Updated January 25, 2024
The Pennsylvania living trust is a legal instrument that formally places the Settlor’s assets into a separate entity to be divided per their instructions at the the time of their death or incapacitation. The benefits of a living trust over a Will are that it avoids the probate process and keeps the disposition of the estate private. In some instances, probate can be a long costly process with the legal fees diminishing the value of the estate considerably. By avoiding this process with a living trust, you are able to ensure that your estate will be handled in line with your intentions should anything unfortunate befall you. Creating and maintaining a living trust can be an expensive task in itself, so it is pertinent to research whether this is the best option for your situation.
Laws – Chapter 77 (Trusts)
Will (Last Will and Testament) – A Will should be used in order to name the inheritors of any property which isn’t included in the living trust.
Individual Roles
These are the four (4) major roles:
Grantor (or “Settlor”) – The person who creates the trust and transfers their assets into it.
Trustee – The Trustee manages the trust as per the Grantor’s written instructions.
Successor Trustee – If the Trustee dies or is incapacitated, this person will become the active Trustee.
Beneficiaries – The people who are named in the living trust as the inheritors of the trust estate.
Types
Irrevocable – An irrevocable trust features the following characteristics:
- Avoids probate
- Keeps the disposition of an estate private
- Protects an estate from creditors and litigation
- Averts estate tax
- Cannot be revoked or amended
Revocable – The following is applicable for, and defines a revocable living trust:
- Avoids probate
- Keeps the disposition of the estate private
- Can be revoked or amended
- The Grantor benefits from the Trust during their lifetime
How to Make a Living Trust in Pennsylvania
According to § 7731-7732, a trust is created by transferring property through a written document to trust and naming a Trustee with disposition taking effect upon the settlor’s death or incapacity. The Grantor must be of sufficient mental capacity to create a living trust and express their intention to do so. Additionally, the same person cannot be named as sole Trustee and sole Beneficiary. Once the assets have been declared, and the Trustee and Beneficiaries have been named, the document must be signed by the Grantor or a person acting under power of attorney. The living trust will then need to be funded by transferring all of the included property into the trust, or the Trustee’s, name.
Motor Vehicles – A Bill of Sale will be employed to transfer motor vehicles into the trust’s name.
Real Estate – Real estate is put in the trust’s ownership by filling out a Pennsylvania Deed in the trust’s name and filing it with the County Recorder’s Office.
Do I Need a Living Trust?
For most Pennsylvania residents, forming a living trust is the only way for their families to avoid the probate process when their estate undergoes disposition. Only the heirs of estates valued at $50,000 or less can apply to bypass probate by filing a Small Estate Affidavit with the decedent’s circuit court. In addition to averting probate, a living trust will keep the disposition of your assets private. For people with large fortunes or a large number of holdings, forming a living trust will enable them to have the security of knowing that there are clear plans laid out detailing how their business and estate will be handled should they fall ill, or otherwise be incapacitated. An Irrevocable Trust can also protect your assets from lawsuits and creditors, and save your family from estate taxes (for estates valued at $5 million or more).