Perspectives
Legal Blog

While living trusts can be valuable estate planning tools, they are also widely misunderstood. Knowing what a living trust can – and can’t – do will help you make better choices for your estate plan.

What a Living Trust Actually Does
A revocable living trust is a document that allows you to transfer ownership of certain assets to a trust during your lifetime. You can serve as your own trustee and if you do then you can continue to use, invest, or sell the assets as you wish. Upon your death, a successor trustee distributes the remaining assets to your beneficiaries or oversees those assets according to your instructions.

Because the assets in the trust are legally owned by the trust, not you personally, those assets generally do not go through probate. However, there are several common misconceptions on what living trusts do and how they can be used to avoid costs after your death.

Misconception #1 – A Living Trust Avoids Probate Entirely
A trust only avoids probate for assets actually transferred into it. If other assets such as bank accounts, vehicles, or real estate are not in the name of the trust, those assets still pass through probate. In practice, many estates end up with both trust and probate assets which leads to a limited probate proceeding while also having to maintain and distribute a trust. If the sole purpose of a trust is to avoid probate, care must be taken to properly title all assets owned.

Misconception #2 – A Living Trust Eliminates Estate Costs and Taxes
Avoiding probate does not mean avoiding taxes or administration costs. Federal estate, Pennsylvania inheritance and federal and state income taxes can still apply, and the trustee will often need professional help with valuations, accountings, or tax filings. While a trust can simplify the process and reduce delays, it does not eliminate all expenses. Even if the majority or all of your assets are held in a trust, your heirs will still need to cover basic administration costs including without limitation tax filings, sending required notices to the state and beneficiaries, and in some cases formal and informal accountings.

Misconception #3 – A Living Trust Replaces Your Will
Even if you have a trust, you may still need a “pour-over Will.” This type of Will directs any assets left outside your trust at death to be transferred into it. Without a Will, those assets might pass under Pennsylvania’s intestacy laws, possibly passing to people you never intended to benefit.

Misconception #4 – Trusts are Only for the Wealthy
Living trusts are not limited to high-net worth individuals. They are often used and can be beneficial for families who own real estate in more than one state, want to maintain privacy, or who want to plan for incapacity. A trust can also help if you wish to manage how and when beneficiaries receive their inheritance.

The Real Benefits of a Living Trust and How We Can Help When structured and maintained properly, a living trust can help your family plan for potential estate or gift tax consequences, provide for smooth management of your assets if you become incapacitated, offer flexibility in distributing assets to beneficiaries over time, and simplify administration if you own property in multiple states. A living trust can be a powerful tool, but only when it’s part of a comprehensive estate plan tailored to your situation. Our estate planning attorneys will evaluate whether a living trust makes sense for your goals and assets, draft the trust so your property is truly covered, prepare companion documents to ensure your plan is complete, and review any existing trust documents to confirm they meet current Pennsylvania requirements and your family’s needs.