Trusts in Pennsylvania
What is a trust?
A trust is an estate planning tool used to control the distribution of your assets. Trusts are often combined with wills to administer estates. Unlike a will, a trust is a very complicated legal document. There are various types of trusts available, and you can implement more than one in your estate plan. Although they are complicated, trusts have certain benefits. They are not subject to the probate process, and they can ensure beneficiaries receive inherited assets quicker than with a traditional will.
They also allow you to control the distribution process more closely, to whom the distributions will be made over time, and how. You can give the trustee (the person who administers the trust) specific plans to follow to help your descendants receive the money they need for the things you want to provide, while also preventing these inheritances from being taken by a beneficiary’s creditors.
How do trusts work?
Your assets and property are transferred to the trust while you are still living. A trustee (the individual you appoint to manage your estate) will then distribute your assets out of the trust after you’ve passed. You can determine who receives percentages of your assets, when they receive them, and other stipulations in the trust.
Common Types of Trusts
There are several types of trusts available for estate planning. Here is a list of some common trusts:
- Revocable Trusts—Revocable trusts are sometimes referred to as Living Trusts or Revocable Living Trusts. This type of trust allows you to maintain control over your assets while you are living. You may revoke or change the trust as needed. Revocable trusts are often used to avoid probate, to plan for incapacity care, and to maintain privacy.
- Irrevocable Trusts—Irrevocable trusts are also known as Irrevocable Living Trusts. Unlike revocable trusts, irrevocable trusts cannot be modified without consent from the named beneficiaries or approval from the court. This type of trust is typically used to protect assets, minimize estate taxes, and plan for Medicaid.
- Testamentary Trusts—Testamentary trusts are established through a will and only go into effect after you have passed. A testamentary trust follows specific instructions for asset management and distribution that are laid out in the will. This type of trust is commonly used to provide for minor children or people with special needs, or to control asset distribution over time.
- Charitable Trusts—Charitable trusts are set up to support charitable organizations or causes. You can design a charitable trust that distributes a portion of your assets to beneficiaries for a period of time, and then gives the remaining assets to a specific charity. Common types of charitable trusts include Charitable Remainder Trusts (or CRTs) and Charitable Lead Trusts (CLTs).
- Special Needs Trusts—Special needs trusts are sometimes referred to as Supplemental Needs Trusts. They are designed to provide for individuals with disabilities or special needs without interrupting any government benefits, like Medicaid or Supplemental Security Income (SSI). Special needs trusts can help to cover expenses beyond those covered by public assistance programs and they can enhance a loved one’s quality of life.
- Pet Trusts—Pet Trusts allow you to assign a trustee to care for your pet and provide money or assets to cover the cost of your pet’s care. By setting up a trust for this, the trustee will be duty-bound to honor any guidelines you establish in the trust. You can include information about a preferred veterinarian, pet food brands, routines to keep, favorite treats, etc.
Are you looking to set up a trust for your estate? Call the estate planning attorneys at Cornerstone Law Firm for help!
What information do you need to establish a trust?
When you’re ready to start a trust with your estate planning attorney, there’s certain information should you prepare to bring with you. Specifics may vary depending on your assets and the type of trust(s) you are forming. Below is a general list of information you should have on hand.
- A valid form of identification—This can take the form of a driver’s license or passport.
- Financial statements—You should prepare a list of statements from any bank accounts, retirement accounts, and investment accounts. You should also bring any property deeds, vehicle titles, and other relevant documentation that demonstrates asset ownership.
- Debt information—Bring a list of any outstanding debts you have, including loans, mortgages, and other liabilities.
- Insurance policies—Bring copies of any life insurance policies and beneficiary information for those policies.
- Estate planning documents—You should have copies of any estate planning documents you currently have in place, like a will, power of attorney, or advance healthcare directive.
- Legal documents—Bring any legal documents like prenuptial or postnuptial agreements, marriage licenses, divorce decrees, and business contracts.
- Beneficiary information—Prepare a list of information for your intended beneficiaries, including their contact information and their relationship to you.
- Guardianship information—Bring details for any potential guardians for your minor children including names and contact information. You should consider preparing a successive list of guardians in case something were to happen to your first choice.
Do you still need a will if you have a trust?
The short answer is: yes. You should have a will in place even if you have a trust. Wills and trusts are often used together to cover all of the assets in an estate.
- A will can include a pour-over provision, which allows any assets not covered by your trust to be poured over into the trust upon your passing. This provision will ensure that all of your assets are distributed according to your wishes.
- A will can provide guardianship details for any minor children you have. Some trusts cover this information, but not every trust. If you have minor children, you need to make sure their care is covered by your estate plans.
- A will can designate the distribution of personal property. Trusts are typically focused on bigger assets and don’t apply to sentimental items, like artwork, jewelry, or family heirlooms. You can explain how to distribute those items in your will.
- A will can clarify your intentions to your family after you’ve passed. You can provide guidance to your loved ones and help avoid any disputes between family members by making your wishes clear.