Blog & Resources

From our “Ask a Question” mailbag: My son is a special needs child and I have formed a Special Needs Trust in my will for his care. How do I fund this Trust without paying the Pennsylvania Inheritance Tax?

If you are unable to fund the trust until your death, then the only way to fund the trust without paying the 4.5% Pennsylvania Inheritance Tax on transfers to children (or to trusts for children) is to use life insurance.

Thanks to a skilled lobbying group, life insurance is exempt from the Pennsylvania Inheritance Tax.

From our “Ask a Question” mailbag: < strong>My estate is worth about $4,000,000, which includes a $1,000,000 life insurance policy. At my death, my estate passes to my two children. Now that the Federal Estate Tax Exemption is at $5,000,000.00, what good is an Irrevocable Life Insurance Trust for me?

In rough terms, as long as your estate stays under $5,000,000.00 (adjusted for inflation) at your death your estate will not owe any Federal Estate Tax, but you are a resident of Camden County, New Jersey, so you are forgetting about the New Jersey Inheritance Tax and the New Jersey Estate Tax. If your assets pass to your children, the New Jersey Inheritance Tax will be zero, but the New Jersey Estate Tax taxes all assets over $675,000.00.

From our “Ask a Question” mailbag: My mother is incapacitated and living in an assisted living facility in Camden County, New Jersey. She appointed my brother agent under her Power of Attorney. My mother has a life insurance policy that names me as beneficiary. My brother refuses to make the payment, so the policy will soon lapse. Can I make the payment?

You certainly can make the payment, as the insurance company does not care who sends the check. The life insurance company will only care if the check clears.

From our “Ask a Question” mailbag: Last year, my mother died in Bucks County and named me as beneficiary of her life insurance. As my children were the contingent beneficiaries, I decided to disclaim the inheritance, so the insurance money passed to my children. I was recently in a car accident. If I am sued can they claim that life insurance money?

No one can force you to take an inheritance.

If you properly disclaimed your interest in the life insurance, then you never received it. If you never received it, then any future creditor that you may have cannot claim the asset.

From our “Ask a Question” mailbag: My mother is incapacitated and living in an assisted living facility in Burlington County, New Jersey. She appointed my brother agent under her power of attorney. My mother has a life insurance policy on her life that names me as beneficiary. My brother refuses to make the payment, so the policy will soon lapse. Can I make the payment?

You certainly can make the payment, as the insurance company does not care who sends the check. The life insurance company will only care if the check clears. If the policy is a term policy, you should consider when the policy lapses.

From our “Ask a Question” mailbag: My father died a resident of Bucks County, Pennsylvania and named his girlfriend as beneficiary of his life insurance policy and pension. I was listed as a secondary beneficiary. Can my father give his life insurance and pension to his girlfriend instead of his children?

From our “Ask a Question” mailbag: My mother is incapacitated and living in an assisted living facility in Atlantic County, New Jersey. She appointed my brother Agent under her Power of Attorney. My mother has a life insurance policy that names me as beneficiary. My brother refuses to make the payment, so the policy will soon lapse. Can I make the payment?

The insurance company does not care who sends the check. Therefore, you certainly can make the payment.

The real question you should be asking here is: should you make the payment?

From our “Ask a Question” mailbag: Last year, my mother died in Philadelphia and named me as beneficiary of her life insurance. As my children were the contingent beneficiaries, I decided to disclaim the inheritance, and the insurance money passed to my children. I was recently in a car accident. If I am sued can they claim that life insurance money?

No one can force you to take an inheritance. If you properly disclaimed your interest in the life insurance, then you never received it.

Summary: In 2014, a trust utilizing Crummey powers allows an individual to contribute $14,000 a year ($28,000 for married couples) into a trust without diminishing the lifetime gift tax exemption. Instead, the gift is exempt from the gift tax under the Annual Gift Tax Exclusion. These gifts can help avoid the 40% Federal Gift Tax, preserving wealth for the family.

Addressing your blended family in your estate plan is a good idea. Though you may not wish to treat your step-children the same way you treat your biological children, by at least mentioning them or giving them a small gift you may avoid hurt feelings and potential conflict.