Daily Local News (West Chester, PA)
Do you really need a non-probate estate?
Assuming you have listened to the many presentations voicing the idea you should avoid probate, you might have decided to jointly title all of your assets or make all your accounts payable on death or transfer on death believing that these actions avoid all complications. You anticipate you will avoid inheritance taxes. As a spoiler alert, this is not necessarily true.
Probate means simply that your executor or personal representative records your will with the Register of Wills and distributes assets and pays bills as directed in the will. There is a process she follows that, depending on the circumstances, may or may not be complicated.
You might have even spoken to a customer service representative at your bank who advised you should add one of your children to the title of all of your accounts. You might be shopping for a revocable living trust also to avoid probate or maybe to handle a more complicated estate where there may be children by a prior marriage.
All of these actions have consequences; some positive, some not so much, depending on the circumstances. As with almost all legal questions, the answer is “it depends” and this is where the conversation begins.
The first thing you should know is that avoiding probate does not necessarily mean you will avoid Pennsylvania inheritance taxes. If your beneficiary is someone other than your spouse and the assets are something other than life insurance, chances are inheritance tax will be owed even if your assets do not pass by will. Your probate estate and your taxable estate are not the same thing. Some assets like life insurance could go to your probate estate and not be taxed. Others like payable on death accounts could go directly to beneficiaries and still be taxed.
Think about that. Your beneficiary might receive an asset and then learn inheritance tax is still due.