June 28, 2017

Wills and Trusts

There are several basic planning documents that you should understand, even if you decide not to use them all.

1. Wills Everyone should have a will. A will can accomplish several important goals

  • Name an Executor – this is the fiduciary appointed under a will to act as the Estate Representative, collect and manage property, pay debts, and make distributions as provided in the will.  The executor guides the estate through the probate process and follows the deceased person’s instructions as directed in the will.  The powers of the Executor should be specified in the will, so that the Executor has flexibility to do what is needed without constantly going back to court. If a person dies intestate (without a valid will), the Estate Representative appointed by the Court is called an Administrator.
  • Name a Guardian – this is the fiduciary who will take custody of any minor children upon a person’s death.  We prepare and execute a guardian appointment form with the will, so that a guardian can step in if the parents are alive but incapacitated or immediately upon a death, to avoid any delay.
  • Dispose of assets – some people give assets outright to a spouse, to children, or to other people or organizations.  Others choose to have a “pour-over will” that directs assets to a trust.  The will must be clear and comprehensive, so that an Executor will not need to seek instruction from the court, but flexible enough to anticipate deaths, disabilities and changes in financial circumstances.
  • Safety Net – You may believe that you need no will because your property is held in joint names, or in  accounts that have beneficiary designations. However, people sometimes omit items, or inherit property, or have property rights they don’t know about. A will ensures that all property will pass according to your wishes.

2.   Trusts The most commonly used trust in a basic estate plan is a Revocable Trust.  This trust is created during a person’s lifetime.  A properly drafted and funded trust can:

  • Manage assets during a person’s incapacity;
  • Eliminate the need for the probate process upon death
  • Minimize and delay payment of federal and state estate taxes, while still providing financial security for a surviving spouse;
  • Manage assets for minor or incapacitated beneficiaries;
  • Protect assets from creditors of beneficiaries;
  • Set aside funds for a beneficiary while preventing that beneficiary from being disqualified for certain public benefits;
  • Ensure that assets are ultimately disposed of in a particular way.

A Trust is created by one or two people (usually called the Grantor or Settlor) and names one or more people, the Trustees, to manage the assets owned by the trust. The Trustees invest, account for and distribute the trust property to the Beneficiaries according to specific directions contained in the trust.

A well-written Trust gives the Trustees clear directions about property management, but also gives them flexibility to adjust to changes in the economy and to circumstances of the beneficiaries.  As the Trust may exist for a long period of time, circumstances will surely change.

There are other types of trusts we can assist you with, such as realty trusts, nominee trusts, irrevocable trusts, irrevocable life insurance trusts (or “ILITs”), irrevocable MassHealth or Medicaid planning trusts, Qualified Personal Residence Trusts (or “QPRTs”), Crummey trusts, to name a few. Whether you need or may benefit from such trusts depends on your family and financial circumstances.