’re healthy, mentally and physically.

How Fidelity Bank Can Help

In addition to an attorney, We can also play an important role in estate planning. Trust Officers at Fidelity Bank offer general guidance regarding estate planning, and they work in conjunction with attorneys to ensure the process goes as smoothly as possible. Upon request, they also provide referrals of attorneys they work with, and trust.

The Trust Department

• Estate Plan Structure: A trust is a separate legal entity that allows a trustee (third party) to hold assets on behalf of you or your beneficiaries. Fidelity’s Trust Officers don’t draft trusts, but they do offer guidance on how one might structure his or her estate plan, advising clients as to whether their plans could benefit from trusts or not. They also discuss needs and goals, and work with their clients’ attorneys to make sure trusts are set up correctly and include all the directions you want your trustee to follow when disbursing the assets or money you place in trust for others.

There are certain situations in which establishing a trust is important. For example, if you have a will and you are leaving money to a family member who has special needs and is receiving government benefits, the receipt of money could disqualify that person from receiving public benefits unless the gift or bequest is made into a special needs trust for that family member.

In addition to the special needs trust, Fidelity also regularly handles irrevocable trusts, revocable (living) trusts, and charitable trusts. To learn more, visit our Trust Services page and scroll down to “Trustee.”

• Transform Vision into Reality: Sometimes clients have ideas as to what they would like to include in their estate plans, but they aren’t sure how to proceed. In these cases, Fidelity’s Trust Officers will work with their attorneys through the drafting process to ensure the plan will be executed properly.
• Administration: For clients who already have some of the documents in place, such as a durable power of attorney, will, and living will, Trust Officers review those documents as part of the initial estate planning consultation. They do not provide legal advice, but they do work in conjunction with attorneys. It’s important to review these documents periodically, especially with life changes such as marriage, birth, and death. Trust Officers bring a different perspective to the review process because they look at documents from the administrative point of view, always considering the mechanics of how the plan will be implemented.
• Fulfill the Role of Executor: An executor is a person or institution appointed by a testator (a person who has made a will) to carry out the terms of that will. Clients may name Fidelity Bank as the executor of their will. The estate administration process is time consuming, complicated, and significant. Leaving this task to a grieving family member may not be the best course of action. The Bank is a disinterested third party with highly skilled professionals who have expertise in estate planning and administration. Naming the bank as an executor can help maintain harmony within the family and alleviate some of the stress families experience during these difficult times.
• Fulfill the Role of Trustee: Like an executor and a will, a Trustee is responsible for carrying out the terms of a trust. This is another situation in which having a disinterested third party, the Bank, distributing and managing funds instead of family members asking the appointed relative for distributions can be very helpful in maintaining peace within the family.

Investment Management

Fidelity’s Investment Managers help clients invest their money in pursuit of their financial goals. This may also be an important part of estate planning.