FAQs - Trusts |
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The following Frequently Asked Questions
will address the most common questions about Trusts. Please feel free
to email or call us if you have other questions. |
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What is a trust?
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Why might I want a trust?
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I own real estate. Should I
put it in trust? |
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What is a living trust? |
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What do I have to do to leave
real estate in a trust? |
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Is there a reason not to hold
real estate in trust? |
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Who should I name as trustee? |
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Q. |
What is a trust?
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A trust is a document that outlines how trust
assets are to be managed and distributed by the trustee. Trusts are
often used for asset protection, estate tax planning, and asset management
for people who are too young or unable to responsibly manage assets
for themselves.
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Why might I want
a trust? |
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Trusts are useful for many things. First, if
your assets are large enough, trusts can be used to reduce estate
taxes. Second, if you are leaving assets to minors, trusts can be
used to manage the assets until the minors are of an age that you
believe they will be able to manage their own money. Third, if you
are giving or leaving assets to a person who has a disability and
who receives government benefits, a supplemental needs trust is the
best way to give assets to that person so that he or she does not
lose government assistance, even for a short period of time. Finally,
by leaving all assets to a trust that is created during your lifetime
(an inter vivos trust), the disposition of your assets remains private.
If you dispose of your assets via a will, the will becomes part of
the public record, and therefore, the disposition of your assetsl
becomes public, as well. If all assets are left to an inter vivos
trust, the trust document does not become public, and therefore, the
disposition of assets does not become public, either.
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Q. |
I own real estate.
Should I put it in trust? |
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A. |
Like almost everything else, it depends. What
are your goals for the real estate? If you want to give it to your
children to use, a trust is a great way to do so. That way, your children
retain the right to use the property, but they do not have the responsibility
of managing the property or the right to sell the property except
as you outline in the trust document.
If you are trying to keep the real estate from having to go through
the probate process on your death, a trust is a good way to do so.
By holding real estate in a trust, the real estate can be used or
sold according to the trust document without having to have consent
of the Probate Court. In addition, if you own real estate in a state
other than Massachusetts, having a trust own the real estate can
avoid ancillary estate administration, having to go through probate
in another state in order to transfer the title of the real estate
to the person or people you want to have it after your death.
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What is a living trust? |
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A living trust is a trust set up during your
lifetime and that you are able to amend or revoke during your lifetime,
often to avoid probate. A living trust becomes irrevocable upon your
death. If you transfer property (real estate, personal property, or
money) to the living trust during your lifetime, it will avoid the
probate process. If all of your property is given to the living trust
in your will, probate will not be avoided, but the distribution of
your property will remain private.
Since a will, when probated, becomes public information, it is possible
for others to learn how and to whom your estate was distributed.
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What do I have
to do to leave real estate in a trust? |
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You must sign and record a new deed to the real
estate that makes the trust the owner of the real estate. If you are
married and you do this, you lose the creditor protection that owning
real estate as husband and wife, tenants by the entirety. In addition,
you lose the creditor protection of a Declaration of Homestead (up
to $500,000.00 of equity in your home for a regular Declaration of
Homestead). In addition, if you would like to refinance your home
loan or would like to take out a reverse mortgage, more likely than
not, the trustee of the trust will have to deed the property back
to you before the mortgage (either a refinanced mortgage or a reverse
mortgage) can be put on the property.
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Is there a reason
not to hold real estate in trust? |
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Yes. Depending upon the type of trust, holding
real estate in trust does not always provide the creditor protection
against your home that a Declaration of Homestead does. A Declaration
of Homestead, in Massachusetts, provides you with up to $500,000.00
of protection for your house per person if you are sued and a judgment
issued against you. In other words, a creditor who obtains a judgment
against you cannot take your home in order to recover the debt. Conversely,
if your primary residence is owned in trust, a creditor may be able
to reach the house and place a lien upon it in order to recover the
debt.
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Who should I name as
trustee? |
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The first person I often name as trustee of a
trust is the trust donor (the person creating and/or putting funds
in trust). For creditor protection purposes, however, it is not advisable
to be the trust donor and trustee. So who else can be trustee? Anyone
over the age of 18 can be trustee. Often, people name adult relatives
as trustee or even hire independent professional trustees. All of
these issues should be discussed with an attorney when the trust is
created. |
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