Do I Need A Trust in Massachusetts?

Generally, but not always, a living trust can be a valuable and useful estate planning tool for many reasons, including:

Providing for Family Members with Special Needs
Avoiding Probate Delays and Costly Legal and Filing Fees
Minimizing Estate Taxes
Protect Children from Overspending
Insulating Assets from Creditors
Minimizing Income Taxes (with an irrevocable trust)

However, for those without a residence or who have a modest estate, the cost of creating a trust may outweigh these potential benefits.

To determine if a trust can help you meet your estate planning objectives, we invite you to schedule a free initial consultation with Jamaica Plain Estate Planning attorney Bob Grodberg. He can discuss your wealth situation and explain whether a trust or other estate planning tools (e.g., a Last Will and Testament, Homestead Protection, Medical and Commercial Powers of Attorney, and Advance Directives, etc.) could benefit you and your family.

What Is A Trust?

A trust is a legally binding agreement whereby an individual (referred to here as the “Founder”) transfers asets to another person (referred to as a trustee), and, if requested, retaining all ownership benefits during the Founder’s life, and providing for the benefit of third-party beneficiaries, as specified in the trust. There are two primary types of trusts:

Testamentary Trusts. Testamentary trusts take effect upon the death of the person making the will (the “testator”); and
Non-Testamentary Trusts. Non-testamentary trusts establish the lifetime and after-death control and distribution of benefits.

Unlike a will that becomes a public record, a trust is typically not subject to public scrutiny, and it can be written to accomplish various goals (e.g., minimize taxes, preserve assets for minors, etc.).

Can I Change the Terms of a Trust?

Revocable living trusts are the most flexible trust option for most individuals, as the terms can be drafted to provide for amendment or termination by the founder. With this type of trust, a trustor can transfer ownership of some of or all property to the name of a trust while still retaining the same level of control over the assets as before.

Alternatively, it is more challenging to change an irrevocable trust; however, an irrevocable trust can be constructed to provide some flexibility.

Can I Accomplish the Same Objectives with A Will?

Wills have two significant shortcomings: assets may have to go through probate, a lengthy and expensive process of validating a will and settling an estate, and wills become public documents, opening them up to scrutiny and will contests. Both shortcomings are generally easily avoidable with a trust, however, as assets in a trust typically bypass probate, and the particulars of a trust generally remain private.

When Is A Trust Beneficial?

A trust can be drafted to provide the Founder with the ability to control how assets are managed both during and after life, which can be particularly appealing for numerous reasons, including:

Providing for A Special Needs Child. A “Special Needs” trust can be a strategic and pragmatic tool for families with special circumstances. For example, if a prospective beneficiary qualifies for “welfare-SSI Support”, special needs trust assets can be distributed to such person without disqualifying the beneficiary from such benefits, therefore extending the availability of such resources.
Avoiding Probate. Probate is a legal process involving verifying that a will is a legal document and ensuring a decedent’s intentions are carried out. Alternatively, probate also occurs when an individual does not have a will, leaving the probate court, guided by Massachusetts statute, to determine how and to whom to distribute assets. This process is often exorbitantly expensive. Consequently, it often drains estate funds intended for beneficiaries. A trust can circumvent probate, ensuring that assets are used to support loved ones (instead of paying for court and legal fees).
Minimizing Estate Taxes. Unlike many other states, Massachusetts levies significant estate taxes for estates over $1 million at death, meaning estates worth less than $1 million do not need to file a return or pay an estate tax.[1] This means that if you own more than $1 million in assets, it is almost always possible to save on estate taxes.
Protecting Beneficiaries from Overspending. If a loved one has difficulties managing money, substance abuse issues, or other special needs, a trust can be utilized to periodically distribute funds so he or she can’t unwisely spend all their inheritance.
Shielding Future Beneficiary Assets from Creditors. Trusts can provide beneficiaries with protection against creditors.[2] If a beneficiary is sued and the trust is well drafted, a creditor will generally be unable to reach the trust assets.
Minimizing Income Taxes. When a Massachusetts irrevocable trust distributes income to beneficiaries, the recipient must pay income tax on the proceeds. Thus, a tax savings can occur if a beneficiary pays income tax at a lower tax bracket than a Founder.

Trusts can be costly, especially for complex estates; thus, it is critical to carefully conduct a cost-benefit analysis to determine if a trust is worth pursuing. As an experienced Jamaica Plain trust attorney, knowing who will benefit from a trust and explaining this is part of Bob Grodberg’s estate planning process.

Call Our Office to Schedule a Free Initial Consultation with Experienced Jamaica Plain Trust Lawyer Bob Grodberg.

Individuals often view estate planning solely as determining who will receive assets after death. However, estate planning encompasses much more – it’s about protecting assets (and a person’s loved ones) from unexpected events that arise during life and ensuring they are not burdened with making difficult end-of-life decisions.

To find out if a trust may be beneficial to your estate and objectives, we invite you to contact our office at 617-983-2626 to schedule a free initial consultation with experienced Massachusetts Estate Planning Attorney Bob Grodberg.

[1] Massachusetts Law About Estate Taxation, Mass.gov, Massachusetts law about estate taxation | Mass.gov.

[2] In Massachusetts, the law does not afford the same protections for self-settled trusts (those created by the testator). If an individual can use the income or principal, there is no creditor protection until after their death.