Tax Consequences to watch out for, Trusts & Real Property

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[Please note: this post and all other posts should not be relied upon as legal advice, please contact us to ensure accurate, up to date, and timely legal advice and representation before taking any actions.]

Placing real estate into a trust can be a useful tool for estate planning and asset protection. However, it is important to be aware of the potential tax consequences of doing so, particularly in the state of Pennsylvania.

One potential tax consequence of placing real estate into a trust in Pennsylvania is the transfer tax. This tax is imposed on the transfer of real estate from one person to another, including transfers to trusts. The possibility to avoid transfer tax or structure your transaction and/or trust in a way that minimizes the risk of being assessed such a tax is one very important reason why you will likely want to utilize an experienced attorney to complete such a transaction.

Another potential tax consequence is the inheritance tax. Pennsylvania imposes an inheritance tax on the transfer of property from a deceased person to their heirs or beneficiaries. The tax rate depends on the relationship of the recipient to the decedent, with higher rates for more distant relatives. If real estate is placed into a trust and the trust is the recipient of the property upon the decedent's death, the inheritance tax may apply.

It is important to carefully consider these potential tax consequences and consult with a qualified attorney or tax professional when planning to place real estate into a trust in Pennsylvania. They can help ensure that the trust is structured in a way that minimizes potential tax liabilities and meets your estate planning and asset protection goals.

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