How Trusts Benefit An Estate Plan
A trust has significant tax, governmental assistance, probate and personal ramifications once invoked, as well as long-term effects.
Trusts have several benefits that often fit in with an individual’s estate planning goals. A trust may be a logical component of your plan if your goals involve:
- Proper descent and distribution of assets
- Probate avoidance
- Estate tax planning
- Flexibility for special needs, spendthrifts, minors, etc.
- Privacy
- Protecting your assets and wealth
There are two types of trusts to consider:
Revocable Trusts
Revocable trusts are common estate planning tools and provide more benefits than irrevocable trusts, but they cannot be used to protect your assets when seeking eligibility for nursing home benefits. As the rules for eligibility in Medicaid, or the MassHealth program, have changed significantly over the years, irrevocable trusts are usually necessary if nursing home care is required.
A revocable trust is in place as long as long as you are alive. You can revoke the trust or make changes at any time.
One of the biggest benefits of a revocable trust is avoiding probate.
A secondary benefit is protection of the trust assets should you start experiencing a mental disability. You can appoint a disability trustee, who manages the trust if you become incapacitated. Without this trustee, there is a long court process mandated by the state to appoint a conservator or guardian to oversee your assets.
A couple of downsides include potential seizure of your property by creditors and the fact that assets will still be subject to estate taxes.
Irrevocable Trusts
Unlike a revocable trust, an irrevocable trust cannot be changed, modified or terminated without the permission of the beneficiary. Having transferred your assets into the trust, you, in essence, surrender your rights of ownership to the assets and the trust.
So, why would you want to do that?
There are significant tax advantages. Assets placed in an irrevocable trust are not taxed when you die. They are also protected from creditor lawsuits. Furthermore, your family will not have to worry about coming up with the money to pay estate taxes.
Contact Us Today
There are advantages and disadvantages to each type of trust. Our attorney can talk with you about the one that will work best for your estate.
To meet directly with a lawyer, set up a free consultation at the Center for Elder Law & Estate Planning by calling 888-784-0864 or filling out our contact form.
We serve Weymouth and the Greater Boston area of Massachusetts.