Should I draft a Will or should I be placing my assets in a Trust?

When it comes time for you to devise your assets, you may be asking yourself, “Should I draft a Will or should I be placing my assets in a Trust?” A Trust in most instances does not replace a Will. An effective Estate Plan requires a Will. Whether there is a Trust component within the Will, or a Trust outside the Will, you almost always need a Will.

Advantages of Creating a Trust:

Tax Avoidance-Property can be left not outright to your children, but in a Trust for their benefit for life. Eventually, the property is distributed to your grandchildren. No federal or Massachusetts estate tax could be imposed on the property that is in the Trust at the time of your child’s death. However, the federal government does impose “a generation-skipping transfer tax” upon the death of your child; there is an exemption available to your grandchildren.

Control and Flexibility- A trust provides a resolution to different concerns and financial circumstances. If you feel that your children or grandchildren are not wise or old enough to handle your assets, you could appoint a qualified Trustee to handle the financial matters for the benefit of your children or grandchildren.

TYPES OF TRUSTS

  1. Testamentary Trust-This is a type of trust that is created in a Will. The disadvantages of this type of trust are that the Trustee’s handling of the assets is subject to supervision of the Court and in cases where a minor is involved, “a guardian ad litem” will be appointed. Also, the Trustee must file annual accounts with the Probate Court and, ultimately, the assets in the Trust and the activity of the Trust will become a matter of public record.
  2. Revocable Trust-In contrast to a Testamentary Trust, you could create a Revocable Trust during your lifetime while retaining the right to revoke it or amend it. Then you would be providing in your Will that your property is to be added to your Trust. You would have unlimited access to your property and could manage it in any way you want during your lifetime.

Like so many things in life, there are the advantages and disadvantages.

The disadvantages of a Revocable Trust regarding real property are transfer of Title to the Trust requires deed preparation, title examination, and recording. In cases where a mortgage needs to be obtained, a Trust may cause disqualification in certain circumstances. On the other hand, once a piece of real property has been placed in a Revocable Trust, there will be no need to include the property in your Probate Estate, which can make things much easier for your heirs. Relatively recent legislation in Massachusetts permits a Trustee of a Trust to file a Certificate stating only the basic abilities of the Trustee to act for the Trust.

Much more to follow!!!

BY: Caroline J. Hanania

Associate Attorney

Topkins & Bevans

Attorneys At Law

781-890-6230 Ext 225

DISCLAIMER: PLEASE NOTE THAT THIS IS NOT LEGAL ADVICE. PLEASE CONSULT AN ATTORNEY REGARDING ANY LEGAL MATTERS

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