Legal Question in Wills and Trusts in Pennsylvania

Re: Family Living Trust Accounts

If you are talking about a Revocable Living Trust the taxes are the same as any other estate. In PA the tax rates are from 6% and up (but going down due to a recent change to 4.5% and up) and federal tax rates start at 37.5% and go up from there. Federal tax rates on estates are only taxed on the amount over 675,000 for 2000. Basically you have to pay tax on anything you own or control at the time of your death (including life insurance proceeds). Generally you can transfer everything to your spouse tax-free, but you incur liability for taxes when you start giving your estate to anyone other than your spouse. A Revocable Living Trust is essentially under the decedant's control at the time of his or her death (because they can revoke it) therefore taxes have to be paid. The only way to get around paying taxes is to set up some sort of trust in which you give away all control (and all of the money) to someone else. Then at that point you do not control the money and it is not included in your estate when you die. However, if you give more than 10,000 a year to one person there might be taxes paid on the amount over 10,000. This is called the gift tax. Living Trusts are one method usually designed to limit liability from creditors when someone is alive and they can speed up distribution of the estate sometimes, but they are not the best method to avoid tax liability. You should talk with an attorney for other solutions if you goal is to avoid paying taxes. I hope this answers your question. If not send me an email and I will reply to you. Thanks.