Trusts Tailored To Meet Your Needs
The trust is not just for the very wealthy. If you have three children under the age of 18 and something happens to you and your spouse, do you know how your estate will be managed for their benefit? Do you know when your children will be entitled to a distribution from your estate? If you have simple wills, or no wills, the answer is that your children’s legal guardian will manage your money and real estate, doing his or her best to guess what you would do in their place. As each child reaches the age of 18, the guardian must give each child his or her share of your estate. Do you think this is a good plan? Most people do not.
A trust is one of the most effective tools to avoid probate, minimize estate taxes, preserve assets and protect beneficiaries’ inheritance money. However, there are different types of trusts and you need one that is right for your individual situation. Call 978-664-2552 or email Attorney Schreiber online to set up a consultation and discuss which option would best accomplish your goals.
What happens if you have no will or trust that directs who will be your children’s guardian and how your children’s inheritance will be managed after your death? With no will or trust, members from both sides of the family could become involved in a lengthy probate court proceeding to determine who will care for your children and who will manage their inheritance. What can you do to prevent this? First, be sure that you have a will that names your children’s legal guardian. Next, establish a revocable trust, also known as a living trust, which may be funded during your lifetime or after your death. If you establish and fund the trust during your lifetime, it may not be necessary to probate your will. You may transfer cash, bank accounts, investments of any type, real estate and any type of business interest to your trust. If you have a disabled child who will need special care and support throughout his or her lifetime, establishing a special needs trust, also known as a supplemental needs trust, is critical. This trust enables you to leave money to your disabled child, to be managed by a trustee chosen by you, in a way that will not disqualify your child from receiving important benefits such as Supplemental Security Income (SSI), Medicaid (MassHealth) benefits, counseling from a social worker, eligibility for a group home or subsidized housing, food stamps and other governmental programs.
Trustees And Beneficiaries
You, or you and your spouse, may be named as the original trustees and beneficiaries of the trust. With a revocable trust, you will have complete control over the management of the trust during your lifetime. You may add funds and property to the trust, you may withdraw funds and property, and you may sell trust property and purchase new property with the proceeds. After you, or you and your spouse, are deceased, the successor trustee or trustees, who are chosen by you, will manage the trust funds for the benefit of your children or other beneficiaries. The successor trustee may be a parent, a sibling, any other family member or a friend. If there is no appropriate family member or friend who can act as trustee, a professional trustee is a good option. You may choose more than one successor trustee. Many married couples choose a family member from each side of the family to serve as successor co-trustees for the benefit of their children. The person whom you name as guardian for your minor children may be a good choice as a successor trustee, or there may be another family member or friend with investment experience who would be a better trustee.
The successor trustees must follow your instructions about the use of the trust funds. Your instructions may be as detailed as you wish. In addition to paying for your children’s living expenses, medical expenses and educational expenses, the successor trustees may be directed to purchase a car for a child, to give a child the down payment to purchase a home, or to pay for a wedding. The trustees will manage the trust funds for the benefit of your children until they reach the age chosen by you to receive an outright distribution of their share of the trust funds. You may direct the successor trustees to make outright distributions in installments such as one-third at age 25, one-third at age 30 and the remainder at age 35. When all of your children have received the final distribution of their share of the trust funds, the trust will terminate. All of this will be accomplished without any involvement with the probate court. As a result, there will be no invasion of your family’s privacy, no time at which money will be unavailable for your children’s needs, no delays for bureaucratic procedures, and the cost of administering your estate will be greatly reduced.
Types Of Trusts
Trusts are a critical part of estate planning if you wish to avoid the need to probate your Will. If you, or you and your spouse, transfer all of your nonretirement bank and investment accounts, your home and other real estate owned by you to your revocable trust prior to your death, it will not be necessary to probate your wills. Establishing one or more trusts is necessary if your goal is to minimize or eliminate liability for estate taxes. The same is true if you have a disabled child who will need care and supervision throughout his or her adult life. The trust is also an excellent vehicle if you want to make gifts to your grandchildren or leave a substantial portion of your estate to charity after your death. There are many different types of trusts. See the article titled “What Type of Trust is Right for Me?” for detailed information about basic and specialized trusts and trust administration. After carefully reviewing your financial situation and personal goals, Roberta will advise you of the appropriate trust or trusts that will achieve your estate planning objectives. She can assist you with the following:
- Revocable trusts
- Irrevocable trusts
- Special Needs trusts
- Irrevocable Insurance trusts
- Marital trusts
- Generation Skipping trusts
- Charitable Remainder trusts
- Asset Protection trusts
The revocable trust, also known as a living trust, is the trust that is most commonly used. The person who establishes the trust, with a written trust agreement, is known as the “settlor” or “grantor” of the trust. The settlor may also be the original trustee and beneficiary of the trust. The settlor of the revocable trust may change the terms of the trust agreement as often as he or she wishes or he or she may terminate the trust. In that case, the trust assets will be distributed back to the settlor. If the trustee becomes incapacitated, the successor trustee chosen by you will manage the trust assets for your benefit. After the settlor’s death, the assets held in the trust will either be managed for the benefit of the beneficiaries named by you, or the assets will be distributed outright to those beneficiaries. A married couple may establish one joint revocable trust, naming themselves as the original trustees and beneficiaries, and their children and/or other family members or friends as the contingent beneficiaries. If the couple wishes to minimize liability for estate taxes, each of them will establish their own revocable trust. In both cases, the spouses will name those family members and friends who will serve as successor trustees, and they will name their children and/or other family members and friends as the contingent beneficiaries.
The assets held in your revocable trust are not considered to be part of your probate estate. If you hold all of your assets in a revocable trust at the time of your death, there will be no need to probate your will. The successor trustee will simply follow your instructions in the trust agreement without any interference from the probate court. The trust offers many different benefits, depending on the specific type of trust used. Some benefits of trusts include probate avoidance, providing for minor or disabled children, minimizing liability for estate taxes and asset protection, including the protection of assets from nursing home costs.
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