For The Tribune-Democrat
No article I have written recently has sparked more interest than the one that appeared on Jan. 12 of this year having to do with revocable trusts.
I thought it bears repeating.
First, the claim of people who sell the living trusts, and I use “sell” advisedly, is that they avoid probate. Probate is the act of handing the will to the register of wills. Since the register in Cambria County, Patty Sharbaugh, comes to Johnstown every Friday to her office in the old Glosser Brothers store building on Locust Street for the sole purpose of receiving wills, you don’t have to travel to the courthouse in Ebensburg if you’re from the southern part of the county. Total time – 10 minutes.
After the probate, Sharbaugh takes the will back to the courthouse, and all the paperwork is done by the following Tuesday; total of four days wait. The probate cost for a $50,000 estate is $215.00.
In California, where these trusts had their birth, the wait for all the work to be done, as well as a mandatory meeting with a judge, usually takes 90 days, and the cost is many times the expense in Pennsylvania.
Tess Canja of the AARP said “For those with modest assets, the preparation of a living trust can be a waste of money and create the false expectation that they will be saving their family time and money when it is time to distribute their estate.”
Think of a trust as a big pot. The only things in the trust are the things you put in it. You must retitle your assets. “Retitle” means to change the name on your assets. Real estate needs a new deed, checking accounts need new checks, stock certificates have to be mailed to the issuer with a request to issue new ones, CDs need to be changed by the bank, etc.
Next, there are no tax savings.
Pennsylvania inheritance taxes apply to estates and trusts in the same way, and at the same rates. Why? Because any asset you can reclaim is always taxable at death. To be “revocable” means to be able to revoke, or cancel the trust. Of course, if you do, don’t forget first to make another deed from the trust back to your own name, and transfer every other item in the trust.
None of the trusts I have seen ever have all the new names on these items. Oh, and don’t forget to put new purchases in the trust. And, what about furniture? It has no title. That’s why even the trust people tell you that a will is also necessary for those items that don’t have a title of ownership. So, why would you want a trust in Pennsylvania?
Attorney General Tom Corbett, now governor, filed a civil lawsuit against 11 defendants who were selling living trusts. He accused the defendants of intentionally deceiving consumers that they were receiving competent legal and impartial estate planning advice, when, in reality, they were coaxed or deceived into purchasing only the products that the defendants sold, mainly annuities and a big expensive book. Usual fees? $2,500.
Two of the defendants are the American Family Legal Plan of Costa Mesa, Calif., and Heritage Marketing & Insurance, with offices in Costa Mesa, and 210 Penn Central Bank Building, Pittsburgh. Copies of the filings are available at (717) 787-5211, Attorney General’s Press Office.
Finally, the Pennsylvania Bar Association encourages its members to point out that Suze Orman and others like her are really talking to the citizens of states such as California, Connecticut and Florida that have long waiting periods and fees running into the thousands of dollars. That scenario is not and never has been Pennsylvania’s.
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