CONNELLY LAW
Serving Rhode Island, Massachusetts and Connecticut
401-724-9400
Southern New England's Certified Elder Law Attorney
Rhode Island, Connecticut, and Massachusetts Certified Elder Law Attorney
Trusts
What is a Trust?
A trust is a sophisticated financial entity that is legally separate from your personal estate. It is specifically designed to protect, grow, and distribute your accumulated assets according to your intentions and desires. When you create a trust, it serves as a holder for various types of assets, such as your home, life insurance policies, bank accounts, investment portfolios, and other valuable properties. Upon your passing, the trust ensures that these assets are distributed according to the terms you have established, reducing the possibility of disputes among heirs.
The individual who establishes a trust is referred to as the grantor or trustor. When the grantor transfers assets into the trust, it is crucial to recognize that these assets are no longer considered part of the grantor's estate. This separation can yield significant legal and financial advantages. To effectively oversee and manage the trust, a trustee is appointed. The trustee may be either an individual, an institution, or an attorney, such as Connelly Law, and their primary responsibilities encompass administering the trust's assets, ensuring adherence to legal requirements, and executing the distribution process as specified by the grantor's directives.
Establishing a trust provides a fundamental legal framework to segregate one's wealth from the wealth intended for transfer, facilitating a structured approach to asset management. Various advantages may arise depending on the type of trust that is created—such as revocable living trusts, irrevocable trusts, or special needs trusts. Among these benefits are enhanced control over one’s wealth, the preservation of one’s legacy, and the potential for reducing estate tax liabilities. Furthermore, a trust can aid in eliminating or streamlining the often complex probate process, thereby enabling a more seamless transition of assets to the designated beneficiaries.
A will and a trust are fundamental elements of estate planning, each serving distinct purposes. While it is advisable that all individuals have a will, not all individuals require a trust; however, both instruments can offer considerable advantages.
A will is a legal document that becomes effective upon an individual’s death. It outlines guardianship arrangements for minor children, specifies asset distribution, communicates preferences for funeral arrangements, and provides instructions for the disposition of personal belongings. This document is subject to the probate process, which renders it a public record and may expose its contents to the scrutiny of interested parties.
Conversely, a trust is created during an individual's lifetime and manages assets according to the individual's directives without including provisions for guardianship or funeral preferences. By transferring asset ownership into the trust, it typically bypasses probate, thereby conserving both time and financial resources for beneficiaries. Trusts afford a level of privacy, maintaining confidentiality regarding the specifics of the estate.
Although a will and a trust fulfill different functions, together they establish a cohesive estate planning strategy that effectively respects the individual’s wishes and manages their legacy.
Some Common Types of Trusts
Revocable Trust
This trust can be created, modified, or revoked by the grantor during their lifetime. It allows the grantor to maintain control over assets and make changes, while helping avoid probate for quicker and more private asset transfer to beneficiaries. Assets remain part of the grantor's taxable estate and are not protected from creditors during their lifetime.
Irrevocable Trust
Generally, this type of trust cannot be changed or revoked by the grantor once established. Assets transferred into an irrevocable trust are typically removed from the grantor's taxable estate, offering potential estate tax reduction and stronger asset protection against creditors compared to a revocable trust. The grantor must relinquish control over the assets once they are placed in the trust.
Living Trusts
Established during the grantor's lifetime, these trusts become active upon creation and funding. They can be either revocable or irrevocable. A key benefit is avoiding probate, leading to quicker and more private asset distribution. The grantor can manage assets if they also serve as the trustee.
Testamentary Trusts
Created through a will, this trust takes effect only upon the grantor's death. Assets are transferred via the will and must undergo probate. Testamentary trusts are often used to provide for beneficiaries like minor children, allowing conditions for asset distribution over time. They are considered irrevocable once they begin upon the grantor's passing
Special Needs Trust
Designed to support individuals with disabilities without jeopardizing their eligibility for government benefits. Funds supplement, rather than replace, government assistance. These trusts can be funded with the beneficiary's assets or by a third party.
Charitable Trust
Irrevocable trusts benefiting a qualified charitable organization. They can offer tax advantages, including income and estate tax savings. Major types include charitable lead trusts (CLT) and charitable remainder trusts (CRT), which differ in how income is distributed between the charity and other beneficiaries.
Funeral Trust
A funeral trust is a financial arrangement set up with a funeral home to pre-fund future funeral and burial expenses. It helps individuals plan ahead, easing the financial burden on their loved ones. Funeral trusts can be revocable (changeable) or irrevocable (unchangeable).
A variety of specialized trusts serve distinct purposes in estate planning and asset management. For example, AB Trusts help married couples maximize estate tax exemptions to preserve wealth for future generations. Blind Trusts prevent conflicts of interest by placing asset control in the hands of an independent trustee. Bypass Trusts minimize estate taxes for couples, while Generation-Skipping Trusts allow direct asset transfers to younger generations, avoiding certain tax implications. Grantor Retained Annuity Trusts (GRATs) enable the grantor to retain an income stream while transferring appreciating assets. Life Insurance Trusts (ILITs) keep life insurance proceeds outside of the taxable estate, enhancing wealth preservation. Qualified Terminable Interest Property Trusts (QTIPs) care for a surviving spouse while controlling asset distribution. Spendthrift Trusts protect assets from creditors, and Totten Trusts (Payable-on-Death Accounts) simplify the transfer of bank accounts upon death. Together, these trusts form a comprehensive estate plan.
Trust Administration
When seeking a trusts and estates attorney in Southern New England, it’s essential to consider the wealth of experience and personalized service offered by Connelly Law. With decades of dedicated practice, our firm embraces a hands-on approach, ensuring that every client benefits from personal guidance tailored to navigate the intricate landscape of trust and estate law. Our profound understanding of the legal framework not only positions us as one of the best in this specialized field but also empowers us to safeguard your legacy and secure a bright, stable future for your family.
We believe that every situation is unique and deserves careful consideration. To discuss your specific circumstances and discover how we can assist you in achieving your estate planning goals, we warmly invite you to reach out for a consultation. Connect with us today at 401-724-9400 to schedule an appointment with our committed team at Connelly Law, where your peace of mind is our highest priority.
Contact Us!
"The most important factor to consider when setting up a trust is its purpose. You don’t need to have a million dollars to provide for your loved ones or manage your estate with a trust. Trusts are sophisticated estate planning tools that offer benefits that a will cannot provide. Call us today to discuss how we can create a trust that meets your needs."
---- RJ Connelly III
Rhode Island, Massachusetts, and Connecticut Certified Elder Law Attorney
Follow us on:
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.