What is a Trust?
A Trust is a powerful and flexible Estate Planning tool that helps ensure that you are cared for now, while you are still living and that your stuff is distributed according to your wishes at death. Although a slightly more involved choice, the benefits of creating a Revocable Living Trust over only a Will, far outweigh the added costs and time, both of which DangerLaw is committed to keeping at a minimum.
Benefits of a Revocable Living Trust vs. a Will
Care During Incapacity
When you create a Trust, you are usually named as the primary “trustee” and continue to control your stuff…just like you do now. Additionally, you also choose successor “Trustees,” people you know and trust, and on whom you can rely to control and distribute your assets. If you become incapacitated, your appointed successor “Trustee” will be able to ensure that, your care and financial affairs continue as you would wish them to, without interruption. This is accomplished by managing and benefiting from your Trust’s assets. Then, when you pass away, these same trusted Trustees will distribute your remaining assets as you designate.
If you have a Will, but not a Trust, your assets will be subject to your State’s Probate process, which is legal and public legal. It is also time consuming and expensive. When you create a Trust, most of the information about your estate is kept confidential your loved ones usually gain immediate access to what you have allocated to them.
Probate is litigation that transitions ownership of your property from you to someone else. A Will must be probated. Therefore, a Will requires that all of your beneficiaries and assets be listed in the public court record for all to see. Sometimes this increases discord amongst friends and family members, A Trust’s contents, however, are kept private and need never be known by the public, which ensures that your personal wishes and assets be known only to those you choose.
A Will leaves property to your named beneficiaries upon your death. Unlike a Trust, a Will does not consider the age, or financial competence of your beneficiaries or whether a beneficiary’s needs-based government benefits may be jeopardized by an inheritance.
A Trust can prevent your money from being distributed directly to your children until they can manage and handle it responsibly. A Trust can be structured to protect your beneficiaries from misusing your inheritance. A Trust can also protect your beneficiaries’ inheritances from divorce, law suits, bankruptcy, irresponsible spending and health problems like drug and gambling addictions.
A Trust is the single most effective means of “death tax” management for married couples.
2011’s $5 million estate tax threshold means most of us need not worry about federal estate tax exposure until 2013 when all but the first $1 million of our estate’s values will be subject to a 55% federal tax. However, currently, Massachusetts has a $1 million threshold. Therefore, without planning, many of us risk eroding the amount we pass onto our loved ones by Massachusetts’ estate tax Planning may reduce or even eliminate this cost.
And $1 million is not hard to reach. Add the value of your home, your 401K plan, your IRA accounts and the death benefit of your life insurance policies, and you are likely there.
Only a Trust allows a married couple to take full advantage of each member’s $1 million personal exemption, sheltering the maximum amount of asset value from the State’s estate taxes and saving a substantial amount of money. This same structure can also be used to save on federal taxes in 2013 and beyond.