How Does a Living Trust Apply in Pennsylvania?
A living trust is a form of estate planning which, unlike things like wills, becomes active while the person is still living. How such trusts work varies from state to state. Here’s what you need to know about living trusts in Pennsylvania.
What Is a Living Trust?
A living trust is a legal document in which a person (the testator) places assets, including bank accounts, property, or other financial assets, into a trust managed by someone else. This could be the testator themselves, or it could be another individual or a corporation such as a bank. Whoever manages the trust is called the trustee.
The trust specifies the trust’s beneficiaries when the testator dies. The testator continues using the assets while alive but has prepared them to be fully transferred after death.
Advantages of a Living Trust
One of the most significant advantages of a living trust is avoiding having the assets go through probate court. Assets that belong to the trust can be distributed to the heirs quickly, as opposed to a will that needs to go through probate court, which can take months or longer and run up significant legal fees.
Another advantage is that a trust is a private transaction. Wills that go through probate become part of the public record. For those who would like to keep their estate details more private, a trust is a way of accomplishing that.
One thing to note: People often erroneously believe that a trust will significantly reduce estate taxes. That’s rarely the case. But Pennsylvania doesn’t have a state estate tax, although it does have a state inheritance tax.
If I Have a Living Trust in Pennsylvania, Do I Still Need a Will?
There are two major reasons you should have a will, even if you have a living trust:
- Guardianship of minor children. Trusts don’t have a mechanism to appoint guardians for orphaned minor children. Only a will accomplishes this. Without a will, the court will assign an orphaned minor a guardian.
- Assets not included in the trust. Any assets not transferred to the trust will not be distributed by the trust. The probate court would handle that.
Let Me Advise You
If you or someone you know wants to investigate setting up a living trust in Pennsylvania, call me at 610-718-6368.
