Do You Actually Need A Trust?

Posted by | · · · · · · · · · · · · · | Estate Planning

A trust can be a useful tool for various scenarios, but is not always necessary and is often oversold to increase attorney’s fees. So the question is: do you actually need a trust?

Here are the three most common scenarios where a trust may make sense for you:

    1. To Avoid Probate on Out-of-State Property.

      If you own real property in more than one state then you may have to go through probate in multiple jurisdictions. For example, many people have a residence in Massachusetts and a vacation home in New Hampshire, Vermont, Maine, or Florida. Normally this would trigger something called “ancillary probate,” which creates further hassle and expenses for your estate. To avoid this outcome, you would typically place the out of state property in your Trust. If done properly, this would avoid the ancillary probate dilemma.

    2. To Avoid Estate Taxes.

      Under the new tax reform, very very few people will owe a federal estate tax. However, Massachusetts has their own estate tax that applies to anyone with a taxable estate over $1 million. While this may not seem like a big deal because of the unlimited marital deduction, it becomes an issue when the surviving spouse dies. It’s also important to note that this estate tax threshold does not currently adjust for inflation and all of your assets are taxable once the threshold is met (which is why it’s commonly referred to as a cliff estate tax). However, married couple’s can effectively protect at least $1 million of their assets by using something called a bypass or credit shelter trust. A well drafted living trust will often have this sub trust provision in it by way of disclaimer funding – effectively allowing the surviving spouse to choose whether or not to elect to fund this type of trust (which allows maximum flexibility).

    3. For Multi-Generational Asset Protection.

      If you have kids or grand kids you would like to leave a substantial amount to, but are concerned that your hard earned money is susceptible to their immature spending habits or potential future creditors (via divorce, bankruptcy, or lawsuits), then you may be inclined to place this money in a Trust rather than having it go outright to the beneficiary. There are some limitations in terms of flexibility, but generally a well drafted trust will allow your beneficiary to receive the assets on an as needed basis without leaving the money vulnerable to creditors.

 

If you have any questions about Trusts or about estate planning in general, then please feel free to contact Joseph Lento at Perennial Trust by calling (781) 202 – 6368 or emailing jlento@perennialtrust.com. You can also download our Free Estate Planning Guide. Thanks for reading!


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