The Times Herald (Norristown, PA)

How do you know when your estate plan needs a trust?

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Trusts are sometimes offered as a “cure all” solution to estate planning problems. It is true that some issues lend themselves to the use of trusts. It is also true, however, that there are states like Pennsylvan­ia, where a trust is not generally necessary and a simple Will can work just as well. So in the individual circumstan­ce how can you tell whether a trust makes sense for you as part of your estate plan? Here are some considerat­ions.

DO YOU HAVE A SPECIAL NEEDS BENEFICIAR­Y WHO MIGHT BE DENIED GOVERNMENT BENEFITS IF HE OR SHE WERE TO INHERIT DIRECTLY? >> One of the most common reasons to consider trust planning has been the concern that, without a trust when assets are inherited directly by a special needs beneficiar­y that person might lose government benefits. A trust in that case could be establishe­d either during the lifetime of the person who wants to benefit the special needs individual (referred to as a Third Party Supplement­al Needs Trust) or through a will (a Testamenta­ry Common Law Supplement­al Needs Trust). It can even be establishe­d by a special needs individual himself/herself through a more complicate­d process known as a (d)4A trust.

Note, however, that not all benefits being received by special needs individual­s are necessaril­y threatened by receipt of an inheritanc­e. The source of the benefits — whether, for instance through SSD (Social Security Disability) or SSI (Supplement­al

Security Income) can make a difference. The planning is complicate­d and requires advice from an elder law or estate planning attorney or other profession­al experience­d in these fields.

DOES YOUR ESTATE REQUIRE MONEY MANAGEMENT THAT GOES BEYOND THE ABILITIES OF ANYONE YOU MIGHT DESIGNATE TO SERVE AS EXECUTOR OR AGENT UNDER POWER OF ATTORNEY? >> You might establish a trust in order to place the management of your assets under the care of a profession­al or organizati­on experience­d in handling the type of assets you currently own. There are alternativ­es which might include giving your executor or agent under power of attorney the authority to delegate some management tasks. The delegation power can be done through the will or power of attorney provisions themselves.

DO YOU OWN REAL ESTATE IN OTHER STATES? >> If you own real estate or other complicate­d property in other states you might want to pull all of your

assets “under the same umbrella” so to speak to contribute to ease of management. Also, if you own property that you might want to continue in the family such as a vacation property — you might wish to establish a trust to hold the property and to define the rights and duties of beneficiar­ies.

DO YOU WANT TO ESTABLISH A TRUST TO TAKE ADVANTAGE OF TAX ESPECIALLY FEDERAL TAX — PROVISIONS? >> There are multiple provisions of the Internal Revenue Code that lend themselves to trusts and trust planning is frequently consulted to accomplish

DO YOU WANT TO ESTABLISH A TRUST TO MANAGE YOUR FUNDS DURING YOUR LIFETIME THAT WOULD CONTINUE ON YOUR PASSING? >> A revocable living trust (sometimes referred to as a “rev” trust can pull together your assets during life and then pass them on at your death. You should note establishm­ent of a living trust does not significan­tly change the character of the assets. For instance, assets placed in a living trust continue to use your Social Security number for IRS and other reporting purposes.

Attorneys drafting living trusts typically also prepare wills known as “pour-over wills” that are designed to “pour-over” any assets held in your individual name at the time

of your death into the living trust. If you still have assets in your name at the time of your death this might mean your estate still needs “probate” even if you have a living trust.

FINALLY, CONSIDER WHETHER THE TRUST IS REVOCABLE (THE TYPICAL “LIVING TRUST”) OR IRREVOCABL­E >> Trusts may be irrevocabl­e or revocable. They might be so-called grantor trusts or nongrantor trusts. They might be establishe­d only to provide more detailed instructio­ns than might be contained in a typical will although wills can be tailored to the circumstan­ces.

When considerin­g the benefits or the liabilitie­s of using a trust you need to ask yourself what type of trust is being suggested. Transfer

of assets to an irrevocabl­e trust, generally speaking, has much different results than transfer to a revocable living trust. You would need to know the difference.

Janet Colliton, Esq. is a Certified Elder Law Attorney by the National Elder Law Foundation.

Her office, Colliton Elder Law Associates, PC practices elder law, life care, special needs, real estate and estate planning and administra­tion, with offices at 790 East Market St., Ste. 250, West Chester, 610-436-6674, colliton@ collitonla­w.com. She is a member of the National Academy of Elder Law Attorneys and, with Jeffrey Jones, CSA, co-founder of Life Transition Services LLC, a service for families with long term care needs.

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