Should I get a Trust

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Should I get a Trust

Post by Zso »

Hi
I need to get a Will written up. I am going to a attorney soon and want to understand if I should get a trust as well.

Some background;
Live in Pennsylvania
I am going to be 66 this month. Married and have 3 siblings
Net worth about 1.8 million
1.1m in k401 accounts between the minus and me
200k in saving accounts
500k house

I do understand that a trust allows you to skip the probate process. However not sure this worth the effort. I recently gone thru a trust Account with my father’s passing and still struggling with his IRA accounts.

Any comments and opinions would be greatly appropriated.
bluebolt
Posts: 1246
Joined: Sat Jan 14, 2017 9:01 am

Re: Should I get a Trust

Post by bluebolt »

Your attorney is likely to give you the best advice based on your specific situation.

I assume you don't have any children.

What is your goal? Do you want all of your money to pass to your spouse when you die and vice-versa? If so, a trust is probably not necessary as long as you specify each other as beneficiaries and/or have joint accounts.

If you have different goals in terms of where your money is going, it gets more complicated and you'd have to describe what you wanted to get good advice.
delamer
Posts: 10536
Joined: Tue Feb 08, 2011 6:13 pm

Re: Should I get a Trust

Post by delamer »

For your heirs, trusts provide protections against divorce and creditors and may be helpful with future Medicaid planning.

Assuming that you and your wife are each other’s primary beneficiaries, who will be the secondary beneficiaries?
Carefreeap
Posts: 2866
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Should I get a Trust

Post by Carefreeap »

First, welcome to the forum!

bsteiner an estate atty will probably weigh in on what the probate process is like in PA.

My experience (not an atty) is with settling some estates in CA where probate is a major and costly PITA and living trusts are commonly used.

I just finished reading Beyond the Grave by Jeffery Condon. It's a good read if you are interested in estate planning. You might also get a book from Nolo Press about how probate works in your state.

As others have said, what's your goal? I'm assuming you want to protect your wife but then what? Are you comfortable with the fact that if you predecease her that your share of the assets will go to her heirs vs your siblings/family members? Something to think about.
Every day I can hike is a good day.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Should I get a Trust

Post by Zso »

Thank you all for the feedback.
My wife is the primary beneficiary, I guess my goal is that the 3 kids get even and easy convenance to the inheritance.
I know that PA. Has an inheritance tax 4.5%. I would like that avoided if possible.
Carefreeap
Posts: 2866
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Should I get a Trust

Post by Carefreeap »

Zso wrote: Fri Jan 10, 2020 6:13 pm Thank you all for the feedback.
My wife is the primary beneficiary, I guess my goal is that the 3 kids get even and easy convenance to the inheritance.
I know that PA. Has an inheritance tax 4.5%. I would like that avoided if possible.
Are these siblings or your children?

Come back Monday morning and bump this thread. Friday afternoons and the weekends tend to be slow. In the meantime read Beyond the Grave. I bought it on Amazon for my kindle for $9.99. If you're new to the estate planning process it will give you some things to think about.

ETA: How was your father's retirement account titled? Typically those are transferred on death to the beneficiary.

It takes a while to settle an estate.
Every day I can hike is a good day.
michaeljc70
Posts: 7102
Joined: Thu Oct 15, 2015 3:53 pm

Re: Should I get a Trust

Post by michaeljc70 »

I cannot speak to PA, but family members I know that set up trusts here in IL do so to avoid probate. Probate kicks in here at $100k (there are caveats). The cost/time of probate here is considerable from what some people tell you (maybe mostly lawyers?). Others tell a different story (much depends on whether the executor can navigate the process or needs to hire an attorney). Either way, a basic trust to avoid probate here typically costs around $2k which makes it worth the money regardless if you have substantial assets. In my state (and I believe many) IRAs, bank accounts, property, etc. with beneficiaries or POD or TOD don't go through probate.
JBTX
Posts: 6983
Joined: Wed Jul 26, 2017 12:46 pm

Re: Should I get a Trust

Post by JBTX »

Zso wrote: Fri Jan 10, 2020 9:44 am Hi
I need to get a Will written up. I am going to a attorney soon and want to understand if I should get a trust as well.

Some background;
Live in Pennsylvania
I am going to be 66 this month. Married and have 3 siblings
Net worth about 1.8 million
1.1m in k401 accounts between the minus and me
200k in saving accounts
500k house

I do understand that a trust allows you to skip the probate process. However not sure this worth the effort. I recently gone thru a trust Account with my father’s passing and still struggling with his IRA accounts.

Any comments and opinions would be greatly appropriated.
As to revocable living trust, it really depends on the state. Some here have said they tend to be oversold and are often unnecessary. I'd wait until an expert weighs in.

In terms of the kids, do you want to leave the money to them outright, to do whatever they want whenever they want, or have it go to an irrevocable trust that offers more protections, but possibly more taxes and complications.

