WILLS AND TRUST

Wills and Trusts are valuable estate planning tools. They serve different purposes, but often work hand-in-hand as part of a comprehensive estate plan.

THE IMPORTANCE OF WILLS AND TRUST

A Last Will and Testament (or a Will) is one of the documents usually discussed while creating or updating your estate plan. A Last Will and Testament acts as a guideline of your wishes for the Probate Court and the authorized Personal Representative (formerly known as the Executor/Executrix) for what you wish to happen to your assets and other belongings after you pass.

A Trust can also be a valuable tool in estate planning. When you create a Trust, you are essentially putting your valuables in a virtual lockbox for safe keeping and providing instructions about how you want these valuables handled. Trusts are generally used to distribute an individual’s or a couple’s assets to the right people in the right amounts at the right time and in the manner deemed appropriate for each of them.

A well-constructed Trust can also help minimize legal fees, estate taxes, and administrative fees. Certain types of Trusts can be designed to protect your estate from lawsuits and creditors. Other types of Trusts can give your beneficiaries access to your estate more quickly with fewer hassles — and avoid the long, tedious legal process known as probate.

The Difference Between a Will and a Trust

Wills and Trusts serve different purposes and often work hand-in-hand as part of comprehensive estate planning.

As described above, your Will acts as an “instruction sheet”, telling the work how to handle your assets after you die.  Remember, however, that whether you have a Will or not, your belongings will need to go through Probate – a public, expensive, and time-consuming process.

With a Trust, a Will becomes much less important.  The Trust, if completely funded, will become the “instruction sheet” for managing your assets.   Typically you want all your assets to pass under the terms of the Trust so that no probate of your estate will be necessary. The Will, although still a good idea to have, takes a back seat to the Trust.

There are a variety of different types of Trusts, each with varying and specific benefits. A few of the most important benefit:

Family Privacy – A Trust is private, so, unlike a Will, there is no public process of Probate, keeping your loved ones’ privacy in tact.

Benefits During Your Lifetime – Unlike a Will, which doesn’t take effect until after you pass, a Trust can become effective whenever you choose. Many people use Trusts to manage their money and plan for their care if they ever become incapacitated or incompetent.

Save Money – A Trust can be an economical choice for a variety of reasons, but specifically, a  Trust can be very helpful to reduce the estate tax exposure for married couples, particularly when the second spouse dies. Our wills and trusts attorneys are experienced in the use of Trusts to help reduce, or even, eliminate your estate tax exposure.

FAQs

REVOCABLE VS IRREVOCABLE TRUST

A Revocable Trust can be changed or revoked by the Grantor during his or her lifetime.

One of the advantages of a Revocable Trust is it gives the Grantor flexibility should needs, goals or situations change. However, a Revocable Trust offers less protection against creditors.

An Irrevocable Trust, as its name implies, cannot be changed, or revoked after it is created. Once an asset is transferred to an Irrevocable Trust, the Grantor is unable to change the terms of the Trust (in most situations) and can no longer benefit from the assets being held by the Trust.

An Irrevocable Trust is considered the “army tank” of Trusts for the degree of asset protection it affords. Assets in an Irrevocable Trust are usually not available to creditors. While it provides the most protection, an Irrevocable Trust, by design, is less flexible.

WHAT IS A REVOCABLE LIVING TRUST?

A Revocable Trust (sometimes also called a Living Trust) can be changed or revoked by the Grantor during his or her lifetime should needs, goals, or situations change. However, a Revocable Trust offers less protection against creditors.

A Revocable Trust is established during the Grantor’s lifetime. It’s most common for a Living Trust to be revocable, but that’s not always the case. Typically, a Living Trust evolves into an Irrevocable Trust upon the death of the Grantor(s). One of the advantages of a Living Trust is that it can be used to bypass probate. A Living Trust can also be used to manage assets during the Grantor’s lifetime, in the event of disability or incapacity.

WHO NEEDS A REVOCABLE LIVING TRUST?

There are many situations where a Revocable Living Trust would be appropriate, but it really starts with your goals and designing an estate plan to meet those goals.  A conversation with your estate planning attorney is the best way to understand which Trust would best suit your specific needs.

