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Southern New England's Certified Elder Law Attorney
Rhode Island, Connecticut, and Massachusetts Certified Elder Law Attorney
A trust is a financial entity, legally separated from your estate, established to protect, grow, and distribute your accumulated assets. Your trust holds the assets — like your home, life insurance, and investment accounts — and distributes them according to your wishes when you die.
When you put money into a trust, you are called a grantor. Since the money in the trust is not legally yours, the trust must have a manager — called a trustee — whose job is to manage the trust and distribution process.
A trust is designed to legally separate you from the wealth you wish to leave behind. Depending on the type of trust you create, numerous potential advantages come with having a trust and a living will. These advantages include control over your wealth, protection of your legacy, elimination or streamlining of the probate process and estate tax savings.
A Will Isn't Enough?
Unfortunately, it is not. A will and a trust serve two distinctly different purposes. While everyone should have a will, not everyone needs a trust. However, many people can benefit from having both. A will takes effect after you die and has information on who should be the guardian of your children, details of your assets, funeral arrangement preferences, and designations for items that are your property only. A will, however, will always need to pass through the probate process, which means a court needs to validate it, and oversee the administration of it, and is a public document.
A trust, on the other hand, is in effect while you are alive. It is not a means of naming a guardian for your children or specifying your funeral preferences. A trust's purpose is to serve as the holder for all your assets with clear instructions for who receives what. In most cases, a trust will not need to go through probate, which, depending on the complexity, can save your family a lot of time and money. Assets within a trust are commonly things like a house, life insurance, retirement plans, and more. And, a trust is not open for public scrutiny.
The Revocable Trust
There are several reasons why a Revocable Living Trust benefits YOU and your Estate Planning. The cornerstone of any Estate Plan is a Revocable Living Trust as it does the following:
It avoids the need for the intrusive court probate process and its high fees and time delays in settling the Estate.
It provides an efficient way of distributing your assets upon your death.
If you become incapacitated, it can provide a way of avoiding a court-ordered Conservatorship.
Most of all, it legally documents your wishes in case of your incapacity or death.
It can help avoid a potential crisis or family problem when you can no longer make your own decisions.
While a living trust is an estate planning tool like a will, it gives you more flexibility to decide what happens to your money and other assets during your lifetime and afterward.
The Irrevocable Trust
An irrevocable trust is one that you (the grantor) cannot revoke in whole or in part. It can only be modified or terminated with the permission of the beneficiary. When a grantor transfers all assets into the trust, the grantor removes his or her rights to access or ownership. For this reason, an irrevocable trust is not considered part of your estate for legal and tax purposes. Estate and tax considerations are the main reasons for setting up an irrevocable trust. The benefit of this type of trust for estate assets is that it effectively removes the trust’s assets from the grantor’s taxable estate. It also can release these assets from personal liability. For the average person, this is a non-issue, which is why revocable living trusts are the more common choice.
A testamentary trust can be an excellent estate-planning tool if you're concerned with providing for one or more beneficiaries for an extended time, such as minor children, someone with special needs...or even someone who is just not very responsible with money so you don't want them to receive a windfall all at once.
Assets and money devoted to these individuals would initially go into your probate estate. Your named executor would then move it to the testamentary trust with rules set by you in your last will and testament.
Special Needs Trust
A special needs trust is a trust tailored to a person with special needs that is designed to manage assets for that person's benefit while not compromising access to important government benefits. There are three main types of special needs trusts: the first-party trust, third-party trust, and the pooled trust.
All three name the person with special needs as the beneficiary. A "first-party" special needs trust holds assets that belong to the person with special needs, such as an
inheritance or an accident settlement. A "third-party" special needs trust holds funds belonging to others who want to help the person with special needs. A pooled trust holds funds from many different beneficiaries with special needs.
Click here to learn more about Special Needs Trusts.
"The most important thing to consider when setting up a trust is its purpose, and you do not have to be sitting on a million dollars to provide for your loved ones or your estate with a trust. Remember, trusts are a sophisticated estate planning tool that can provide added benefits that a will cannot offer. Call us today to discuss how we can design a trust that meets your needs."
---- RJ Connelly III
Rhode Island, Massachusetts, and Connecticut Certified Elder Law Attorney
"Southern New England's Certified Elder Law Attorney"
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Rhode Island Elder Law Attorney
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Pawtucket, RI 02860
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This website includes general information about legal issues, issues affecting seniors and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal issues and/or problems.