It is not difficult to become confused about the terms and uses of various types of trust. At Surprenant & Beneski, P.C., where we serve estate planning clients throughout Southeastern Massachusetts and Cape Cod, we find that many people come to us with questions about trusts. They want to know precisely what trusts are, whether they will be useful in their particular estate plans, and what kind of property trusts can hold.
We will offer some clarification in this blog. For a more in-depth consultation pertaining to your own possible use of trusts, make an appointment for a consultation so our knowledgeable trust attorneys can answer all your questions and discuss your options.
What Is a Trust?
A trust is a legal arrangement that protects assets from a number of risks, including probate, excessive taxation, unwise spending, scam artists, creditors, divorce, and frivolous lawsuits. The parties involved in a trust arrangement are the grantor (also known as the settlor or trustor) who establishes the trust and funds it, the beneficiary who will inherit it, and the trustee who will manage the assets according to the trustor’s wishes. The trustee can be an individual or an institution (e.g. a bank) and often the grantor is also the trustee or one of the trustees.
Differing Purposes of Wills and Trusts
While an estate plan may be will-based or trust-based, the two tools do not handle all of the same tasks. For example, a will, unlike a trust, names the personal representative (executor) of the estate and the guardian for the grantor’s minor children. A trust, on the other hand, can protect the assets it holds (as mentioned above) — something the will cannot accomplish.
Types of Assets You Can Put in a Trust
A wide variety of assets can fund your trusts, including:
- Real property, e.g. your primary residence, your vacation or second home, real estate you own as an investment
- Checking or savings accounts held at banks, credit unions, or savings and loan associations.
- Investments, including stocks, bonds, and money market accounts
- Life insurance policies
- Business interests and assets
- Collectibles and antiques
Nonetheless, there are valuables that should not be stored in trusts, such as retirement accounts, everyday-use vehicles, and health savings accounts (HSAs) from which you can withdraw money tax-free as long as you use it for qualified medical expenses, such as copayments or deductibles.
The Benefits of Trusts for Protecting Your Property
A trust has benefits for creators and beneficiaries alike. You may consider using a trust to:
- Pass on assets without going through probate
- Create a plan for managing personal or business assets if you become incapacitated
- Set aside assets to care for a special needs dependent
- Establish rules or requirements beneficiaries must meet to receive their inheritance (e.g. reach a certain age, earn a college degree)
- Preserve assets for the care of minor children in the event that you pass away
- Reduce estate and gift taxes
- Protecting spendthrift beneficiaries from their own worst instincts
- Establishing an efficient path to charitable giving
As you can see, creating a trust can be a valuable instrument in estate planning, especially under certain circumstances.
Contact Our Experienced Trust Attorneys Today for Sound Legal Guidance
We have been successfully advising estate planning clients for decades and are well-prepared to help you create trusts that will best suit your needs. Whether you are creating an estate plan for the first time or updating or streamlining your existing plan, contacting Surprenant & Beneski will give you a leg up.