| |
 |
 |
 |
| Many people think that because their assets are
in a trust they aren’t subject to Pennsylvania
Inheritance Tax. This is not so! |
| Assets in typical Living Trusts are fully taxable
for the Pennsylvania Inheritance Tax, (72 P.S. 9107)
and the Federal Estate Tax (which currently applies
to estates over $2,000,000). The assets are taxable
because the trust is revocable and the creator has
retained the right to the income and, often, for other
reasons. |
 |
| One cannot insulate oneself from creditors by
placing assets in a Living Trust. So long as the
creator has the right to revoke or amend the trust,
the assets are subject to attachment just as they
would be if solely owned. |
 |
| Living trusts are often advertised by lay persons
as insuring a right of privacy. There is none! |
| This is principally because an Inheritance Tax must
be filed which discloses all the assets of the trust
and the date of death values. With the return a copy
of the Deed of Trust must also be filed. |
| There are other events, such as a transfer of realty
or litigation, which would also cause a Living Trust
to be a matter of record. |
 |
| Any creditor, heir or party in interest may, through
litigation, seek protection of the court. Absent litigation,
court involvement in the probate process is minimal
and serves to insure orderly and just transfer of
estates at death. |
 |
| There are time constraints in the probate process,
but a simple administration can be completed in about
a year. However, in a simple estate a personal representative
can and usually does make a risk distribution commonly
called an “advancement” shortly after
probate. |
| A trustee, after the creator’s death, faces
the same constraints such as a concern for creditors
as exist in a probate estate. However, the probate
process can guarantee distribution after a year free
of any adverse claims, something Living Trusts do
not accomplish. |
 |
| An attorney consultation is strongly advised before
going to the expense and burden of a Living Trust. |
| You should first consider the cost of setting up
the trust and your loss of use of that money during
your lifetime. |
| You should also consider the cost and bother of
transferring the assets to the trust, which
must be done to be effective. This is an
extra step that is not required with probate. |
| There also is the burden of maintaining the trust
as a separate entity during your lifetime. |
| Other factors include the age of the client, whether
out-of-state realty is involved (in which case a trust
is advisable), the costs of probate (which in Pennsylvania
is minimal), the ability and integrity of the contingent
trustee who will make distribution, whether a business
is involved and the extent and expense of attorney
involvement during the client’s life and at
death. |
| For further information, please contact
Attorney Petrillo. |
|
|
