Preventing Estate of Emergency

Proper preparation can make succession planning simple

Planning for events unforeseen or eventualities that befall everyone eventually is the job for Nicole Pardus. As an estate planning attorney for Long & Long in Greensburg, Westmoreland County, Nicole provides guidance to clients who want to ensure that their property and assets remain in their family or are charitably transferred to benefit their community. In this Q&A, she shares her expertise as well as the latest information on SECURE ACT 2.0 and Pennsylvania’s succession laws.
 

When you speak to individuals or organizations, how do you communicate the importance of estate planning to them?

The thing I really try to stress is control. Estate planning is about controlling, at least in part, how your life and legacy are set up. Pennsylvania has very clear intestate succession laws, so people sometimes think they don't need to worry about estate planning, but it is very important for people to understand that estate planning is much more than what is in your will. Estate planning should be an all-encompassing review and plan of your assets, goals and wishes.

Broadly speaking, what should Pennsylvania residents know about how succession laws impact their assets if an estate plan is not in place?

When an individual dies without a will or other estate planning documents, such as a trust, there is a myth that the state is entitled to take your probate assets. In reality, Pennsylvania’s Intestate Succession law controls who is entitled to your assets. The law provides what share a spouse, child or other family member would receive if an individual died with probate assets but without a will. For example, clients sometime assume that if they have a spouse, a will is unnecessary because everything will automatically pass to their spouse. This is untrue. If spouses hold their assets jointly – or have beneficiary designations – then yes, those assets pass to the spouse as the surviving joint owner or beneficiary. However, if one spouse dies with probate assets, then depending on the situation, some assets may pass to the parents of the deceased spouse.  

What are some of the current challenges that make having estate plans so important, if any are particularly prevalent?

If you have children, planning for guardianship of those children is very, very important and can create tension between family members, especially if the issue is not addressed in an estate plan. Another big issue is planning for Medicaid purposes and asset protection. There are very limited options in shielding assets from Medicaid and sometimes it is just not feasible for people to plan to do so. Also, with the passing of the SECURE Act, it is becoming important to have discussions regarding IRAs and estate planning.

Can you break down the SECURE Act for novices, because it is something I hear a lot from our Development and Donor Services staff? What parts should people be most aware of?

The original SECURE Act was signed into law in Dec. 2019. It drastically changed how retirement benefits are viewed in terms of estate planning. Except for certain beneficiaries – minor children, a surviving spouse, disabled or chronically ill individuals, etc. – a beneficiary must now take all the money out of the IRA within 10 years of the decedent's death. Previously, beneficiaries were able to stretch the payouts over their life expectancy.

With the passing of the SECURE Act, the stretch was essentially eliminated except in these circumstances where there is an eligible beneficiary. Now a beneficiary must take the full IRA over the 10-year period. They are now going to see a much higher income tax than they would have when the payouts could have been stretched. This creates an issue because many clients have a great deal of their assets in retirement accounts, so they are now considering using other types of assets to pass wealth.

In 2022, the Securing a Strong Retirement Act AKA the SECURE Act 2.0 was passed. This Act changed a few things specifically related to estate planning.

• First, the age for taking Required Minimum Distributions ("RMDs") has increased to 73 (75 by 2033), which allows people to continue to defer income taxes on their investments.
• Second, I think the most important change in SECURE 2.0 deals with charitable planning for retirement accounts. For example, individuals who are 70.5 and older, may give to charity via a distribution from their IRA directly to the charity. This is known as a qualified charitable distribution, and it allows individuals to exclude the IRA distribution from taxable income while meeting their RMD.

The SECURE Act and SECURE Act 2.0 are extensive, and I have only briefly touched on provisions in both laws that impact estate planning so that is why it is essential to consult with an attorney for individuals interested in discussing their estate planning.  

I mentioned your professional philanthropy in the photo caption, but you also shared that, outside of the legal field, your own philanthropy focuses on the environment and women's rights. How does the charitable component fit for you?

I am fortunate to be able to focus some of my energy and time on organizations that champion these causes and I believe they are areas which I will always be passionate about. Everyone’s life experiences are so different, and those experiences inform our values, which is why I think it is so essential for everyone to have a discussion around their values and how those values can translates to giving.

When I speak with clients about charitable giving, we focus on my client's values and what organizations and causes are important to them. I also try to advise my clients about the different sizes of nonprofits and the impact their gift would have on organizations. And I try to encourage giving without many restrictions, but that is always a part of the conversation.

Updating a will can be time consuming for all and sometimes costly. What are ways of doing it outside of the document so people can plan it, set it and revisit it? And how does working with a Foundation such as ours become advantageous to that?

The only true ways to modify a will are by amendment, also known as codicil, or creating a new document. But sometimes instead of modifying a will, I encourage clients to review their beneficiary designations or other assets that pass outside of probate. Also, clients who wish to provide for nonprofits can consider giving money to a foundation like The Pittsburgh Foundation and setting up a fund prior to their death. In doing so, they don't have to modify their will to reflect the organizations they care about and can instead do that work through the foundation which would be less costly.

LEARN MORE For more information about estate planning and creating or amending your will, please visit the Will Week web page:  will week