Conti Law: Which Trust is Right for You?

By Kevin Brown

“Nothing is certain except death and taxes,” is a familiar saying that originated with Benjamin Franklin in 1789. It perfectly sums up, even to this day, what fate and the law hold in store for each of us. 

If you’re like most people, you’ve worked hard all your life to save for retirement, you own your home, and you would like to ensure that your savings, your home and your other assets will not be excessively taxed upon your death and will pass along to your surviving family members.

While most people have a will designating the distribution of their assets after their death, many assume a trust is only needed by the wealthy. There are distinct differences between wills and trusts. Unlike a will, a trust can actually shield your assets from probate, taxation, and creditors.

“The way that I explain it to clients is that the amount of money you have doesn't really matter,” says Michele Conti, founder of Conti Law, a Pittsburgh-area estate planning legal firm. “That's usually the biggest misconception.”

“It really deals with the type of account you have,” she explains. “If you have an account that you can put beneficiaries on, then a trust may not be necessary, because that beneficiary designation allows that account to fall outside of probate when you pass away. Ordinarily, we'll see folks who want to have bank accounts or real estate avoid probate when they die, and that's when we'll use a revocable living trust. The revocable living trust still allows them control ownership of the asset. The only difference is, when they pass away, if that asset is held in that trust, then probate is avoided,” she says.

Besides the revocable living trust, there is another type of trust called an “irrevocable trust.” As the name suggests, it cannot be amended or revoked once it is established. Ownership of the assets rest with the trust and not with the original owner of the assets. Trustees are appointed to manage the assets of the trust.

“An irrevocable trust can be used for a whole host of things, but primarily we see it for life insurance policies and for legacy property. What I mean by that is a farm or property that's been held in the trust over a number of generations, and we know that that won't be sold down the road, so they want to keep passing it on to a family member. The difference is, when you use an irrevocable trust, you're giving up control. It's no longer yours anymore. The other issue is, you cannot amend an irrevocable trust like you can with a revocable trust. You can modify an irrevocable trust, but it requires the consent of all current and future beneficiaries to sign off on,” Michele explains.

A major benefit of a trust is the avoidance of probate which is the review of the estate by county government to certify how the assets are to be distributed. When only a will exists, the estate goes through probate. Probate can take up to a year or longer and is quite costly in legal fees. In the absence of a will or trust, the estate goes to the state rather than to any heirs. 

For a relatively simple estate, the appropriate trust is the revocable living trust, according to Michele. 

“With the revocable living trust, those accounts and assets avoid probate when the owner passes. However, if someone is looking to shelter assets from creditors in the future, a revocable living trust will not achieve that goal. For an asset to be protected or sheltered, it has to be in a form of an irrevocable trust for at least five years,” Michele explains.

What if the situation is more complicated? Let's say the individual owns a business and they want to make sure the business is passed along to a specific person or persons?

“Normally, we're still going to utilize the revocable living trust, and we would do an assignment from their business, and we'd make sure that that assignment into the trust also is reflected in their operating agreement for the business. Most often, the revocable trust is the one that suits a majority of the client's needs,” says Michele.

Another situation is when an individual is admitted to a nursing home. Medicare covers an initial period of the cost, but then the individual must qualify for Medicaid which results in “spend-down” of their assets in order for the patient to stay in the nursing home. A trust can help shield the assets from the spend-down.

“In order to shield the assets from the Medicaid “spend-down”, an irrevocable trust is used, but it must have been established for five years,” says Michele. 

Planning ahead is most important when considering the circumstances of your estate planning and determining which trust is right for you. Attorneys who specialize in estate planning like Michele and her partners at Conti Law are best suited to advise on the appropriate trust.

Michele has been an attorney for over 22 years. She practices in the areas of estate planning, estate administration, special needs trusts, guardianship, taxation and post-litigation planning. Michele also focuses on advanced planning strategies for clients to shelter assets from creditors, potential tax matters, guardianship and gifting consequences.

Headquartered in Oakdale, Conti Law has been in business in the Pittsburgh area for nine years and specializes in estate planning, estate and trust administration, guardianships, elder law, special needs planning, real estate and business law. 

To make an appointment, call Conti Law at (724) 784-0239 or email reception@contilawpgh.com. Their website is www.contilawpgh.com. The firm’s offices are located at 7880 Steubenville Pike, Oakdale, PA 15071.