Avoiding Probate
When it comes to estate planning certain trends play themselves out and reappear years later. One such trend is the notion that probate, the recording of a Will or filing of an estate administration without a Will, is to be avoided regardless of the circumstances. Using this as a rallying cry, some companies came to be known as “trust mills” and churned out multiple living trusts for couples that had jointly titled assets and IRA’s and life insurance with individual beneficiaries named that would not be subject to probate anyway.
It seems there has been a lull in the “trust mill” period but still much confusion as to when an estate needs to be probated. If you take advice of the estate planning lawyers for hire, you will understand that especially over the past few years, Pennsylvania has passed some laws that further reduce the number of estates that need full probate. Whether these procedures should be followed in an individual case depends on the circumstances.
Probate in Pennsylvania, by the way is not so bad. While some states have high statutorily mandated fees, the Pennsylvania filing fee which is based on the size of the estate, is reasonable. The length of time to settle the estate, unless there are difficulties with disposing of certain types of assets or problems with certain beneficiaries’ inheriting, can be dependent on the Executor. Since the Executor is often a family member who also inherits, there is incentive to move the estate. Of course, as in any field, unforeseen circumstances can interfere and extend the time.
Here are some changes to probate requirements that might not have come to your attention.
Small Bank Accounts. Act 35 of 2013 changed the rules regarding distribution of small bank accounts by increasing the amount that can be distributed without probate from $3,500 to $10,000. The law states “Any bank, savings association, savings and loan association, building and loan association, credit union or other savings organization, at any time after the death of a depositor, member or certificate holder, shall pay the amount on deposit or represented by the certificate, when the total standing to the credit of the decedent in that institution does not exceed $10,000, to the spouse, any child, the father or mother or any sister or brother (preference being given in the order named) of the deceased depositor, member or certificate holder, provided that a receipted funeral bill or an affidavit, executed by a licensed funeral director which sets forth that satisfactory arrangements for payment of funeral services have been made, is presented.” The person who receives the funds is accountable for proper distribution.
Patient’s Care Account- Medicaid. Medical Assistance recipients who reside in a Medicaid certified facility, typically a nursing home, usually have what is known as a “personal needs account.” Act 35 at 3101(C) allows release of funds from the “patient’s care account” to a funeral director in an amount up to $10,000. A provision for release of the balance in the account to relatives is odd. Medicaid rules do not permit the resident to have more than $2,400 in the case of one group of recipients and $8,000 in the case of another. Also if funds are released to parties other than the funeral director, the State would claim for it back under Pennsylvania’s “estate recovery” laws. Overall it would make much better sense simply to buy an irrevocable prepaid burial reserve prior to the person’s death and before Medicaid. This is allowed.
Small Estate Petition. For years clients who wanted to close accounts or handle smaller estates were told to file a Small Estate Petition. The amount permitted to be filed as a Small Estate has now been raised to $50,000. However, in more than 30 years of practicing law I never saw a reason to file a Small Estate Petition. Much of what needs to be done for a regular estate filing still needs to be done with a “Small Estate.” You still have to name the beneficiaries, the assets, the bills paid, the disbursements, the claims against the estate in order of preference, notice the interested parties and file an Inheritance Tax return. To establish the order of preference for an insolvent estate, you would need to know the statute which could mean you would be consulting an attorney anyway. If you would like to try, however, the Petition can be located on the Chester County website, www.chesco.org under Register of Wills.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.