How to Create a Living Trust in Pennsylvania

A Pennsylvania living trust places your assets in a trust during your life and distributes them to your beneficiaries after your death. A revocable living trust offers flexibility and control, making it a popular option in Pennsylvania. Still, depending on your circumstances, you might consider an irrevocable trust as well. Before you start the process, let’s review how living trusts work in Pennsylvania and the primary differences between both types. 

Living trusts in Pennsylvania

When you establish a living trust in Pennsylvania, you are the “settlor,” the person putting your assets into the trust. Whether it’s a revocable or irrevocable trust, you’ll also specify the terms for how you want it to be managed and who will inherit from the trust. However, there are a few important distinctions to be aware of. 

Revocable trust: 

• You maintain complete control over the trust assets
• Can be changed or eliminated during your life if you wish

Irrevocable trust: 

• You no longer control assets you transfer into the trust
• Once established, you typically can’t change or dissolve the trust 

Most individuals and families in Pennsylvania use revocable trusts to retain control over their assets. On the other hand, irrevocable trusts may reduce the settlor’s tax liability since they no longer own or control the trust’s assets. However, beneficiaries are still responsible for paying Pennsylvania’s state inheritance tax, whether the trust is revocable or irrevocable.

When to use a living trust

It’s always a good idea to create an estate plan, but you might set up a trust in particular if any of these situations apply to you:

• You own assets in multiple states. Each property would otherwise require separate probate proceedings in its respective state. 
• You’re part of a blended family. Your estate includes stepchildren, multiple marriages, or family dynamics that could complicate the inheritance process. 
• You have a complex estate. You have shares in a family business, partnership interests, or properties that need careful management and asset protection.
• You anticipate family conflicts. Legally binding instructions set clear expectations and make it easier to resolve conflicts between beneficiaries. 

Though more complex than a will, a properly executed living trust helps your estate and beneficiaries avoid probate in Pennsylvania, which by itself makes the extra effort worth it for many. 

Probate in PA

Probate is the court procedure that approves a will and puts it into effect. Pennsylvania has not adopted the Uniform Probate Code, so its procedures are considered more complex. However, a small estate probate proceeding is available if you have $50,000 or less in your estate when you die.

Otherwise, probate can take months and also typically involves the expense of an attorney, an executor, and court fees. Assets passed by a will cannot be distributed until probate has concluded, whereas assets in the trust can usually be distributed sooner.

Benefits of setting up a living trust in Pennsylvania

If you’re unsure whether a living trust is right for you, take a look at these benefits to see if you should move forward. 

Avoiding probate

As discussed, a living trust allows you to bypass probate entirely. If you have assets in more than one state, your trust allows you to bypass probate in those other states as well.

Another trust benefit is the privacy it offers. Another trust benefit is the privacy it offers. When a will is probated, it becomes public record in Pennsylvania. However, your assets, beneficiaries, and instructions included in a living trust are not revealed as part of the public record like a will. 

Avoiding guardianship and conservatorship

Your revocable living trust protects you should you become mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust, and a conservatorship proceeding is likely unnecessary. 

Your trust can also help prevent guardianship disputes by naming who should make personal and healthcare decisions on your behalf. Meanwhile, your successor trustee will manage your estate and financial affairs according to your documented wishes. 

Flexibility

One of the most popular reasons for opening a trust is because of the control it gives you over your assets. It is a common misperception that a trust takes your assets away from you. While the trust technically owns your assets, you continue to live in your home, drive your car, spend your money, and do everything you normally would (provided you set up a revocable trust). 

You also have control of the assets after you die because you set up the rules for the trust. You can decide to distribute the assets whenever you want. Some grantors wait for beneficiaries to turn certain ages before they inherit. 

Drawbacks of setting up a living trust in Pennsylvania

You should consider the following points before you set up your trust in Pennsylvania. 

Time and effort to manage a living trust

Unlike a will, a living trust needs regular maintenance to remain effective. For instance, you’ll need to retitle assets in the trust’s name, update documentation if you acquire any new property, and modify the terms if circumstances change. 

Cost of creating a living trust

Attorneys in Pennsylvania may charge anywhere from $1,000 to $3,000 or more to draft a living trust. While you can find DIY options or use a template, keep in mind that any errors (whether in the document or when you go to fund the trust) can result in serious consequences for your estate plan. 

