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Trust Planning: Should Your Estate Plan Include It?

Trust planning can be beneficial in a variety of situations. Consider the following examples.

The Donovans raised four wonderful children, three of whom are out of college and off to promising starts with their careers.  One of their children, Daniel, has Down’s Syndrome and lives at home with his parents.  Daniel’s parents are inspired daily by his big heart and the friendly way that Daniel greets people at the grocery store, his doctor’s office, and his school.  Daniel’s parents take him to physical and occupational therapy to ensure that Daniel will develop his talents to their full potential, but they worry that Daniel would not have appropriate housing or care if they were to pass away. 

Caroline recently named her son, Brent, as a co-owner on her bank account.  Brent lost his job and has struggled to pay his bills.  Caroline has faith that Brent will find his way, but in the meantime she wanted him to have the money he needs to pay basic living expenses.  Caroline did not know how much credit card debt Brent had amassed in recent years, nor did she know that the credit card companies are now coming for the money Brent has access to in the joint bank account. 

Karl and Gail are enjoying retirement.  They are satisfied that they have wills that provide for their children once they pass away.  Karl and Gail spend as much time as they can at their vacation properties in Maine and Florida.  Their son, who is named in the wills to be the executor of Karl and Gail’s estates, shows them an article about estate planning.  The article explains how Karl and Gail’s estates will need to go through the probate process not only in Pennsylvania, but also in each state where they own property.  Now Karl and Gail are wondering how much of their money will go to court costs and attorney’s fees because of multiple probates.

Each of these families could benefit from a trust.  There are many kinds of trusts, each tailored to specific needs.  Generally, instead of giving money or property to another person outright or leaving it in a lump sum in a will, a trust involves putting the money into a box with specific instructions about how the money should be managed.  A trustee is in charge of the box and follows the instructions to disburse the money.  The people who receive the money in the box are the beneficiaries.  People often create trusts during their lifetime, but trusts can be included inside a will to be established after the person making the will passes away.

Trusts are commonly misunderstood, especially when it comes to protection from creditors.  It may be too late for Caroline to protect the money in her bank account from Brent’s creditors.  She may need to fight the credit card companies in court, arguing that the money is really hers and Brent was added to the account only for convenience.  Instead of adding Brent to her account, Caroline would have been wise to establish a revocable living trust that allowed for occasional disbursements to Brent for his living expenses.  Such a trust could be established in a way that Brent had no entitlement or ready access to the money in the trust.  Although Caroline’s creditors could probably still get access to that money, Brent’s creditors could not. 

Planning ahead with a trust would also work for Karl and Gail.  One of the most common reasons why people establish a trust is to avoid probate, the process in which a county court determines that a will is valid and an executor is authorized to pay debts and distribute property to beneficiaries.  When a person with a will owns property in other states, there must not only be a probate in the person’s home state, but also there must be an ancillary probate in every state where the person owns property.  Although Pennsylvania’s probate costs are relatively modest, that may not be the case in other states where the person owns a vacation or investment property.  A trust does not go through probate.  It is a private agreement, does not become public as a will does, and will be administered without court involvement in any state.  As an added bonus, if any of Karl and Gail’s children ever get divorced, then their trust can be designed to keep money and property in the family, protecting it from ex-spouses. 

Trust planning is especially beneficial for families like the Donovans with special needs children.  If Daniel will never work in a job that comes with medical insurance, it will be very important for Daniel to qualify for Medicaid and Supplemental Security Income benefits.  Those benefits are available only to people whose income and resources are limited.  Instead of leaving money to Daniel outright, the Donovans could establish a Special Needs Trust to cover Daniel’s expenses for housing, dental and vision care, and even recreation without jeopardizing his Medicaid or SSI benefits. 

For many people, a will-based estate plan is sufficient to ensure that money and property will be distributed to their loved ones in the way they wish.  For others, a trust may be necessary for protection against creditors and divorces, to avoid the expense and time associated with probate, or to ensure that a special needs child will receive health care and housing.  If you would like to hear more about using trusts to protect your family and your property, Keystone Elder Law P.C. will hold a seminar and answer questions about trust planning on Thursday, March 12, at 3 p.m. in our conference center. Registration is preferred in case of unanticipated schedule changes.  Please call 717-697-3223 or email

Patrick Cawley, Attorney