Berman & Asbel, LLP

Determining whether a living trust is right for a person's estate

Pennsylvania residents may be interested in a recent piece discussing some of the reasons why they may want to consider adding a living trust to their comprehensive estate plan. This type of trust has several advantages and drawbacks that should be considered.

Financial professionals often advise that some individuals add a revocable living trust to their estate plan; however, this type of trust may not be appropriate for everyone. A living trust denotes any trust that is set up during a person's lifetime. A revocable living trust is a type of trust that allows the person to access and receive the benefit of the trust assets. This allows people to get some of the benefits of a trust, such as avoiding probate, while still being able to enjoy their assets. One major drawback of this type of trust, however, is that a person's creditors can also reach into the trust assets, meaning that the person's debts may still be paid out of the trust after he or she dies.

Most suitable for those with substantial assets as it skirts state and federal tax exemptions, an irrevocable living trust does not allow the trust's assets to be used during the person's lifetime, which effectively shields those assets from creditors. Consequently, however, this type of trust may not be appropriate for those who require access to those assets before they pass away.

Deciding whether to establish a trust and determining which type of trust to create can depend on a number of factors. An attorney with experience in estate planning could, along with a financial professional, help assess a client's financial situation and come up with an estate plan that can protect the person's assets and minimize taxes for their beneficiaries. The attorney could also draft any additional estate planning documents such as durable powers of attorney.

Source: NBR, "A matter of trusts: Benefactors, heirs and their advisors", Maureen Nevin, August 04, 2014

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