Pennsylvania Living Trust
The Pennsylvania rules that shape the document: the inheritance tax that reaches revocable trust transfers under 72 P.S. Section 9107(c)(7), the elective share at 20 Pa.C.S. Section 2203, and the realty transfer tax exemption at 61 Pa. Code Section 91.156.
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Introduction
A living trust lets you transfer assets to a trustee during your lifetime so they avoid Pennsylvania probate at your death, but only for what you actually retitle into it; anything still in your own name goes through probate regardless of what the trust document says. Pennsylvania is one of only about six states left with a true inheritance tax, and funding a revocable living trust does nothing to avoid it: 72 P.S. Section 9107(c)(7) taxes, at death, any transfer over which the decedent held a power to alter, amend, or revoke the beneficiary's interest, which is exactly what a revocable living trust is. Pennsylvania adopted its own version of the Uniform Trust Act in 2006 at 20 Pa.C.S. Sections 7701-7799.3, but the elective share, perpetuities, inheritance tax, and homestead rules cited on this page sit outside that chapter in older, Pennsylvania-specific titles that were never conformed to it.
Key Things to Know
- 1
Pennsylvania is one of about six states left with a true inheritance tax, and funding a revocable living trust does not avoid it. 72 P.S. Section 9107(c)(7) taxes, at death, any transfer over which the decedent held a power to alter, amend, or revoke the beneficiary's interest, textbook language for a revocable trust, so trust assets are taxed exactly like probate assets: 0 percent to a spouse or to a parent from a child 21 or younger, 4.5 percent to children and other lineal descendants, 12 percent to siblings, and 15 percent to everyone else.
- 2
No notary, witness, or will formality is required to create a Pennsylvania living trust. 20 Pa.C.S. Section 7732(a) requires only a signed writing that shows an intent to create the trust and states its terms, along with settlor capacity, a definite beneficiary, and a trustee with duties to perform. Pennsylvania goes further than most states: the trust instrument may be signed by mark, or by another person on the settlor's behalf and at the settlor's direction, in the same manner as a power of attorney (Section 7732(b.1)).
- 3
A Pennsylvania surviving spouse can claim one-third of a statutory pool of property that is much broader than the probate estate, including property the decedent could revoke or invade for the decedent's own benefit at death, which squarely covers an ordinary revocable living trust, and lifetime gifts within one year of death exceeding $3,000 per donee in the aggregate (20 Pa.C.S. Section 2203(a)(3), (a)(6)). A Pennsylvania living trust does not remove assets from that reach.
- 4
Pennsylvania has no dedicated homestead exemption protecting a residence from creditors; the only general judgment exemption is $300 in the aggregate for real or personal property (42 Pa.C.S. Section 8123(a)), so funding a home into a Pennsylvania living trust creates no homestead-abandonment risk of the kind that exists in states with a real creditor homestead. A separate question, whether the property-tax homestead exclusion under 53 Pa.C.S. Section 8401 stays available once you deed your home to your own trust and continue serving as trustee, is not resolved by statute; confirm current eligibility with your county assessment office.
- 5
Funding real property into a Pennsylvania living trust is exempt from the state's realty transfer tax only when the transfer is for no or nominal consideration (61 Pa. Code Section 91.156(c)), and the recorder of deeds will not grant the exemption unless presented with a copy of the trust agreement at recording (Section 91.156(g)). A later transfer out of the trust to a beneficiary other than the settlor is exempt only if it is for no or nominal consideration and goes to the person holding the vested remainder interest (Section 91.156(f)); otherwise it is fully taxable.
- 6
A Pennsylvania revocable living trust gives the settlor zero creditor protection during life; trust property remains subject to the settlor's own creditors regardless of any spendthrift language (20 Pa.C.S. Section 7745(1)). After death, creditors have the same rights against trust assets as against the probate estate, with estate assets applied first, and a claim against real property is barred unless written notice is filed with the clerk within one year of death (Section 7755(a), (f)(2)).
- 7
Pennsylvania has no trust registration statute, so nothing is filed with any court to create or maintain a living trust; only a deed funding real property is recorded, with the county recorder of deeds. Pennsylvania also abolished the rule against perpetuities outright for interests created after December 31, 2006, putting it in the small perpetual-trust-state club alongside South Dakota, Nevada, Alaska, Delaware, and Wyoming, subject only to a narrow 360-year cap that applies when a power of appointment is exercised to create a second power of appointment (20 Pa.C.S. Section 6107.1).
Key decisions before you file
Before you file a Living Trust in Pennsylvania, a few decisions shape the document: which option to choose and what each one means. The Living Trust guide walks through them.
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Pennsylvania Requirements for Living Trust
Pennsylvania No Notary or Witness Required to Create the Trust
20 Pa.C.S. Section 7732(a) requires only a signed writing that shows intent to create the trust, settlor capacity, a definite beneficiary, and a trustee with duties to perform. The instrument may be signed by mark, or by another person on the settlor's behalf and at the settlor's direction, in the same manner as a power of attorney (Section 7732(b.1)).
Pennsylvania Inheritance Tax Reaches Revocable Trust Transfers
72 P.S. Section 9107(c)(7) taxes, at death, any transfer over which the decedent held a power to alter, amend, or revoke the beneficiary's interest, which describes an ordinary revocable living trust. Rates run 0 percent to a spouse, 4.5 percent to children and lineal descendants, 12 percent to siblings, and 15 percent to other heirs.
Pennsylvania Elective Share Reaches Revocable Trust Assets
20 Pa.C.S. Section 2203(a)(3), (a)(6) lets a surviving spouse claim one-third of a statutory pool that includes property the decedent could revoke or invade for the decedent's own benefit at death, plus certain lifetime gifts within one year of death. A revocable living trust does not remove assets from this reach.
Pennsylvania Realty Transfer Tax Exemption Requires a Copy of the Trust at Recording
61 Pa. Code Section 91.156(c) exempts funding a residence into the trust for no or nominal consideration, but Section 91.156(g) denies the exemption unless the recorder of deeds is presented with a copy of the trust agreement at recording.
Pennsylvania Has No Real Creditor Homestead Exemption
The only general judgment exemption is $300 in the aggregate for real or personal property (42 Pa.C.S. Section 8123(a)). A separate property-tax homestead exclusion (53 Pa.C.S. Section 8401) has an unresolved application to a settlor-trustee; confirm with the county assessment office.
Pennsylvania Certificate of Trust Must Include the Taxpayer Identification Number
20 Pa.C.S. Section 7790.3(a)(7) requires a certification of trust to state the trust's taxpayer identification number, an addition beyond the uniform text. A recipient who demands the full instrument in bad faith is liable for the trustee's damages under Section 7790.3(h).