Monday, December 13, 2010

Do I Need A Revocable Living Trust?

Revocable Living Trusts are a substitute to a Last Will & Testament, but for many Pennsylvanian’s, living trusts aren’t necessary for an effective estate plan.

Historically, many people have planned with a living trust to (a) avoid probate and (b) save on federal estate taxes.

Pennsylvania is one of a number of states that has simplified their probate process over the years. Probate in Pennsylvania is mostly handled by your executor and attorney outside of court, unless someone challenges your will or the distribution of your assets. Other states, like Florida and California, still have more burdensome probate processes that require court supervision.

Federal estate taxes fluctuate, but the rates that Congress is discussing for 2011 and 2012 mean that far less than 1% of people will ever be affected by such a tax. The White House and Congress are proposing an estate tax exemption of $5 Million. That means you will not be affected by the tax until you have over $5 Million in assets. Regardless of whether you are affected or not, a living trust does no better than a will with a testamentary trust in saving on tax dollars.

Because probate is simpler in Pennsylvania and living trusts are not tax avoidance tools, many people in Pennsylvania have wills as their fundamental estate planning tool. However, a living trust does have benefits for certain cases. You should seek an estate planning attorney to help educate you about what tools you need for your estate plan. Estate planning is a very individualized field of law, and the tools you need depends on your family, your circumstances and your goals.

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