Take note on some of the threads on the "Secure Act". When your kids inherit your IRAS they most likely will have to have the IRAS liquidated in 10 years. If you and/or your wife live a long time it probably won't be much of an issue. If both you and wife are hit by a bus tomorrow kids may have a material tax bill on liquidation of any traditional IRAS.
michaeljc70
Posts: 7102
Joined: Thu Oct 15, 2015 3:53 pm

Re: Should I get a Trust

Post by michaeljc70 »

JBTX wrote: Fri Jan 10, 2020 6:57 pm
Zso wrote: Fri Jan 10, 2020 9:44 am Hi
I need to get a Will written up. I am going to a attorney soon and want to understand if I should get a trust as well.

Some background;
Live in Pennsylvania
I am going to be 66 this month. Married and have 3 siblings
Net worth about 1.8 million
1.1m in k401 accounts between the minus and me
200k in saving accounts
500k house

I do understand that a trust allows you to skip the probate process. However not sure this worth the effort. I recently gone thru a trust Account with my father’s passing and still struggling with his IRA accounts.

Any comments and opinions would be greatly appropriated.
As to revocable living trust, it really depends on the state. Some here have said they tend to be oversold and are often unnecessary. I'd wait until an expert weighs in.

In terms of the kids, do you want to leave the money to them outright, to do whatever they want whenever they want, or have it go to an irrevocable trust that offers more protections, but possibly more taxes and complications.

Take note on some of the threads on the "Secure Act". When your kids inherit your IRAS they most likely will have to have the IRAS liquidated in 10 years. If you and/or your wife live a long time it probably won't be much of an issue. If both you and wife are hit by a bus tomorrow kids may have a material tax bill on liquidation of any traditional IRAS.
Okay, but isn't that like the LTC insurance salesalemen chiming in the LTC threads?
JBTX
Posts: 6983
Joined: Wed Jul 26, 2017 12:46 pm

Re: Should I get a Trust

Post by JBTX »

michaeljc70 wrote: Fri Jan 10, 2020 7:09 pm
JBTX wrote: Fri Jan 10, 2020 6:57 pm
Zso wrote: Fri Jan 10, 2020 9:44 am Hi
I need to get a Will written up. I am going to a attorney soon and want to understand if I should get a trust as well.

Some background;
Live in Pennsylvania
I am going to be 66 this month. Married and have 3 siblings
Net worth about 1.8 million
1.1m in k401 accounts between the minus and me
200k in saving accounts
500k house

I do understand that a trust allows you to skip the probate process. However not sure this worth the effort. I recently gone thru a trust Account with my father’s passing and still struggling with his IRA accounts.

Any comments and opinions would be greatly appropriated.
As to revocable living trust, it really depends on the state. Some here have said they tend to be oversold and are often unnecessary. I'd wait until an expert weighs in.

In terms of the kids, do you want to leave the money to them outright, to do whatever they want whenever they want, or have it go to an irrevocable trust that offers more protections, but possibly more taxes and complications.

Take note on some of the threads on the "Secure Act". When your kids inherit your IRAS they most likely will have to have the IRAS liquidated in 10 years. If you and/or your wife live a long time it probably won't be much of an issue. If both you and wife are hit by a bus tomorrow kids may have a material tax bill on liquidation of any traditional IRAS.
Okay, but isn't that like the LTC insurance salesalemen chiming in the LTC threads?
I'm not a lawyer so take what I say with a grain of salt.

If a lawyer wanted to cash in, the more trusts, the more money they make. They would have every incentive to get you into a RLC. Yet some here say they aren't always necessary, in spite of that. I know in my state the cost of probate for a standard situation isn't much more than the cost of writing the trust. But that probably isn't true in all states.

There are other benefits to an RLT. Are they worth the cost and complications? It entirely depends on the situation.
michaeljc70
Posts: 7102
Joined: Thu Oct 15, 2015 3:53 pm

Re: Should I get a Trust

Post by michaeljc70 »

JBTX wrote: Fri Jan 10, 2020 7:20 pm
michaeljc70 wrote: Fri Jan 10, 2020 7:09 pm
JBTX wrote: Fri Jan 10, 2020 6:57 pm
Zso wrote: Fri Jan 10, 2020 9:44 am Hi
I need to get a Will written up. I am going to a attorney soon and want to understand if I should get a trust as well.

Some background;
Live in Pennsylvania
I am going to be 66 this month. Married and have 3 siblings
Net worth about 1.8 million
1.1m in k401 accounts between the minus and me
200k in saving accounts
500k house

I do understand that a trust allows you to skip the probate process. However not sure this worth the effort. I recently gone thru a trust Account with my father’s passing and still struggling with his IRA accounts.

Any comments and opinions would be greatly appropriated.
As to revocable living trust, it really depends on the state. Some here have said they tend to be oversold and are often unnecessary. I'd wait until an expert weighs in.

In terms of the kids, do you want to leave the money to them outright, to do whatever they want whenever they want, or have it go to an irrevocable trust that offers more protections, but possibly more taxes and complications.

Take note on some of the threads on the "Secure Act". When your kids inherit your IRAS they most likely will have to have the IRAS liquidated in 10 years. If you and/or your wife live a long time it probably won't be much of an issue. If both you and wife are hit by a bus tomorrow kids may have a material tax bill on liquidation of any traditional IRAS.
Okay, but isn't that like the LTC insurance salesalemen chiming in the LTC threads?
I'm not a lawyer so take what I say with a grain of salt.