WHAT IS AN IRREVOCABLE TRUST?

An Irrevocable Trust, as its name implies, cannot be changed, or revoked after it is created. Once an asset is transferred to an Irrevocable Trust, the Grantor is unable to change the terms of the Trust (in most situations) and can no longer benefit from the assets being held by the Trust.

An Irrevocable Trust is considered the “army tank” of Trusts for the degree of asset protection it affords. Assets in an Irrevocable Trust are usually not available to creditors. While it provides the most protection, an Irrevocable Trust, by design, is less flexible.

IS IT BETTER TO HAVE A WILL OR A TRUST?

Wills and Trusts serve different purposes and often work hand-in-hand as part of comprehensive estate planning. The best way to know which documents suit your situation is to discuss your needs with an estate planning attorney

WHEN SHOULD YOU HAVE A TRUST INSTEAD OF WILL?

If you have a Trust, you should have a Will as well. A Will provides a safety net in case an asset has not been properly funded into your Trust.

WHAT ARE THE DISADVANTAGES OF A TRUST?

Depending on the type of trust you are considering, disadvantages of a trust can vary. For example, an Irrevocable Trust protects assets from creditors and nursing homes, but it is also has the downside that you the creator cannot benefit from the Trust.  A conversation with your estate planning attorney is the best way to understand which Trust would best suit your specific needs.

IS IT A GOOD IDEA TO PUT YOUR HOUSE IN A TRUST?

For many people, their most valuable asset is their home. Often the mortgage has been paid down or even paid off. One of the most common reasons that our clients establish Trusts is to ensure that the value of their home is protected.

WHAT ASSETS SHOULD NOT BE INCLUDED IN A LIVING TRUST?

Since the most common trust is a Revocable Living Trust, some assets that are not permitted in this type of trust are:

  • Qualified retirement accounts such as 401(k)s and IRAs
  • HSAs and medical savings accounts
  • Uniform Transfers or Uniform Gifts to Minors
  • Life insurance (except when owned by an Irrevocable Life Insurance Trust)
  • Motor vehicles4

If you have assets that you are considering placing in a Trust after it is created, it’s important to seek the advice of your estate planning attorney prior to doing so. Keep in mind that if assets are not in your Trust, they may be subject to probate.

HOW MUCH DOES IT COST TO HAVE A WILL AND TRUST CREATED?

For a couple, Living Trust planning can cost between $4,000 and $6,000. As with most services, the more complex, the higher the cost.

One way to gauge the value of a Trust is to look at the cost of not having one. When you total up the cost of Probate (approximately 5% of the estate), estate taxes (0.80% – 16% of the estate) and potential loss due to creditors, you see that the cost of setting up a Trust pales in comparison to the cost of not having one.

CAN YOU AVOID HAVING A WILL AND TRUST?

Whether you have a Will or not, your belongings will need to go through Probate – a public, expensive, and time-consuming process.

If you have a Trust, typically you want all of your assets to pass under the terms of the Trust so that no probate of your estate will be necessary. However, you should still have a Will because a Will provides a safety net in case an asset has not been properly funded into your Trust.

HOW A LIVING TRUST CAN HELP THE ELDERLY?

A living trust can be helpful because the Grantor (the person setting up the trust) maintains full control over the Trust assets during their lifetime. That means you have the right to change the Trust terms at any point (as long as you are competent to do so) and with the assets as you wish.

A Living Trust can also be used to manage assets during the Grantor’s lifetime, in the event of disability or incapacity.  Unfortunately, a living trust does not offer any protection from any future creditor or nursing claim.

WILLS AND TRUST ATTORNEY TEAM LEADER

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As a nurse attorney with over 25 years of legal experience, Cathleen Summers concentrates her legal practice on long-term care planning, estate planning, and guardianship. We serve clients in the Boston Massachusetts area, and our offices are located in Acton, MA, and Sudbury, MA.
We are easy to talk to, so feel free to call for an appointment. Our team will make the process as smooth as possible.

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