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Do you REALLY need a Revocable Living Trust?

A “Revocable Living Trust,” is often suggested as a Will substitute and an estate planning tool that will protect an individual’s assets, ensure they are quickly passed on to beneficiaries upon death and avoids creditor claims. A trust is referred to as “living” because it is a legal document created during an individual’s lifetime. The term “revocable” is applied when a trust is created in such a way that it allows changes to be made by the “settlor’ the individual who established the trust.

People often create a Revocable Living Trust because, unlike a Will, a trust allows your assets to pass directly to heirs without the intervention of probate, which is recording your Last Will and Testament as a public document. In some states, the probate process is expensive, or requires an executor to be a resident of that state or may require court review.
However, in Pennsylvania, the trust may be much simpler and may not suggested that everyone needs a Revocable Living Trust as a Will substitute.

What You Need to Know About Probate in Pennsylvania
The first thing to know about the probate process in Pennsylvania is, even if you do not have a Revocable Living Trust, not all assets need to go through probate to pass to beneficiaries upon your death. Generally, probate is reserved for those assets that are in the deceased’s name alone, with everything else able to pass to beneficiaries without court approval either by joint ownership, beneficiary designation, or transfer on death arrangements.

In more specific terms, a house jointly owned by a surviving spouse can be transferred without going through probate. So too can financial accounts for which the deceased has designated a beneficiary, including 401k retirement plan accounts, payable-on-death (POD) accounts, and life insurance plans. What is more, the surviving spouse (or, in their absence, children or other relatives), may receive small amounts of cash without probate’s intervention. Probate fees, which are based on the size of the estate, are often less than the additional cost of creating and funding a Revocable Living Trust.

Interesting to note, those that do have Revocable Living Trusts as a Will substitute will still be required to probate their Will if any assets are in fact in the decedent’s name alone as of the date of death. These types of Wills, typically referred to as a “Pour Over Will” it directs all gifts to the Revocable Living Trust after the probate occurs. It is important to note, that the Pennsylvania Inheritance Tax that will be collected will be identical whether a Revocable Living Trust or a Will is used

When to Consider a Revocable Living Trust
Rather than a Will substitute, a Revocable Living Trust can often be a wonderful General Durable Power of Attorney alternative for management of assets in event of incapacity. If your estate is large and includes complicated assets such as investment account and fine art or if you foresee family conflict erupting around the distribution of your estate, it is worth talking to an experienced elder law attorney about whether a revocable trust may help in disability planning.

Another scenario in which a living trust can be of enormous benefit is when an individual owns real estate outside of Pennsylvania. It is possible to avoid an ancillary estate administration by funding (i.e., placing the real estate outside of Pennsylvania in the Revocable Living Trust).

To learn more about when (and when not) to consider a Revocable Living Trust for your estate planning needs, do not hesitate to reach out to Anderson Elder Law either by calling us at 610-566-4700 or using the contact form on our website.