Most clients come to me looking for a “simple Will” and we talk about all the related estate planning legal instruments they also need to really accomplish their goals and protect their loved ones. What is perhaps less obvious is why even those with modest estates might also like a Revocable Living Trust (“trust”) as a centerpiece of their estate plan. I often ask clients whether they’d like a trust, but I assure you it’s not just an up-sell technique a la McDonald’s “you want fries with that?” I am not at all interested in up-selling my clients legal services they do not need. To help you better understand why in many cases a trust is not just extra carbs to avoid, opting for the leaner estate plan, the following are some of the benefits of establishing a trust.
- Provide for the Long Term Management of Your Minor Child’s Assets. Without a trust, if both parents of a minor child die, the court will have to appoint a Guardian to oversee the child’s inheritance, making annual reports to the court, until the child turns 18 years old and receives everything outright. With a trust, you can decide when your child receives how much of her inheritance (for example, 1/4 at 25, 1/2 at 30, 1/4 at 35) and even take additional measures to protect your child from immature decisions and creditors.
- Avoid Probate. When you have a trust, your named successor trustee is in control of all of your assets so there is no need to go through the whole court process called probate that is otherwise necessary to change legal title to all your assets and permit the financial custodians of your banks, the registrar of deeds, and so on to release your assets to your children without concern about potential lawsuits for doing so before completion of the probate process. In Massachusetts the probate process generally takes approximately 12-16 months and costs approximately 5% of the value of your gross estate in necessary appraisal and court costs and attorneys’ fees. In addition, during the entirety of the probate process, your assets are frozen and inaccessible. A will alone does not avoid probate; rather, it ensures that you will need to probate your estate.
- Avoid Various Potential Unintended Consequences of Creating Joint Ownership With or Transferring Ownership to Your Adult Children. If you have adult children, it is often far better to name them as your successor trustees of a revocable living trust than to transfer ownership of your property to them because of the potential unintended tax and other consequences. (I will explain more on this in another blog post to follow soon…)
- Help Your Loved Ones Obtain Faster Access to Your Bank and Other Financial Accounts. While a Durable Power of Attorney (“POA”) is a legally-enforceable and binding instrument, many banks and other financial institutions historically have had an inherent distrust of and been resistant to comply quickly (if at all) with them. It has not been uncommon, practically speaking, for such institutions to demand proof of a more recent grant of power or corroboration of incapacity or even require their own forms. Although the new Massachusetts Uniform Probate Code amended the Durable Power of Attorney statute as of July 1, 2009 to alleviate these concerns, it is still very new law and it remains to be seen whether these problems will persist. Financial institutions are often much more willing to work with a trustee of a trust than with an attorney-in-fact named under a POA. Having a trust can make the process much easier for your named trustee and intended beneficiaries. A POA is still necessary, however, to allow your agent to act with respect to those issues not encompassed by the trust, such as dealing with government agencies, contracting for services on your behalf, completing any work to fund the trust, or dealing with any other assets that may not be in the trust.
- Ensure That Your Loved Ones Have Immediate Access to Your Assets and That They Are Distributed as You Want. With a trust, there is no delay in making the disbursements to the people you want, how and when you want them made as there would be if your estate had to go through probate. A trust looks and functions much like a Will in that it includes instructions for how you want your estate to be distributed upon your death. The trust, while completely changeable during your lifetime, becomes irrevocable upon your death. You can therefore specify exactly whom you want to receive what, when and how you want them to receive it.
- Protect Your Family’s Privacy. Whereas a Will must be submitted to the court and becomes a public record for any and all interested parties to see, a trust is a private agreement not subject to public disclosure. With a trust, there is no need for everyone to know exactly how much of what you had where and to whom it is going. Unlike the Executor of an estate under your Will, your Successor Trustee of your trust will not be required to report to the court, making the process of wrapping up your estate not only more expedient and convenient, but also completely private.
If you are a Massachusetts resident who wants to learn more about how your family might benefit from having a trust at the heart of your estate plan, please call my office at (781) 740-0848 to schedule an appointment.