If a lawyer wanted to cash in, the more trusts, the more money they make. They would have every incentive to get you into a RLC. Yet some here say they aren't always necessary, in spite of that. I know in my state the cost of probate for a standard situation isn't much more than the cost of writing the trust. But that probably isn't true in all states.

There are other benefits to an RLT. Are they worth the cost and complications? It entirely depends on the situation.
I agree. What I've been told by family members that have done trusts is "absolutely get a trust to avoid probate. It is so expensive." I'm sure that is what their lawyers told them. I've heard "they will take 30% of what you have". I've never found anything to back that up. I am not saying no one needs a trust. I think it is probably worth it for a lot of people. When researching it on my own it seems that the probate process isn't necessarily that expensive but it depends on your capabilities.

For many (I'm excluding people with huge estates and complex beneficiary plans) I think it is like the question of "should I do my own taxes" or "do I need a contractor to remodel my guest bathroom". It depends.
Carefreeap
Posts: 2866
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Should I get a Trust

Post by Carefreeap »

michaeljc70 wrote: Fri Jan 10, 2020 7:36 pm
JBTX wrote: Fri Jan 10, 2020 7:20 pm
michaeljc70 wrote: Fri Jan 10, 2020 7:09 pm
JBTX wrote: Fri Jan 10, 2020 6:57 pm
Zso wrote: Fri Jan 10, 2020 9:44 am Hi
I need to get a Will written up. I am going to a attorney soon and want to understand if I should get a trust as well.

Some background;
Live in Pennsylvania
I am going to be 66 this month. Married and have 3 siblings
Net worth about 1.8 million
1.1m in k401 accounts between the minus and me
200k in saving accounts
500k house

I do understand that a trust allows you to skip the probate process. However not sure this worth the effort. I recently gone thru a trust Account with my father’s passing and still struggling with his IRA accounts.

Any comments and opinions would be greatly appropriated.
As to revocable living trust, it really depends on the state. Some here have said they tend to be oversold and are often unnecessary. I'd wait until an expert weighs in.

In terms of the kids, do you want to leave the money to them outright, to do whatever they want whenever they want, or have it go to an irrevocable trust that offers more protections, but possibly more taxes and complications.

Take note on some of the threads on the "Secure Act". When your kids inherit your IRAS they most likely will have to have the IRAS liquidated in 10 years. If you and/or your wife live a long time it probably won't be much of an issue. If both you and wife are hit by a bus tomorrow kids may have a material tax bill on liquidation of any traditional IRAS.
Okay, but isn't that like the LTC insurance salesalemen chiming in the LTC threads?
I'm not a lawyer so take what I say with a grain of salt.

If a lawyer wanted to cash in, the more trusts, the more money they make. They would have every incentive to get you into a RLC. Yet some here say they aren't always necessary, in spite of that. I know in my state the cost of probate for a standard situation isn't much more than the cost of writing the trust. But that probably isn't true in all states.

There are other benefits to an RLT. Are they worth the cost and complications? It entirely depends on the situation.
I agree. What I've been told by family members that have done trusts is "absolutely get a trust to avoid probate. It is so expensive." I'm sure that is what their lawyers told them. I've heard "they will take 30% of what you have". I've never found anything to back that up. I am not saying no one needs a trust. I think it is probably worth it for a lot of people. When researching it on my own it seems that the probate process isn't necessarily that expensive but it depends on your capabilities.

For many (I'm excluding people with huge estates and complex beneficiary plans) I think it is like the question of "should I do my own taxes" or "do I need a contractor to remodel my guest bathroom". It depends.
In my state (CA) it can take close to 2 years. In a falling market (like 2008) that can be expensive.

I do think that they can be over sold and for small estates perhaps using a Beneficary Deed for real estate which effectively turns the real estate into a TOD account that can make sense.

However as is said in the beginning of Beyond the Grave, you know your spouse/children and do you think they would fully carry out your wishes? In my mother's case she knew my brother was a financial train wreck and frankly greedy. She would never say those things about her son and loved him but she knew he shouldn't be in charge of her estate.
Every day I can hike is a good day.
michaeljc70
Posts: 7102
Joined: Thu Oct 15, 2015 3:53 pm

Re: Should I get a Trust

Post by michaeljc70 »

Carefreeap wrote: Fri Jan 10, 2020 7:44 pm
michaeljc70 wrote: Fri Jan 10, 2020 7:36 pm
JBTX wrote: Fri Jan 10, 2020 7:20 pm
michaeljc70 wrote: Fri Jan 10, 2020 7:09 pm
JBTX wrote: Fri Jan 10, 2020 6:57 pm

As to revocable living trust, it really depends on the state. Some here have said they tend to be oversold and are often unnecessary. I'd wait until an expert weighs in.

In terms of the kids, do you want to leave the money to them outright, to do whatever they want whenever they want, or have it go to an irrevocable trust that offers more protections, but possibly more taxes and complications.

