Don’t Let Time Be Your Enemy

By: Pile Law Firm, PLLC

Living Wills and Testamentary Trusts: Expanding the Scope of Your Estate Plan

Latest News

What Is a Living Will and How Can It Help Me?

A living will is a document that clearly expresses your wishes and detailed instructions regarding your health care when you are deemed incompetent and have an end-stage medical condition.

If you become ill, impaired, or reach an advanced age and cannot direct your medical care, this document can be your lifeline, ensuring your wishes are followed. Without such documentation, many vital decisions may end up in the hands of an estranged family member, your medical team, or even a judge—none of whom may know your preferences.

Of course, choosing the right person or “agent” to carry out your wishes is one of the most essential parts of any living will. Under Pennsylvania law, the “agent” may be your spouse, partner, relative, or even a close friend.

However, under these laws, some people cannot be your agent. For example;

  • Your physician or health care provider, unless they’re related to you by blood, marriage, or adoption.
  • Also, the owner, operator, or employee of any health care provider from which you are getting your current care unless they’re a related blood relative, spouse, or by adoption.

A living will is crucial for ensuring you die with dignity and have someone appointed to carry out your wishes. Although it may seem like a simple legal document, it should be drafted by a skilled and experienced Blue Bell estate planning lawyer to ensure it is accurate and legally valid.

What Is a Testamentary Trust and Can It Expand the Scope of My Last Will and Testament?

A living will has a specific function: it addresses your wishes if you become incapacitated due to illness or accident. In contrast, a Last Will and Testament (a Will) covers broader family issues such as finances and property.

While there may be some overlap between these documents, they typically address different aspects of your estate plan. Depending on the complexity of your estate, both documents are usually included in a comprehensive estate plan.

A testamentary trust is another component of an estate plan that becomes active only after your death. When creating a testamentary trust, you must appoint an executor to manage the trust’s duties, actions, and responsibilities. Your estate is transferred into the trust upon your death, and specific conditions must be met before the estate is distributed to the beneficiaries.

For example, you might leave funds for a child’s education, which will be released only if the child enrolls in a bona fide four-year college program. Alternatively, you can create a testamentary trust to distribute assets to a specific charity according to your predetermined plans.

The key point is that a valid and legally secure estate plan provides you with various options and strictly follows the laws of Pennsylvania. These detailed and specific options enable you and your skilled Blue Bell estate planning lawyer to use the exact documents needed to ensure your final wishes and instructions are fully carried out.

Why May I Need To Use a Testamentary Trust?

When you die or become incapacitated, most people want to ensure their family, assets, and businesses are protected and distributed according to their detailed instructions. Trusts serve this purpose by safeguarding your assets. While there are various types of trusts, a testamentary trust is particularly useful for two reasons:

  • A testamentary trust can protect assets after death and provide greater control over how they are distributed to beneficiaries. The trustee holds legal ownership of the estate assets.
  • Additionally, a testamentary trust can reduce the amount of taxes beneficiaries pay on their inheritance income. The trustee can distribute income to different people and related entities, taking advantage of their different tax rates.

A key feature of a testamentary trust is that it specifies when your beneficiaries receive funds, how much they receive, and how the funds can be used. For example, you might stipulate that your young children receive payments from the trust once they reach a certain age, or you could provide them with a smaller amount when they are young and a larger amount as they get older.

To address these considerations and ensure your trust (regardless of type) fulfills your specific wishes, it is essential to seek the assistance of a qualified, knowledgeable, empathetic, and detail-oriented estate planning lawyer.

Is a Testamentary Trust Difficult to Create?

While some argue that creating a testamentary trust is relatively straightforward, others find it complex and time-consuming. Testamentary trusts are legal tools that allow individuals to manage their estates after death, often as part of a will. Here are some considerations to keep in mind when creating a testamentary trust:

Complexity: Testamentary trusts can be more complex than traditional wills, and they can be difficult to understand. Mistakes or inconsistencies in the document can have costly consequences in the future.

Taxation: Trust income is generally not subject to double taxation, but the amount of tax payable by beneficiaries can be complex.

Asset titling: If assets aren’t titled correctly, they might be excluded from the trust.

Legal challenges: Do-it-yourself forms could be more likely to face legal challenges. 

I Need More Information On a Testamentary Trust; How Should I Proceed?

Every estate plan is unique, and incorporating a testamentary trust can be an effective method to distribute assets to your beneficiaries after your death. However, this approach requires careful consideration of different property transfer methods and a thorough understanding of various trust options and their specific functions.

A prudent first step is to consult with an estate planning lawyer who will take the time to understand your goals and objectives for your estate plan. Your lawyer can identify aspects you may not have considered and recommend the appropriate documents and trust types tailored to meet your specific needs..

At Pile Law Firm we have a long history of working closely with our clients to understand their needs and wishes fully. Call us today at 267-281-1675 for a free consultation on your case, and we will ensure you receive the proper guidance to put your mind at ease.