Joe of Bucks County has a partner to whom he would like to leave a certain amount of money at his death, but if Partner dies before using the assets Joe would like the money to be used for his Niece. A typical Will gives the money directly to Partner subject to a 15% inheritance tax and the money is available to Partner’s creditors and Partner may leave the money to whomever he wishes, ignoring Joe’s wishes. Lets say Partner respects Joe’s wish, dies a resident of Philadelphia, and in his Will gives the remaining assets to Niece; a second 15% Inheritance Tax occurs.
One Answer: Lawyer could form an Irrevocable Trust into which Joe transfers the assets so that at his death the assets are not his…they are trust’s. Partner can have access to this trust during Joe’s lifetime, or only after Joe’s death, whatever Joe wishes. At Joe’s death there is no Pennsylvania Inheritance Tax, a 15% savings. Plus, should Partner later have creditors, the assets are safe. Further, the trust can require the remaining assets be used for Niece. Joe’s wishes are respected and the 15% tax is avoided.
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