Take note on some of the threads on the "Secure Act". When your kids inherit your IRAS they most likely will have to have the IRAS liquidated in 10 years. If you and/or your wife live a long time it probably won't be much of an issue. If both you and wife are hit by a bus tomorrow kids may have a material tax bill on liquidation of any traditional IRAS.
Okay, but isn't that like the LTC insurance salesalemen chiming in the LTC threads?
I'm not a lawyer so take what I say with a grain of salt.

If a lawyer wanted to cash in, the more trusts, the more money they make. They would have every incentive to get you into a RLC. Yet some here say they aren't always necessary, in spite of that. I know in my state the cost of probate for a standard situation isn't much more than the cost of writing the trust. But that probably isn't true in all states.

There are other benefits to an RLT. Are they worth the cost and complications? It entirely depends on the situation.
I agree. What I've been told by family members that have done trusts is "absolutely get a trust to avoid probate. It is so expensive." I'm sure that is what their lawyers told them. I've heard "they will take 30% of what you have". I've never found anything to back that up. I am not saying no one needs a trust. I think it is probably worth it for a lot of people. When researching it on my own it seems that the probate process isn't necessarily that expensive but it depends on your capabilities.

For many (I'm excluding people with huge estates and complex beneficiary plans) I think it is like the question of "should I do my own taxes" or "do I need a contractor to remodel my guest bathroom". It depends.
In my state (CA) it can take close to 2 years. In a falling market (like 2008) that can be expensive.

I do think that they can be over sold and for small estates perhaps using a Beneficary Deed for real estate which effectively turns the real estate into a TOD account that can make sense.

However as is said in the beginning of Beyond the Grave, you know your spouse/children and do you think they would fully carry out your wishes? In my mother's case she knew my brother was a financial train wreck and frankly greedy. She would never say those things about her son and loved him but she knew he shouldn't be in charge of her estate.
In researching it in my state, I can specify beneficiaries/TOD/POD for essentially everything I own except my car and personal property (clothes, furniture, electronics, etc). One issue is some institutions don't allow contingent beneficiaries (or people don't specify them if they can). If I cannot specify a contingent beneficiary and my beneficiary dies before me and I don't make changes (or they die at the same time) that could push me over the probate limit. At age 49 with no kids, I am living with these limitations but probably won't when I get a little older.
delamer
Posts: 10536
Joined: Tue Feb 08, 2011 6:13 pm

Re: Should I get a Trust

Post by delamer »

Zso wrote: Fri Jan 10, 2020 6:13 pm Thank you all for the feedback.
My wife is the primary beneficiary, I guess my goal is that the 3 kids get even and easy convenance to the inheritance.
I know that PA. Has an inheritance tax 4.5%. I would like that avoided if possible.
This is my understanding as a non-attorney:

So there are trusts that are established as a provision of your will once you are deceased, called “testamentary trusts.”

Then there are trusts that can be set up to hold your assets while you are still alive, which are a totally different thing.

Estate attorneys are going to recommend testamentary trusts for most people who are leaving money to family/friends. But ultimately these trusts offer protections to the heirs, not directly to the decedent.

Whether a trust while you are living makes sense depends on many factors, including your state.

Your attorney can tell you if there is a way to reduce or eliminate the inheritance tax.
Compound
Posts: 835
Joined: Mon May 26, 2014 1:32 pm

Re: Should I get a Trust

Post by Compound »

Zso wrote: Fri Jan 10, 2020 6:13 pm Thank you all for the feedback.
My wife is the primary beneficiary, I guess my goal is that the 3 kids get even and easy convenance to the inheritance.
I know that PA. Has an inheritance tax 4.5%. I would like that avoided if possible.
I’m also in PA and recently got a couple of estate planning opinions from different attorneys. From both I heard probate is relatively smooth here in PA. I was told it isn’t much to worry about. One attorney advised a trust for asset protection purposes for our heirs; the other thought it unnecessary.

I don’t think you can dodge the inheritance tax for your children if you continue to live in PA. The only remedy I’m aware of is to move out of state.
User avatar
Steelersfan
Posts: 3830
Joined: Thu Jun 19, 2008 8:47 pm

Re: Should I get a Trust

Post by Steelersfan »

Compound wrote: Fri Jan 10, 2020 8:19 pm
Zso wrote: Fri Jan 10, 2020 6:13 pm Thank you all for the feedback.
My wife is the primary beneficiary, I guess my goal is that the 3 kids get even and easy convenance to the inheritance.
I know that PA. Has an inheritance tax 4.5%. I would like that avoided if possible.
I’m also in PA and recently got a couple of estate planning opinions from different attorneys. From both I heard probate is relatively smooth here in PA. I was told it isn’t much to worry about. One attorney advised a trust for asset protection purposes for our heirs; the other thought it unnecessary.

I don’t think you can dodge the inheritance tax for your children if you continue to live in PA. The only remedy I’m aware of is to move out of state.
I got exactly the same advice form two different lawyers a few years ago. I elected not to go the testamentary trust route, although I understand why others do. Any assets inherited by the children will be subject to the inheritance tax, even if they live in another state.

