Exemptions for federal estate taxes continue to rise to the point that they are not an issue for most middle-to-upper-income people who plan to leave money to their heirs. Nevertheless, federal estate tax still represents a very big problem for wealthy Pennsylvania residents. The state of Pennsylvania also has what is called an inheritance tax that heirs must pay when they receive money and assets from a deceased benefactor. Traditionally, trusts have been used to help individuals avoid such taxes, and trusts are still very useful today -- not just for avoiding estate and inheritance taxes, either.
Revocable trusts are some of the most common estate-planning tools being used today. A trust can be financed with a wide variety of property, including securities, real estate, life insurance proceeds and cash. A trust document is also very malleable, and it can provide income and bequeath assets to survivors in a way that treats each heir uniquely and individually. For example, a trust might be constructed to provide income to one's spouse until he or she dies, and then it could provide income to one's children after that -- and grandchildren after that.
In the case of young children, an estate planner could create provisions in the trust to dispense funds to the children at certain times. For example, a lump sum might be paid when the child reaches college age to help with tuition. It could be timed to dispense money at the point of marriage or at the birth of a first child as well.
Trusts can be used in other important ways too. For example, they can be used to protect assets as the aging process takes hold and an individual is no longer able to make financial decisions on behalf of himself or herself. By speaking with an estate-planning professional, Pennsylvania residents can gain a sense of how they might be able to incorporate trusts into their estate plan to best achieve the goals and wishes they have for after they are gone.
Source: cincinnati.com, "Trusts remain useful tool in estate planning", J. Brendan Ryan, Nov. 21, 2014