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LGBT Trusts

As Pennsylvania Estate Planning attorneys working with LGBT couples, we explore many options available to our clients to help avoid the 15% Pennsylvania Inheritance Tax levied on inheritances between partners.

Drafting Wills as Estate Planning Lawyers is second nature, a daily occurrence, but in certain circumstances drafting a Trust for Pennsylvania LGBT clients is a better option than a Will. There are many LGBT Trust Strategies. A typical strategy takes advantage of the fact that Pennsylvania has no gift tax.

Lets use a common set of facts for an example. Joe Smith is a resident of Bucks County, Pennsylvania, and has a partner to whom he would like to leave a certain amount of money at his death for his partner’s care and use, but if his partner dies before using the assets, Joe would like the money to be used for his nieces and nephews’ education. If he had his Estate Planning Lawyer draft a typical Will, giving the money directly to the partner, it would be subject to a 15% inheritance tax. Once in the partner’s accounts this money could be lost to the partner’s creditors, law suits and the partner is free to leave the money to whomever he wishes, completely ignoring Joe’s wishes about the nieces and nephews. Lets say the partner does respect Joe’s wish, dies a resident of Philadelphia, Pennsylvania, and in his Will gives the remaining assets to the nieces and nephews, this inheritance is subject to another 15% Pennsylvania Inheritance Tax.

Instead, Joe’s Estate Planning Lawyer could form an Irrevocable Trust during Joe’s lifetime. Joe could transfer the assets to the trust during his lifetime (the details of how this is done without federal gift tax are beyond the scope of this short article) so that at his death the assets are not his…they belong to the trust. The partner can have access to this trust during Joe’s lifetime, or only after Joe’s death, whatever plan Joe finds best reflects his wishes. At Joe’s death there is no Pennsylvania Inheritance Tax on what was given to the trust, a 15% savings. Plus, should the partner later be sued or have creditors, the assets are safe. Further, the Estate Planning Attorney can draft the trust so that at the partner’s death the remaining assets immediately are used for the nieces and nephews. This removes the partner’s ability to change his mind and give the assets to others and avoids the 15% Inheritance Tax at the partner’s death on transfers between he and Joe’s nieces and nephews.

This describes in simple terms one useful method to reduce tax on transfers between LGBT couples. More examples maybe found here. If you are part of a LGBT relationship do not limit yourself to the old fashioned “I love you” Will, instead examine the many options presented by Trusts.

Our firm focuses exclusively in the area of estate planning, probate, and the litigation surrounding estate planning and probate, so if you need assistance in developing your Estate Plan please call one of our Estate Planning Lawyers for a free consultation. We have Estate Planning Attorneys in Pennsylvania, New York, New Jersey, Minnesota and Florida. Estate Planning is all our Estate Planning Lawyers do!

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Estate Matters
The Klenk Law Blog



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