What is a Living Trust?
If you want to ensure that your loved ones are provided for once you pass on, you have probably already begun your estate planning. If you want to allow your family members to have immediate access to your property once you die and avoid probate, then you may want to consider creating a living trust.
Our Harrisburg estate planning attorneys would like to go over the numerous benefits of establishing a living trust as part of your estate plan.
Purpose of a Living Trust
A living trust, also known as an “inter vivos trust” or “revocable trust,” allows assets to pass to heirs without having to go through probate. This will allow you to maintain a level of privacy (unlike a will that goes through probate and enters the public record).
The creator of the trust, known as the grantor, can indicate how assets will be distributed when he or she dies. The grantor will need to “fund the trust” by retitling assets in the name of the trust. In most types of living trusts, the grantor will not have to relinquish his or her rights to any property placed in the trust.
Most living trusts are revocable, permitting the grantor to appoint or remove trustees and even change the conditions of the trust. When the grantor dies, the trust will become irrevocable (meaning the terms can no longer be modified). As stipulated by the terms of the trust, the trustee is allowed to allocate property to the beneficiaries upon the grantor’s death or manage the trust property for their benefit.
Roles in a Living Trust
There are three distinct roles in a living trust:
- Grantor or Settlor: The person who creates the trust; title designation of funds placed in the trust will change from being owned individually by the Grantor to being owned by the trust.
- Trustee: The person who manages the trust assets for the benefit of someone else. During the grantor’s lifetime, he or she will typically be the trustee of the trust, with a successor trustee being appointed if the grantor becomes disabled or dies.
- Beneficiary: The person who receives the trust funds or property. The grantor may be named a beneficiary during his or her lifetime, but upon death, the property will be distributed to residuary beneficiaries.
Does a Living Trust Avoid Inheritance Taxes?
Based upon a beneficiary’s relationship to the decedent and the amount inherited, heirs may be subject to an inheritance tax. Unfortunately, placing assets in a living trust does not avoid the Pennsylvania inheritance tax, which is as follows:
- 0% on transfers to a surviving spouse or to a parent from a child 21 years of age or younger
- 4.5% on transfers to direct descendants and lineal heirs
- 12% on transfers to siblings
- 15% on transfers to other heirs, excluding charitable organizations, exempt institutions, and tax-exempt government entities
Should I Hire an Attorney to Set Up a Trust?
While you may attempt to draft a trust using one of the many online platforms, this is not a wise decision. When you hire Harrisburg estate planning attorneys, they will work with you to develop verbiage that aligns with your wishes. Additionally, an attorney can assist your trustee in managing funds and in taking appropriate steps when you die.
Reach Out to Our Harrisburg Estate Planning Attorneys Today
While there are many benefits to creating a living trust, your specific estate situation will determine if it is the right choice for you. If you are considering creating a living trust, our Harrisburg estate planning attorneys are available to answer any of your questions. To arrange your initial consultation, contact us online or by phone today.