When you create a trust, you are putting in place a legal arrangement that will protect your assets for the benefit of someone else. This can be a very important step, especially if you have children or other loved ones who may need some help down the road. A trust can provide peace of mind, knowing that your loved ones will be taken care of even if something happens to you.
In addition, trusts can be helpful in estate planning. They can allow you to pass on your assets to your heirs in a tax-efficient way, and they can also help protect those assets from creditors. If you want to make sure your estate is handled in the way you want, starting a trust is a great way to do that.
Concerned about what will happen to your assets after your death? At the Law Office of Polly Tatum, we are here to help you take control of your assets by setting up a trust, which serves to avoid probate after your death. Because the assets placed in a trust are able to pass outside of probate, it saves time and court fees and may reduce estate taxes. Call us today at (774) 366-3688 to begin setting up a trust.
What Is A Trust?
A trust is a fiduciary agreement between a third party (“trustee”) who holds assets on behalf of a beneficiary or beneficiaries. There are numerous types of trusts, but the main goal of any trust document is to organize your assets and protect your wealth.
A trust is a legal arrangement that can protect assets for the benefit of people who may not be able to take care of themselves. Trusts are often used as part of an estate plan, and they come in many forms. There are trusts that can pay out income or principal at regular intervals, trusts that allow you to decide when beneficiaries receive payments (known as “discretionary” trusts), and even trusts designed specifically for disabled people.
A trust differs from a will, as it allows your beneficiaries to gain access to any assets more quickly than they might otherwise if they were transferred through a will. The main difference between a trust and a will is a trust can go into effect at any time, whereas a will goes into effect after you die. Living trusts are created while you’re alive.
While there are many types of trusts, a major distinction between them is whether they are revocable trusts or irrevocable trusts:
- Revocable trusts: Also called a living trust, these allow you to retain control of the assets during your lifetime. These trusts are flexible and can be dissolved at any time, which is useful if your circumstances or intentions change. A major drawback some find in this flexibility is that all assets transferred to the trust are still considered personal assets and are subject to creditors and estate taxes. All revocable trusts become irrevocable after the death of the grantor.
- Irrevocable trusts: Irrevocable trusts cannot be changed by the grantor after they are signed and the trust has been funded. All assets transferred to the trust can’t be taken back. That means the assets in the trust are permanently given to the trustee, and the grantor no longer owns the assets. However, the trust assets don’t comprise or contribute to the value of the grantor’s estate, so they’re not subject to estate taxes when they die.
The Differences Between Trusts & Wills
A will, also known as a last will and testament, outlines how a person’s assets and property should be distributed upon passing. It can also specify guardianship for minor children, appoint an executor to manage the estate and address other important matters. Wills are typically subject to probate, a legal process that validates and oversees asset distribution.
On the other hand, a trust is a different legal arrangement. It is where a person, known as the trustor or grantor, transfers their assets to a separate entity. This entity is known as the trust for the benefit of one or more beneficiaries. The trustee manages it, follows the trust’s terms, and distributes the assets according to the trustor’s instructions. Trusts can be revocable or irrevocable. They can offer various benefits, including avoiding probate, maintaining privacy, and providing more control over asset distribution.
What Are Some Of The Benefits Of Establishing A Trust?
Some of the benefits of establishing a trust include:
- Controlling your wealth: A trust allows you to specify its terms and control to whom and when distributions should be made (before or after your death).
- Protecting your legacy: A well-constructed trust protects your estate from your heirs’ creditors.
- Privacy: Probate is included in the public record, but a trust allows assets to pass outside of probate and remain private.
In essence, trusts are versatile tools empowering individuals to safeguard wealth, support loved ones, and shape their lasting legacy. Consider the following benefits below.
- Avoid probate. Trusts offer a significant advantage by avoiding probate, the legal process of validating and distributing assets through a will. When properties are in a trust, they are no longer part of your estate and thus skip the time-consuming and potentially expensive probate process. Instead, they can be directly transferred to beneficiaries, typically faster and with more privacy since trust documents are not public.
- Privacy. Confidentiality can help protect sensitive financial and personal information. Trusts are private documents, unlike wills. Though a will is also initially confidential, it becomes a public record during probate.
