Trusts

I only recommend a Trust if it is needed for a particular purpose. Together we can determine if a Trust will serve your best interests now, in the future, and after you have passed away. You do not have to be a millionaire to have a trust.

 A signed Trust it is added to the Big Five (see “Estate Planning”).  The Trust is in addition to the Will because the Will cannot accomplish what a Trust can do.

MAJOR TYPES OF TRUSTS

1. The Revocable Trust

The most common type of trust is the revocable trust, also called the “living” trust. The most common reasons to create a revocable trust are:
1) To avoid or minimize estate taxes;
2) To avoid having to file multiple probate matters, one in each state where real property is owned;
3) To stretch out payments to beneficiaries over time;
4) To manage money in a flexible way in complex family situations;
5) To set up education funds;
6) To take care of two sets of beneficiaries, such as a married couple each with children from a previous relationship;
7) To set up a system for the management of a family home intended to be preserved for one or more generations.
8) To avoid probate.

This type of trust can be revoked or amended.

2. The Special Needs Trust (SNT)

SNTs shelter money and other assets for the benefit of a person who is receiving public benefits or who is unable to manage his/her own financial matters. There are two types of SNTs: First Party (the beneficiary uses his or her own money to fund the trust) and Third Party (someone else funds the trust).  See Article for examples of the SNT’s value.

3. Testamentary Trust

Some Wills have additional language creating a testamentary trust. It is called a testamentary trust because it doesn’t “spring alive” until the death of the testator, the person who signed the Will. When the testator dies, the money from the testator’s estate passes into the trust. This is a great tool to preserve assets when one spouse is likely to enter a nursing home well before the other spouse.

4. The Income Only Irrevocable Trust (IIOT)

The IIOT is a powerful MassHealth/ Medicaid planning tool. Federal and Massachusetts Medicaid laws permit the owner to transfer assets such as real property, money or other assets into an IIOT. The person who transfers the assets is called the grantor, who is not permitted to own or abe able to access the assets or be the trustee, but who is permitted to receive trust income.

If the grantor later needs to enter a skilled nursing home and applies for MassHealth benefits, the assets in the IIOT are not treated as the grantor’s assets if more than five years have passed from the date of the transfer to the IIOT. In other words, the assets will not have to be used to pay the nursing home or to pay back MassHealth.

There are also Pet Trusts; Irrevocable Life Insurance Trust (ILIT); Estate Tax Planning Trusts; Charitable Lead Trust, each of which provides unique benefits for a particular purpose.

The trust is like a roadmap that the trustee uses to follow the grantor’s directions as to how to manage and payout grantor’s money upon the grantor’s mental incompetency or death. When I draft a trust I only have two limitations: the grantor’s goals must be 1) legal and 2) sufficiently clear so the trustee knows what the grantor intended. Trusts are flexible, amazing estate planning tools!

Please see my article on Trusts for more detailed information and examples.