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What Is a Trust and Why Should I Use One?

11/13/2019

1 Comment

 
Picture

What are Trusts and Why to Use Them

​Trusts are common estate planning tools to hold your assets for the benefit of some or all of your heirs instead of passing on the funds or property to them directly. They provide oversight and management of your assets, and ensure your heirs are properly supported for years to come.

If you are the one creating the trust, then you are the Grantor or Donor. You are granting control over your assets, estate, or property and defining the terms of the trust’s management and distribution.  

You identify one or more Trustees, those who will be responsible for administering the trust. You can provide specific guidance to them about how you would like decisions to be made. In many cases you may serve as a Trustee during your lifetime.    

You also name one or more Beneficiaries. These heirs receive the property or assets over time as you have defined. For example, you might create a trust with terms to take care of your surviving spouse while preserving the core assets for your children when that spouse dies.
​

Trusts are different from wills because they go into effect as soon as they are created. They can benefit those you care about during your lifetime, including yourself.  However, both trusts and wills are key documents in a comprehensive estate plan.

Uses of a Trust

As the Grantor, you can manage your assets during your lifetime and define how your estate will be allocated upon your death. You may even benefit directly from the trust during your lifetime depending on the particular agreement. This can be important if you ultimately need long-term care.

Trusts do not go through probate court, which can be costly in terms of both money and time. Assets within a trust will be available to your heirs after your passing, instead of needing to wait to pass through the probate process. 

Other valuable uses are to provide for children until they are ready to manage the assets themselves, to support dependents with special needs without disrupting government benefits, and to protect your financial legacy from creditors.  

Trusts can also be used to avoid family conflicts because the terms within the trust remain private, unlike your Will. 

Selecting the Right Trust

An experienced lawyer can help you identify the type of trust that matches your long-term wishes.  Some common types are:
  • Living Trusts, which contain assets or property intended for your use during your lifetime. Upon your death, they pass on to your heir(s) without going through probate court as long as the trust is funded.
  • Family Trusts (also referred to as Bypass Trusts or Credit Shelter Trusts) take advantage of estate tax exemptions while allowing you to support your spouse during his or her lifetime and still guarantee that assets ultimately end up with your children.
  • Blind Trusts are handled solely by the trustees without your heirs’ knowledge and are often used to avoid conflicts between all the living parties involved.
  • Charitable Trusts have a charity or non-profit organization as the beneficiary. Typically, the assets in this trust would be built up during your lifetime and be distributed upon your passing in increments that allow for avoiding or reducing estate and/or gift taxes.
A trust can be revocable or irrevocable. Setting up a revocable trust means you can change or end the trust at any point during your lifetime. However, there are some instances when it is required that a trust be irrevocable in order to achieve your asset protection goals.  

The Bottom Line

Trusts are an important estate planning tool to protect your wealth and financial legacy.  They allow you to dictate both how your assets are managed during your lifetime and how they will be distributed upon your death.

When you are ready to manage and protect your estate by creating a trust, contact SLN Law. Our estate planning team will guide you through the process of designing the trust that achieves your goals.

1 Comment
Mia Evans link
4/29/2023 04:26:11 am

I like that you talked about being able to avoid probate court when we have trusts prepared which can be a cost-effective solution for owners. I want to learn more about this for the benefit of my kids as well if ever I become disabled or if I pass away earlier than expected. So I hope to meet with a reputable trust fund lawyer to educate me about this and help me create the documents and plans needed to secure the future of my family even when I am gone.

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  • Home
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        • Employee Handbook Basics
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      • Employee Complaints About Pay
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        • Are non competes enforceable
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        • Massachusetts Minimum Wage
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  • Estate Planning
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      • Why You Need an Estate Plan >
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      • Children with Special Needs
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    • Is Your Will Enough >
      • Special Circumstances >
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        • Estate Planning for a Non Citizen Spouse
        • Estate Planning and Divorce
        • Estate Planning for Small Business Owners
      • Surviving Spouse's Share
      • Disinheriting Children Massachusetts
      • Updating Your Estate Plan
    • Estate Planning Documents >
      • What is a Trust >
        • Revocable trust
        • Irrevocable trust
        • Irrevocable vs revocable trust
      • Last Will and Testament
      • Durable Power of Attorney
      • Massachusetts Health Care Proxy
      • Life Estates in Massachusetts
      • Massachusetts Pet Trust
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      • Non Probate Assets
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