I'm not a lawyer, but my understanding is that there is no connection between probate and paying inheritance tax, at least in PA.
nesdog
Posts: 176
Joined: Thu Dec 07, 2017 8:20 pm

Re: Should I get a Trust

Post by nesdog »

Here in California, probate costs are regulated by law. We had to probate a relative's estate and the fees were close to 30K. We are just setting up our RLT and estate plan with respect to our daughter. Lawyer fees around 3K plus some filing costs. Definitely worth it here.
Insert clever comment here...
JBTX
Posts: 6983
Joined: Wed Jul 26, 2017 12:46 pm

Re: Should I get a Trust

Post by JBTX »

viewtopic.php?t=262261

In a thread a year ago or so Bruce Steiner, an estate planning attorney, indicated PA is fairly simple and RLCs aren't commonly used.
bsteiner wrote: Wed Oct 24, 2018 10:26 pm Probating a Will in Pennsylvania is sufficiently simple that revocable trusts are not commonly used in Pennsylvania. The lawyer would run up more billable hours preparing revocable trusts than he/she would to probate your Wills.

Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Should I get a Trust

Post by Zso »

Carefreeap wrote: Fri Jan 10, 2020 3:42 pm First, welcome to the forum!

bsteiner an estate atty will probably weigh in on what the probate process is like in PA.
WOW!
Thank you. I found Bogleheads forum just a few days ago. I wish I’ve found this site sooner. Just cannot stop reading all the wealth of information here.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Should I get a Trust

Post by Zso »

Carefreeap wrote: Fri Jan 10, 2020 6:46 pm
Zso wrote: Fri Jan 10, 2020 6:13 pm Thank you all for the feedback.
My wife is the primary beneficiary, I guess my goal is that the 3 kids get even and easy convenance to the inheritance.
I know that PA. Has an inheritance tax 4.5%. I would like that avoided if possible.
Are these siblings or your children?
I must be loosing it. I meant to write children.
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Should I get a Trust

Post by Zso »

JBTX wrote: Fri Jan 10, 2020 10:54 pm viewtopic.php?t=262261

In a thread a year ago or so Bruce Steiner, an estate planning attorney, indicated PA is fairly simple and RLCs aren't commonly used.
bsteiner wrote: Wed Oct 24, 2018 10:26 pm Probating a Will in Pennsylvania is sufficiently simple that revocable trusts are not commonly used in Pennsylvania. The lawyer would run up more billable hours preparing revocable trusts than he/she would to probate your Wills.

Thank you all for the information. I wanted at least some opinion before I met with an attorney. It appears that a trust in PA may not be necessary.
JBTX
Posts: 6983
Joined: Wed Jul 26, 2017 12:46 pm

Re: Should I get a Trust

Post by JBTX »

Zso wrote: Sat Jan 11, 2020 9:38 am
JBTX wrote: Fri Jan 10, 2020 10:54 pm viewtopic.php?t=262261

In a thread a year ago or so Bruce Steiner, an estate planning attorney, indicated PA is fairly simple and RLCs aren't commonly used.
bsteiner wrote: Wed Oct 24, 2018 10:26 pm Probating a Will in Pennsylvania is sufficiently simple that revocable trusts are not commonly used in Pennsylvania. The lawyer would run up more billable hours preparing revocable trusts than he/she would to probate your Wills.

Thank you all for the information. I wanted at least some opinion before I met with an attorney. It appears that a trust in PA may not be necessary.
You can get a lot of good information using the forum search function here. For instance, search "bsteiner" and "trust" and read those posts. I searched bsteiner and Pennsylvania to find that.
Prudence
Posts: 564
Joined: Fri Mar 09, 2012 4:55 pm

Re: Should I get a Trust

Post by Prudence »

Steelersfan wrote: Fri Jan 10, 2020 8:27 pm
Compound wrote: Fri Jan 10, 2020 8:19 pm
Zso wrote: Fri Jan 10, 2020 6:13 pm Thank you all for the feedback.
My wife is the primary beneficiary, I guess my goal is that the 3 kids get even and easy convenance to the inheritance.
I know that PA. Has an inheritance tax 4.5%. I would like that avoided if possible.
I’m also in PA and recently got a couple of estate planning opinions from different attorneys. From both I heard probate is relatively smooth here in PA. I was told it isn’t much to worry about. One attorney advised a trust for asset protection purposes for our heirs; the other thought it unnecessary.

I don’t think you can dodge the inheritance tax for your children if you continue to live in PA. The only remedy I’m aware of is to move out of state.
I got exactly the same advice form two different lawyers a few years ago. I elected not to go the testamentary trust route, although I understand why others do. Any assets inherited by the children will be subject to the inheritance tax, even if they live in another state.

I'm not a lawyer, but my understanding is that there is no connection between probate and paying inheritance tax, at least in PA.
I live in Maryland and probate is not a big issue if you have a will so I have not set up any trusts. Most of our stuff has POD/TOD/beneficiary. (We own our house jointly). It is my understanding that we can't avoid any federal or Maryland state taxes by having a trust but some of my neighbors believe that their trusts will reduce taxes for their estates and heirs. Are they right?
bsteiner
Posts: 5140
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Should I get a Trust

Post by bsteiner »

Carefreeap wrote: Fri Jan 10, 2020 7:44 pm ...
In my state (CA) it [probate] can take close to 2 years. ...
It's more like 2 hours in Pennsylvania so it's not worth worrying about. I've had 2 estates of clients who moved to Pennsylvania where we brought in Pennsylvania counsel to probate the Will and 3 who lived elsewhere but owned real estate in Pennsylvania where we brought in Pennsylvania counsel to do the ancillary probate. In each case, it was trivial.

