Revocable Living Trusts

Living Trusts (more formally referred to as Revocable Living Trusts) have gained increasing popularity in recent years. More information is below.

WHAT IS A LIVING TRUST?

A Living Trust is a substitute for a will. It is arguable whether a Living Trust is superior to a will, and that depends on the facts, circumstances and needs of each family.

Unlike a will, which is effective only at death, a Living Trust is set up while you are living. Typically, an individual who creates a living trust will re-title his or her assets (home, accounts, etc) into the name of the living trust. You have complete control of those assets while you are living. In your trust, you write instructions as to how your assets are distributed when you die. The advantage of a trust is that its existence is continual, and can provide a more orderly distribution of an inheritance (for instance, a small portion on an annual basis).

WHEN DO I NEED A LIVING TRUST?

You should consider a living trust for the following reasons:

• Blended Family/Second Marriage: A living trust may be appropriate in these matters, so that the surviving spouse does not disinherit the first-to-die spouse’s kids from another marriage. This cannot be accomplished through a will.
   
• Privacy: If there are circumstances which require as much privacy as possible regarding your estate, a living trust can make more sense than a will. A will must be probated and is public; a living trust does not need to be probated.
   
• Spendthrift Children: Issues to consider in this respect are whether you’d like your beneficiaries to receive your assets directly, or whether you’d prefer to have the assets placed in trust and distributed based on a number of factors which you designate, such as age, need and even incentives based on behavior and education.  All too often, children receive substantial assets before they are mature enough to handle them properly, with devastating results. Our firm protects children from themselves, creditors and predators. This is the often a key part of the estate plan where we take the time necessary to learn about each family so that we can determine what instructions should be implemented.
   
• Property in Multiple States: If you have a vacation home, or properties in several states, your estate will have to file “ancillary probate” in each state where you own property. By employing a living trust, you can avoid multi-state probate.

YOU DO NOT NEED A LIVING TRUST IF…

• You want to avoid taxes: Living trusts are not a tax avoidance tool. A living trust can employ tax reducing and prolonging measures (specifically, using an AB trust for married couples). However, a will can do the exact same thing. You cannot avoid PA Inheritance Taxes simply by using a trust.
   
• You want to avoid probate: Probate is a modest process in Pennsylvania, unlike other states. The fees for an attorney to assist in probate matters are not great. Furthermore, living trust administration fees will be about equal, if not more in Pennsylvania. Using a living trust to avoid probate in Pennsylvania is therefore not recommended.

ADVANTAGES OF LIVING TRUSTS

• Provides continuity and helps you get your affairs in order while still living.
   
• Avoids probate, particularly beneficial if you own property in multiple states.
   
• If you become incapacitated or disabled, any assets titled in the name of the living trust is handled by your successor trustee; no power of attorney is needed to control those assets.
   
• Potential asset protection for your beneficiaries (not for you).
   
• Ability to control from your grave (provide an inheritance based on how you want, when you want, etc.).

DISADVANTAGES OF LIVING TRUST:

• More costly than wills.
   
• Requires trust administration.
   
• Although more private than wills, can still be challenged in court.
   
• Must make sure all assets are placed in trust name to avoid probate, particularly newly acquired assets after trust is created.

CONCLUSION:

Living trusts can be an excellent estate planning tool for some families. Please schedule an initial, no-obligation consultation with our firm to discuss whether a living trust makes sense for you. You can call us now at (215) 706-0200 or email us.