Over the past few years, the 'Living Trust' concept has been advertised in direct mailings to many older adults throughout Pennsylvania. In addition, there have been numerous newspaper advertisements for Living Trust seminars. These advertisements have left many older adults very confused about the purposes and benefits of a Living Trust.
Living Trusts come in many flavors. This article will be geared to providing an overview of the Revocable Living Trust, as this type of Living Trust is the one that is constantly getting all the direct mailing and free seminar attention.
What is a Revocable Living Trust?
A Revocable Living Trust is a trust that is created during the Settlor's lifetime. The Settlor, also sometimes called the Grantor, is the person who sets up the trust. The Settlor retains the right to receive the income of the trust, spend the principal, and to completely revoke the trust at any time during the Settlor's lifetime.
Dispelling the Myths associated with the Revocable Living Trust
Many proponents of the Living Trust are promoting it as an essential aspect of everyone's Estate Plan. The advertisements generally imply that a Living Trust will help save all kinds of estate expenses. In fact, more often than not, our experience has shown that the Revocable Living Trust does not meet the specific goals of the older adult and can often lead to unnecessary complications and expenses. While laws vary from state to state, in Pennsylvania, a Revocable Living Trust will normally not reduce death taxes nor significantly lower estate expenses. Be sure you get expert and objective legal help before buying a Living Trust package.
Revocable Living Trusts can cost several thousand dollars to set-up. There can also be additional costs incurred to transfer assets into the trust. In some cases where the use of a living trust is appropriate, several thousand dollars might very well be a good investment. The key is to look at the Revocable Living Trust from the perspective of the goals of the individual and family.
Don't Revocable Living Trusts save the unnecessary expense and time associated with probate? In our opinion (an opinion that is shared by most Pennsylvania estate planning attorneys), the probate process is not an expensive or time consuming one in Pennsylvania. In fact, the probate process offers the decedent and intended heirs numerous legal protections that are not readily available where assets are passed through a Revocable Living Trust. Let's take a moment to review what probate entails. Probate is the process where the Executor files a petition with the Register of Wills and is granted authority to represent the decedent's estate. The Executor is thus authorized to carry out the administration of the estate, which includes collecting assets, paying debts and taxes, and ultimately distributing the assets to the intended beneficiaries. The actual cost associated with "probate" is the fee paid to the county. This fee is based on the size of the estate.
At this point it is only proper to note that there are additional expenses associated with the estate administration process, including the Executor's right to a commission, and Attorney fees. This is true - but the reality is that there are similar costs associated with winding down and distributing assets from a Revocable Living Trust. Just like an Executor, a Trustee has the right to compensation as does the attorney who is assisting in completing the Trust's distributions and closing. With a living trust the trust still has to be administered, debts paid, taxes calculated and paid, disputes resolved, assets distributed to beneficiaries (this work is similar to the work involved in probating an estate.)
Revocable Living Trust & Nursing Home Costs
Many older adults are concerned about the cost of an extended nursing home stay and the effect that this will have on their life savings. Unfortunately, the Revocable Living Trust does not afford any protection in this regard. The position taken by the Department of Public Welfare (the Pennsylvania Agency in charge of administering the Medical Assistance Program) is that assets in a Revocable Living Trust are still available to pay for the cost of nursing home care.
Summary
Given all the information regarding the Revocable Living Trust that is filtering into the homes of older adults, The Law Firm of Shawn M. Pierson believes it is important to present you with additional information regarding this Estate & Lifetime Planning tool. As is true with many types of legal planning, there are advantages & disadvantages to using the Revocable Living Trust as part of your Estate & Lifetime Plan.
In closing, there is one old saying that might save you from unnecessarily spending several thousand of your hard earned dollars...'Look before you leap'. If you are considering a Revocable Living Trust, you may want to get a second opinion before you commit.
Law Office of
SHAWN M. PIERSON
105 East Oregon Road
Lititz, Pennsylvania 17543
717-560-4966 |