California is the outlier in this regard. But since about 1/8 of the country's population lives in California it gets a good deal of attention.

Now for the more important issues.

There are several ways to avoid the 4.5% Pennsylvania inheritance tax on transfers to children, but like trying to avoid having to probate your Will, the effort to avoid the Pennsylvania inheritance tax may be worse than paying the tax. You could invest in life insurance (which is exempt from inheritance tax if it passes to named beneficiaries), you could invest in real estate located outside Pennsylvania, you could give away your assets during your lifetime, or you could move to another state.

You may want to consider Roth conversions to the extent you can convert at not too high a tax bracket.

You may want to consider providing for your children in trust rather than outright, to keep your children's inheritances out of their estates, and to protect their inheritances from their creditors and spouses, and Medicaid.

Alternatively, you may want to consider leaving your 401(k) benefits to your children in charitable remainder trusts (CRT), to replicate the stretch. With a CRT, the child would receive a percentage of the value of the trust each year (at least 5%), with the balance at death going to charity. The value of the charity's remainder interest has to be worth at least 10% of the initial value of the trust at inception. The ability to replicate the stretch will probably offset or more than offset the loss of the remainder interest. The tradeoffs are that the payments go to the child outright (which defeats the asset protection), and the trust is inflexible (which means that the child needs to have some other money available for one-off needs). This works best for children who are likely to need distributions, aren't likely to have taxable estates, and are at low risk for creditors and divorcing spouses.
muddlehead
Posts: 271
Joined: Mon Sep 22, 2008 2:03 pm

Re: Should I get a Trust

Post by muddlehead »

I'm in Northern California. Not enough to worry about Fed Estate or Death Tax. One wife. 2 kids. 50/50 split to the kids at death of both or second spouse. We have a little more money than you, but same ideas hold forth. Money in 2 places. Bank acct and brokerage acct. TOD / POD for each is set up. One spouse dies, go to other. Second spouse 50/50 to kids. And here in California, don't know about your state, our house has the same thing. Called Transfer on Death Beneficiary Deed. Same TOD / POD there. Easy peasy. Hope that helps.
Carefreeap
Posts: 2866
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Should I get a Trust

Post by Carefreeap »

muddlehead wrote: Sat Jan 11, 2020 9:08 pm I'm in Northern California. Not enough to worry about Fed Estate or Death Tax. One wife. 2 kids. 50/50 split to the kids at death of both or second spouse. We have a little more money than you, but same ideas hold forth. Money in 2 places. Bank acct and brokerage acct. TOD / POD for each is set up. One spouse dies, go to other. Second spouse 50/50 to kids. And here in California, don't know about your state, our house has the same thing. Called Transfer on Death Beneficiary Deed. Same TOD / POD there. Easy peasy. Hope that helps.
I think the Beneficiary Deed can be a wonderful tool in the right circumstance. They are relatively new in CA but have been used in other states like AZ for a while. The biggest drawback I can foresee is a scenario whereby one of the beneficiaries has a bunch of debts (especially floating liens like IRS) which can attach to any property you own.

I, for one, was glad beneficiary deeds were not available when my mom died in 2008. My brother is what Jeff Condon "Beyond the Grave" calls "financially immature". I'll call him a trainwreck. At the time of my mother's passing he was in foreclosure (HELOC so a recourse loan) and during the time of me settling the estate, subject to tax liens as well as a county lien for non payment of child support. There's no way in h*ll I would want to co-own a property with my brother for a minute. Even though the creditors would only be entitled to his half of the property, it would take months trying to clean it up and likely some money spent on an attorney. Fortunately my mother set up a living trust and while the situation was complicated I (as successor Trustee) was able to keep her properties in the name of the Trust until the transfer to the new owners.

There was one hiccup though requiring us to make a trip to the Probate Court. She had failed to title her little rental house in the Trust's name even though it was listed as one of the Trust's assets. That trip to the Probate Court for an abbreviated probate process (name escapes me at the moment) took six months and cost $2500 in atty and court costs. This was back in 2008 when real estate values were dropping like a stone. The property lost about 10% of its value from the time of her death until it sold. The expression "Time is Money" was certainly true in this situation.
Every day I can hike is a good day.
chemocean
Posts: 254
Joined: Mon Dec 19, 2016 9:45 pm

Re: Should I get a Trust

Post by chemocean »

Prudence wrote: Sat Jan 11, 2020 12:48 pm I live in Maryland and probate is not a big issue if you have a will so I have not set up any trusts. Most of our stuff has POD/TOD/beneficiary. (We own our house jointly). It is my understanding that we can't avoid any federal or Maryland state taxes by having a trust but some of my neighbors believe that their trusts will reduce taxes for their estates and heirs. Are they right?
I have experience as executor of small estates in Maryland and Delaware. Maryland has a flat assessment of total assets going through probate, even for small estate (1.75% if I recall). Thus, trusts reduce the amount of the those assessments. However, your POD/TOD beneficiary designations achieve the same goal of not having your assets go through probate. I don't believe that Delaware assess those fees on small estate.
User avatar
Steelersfan
Posts: 3830
Joined: Thu Jun 19, 2008 8:47 pm

