Test your knowledge of trusts by answering True or False.
(Answers below – no peeking!)
1. If you have a living trust, you do not need to have a Will.
2. A living trust always reduces taxes.
3. A living trust is cheaper than a will.
4. A revocable living trust will protect my property from creditors.
5. In an irrevocable trust, someone can be given the power to change some of its provisions.
1. False. The Living Trust will only transfer property that has been properly titled into
the Trust. Unfortunately, in my experience property it is very unlikely all property will be
in the living trust at death; property is often left outside of the Trust or is incorrectly titled
and thus not included. In addition, newly acquired assets are also often not placed into
the Trust. These assets will often require a probate proceeding to be transferred to the
2. False. Since a revocable trust can be cancelled at any time the property in it is still
considered to be owned by the grantor and that makes all trust income taxable to that
person. In addition, all property transferred from the Trust at the death of the person
who made it will be subject to Pennsylvania Inheritance Taxes as well.
3. False. As said earlier, the trust does not avoid the necessity of having a Will
prepared so getting a living trust adds to the overall cost of getting the essential
documents prepared (Will, Durable Power of Attorney and Health Care POA/Living Will)
and it can also be expensive to transfer assets to the trust. At death the process of
unwinding the trust is every bit as complicated and time consuming as is probate. In
addition, as said earlier, the cost of preparing an Inheritance tax return and the taxes
themselves will not be avoided.
4. False. Since the property in a revocable living trust is still considered to be owned
by the grantor it will be subject to claims by the grantor’s creditors. So, a living trust does
not provide any greater protection against creditors than if the grantor had not created
5. True. Don’t let that “Irrevocable” title make you think that certain changes cannot
be made after the trust is established; depending on what purpose the trust is created
to deal with, provisions can be added to the trust agreement language to allow some
flexibility to the grantor.
So..how’d you do?
There are many different “flavors” of Trusts and not all are appropriate for you. Now that you’ve
learned a little more about your own knowledge of trusts, call me to discuss your needs.