In Pennsylvania, wills and trusts serve as essential estate planning tools with a similar purpose of providing how an estate should be distributed when the owner dies. Despite having this common goal, they offer different advantages and are treated differently under the law. When trying to decide if one or both would be ideal for your situation, understanding how these options affect not only your estate but your loved ones after you pass away is crucial.
What Does a Will Do for My Pennsylvania Estate?
One of the foundational pieces of an estate plan is a legal document known as a will. This tool directs how your assets and other personal property is to be distributed to those you designate as beneficiaries within its provisions. Another important use of a will in your estate plan is that you can name a guardian for your minor children you might leave behind should you die unexpectedly. This includes allowing them to manage any assets or property you leave behind for them.
When a will gets executed, your chosen personal representative will carry out your wishes and take on the duties of settling your estate. Some of the many tasks a chosen executor will have to complete are:
- File the will with the Register of Wills
- Inform all heirs named in your will
- Post a public notice to creditors and heirs according to PA law
- Inventory all of your assets and conduct a valuation of the estate
- File and pay your final income tax return
- Pay all valid, outstanding debts
- Distribute remaining assets to your heirs
- Submit a final accounting to the court
While this may seem a very complex process, dying without a will in place can cause undue hardship on your loved ones and leave your assets in limbo. Dying intestate, without a will, subjects your assets to Pennsylvania intestacy laws.
How Do Trusts Work in Pennsylvania?
Trusts, like wills, are an invaluable estate planning tool that can provide for your surviving family after you die. This option creates a fiduciary relationship where you, the trustor, can give another person, the trustee, the ownership of assets on behalf of a third party, the beneficiary. As complicated as that sounds, a trust allows you to set the trustee parameters and how they are to handle your entrusted property. Further, trusts do not go into effect until you transfer assets into it.
While there are several types of trusts you could use as part of your estate plan in Pennsylvania, there are two forms that are more commonly used:
Testamentary Trust
This trust gets formed in your will so that your property gets transferred to the trust upon your death. It is up to you if all or just part of your assets or entrusted, even if just a life insurance policy. Usually, when this approach to estate planning is used, the trustor will attach specific conditions to the property being held. Once the designated beneficiary(ies) meets these requirements, they will receive their distribution.
Living Trust
Another popular trust type is the living trust. This gets formed while you are still alive and will continue past your death. These are popular for many families because they are wise to avoid a lengthy and costly probate process if all probated assets are put within it before you die. In Pennsylvania, probate is a legal process where untitled property, or assets without special transfer-death or pay-on-death conditions, will be distributed to your beneficiaries.
As a trust, it comes in two primary forms: revocable and irrevocable. Revocable versions give you the flexibility to change terms or eliminate them any time after their creation so long as you are still living and competent. On the other hand, you may opt for an irrevocable living trust, which does not allow for this level of flexibility but helps to shield your estate from taxation. This option takes away your ownership of the assets you place within it permanently.
Speak with a Pennsylvania Estate Planning Attorney About Your Best Options
If you are unsure of the differences between a will or trust and how it will affect your Pennsylvania estate plan, speaking with an experienced estate law attorney will prove invaluable. The attorneys of Antanavage Farbiarz, PLLC, provide a wealth of knowledge and comprehensive legal advice. Set up a consultation and learn how our services can help you manage this complex process and avoid costly mistakes and litigation issues.