Estate Matters
The Klenk Law Blog

Posted on Thursday, April 7th, 2016 by Peter Klenk

From our “Ask a Question” mailbag: Should I name my child as the beneficiary of my life insurance?

No Kids Sign

When Planning Your Estate Never name your child as beneficiary of life insurance

Naming your child as beneficiary of your life insurance raises a number of problems and the loss of a valuable tool.

By naming your child as the beneficiary of your life insurance it means your child receives the proceeds, which are then open to your child’s creditors, divorce proceedings and will be part of your child’s taxable estate at death. Further, if your child is a minor, the child cannot collect the life insurance and it might require the appointment of a court appointed guardian of the estate to collect and hold the funds until your child is 18.

Instead, if you form a trust under your will for your child and name that trust as beneficiary, the trust receives the insurance and not your child. The terms of this trust can include language that allows your child to serve as the trustee at an appropriate age with broad rights to invest the insurance proceeds as well as use the trust assets for your child and his descendants, but can also shelter the insurance proceeds from your child’s creditors, divorce and avoid estate and inheritance taxes at your child’s subsequent death.

Even better, if your child serves as the Trustee then there is no Trustee cost to run the trust over your child’s lifetime, as your child will serve without fee.

This is a simple explanation, but I would be happy to set up a free consultation to provide you with a more detailed explanation.

If you have further questions about Life Insurance, trusts, and estate planning, or any other questions about Estate Planning, feel free to contact our office for a free consultation.

Wills, Trusts and Probate, it’s all we do!

Peter Klenk, Esq.

Posted on Thursday, April 7th, 2016 by Peter Klenk

From our “Ask a Question” mailbag: Is there a general rule about how much life insurance I should have as part of my estate plan?

Over the years I have heard a few rules of thumb about the amount of life insurance a person should own. The most common general rule bantered about is having a policy 10x your salary.

While it is nice to have a quick rule, there are other factors you should consider. Don’t worry; it won’t take to much time.

Life insurance is a tool and you are purchasing life insurance to address a specific concern. If that concern is to provide for your children until they are out of school, then factors to consider are the children’s ages and the expected costs of education after high school for each child. If your children are older or will attend a state school, your needs are less than if you have younger children who will likely wish to attend a private school. Another factor to consider for children is if you wish to leave them some amount over the cost of education for things like a wedding or down payment on a house.

If your concern is to leave your spouse financially unburdened, then factors include the size of debts you wish paid off, your spouse’s ability to maintain his or her lifestyle without your income and will your spouse need to take time some off from work without income?

Once you have identified the purpose for the life insurance, and an approximate amount to address that purpose, you can more easily calculate the size policy needed. Your wealth advisor or insurance professional should be able to help you with this calculation.

There is no one-size fits all method to arrive at the correct size insurance policy that will address your need, but by taking a little bit of time you can arrive at a very good estimate of what size policy is a good fit for yourself.

I suggest that you document and file how you arrived at your calculation. This way, as the years pass, you can more easily revisit your reasoning and decide if the policy you purchased need be increased to address a rise in need or decreased as needs diminish. It is difficult to remember what your reasoning was 5 or 10 years prior without referring to some good notes.

If you have further questions about life insurance as part of an Estate Plan, or Estate Planning in Chester County PA, feel free to contact our office for a free consultation.

Posted on Thursday, March 10th, 2016 by Peter Klenk

From our “Ask a Question” mailbag: “My Wife is divorcing me, what estate planning documents should I change to protect myself?”

Once your marriage begins to unravel, there are three estate planning document you should change immediately.

Durable General Power of Attorney: During the divorce process, who do you wish to handle your financial decisions, pay your bills or even negotiate your divorce should you become incapacitated? If you have already given your spouse this power, it is time to change your Durable General Power of Attorney or, if you have never signed one, it is time for you to select who should protect you if circumstance prevent you from protecting yourself.

Medical Health Care Power of Attorney an Living Will: Should you have a medical emergency during your divorce and be unable to speak for yourself, your spouse is still the person the law recognizes as having the default power to make your medical decisions. Given that you are getting a divorce, you likely would prefer to name someone else. Signing a new Medical Health Care Power of Attorney and Living Will allows you to select a neutral and friendly person who can represent your wishes.

Last Will and Testament: If you have a Will that gives your assets to your soon-to-be ex-spouse, you likely will wish to name new heirs. If you have no Will, the Rules of Intestacy will likely give much if not all your assets to your spouse until you are divorced. If you have an old Will, it likely gives much if not all of your estate to your spouse. Both are reasons to update your Will to name a neutral Executor and to reflect your true wishes, such as setting up trusts for your children with a friendly Trustee.

