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If an irrevocable trust is created and the main trustee dies, does remaining trustee pay inheritance tax on everything/

Mckees Rocks, PA |

My father was told that if we create an irrevocable trust and i am listed as co-trustee, everything will transfer to me upon his death and i will not have to pay inheritance tax. is that correct? Also does a trust need to be created and prepared by an attorney or could i obtain the correct forms and do myself?

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Attorney answers 3

Posted

This is a very complicated area.

You need to see an attorney - too easy to make a mistake.

For example only, if your dad creates an irrevocable trust and retains an income interest, is included in his taxable esate.

There are many nuances.

See an attorney - being frugal will likely cost later!

Steven J. Fromm

Steven J. Fromm

Posted

Also, note that PA has a 1 year rule on gifts that would have a dramatic impact if he dies within 1 year of the creation of the trust.

Posted

I concur with my colleague. Don't try to do this on your own. Do-it-yourself forms are not specialized to individual states and absolutely are not tailored to your father's specific situation. Short answer is that, if prepared correctly and administered properly, the assets in an irrevocable trust are not taxed at the death of the grantor. However, they are taxed at the time that the assets are gifted in to the trust. Again, find an experienced estate planning attorney to assist you. Right now, the federal exemption is $5 million and I don't know about the Pennsylvania tax, so consider how much tax you will actually save in relation to the inaccesibility of the assxets to your father and the administrative requirements of such a trust. In my experience, DIY estate plans create far more problems which cost a whole lot more to fix than you would have invested with a quality attorney who can talk to you and explain things to you and answer your questions and also develop a plan that meets all of your father's needs. Invest a portion of your anticipated tax savings in attorney's fees in this case-- I assure you it will be money well spent. Good luck to you all.

This response contemplates only the laws of Ohio and is not intended to apply to other jurisdictions. None of the information in this response should be used or relied upon as legal advice or legal opinion about specific matters, facts, situations or issues. Viewing it does not establish an attorney-client relationship between you and Sherrille D. Akin, the law firm of Isaac, Brant, Ledman & Teetor LLP, or any of its individual attorneys

Steven J. Fromm

Steven J. Fromm

Posted

Also, note that PA has a 1 year rule on gifts that would have a dramatic impact if he dies within 1 year of the creation of the trust.

Posted

There are a number of complexities involved in setting up an irrevocable trust. Your father's intent has to be determined and his overall estate needs to be evaluated since he would no longer have control over assets placed in the irrevocable trust. An experienced estate planning attorney would be needed in this situation. Do it yourself plans would cause more problems than you may anticipate. Though you can avoid inheritance taxes with an correctly implemented irrevocable trust, you have to be aware of the requirements during the term of the trust. This would include gifting and separate taxation on income generated by the trust. As expressed by my colleagues, you want to get this right in the first instance.

The information you obtain herein is not, nor is it intended to be, legal advice. It does not establish an Attorney/Client relationship. You should consult an experienced probate or estate attorney for individual advice regarding your own situation.

Steven J. Fromm

Steven J. Fromm

Posted

Also, note that PA has a 1 year rule on gifts that would have a dramatic impact if he dies within 1 year of the creation of the trust.

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