Re: Should I get a Trust

Post by Steelersfan »

chemocean wrote: Sun Jan 12, 2020 1:03 am

I have experience as executor of small estates in Maryland and Delaware. Maryland has a flat assessment of total assets going through probate, even for small estate (1.75% if I recall). Thus, trusts reduce the amount of the those assessments. However, your POD/TOD beneficiary designations achieve the same goal of not having your assets go through probate. I don't believe that Delaware assess those fees on small estate.
It looks like the Maryland probate fees are well less than 1.75%: http://registers.maryland.gov/main/fees.html
bsteiner
Posts: 5140
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Should I get a Trust

Post by bsteiner »

Steelersfan wrote: Sun Jan 12, 2020 7:43 am
chemocean wrote: Sun Jan 12, 2020 1:03 am

I have experience as executor of small estates in Maryland and Delaware. Maryland has a flat assessment of total assets going through probate, even for small estate (1.75% if I recall). Thus, trusts reduce the amount of the those assessments. However, your POD/TOD beneficiary designations achieve the same goal of not having your assets go through probate. I don't believe that Delaware assess those fees on small estate.
It looks like the Maryland probate fees are well less than 1.75%: http://registers.maryland.gov/main/fees.html
chemocean meant Delaware, which has a 1.75% probate court fee on assets other than real estate. A revocable trust would make sense for a Delaware resident to avoid this fee.

Maryland has the opposite situation. Absent court approval, Maryland limits the combined amount of legal fees and executors' commissions (fees) in estates to 3.6% of the estate plus $1,080. Thus far, we've been able to keep our legal fees under 50% of that amount on our Maryland estates so as to allow for executors' commissions and to avoid having to seek court approval of legal fees or executors' commissions.
Leesbro63
Posts: 6787
Joined: Mon Nov 08, 2010 4:36 pm

Re: Should I get a Trust

Post by Leesbro63 »

Compound wrote: Fri Jan 10, 2020 8:19 pm
Zso wrote: Fri Jan 10, 2020 6:13 pm Thank you all for the feedback.
My wife is the primary beneficiary, I guess my goal is that the 3 kids get even and easy convenance to the inheritance.
I know that PA. Has an inheritance tax 4.5%. I would like that avoided if possible.
I’m also in PA and recently got a couple of estate planning opinions from different attorneys. From both I heard probate is relatively smooth here in PA. I was told it isn’t much to worry about. One attorney advised a trust for asset protection purposes for our heirs; the other thought it unnecessary.

I don’t think you can dodge the inheritance tax for your children if you continue to live in PA. The only remedy I’m aware of is to move out of state.
I’m in PA also. Agree with last comment...there’s really no legal way to avoid the inheritance tax for heirs of Pa. residents.
Last edited by Leesbro63 on Sun Jan 12, 2020 9:00 pm, edited 1 time in total.
muddlehead
Posts: 271
Joined: Mon Sep 22, 2008 2:03 pm

Re: Should I get a Trust

Post by muddlehead »

Carefreeap wrote:

" " I think the Beneficiary Deed can be a wonderful tool in the right circumstance. They are relatively new in CA but have been used in other states like AZ for a while. The biggest drawback I can foresee is a scenario whereby one of the beneficiaries has a bunch of debts (especially floating liens like IRS) which can attach to any property you own. " "


For sure. Our family dynamic - one marriage - 2 kids - no divorces - one house - no rentals - 50/50 beneficiaries split - what I call as plain vanilla a scenario as there is - is ideal for the TOD / POD route.

Not everyone, of course, is in that model of simplicity. However, imho, many are and are talked out of the TOD / POD route by salespeople. C'est la vie.
JGoneRiding
Posts: 1970
Joined: Tue Jul 15, 2014 3:26 pm

Re: Should I get a Trust

Post by JGoneRiding »

Ianal. I am in the middle or end of probate in a suppose to be easyish state. Its only been bad because of one heir causing problems and just everything taking longer than anticipated. That said anything other than routine probate where I as executor had final say would have been a total nightmare! Why you ask. Well outside of the IRA (not probated) the rest of the estate was a house and an underwater jeep. Getting ng 6 people to deal with the house would have been horrible!

One of the worse things was despite significant prepaying for death there was not enough funds to pay the mortgage, pay the lawyer, and pay for internment. We had towait for the house to sell to do that. So if you leave anything for your executor to do make sure there is liquid funds to do it!