If you’d rather not take this risk but want to keep costs predictable, you can also work with LegalZoom’s attorney-supported living trust service.

How to create a living trust in Pennsylvania in 7 steps

Regardless of how you create a living trust, you’ll need to complete these steps in order to draft and execute the document: 

1. Choose between an individual or joint trust

Generally, individual trusts work for single people. If you’re married, own property together, and want to combine your estate plans, then a joint trust makes more sense. 

2. Decide what property to include in the trust

Next, you can determine what assets you’ll transfer to the trust, such as:

• Real estate properties
• Bank accounts and investments
• Valuable personal property 

The goal is usually to place as many assets into the trust as possible, but some assets, such as life insurance and retirement accounts, cannot be held by a trust. If you have any questions about what you can’t or can’t transfer, you might reach out to a Pennsylvania estate planning attorney. 

3. Choose a trustee

You need a trustee to manage the trust. Most people choose themselves for revocable living trusts. However, you’ll still need to appoint a successor trustee—someone reliable who will manage and distribute assets when you die. Your trustee must also agree to perform the duties asked of them, and the sole beneficiary cannot be named as the trustee of the trust.

4. Decide who will be the trust's beneficiaries

In Pennsylvania, you can name family members, friends, charities, or organizations as your beneficiaries. As you consider who you want to name as your beneficiaries, be sure to note each one’s share and any conditions for inheritance. 

5. Create the living trust document

You’ll outline all of the previous information in your trust document, including your type of trust, assets to be distributed, trustee(s), and beneficiaries. However, you should work with an attorney or use a service like ours to help ensure your document meets Pennsylvania’s legal requirements. 

6. Sign the trust document in front of a notary

You should strongly consider signing the trust document in front of a notary public. Some banks and financial institutions offer notary services, or you can find a local notary through Pennsylvania’s Department of State. 

7. Transfer property to the trust

The trust is not active and complete until you transfer ownership of your assets into it. This process, known as “funding” the trust, typically involves these steps: 

• Recording new deeds for real estate
• Changing account titles
• Transferring any business or ownership interests 

Be sure to keep copies of the new documents and update your trust as needed if you acquire new assets. 

Living trusts and estate taxes in Pennsylvania

Estate tax is an important consideration in estate planning. However, living trusts do not avoid estate or inheritance tax. Pennsylvania applies an inheritance tax of 4.5% to transfer to direct descendants (such as children and grandchildren), 12% to siblings, and 15% to all others. The federal government also applies an estate tax to estates valued over $13.61 million (as of writing, the federal estate tax threshold increases annually). 

Still, certain strategies may offer tax benefits or reduce your liability. For example, specially constructed trusts called AB, marital, or QTIP trusts allow assets to pass from one spouse to another while potentially reducing or deferring federal estate taxes. However, it’s important to note that standard living trusts don’t hide assets from Medicaid or from creditors. 

If you’re thinking about setting up a specialized trust like one of these, it’s especially crucial to first consult an attorney—and you can find one in your area of Pennsylvania through our online directory. 

FAQs

How much does it cost to create a living trust in Pennsylvania?

You can theoretically create a living trust in PA for free if you draft it yourself, but this comes with considerable risks. Attorneys may charge between $1,000 and $3,000, or you can go with LegalZoom for as low as $399 to create your living trust. 

Does a living trust avoid probate in Pennsylvania?

Yes, a properly funded and executed trust allows assets to bypass Pennsylvania’s probate process. However, this only applies to assets actually transferred into the trust—any assets left outside may still be subject to probate. 

Is it better to have a will or trust in Pennsylvania?

While trusts offer more control and privacy, they require ongoing maintenance and higher upfront costs. Wills are simpler but must go through probate. As a result, many people in PA use both estate planning methods—a trust for major assets and a will to catch anything left out, also known as a “pour-over will.”

Can I create my own living trust in Pennsylvania?

Yes, you can create your own living trust in Pennsylvania, but you should pay close attention to the legal requirements and wording of your terms. Errors can invalidate the trust or create unexpected consequences for your beneficiaries. 

Will a living trust avoid Pennsylvania inheritance tax? 

No, Pennsylvania’s inheritance applies regardless of how assets are held. Tax payments are due upon death and must be paid within nine months. However, paying within three months qualifies for a 5% discount. 

Brette Sember, J.D., contributed to this article