House Co-Sponsorship Memoranda

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In the near future, I will be introducing legislation regarding a critical component of estate planning. The measure would spell out the legal requirements for a living trust to serve as a substitute for a will and help families to continue to transfer property without having to pay the one percent realty transfer tax.

The bill would provide definitions for a living trust and provide in statute that a living trust need not be revocable for it to be considered similar to a will for tax purposes. People have been setting up living trusts under the assumption that the one percent realty transfer tax would not apply, as in a traditional will.

A recent Pennsylvania legal case targeted the tax liability in a living trust when the Department of Revenue sought taxes, interest and fees after a couple transferred the family home and farm to a Family Irrevocable Trust that named only themselves and their daughter as beneficiaries. The Commonwealth Court upheld the family’s exemption from the Realty Transfer Tax, affirming that the trust was a viable “will substitute.” However, the Pennsylvania Supreme Court recently overturned that decision, leaving many seniors who had used the prior decision as a basis for estate planning in a precarious situation.

By clarifying tax exemptions offered through living trusts, my bill would simplify the estate process by providing a clear understanding of what is legally required to exempt property transfers from taxes.

Please join me in sponsoring this important legislation.