Modern estate planning techniques offer individuals many options to pass on their assets to their family members after their death. While creating a traditional will can be a beneficial option, moving property and assets through a trust carries significant advantages.
When you place property into a living trust, you keep control but not ownership of the property. The legal owner of the property becomes the trustee, who is bound to follow the terms of the trust. In a Living Trust, you act as the first trustee.
Moving assets through a trust can make administering your estate much simpler after you die. It may be able to protect your estate from paying taxes after your death, and transferring property through a trust can simplify and shorten the probate process. A Boston trusts lawyer could help you better understand the role that a trust plays in securing your beneficiaries’ financial future. Call today to discuss your options with a knowledgeable trusts and estates lawyer.
A trust takes legal control over a person’s property and disperses it to their beneficiaries at a designated time. When you create a trust, you surrender all control over the particular property. This property may then be transferred to your beneficiaries immediately, at a future specific date, or upon your death.
Creating these trusts can be fairly straightforward. According to Massachusetts General Laws Ch. 203E § 402, a trust must:
The law is mostly silent regarding the potential reasons and legality of the creation of a trust. However, it is important to note that a trust cannot fulfill an otherwise illegal purpose. A member of our estate planning team could further explain the legal processes behind forming a trust in Boston.
Trusts can make the estate planning process more flexible and convenient, especially in contrast to the more complicated will. While a will only carries legal effect once a testator dies, a trust can disperse property or cash at any time. As long as the trust documentation specifically notes this time, the trustee must move the assets when that date arrives.
Another potential benefit of a trust is reducing taxation. Property that sits in trust is no longer the property of the trust makers, meaning the trust may pay taxes on the value of that property, but the trust maker will not. Similarly, moving property through a trust can help to avoid prominent taxes such as the gift tax or estate tax.
Finally, moving property through a trust can help parties avoid a lengthy or contentious probate process. Probate occurs whenever a person dies, during which the court must interpret the contents of their will and deal with the rights of the heirs of their estate. Fortunately, a trust that distributes property after a trust maker’s death never goes through probate. As a result, a trust can serve as a substitute to many of the provisions that traditionally flowed through a will.
“Passing bank accounts through a living trust, instead of a “pay on death” account, has important advantages. When my father died, he left a POD account with money from his beloved stamp collection. The bank learned from his death from Social Security and froze the account. Even though everything was supposed to be paid to my mother upon his death, the bank locked up over thousands and thousands of dollars in their own internal processing for months after he died. If the bank account had been “owned” by a trust, my mother would have had uninterrupted access to this money when she needed it the most.”
People create trusts for many reasons, such as to provide funds to a charity, avoid probate after their death, to transfer assets free from taxation, or to provide assets to minor children.
Forming a trust is fairly simple. As long as a person has the capacity and intent to create a trust and the document meets some standard formation rules, a court will rarely interfere. At the same time, these trusts are highly flexible and can serve a range of functions.
The hard part of the trust is not the formation, but the funding. An empty trust is as useful as an empty gas tank. While you are alive, you need to take legal actions to fill your trust with your valuable property. Failing to do so is a leading reason of why trusts fail.
If you have questions regarding this kind of agreement, reach out to a Boston trusts lawyer today. One of our seasoned attorneys could provide more information about the legal concept of a trust, work to identify your specific goals, and craft documents that meet those aspirations.