Also your will has the final say as to what happens to you and your minor children. If you care about those thi ng s you will end up in probate. Its ad much work to do a minor estate as a more complicated one the executor just Doesn't get paid as well.
LSLover
Posts: 216
Joined: Thu May 19, 2016 1:39 pm

Re: Should I get a Trust

Post by LSLover »

bsteiner wrote: Sun Jan 12, 2020 9:12 am
Steelersfan wrote: Sun Jan 12, 2020 7:43 am
chemocean wrote: Sun Jan 12, 2020 1:03 am

I have experience as executor of small estates in Maryland and Delaware. Maryland has a flat assessment of total assets going through probate, even for small estate (1.75% if I recall). Thus, trusts reduce the amount of the those assessments. However, your POD/TOD beneficiary designations achieve the same goal of not having your assets go through probate. I don't believe that Delaware assess those fees on small estate.
It looks like the Maryland probate fees are well less than 1.75%: http://registers.maryland.gov/main/fees.html
chemocean meant Delaware, which has a 1.75% probate court fee on assets other than real estate. A revocable trust would make sense for a Delaware resident to avoid this fee.

Maryland has the opposite situation. Absent court approval, Maryland limits the combined amount of legal fees and executors' commissions (fees) in estates to 3.6% of the estate plus $1,080. Thus far, we've been able to keep our legal fees under 50% of that amount on our Maryland estates so as to allow for executors' commissions and to avoid having to seek court approval of legal fees or executors' commissions.
Bsteiner, please help me understand the Maryland situation. Even if you typically manage to keep your legal fees under 50% (of the 3.6%), it still will be more in fees than the 1.75% fee charged in Delaware where you said that a revocable trust would make sense. Why wouldn’t it then make sense to set up a revocable trust in Maryland since it is more expensive in Maryland than in Delaware (1.8% vs 1.75%)?
bsteiner
Posts: 5140
Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Should I get a Trust

Post by bsteiner »

LSLover wrote: Tue Jan 14, 2020 8:19 am ..
Bsteiner, please help me understand the Maryland situation. Even if you typically manage to keep your legal fees under 50% (of the 3.6%), it still will be more in fees than the 1.75% fee charged in Delaware where you said that a revocable trust would make sense. Why wouldn’t it then make sense to set up a revocable trust in Maryland since it is more expensive in Maryland than in Delaware (1.8% vs 1.75%)?
Probating the Will is usually a small part of the work involved in an estate administration. So on a time basis our legal fees are about the same regardless of whether someone had a revocable trust. We still have to deal with the assets and the people, get the assets appraised, prepare the estate tax returns, decide as to tax elections, sell whatever assets have to be sold, consider disclaimers and prepare them if appropriate, and do whatever else has to be done.

Probably as often as not, even if someone has a revocable trust, we have to probate the Will anyway, though that's usually not difficult, expensive or burdensome.

The 1.75% in Delaware is payable to the court, not the lawyer. Since the legal work is about the same either way, it would make sense to create a revocable trust in Delaware to avoid having to pay 1.75% to the court.
LSLover
Posts: 216
Joined: Thu May 19, 2016 1:39 pm

Re: Should I get a Trust

Post by LSLover »

bsteiner wrote: Tue Jan 14, 2020 8:43 am
LSLover wrote: Tue Jan 14, 2020 8:19 am ..
Bsteiner, please help me understand the Maryland situation. Even if you typically manage to keep your legal fees under 50% (of the 3.6%), it still will be more in fees than the 1.75% fee charged in Delaware where you said that a revocable trust would make sense. Why wouldn’t it then make sense to set up a revocable trust in Maryland since it is more expensive in Maryland than in Delaware (1.8% vs 1.75%)?
Probating the Will is usually a small part of the work involved in an estate administration. So on a time basis our legal fees are about the same regardless of whether someone had a revocable trust. We still have to deal with the assets and the people, get the assets appraised, prepare the estate tax returns, decide as to tax elections, sell whatever assets have to be sold, consider disclaimers and prepare them if appropriate, and do whatever else has to be done.

Probably as often as not, even if someone has a revocable trust, we have to probate the Will anyway, though that's usually not difficult, expensive or burdensome.

The 1.75% in Delaware is payable to the court, not the lawyer. Since the legal work is about the same either way, it would make sense to create a revocable trust in Delaware to avoid having to pay 1.75% to the court.
Thank you, I understand it now. What is the $$$ range of typical attorney fees that should be expected for the work listed above if most assets are in brokerage accounts plus a house?
Topic Author
Zso
Posts: 28
Joined: Fri Jan 10, 2020 9:14 am

Re: Should I get a Trust

Post by Zso »

bsteiner wrote: Sat Jan 11, 2020 1:08 pm
Carefreeap wrote: Fri Jan 10, 2020 7:44 pm ...
In my state (CA) it [probate] can take close to 2 years. ...
It's more like 2 hours in Pennsylvania so it's not worth worrying about. I've had 2 estates of clients who moved to Pennsylvania where we brought in Pennsylvania counsel to probate the Will and 3 who lived elsewhere but owned real estate in Pennsylvania where we brought in Pennsylvania counsel to do the ancillary probate. In each case, it was trivial.

California is the outlier in this regard. But since about 1/8 of the country's population lives in California it gets a good deal of attention.
.
Mr Steiner
Thank you for the info. I had met with my attorney and he has confirmed that a probate in PA is probably less than an hour. He did not recommend getting a Trust in my situation.
I have decided to keep it simple and just get a Will. The cost $500. A trust in PA can get very complicated and may cost $2500.
Post Reply