Can I Set Up a Trust Fund for My Niece or Nephew?

You may have a special bond with your niece or nephew, making you view them more like a daughter or son. This may be especially true if you do not have children of your own, have been appointed as their legal guardian, or otherwise. With this, you may want to set up a trust fund in their name so that they may be financially supported when you are no longer around to offer such support yourself. Continue reading to learn how to establish a trust fund for your niece or nephew and how one of the experienced Butler County trusts attorneys at Heritage Elder Law & Estate Planning, LLC can work to ensure this is a well-thought-out plan.

How can I set up a trust fund to benefit my niece or nephew?

First of all, there is no limitation to whom you can pass along your assets. Meaning, you are most certainly allowed to set up a trust fund for your niece or nephew. This may be considered a wise way to leave their inheritance, as they may not be able to access the funds until they have reached a mature age. All the while, their parent (i.e., your trusted sibling, brother-in-law, or sister-in-law) may serve as the trustee so that they may guide them in mature money management.

How does the Pennsylvania inheritance tax rate affect my niece or nephew?

To reiterate, you may not be limited to which family member you may set up a trust fund for. However, you must still consider how Pennsylvania’s imposed inheritance tax rate may affect each family member differently.

That is, you may view your niece or nephew more like a daughter or son. But this does not mean Pennsylvania’s estate law has the same regard. This is all to say that, as a nonlineal family member, your niece or nephew may have a 15 percent inheritance tax on the property they inherit from you. With this in mind, you may sooner put them on your life insurance policy or gift them your assets throughout your lifetime.

Without further ado, the Pennsylvania inheritance tax rate imposed on each of your family members is as follows:

• There is no inheritance tax rate imposed on the following family members:
  • Your surviving spouse.
  • Your favorite charitable organization.
  • Your parents, adoptive parents, or stepparents (if you sadly pass on at 21 years old or younger).
• There is a 4.5 percent inheritance tax rate imposed on the following family members:
  • Your parents and grandparents.
  • Your children and their spouses.
  • Your children and their descendants and step-descendants.
• There is a 12 percent inheritance tax rate imposed on the following family members:
  • Your siblings by adoption.
  • Your siblings by blood (including half-siblings).
• There is a 15 percent inheritance tax rate imposed on the following family members:
  • Your nieces and nephews.
  • Your aunts and uncles.
  • Your cousins.
  • Your brothers-in-law and sisters-in-law.
  • Your friends.

Arguably the most important step you must remember to take when setting up a trust fund is hiring one of the skilled Butler County estate planning & probate attorneys. Our team at Heritage Elder Law & Estate Planning, LLC is looking forward to working with you.