- Control. Trustors can specify how and when beneficiaries receive their assets, allowing for more control over wealth distribution. For example, a person can distribute gradually, such as providing for a child’s education expenses over several years.
- Asset protection. Irrevocable trusts can offer protection from creditors, lawsuits, and potential estate taxes. Assets held within these trusts may be shielded from legal claims and estate tax liability.
- Continuity of management. Trusts can ensure the seamless management of assets if the trustor becomes incapacitated. The trustee can manage affairs according to the trust’s terms.
- Tax planning. Certain trusts, such as bypass or marital trusts, can be used for estate tax planning purposes to minimize the tax burden on the estate.
- Specialized Uses. Trusts can serve specific purposes, such as caring for minor children, supporting charitable causes, or providing for individuals with special needs. This helps them become highly adaptable to various family and financial situations.
What Are Some Complications That Can Arise When Establishing A Trust?
There are many potential complications that can arise when establishing a trust. One common complication is finding a qualified trustee. The trustee is the person who will manage the trust and its assets. It is important to find a trustee who is honest and trustworthy. Another complication that can arise is deciding how to distribute the assets of the trust. This can be a difficult decision, especially if there are multiple beneficiaries.
No two trusts are alike, so it’s important to have an attorney who is familiar with the nuances of trust law. At our firm, we take the time to get to know our clients and their unique needs. We then tailor our services to fit each client’s individual situation.
If you are considering setting up a trust, it is important to consult with an experienced trusts lawyer. A trusts lawyer can help you navigate the complicated process of setting up a trust and avoid potential problems. We offer personalized solutions for trusts and estate planning. Contact us today to schedule a consultation.
A Lawyer For Trust Can Help You Choose
Are you considering establishing a trust as part of your estate plan? Then you might have wondered: Is there a trust attorney near me? That is a valid concern; there are good reasons to hire a trust lawyer. For one, each type of trust serves a different purpose. Understanding how each type works helps you choose the type of trust that will best work for you. Here are some common types of trusts.
Revocable Living Trust
This trust allows the grantor to maintain control of their assets during their lifetime and make changes or revoke the trust if necessary. It often helps avoid probate and streamline asset distribution after death.
Once established, no one can alter or revoke a living trust without the beneficiaries’ consent. This type of trust may offer asset protection and estate tax benefits.
A testamentary trust is a legal arrangement created within a person’s will, which becomes active after death. It involves designating assets (like money, property, or investments) to be managed for specific beneficiaries, with instructions on how and when these assets are distributed. A trustee is usually appointed to oversee and follow these instructions.
This type is often used to support minor children or individuals with special needs by managing assets on their behalf until they meet certain conditions or reach a specific age. Testamentary trusts are a valuable tool in estate planning, ensuring assets are distributed according to the person’s wishes after their passing.
A charitable trust is a legal setup where someone or an organization donates assets like money, property, or investments to support charitable causes. Such trusts aim to positively impact society by supporting education, healthcare, or cultural preservation. Donors can benefit from potential tax advantages, depending on their location and the trust’s terms, while contributing to worthwhile charitable efforts.
Special Needs Trust
A special needs trust is also known as a supplemental needs trust. It is a legal arrangement created to provide financial support and care for individuals or relatives with disabilities or special needs. One advantage of this is it preserves the beneficiary’s eligibility for government benefits like Medicaid or Supplemental Security Income (SSI).
In this trust, assets are placed in the care of a trustee who manages and distributes them for the person with special needs. It is specifically structured to supplement government assistance programs rather than replace them.
The trust can pay for expenses not covered by public benefits, such as medical care, therapy, education, transportation, and personal comfort items. By using it, individuals with disabilities can receive additional support without jeopardizing their eligibility for crucial government assistance programs.
Do I Need A Trust Lawyer To Establish A Trust?
Although you can educate yourself about trusts and other forms of estate planning, you can hardly expect to be an expert without the years of law school and practice behind you. At the Law Office of Polly Tatum, we have the ability to draft all the necessary paperwork for you by the corresponding deadlines and amend them whenever necessary. If you have questions about trusts, please contact us for a strategy session. Interested in establishing a trust? Call our estate planning lawyers in Worcester at (774) 366-3688 or contact us online to book an appointment.