These are the three main documents you should immediately consider changing if your marriage is ending, but there might be others depending on your specific circumstances and assets. Meet with an experienced estate planning attorney to make sure your interests are protected.

If you have further questions about estate planning, and divorce, or any other questions about estate planning in Bucks County, PA, feel free to contact our office for a free consultation.

Wills, Trusts and Probate, it’s all we do!

Peter Klenk, Esq.

Posted on Wednesday, February 17th, 2016 by Peter Klenk

From our “Ask a Question” mailbag: My mother is having trouble managing her finances and I discovered she wrote a check to some person who called her on the phone. It wasn’t much, but she was confused and in the future might get scammed out of a large sum by some telemarketer or criminal. Can a revocable living trust or an Irrevocable Trust help protect her?

Although the internet connects more of our elderly population to loved ones and to the rest of the world, this connection has also opened up new opportunities for elder abuse. You’re right to be concerned, and to wonder if the person who conned her out of a small sum will not return for more. Read more »

Posted on Tuesday, February 16th, 2016 by Peter Klenk

From our “Ask a Question” mailbag: I believe my brother used undue influence to get my father to change his will. If I decide to challenge the will, where will the trial be held? How long will the process take?

Will contests are heard by the judges in the Chester County Orphans’ Court. The Chester County Orphans’ Court is located in West Chester. In many cases, will contest challenges settle before a trial. If the case settles, the parties could agree to terms in a matter of weeks, months or it could be on the courthouse steps minutes before trial. Read more »

Posted on Tuesday, February 9th, 2016 by Peter Klenk

From our “Ask a Question” mailbag: My sister died in New Jersey without a will. She was never married, had no children and our parents are dead. Our dad had a daughter out of wedlock when he was very young. It was something that the family didn’t speak of and we only saw her once in our lives. Does she receive a share of my sister’s estate?

New Jersey law gave your sister the ability to leave her assets to any person and to exclude any person but, because she didn’t make a will, her probate assets pass under the New Jersey Rules of Intestacy.

Those rules state that if a person dies unmarried, without children or living parents, then the assets pass equally to siblings. There is no difference in the New Jersey Intestacy Rules between a full or half sibling. So, even though your sister may have never spoken to her half-sister, Read more »

Posted on Sunday, February 7th, 2016 by Peter Klenk

From our “Ask a Question” mailbag: Before he died, my dad lived with me in Gloucester County, New Jersey for several years. My wife and I took him to the doctor and cared for him when he became bedridden. He died without a will and all his assets are being divided between my brothers and I equally. They never helped with his care. This is not fair. Can I make the estate pay me for my time?

Under New Jersey rules, your father could have made a will and given you the entire estate, or had a will that said you would receive more of his estate to reflect the work you did. Because he did not make a will, the New Jersey intestate rules divide his assets between all children, equally. Prior to the assets being divided, all his creditors must be paid. This includes his funeral expenses and final taxes. Read more »

Posted on Friday, February 5th, 2016 by Peter Klenk

From our “Ask a Question” mailbag: The attorney handling my uncle’s Bucks County estate mailed me a Receipt, Release, Refunding and Indemnification Agreement. There are no details about how much he spent or other expenses. If I sign this, do I waive my rights to ask any questions?

A Receipt, Release, Refunding and Indemnification Agreement is a probate tool that allows the executor to distribute estate funds to a beneficiary with the promise from the beneficiary to return the funds if it later turns out they were distributed in error. The same form can contain language that, if you sign, means that you agree to take the funds without an accounting and waive your rights to ask future questions. Read more »

Posted on Wednesday, February 3rd, 2016 by Peter Klenk

From our “Ask a Question” mailbag: Is there a statute of limitations period to challenge a will in Bucks County?

Yes. You have one year from the filing of the will to appeal the filing of a will and to contest the validity through a will contest or will challenge. Filing sooner rather than later is usually the best, as the Executor might be selling or distributing assets, which may be difficult or impossible to recover. Read more »

Posted on Tuesday, February 2nd, 2016 by Peter Klenk

From our “Ask a Question” mailbag: I have heard that if I form a trust, I can help reduce the federal estate tax due at my death, is that true?

There are many types of trusts. Some help reduce the federal estate tax and others do not.

For example, a Revocable Living Trust is a useful tool for many reasons, but it does nothing to help reduce the federal estate tax. A typical trust used to reduce the federal estate tax is the Irrevocable Life Insurance Trust. These trusts can vary greatly, but their usual goal is to remove your life insurance from your taxable estate. Read more »