pros and cons
trusts can give tax
or non-tax benefits
Using a trust can help you and your family. Yet sometimes your situation may not call for the benefits a trust provision can give you. You should have an honest evaluation of your situation and then a recommendation of whether to use a will or trust as the center of your estate planning.
You can use trusts to gain tax benefits or for non-tax reasons, such as protecting a future beneficiary from their less than desirable habits.
Many married persons, with over $1 million in total wealth in MA, will use a MA revocable living trust to pave the way for the family to pay less in MA estate tax. Because MA has a $1 million limit on family wealth before MA estate tax becomes due.
With a married person's living trust, you can protect up to $2 million from MA estate taxes.
For non-tax purposes, by setting up a trust you can control how money will be used for another person, perhaps one who has a physical or mental problem. Trusts can protect a loved one from their own less than stellar behavior patterns, such as overspending, gambling, drug problems, alcohol problems, marital issues, etc.
For example: a person of any sized wealth may have a son or daughter with a serious drug problem. If assets are left outright to the drug addict, the money can be lost within months.
Alternatively, if the money is put into a trust at the parent's death, then the trustee can pay for the beneficiary's rent and food but not allow the bulk of the funds to be lost. Eventually, hopefully, the problem will pass, the beneficiary’s situation improves, and the trustee can give the balance to the recovered loved one.
A major difference between an irrevocable trust and a Massachusetts revocable living trust is that you can change the revocable living trust at a later date after signing.
Consider asset protection before signing a trust. Asset protection for someone other than the person creating the trust may be a reason to create a MA revocable living trust.
Unless it is an irrevocable trust, with the trust maker not holding any rights after signing the trust, a revocable living trust will generally NOT give asset protection. This is important to know. If you don't understand this, speak with a Massachusetts estate revocable and irrevocable trust attorney. Feel free to contact me.
A property owner can lower their estate and income taxes by setting up a trust.
Tax law has precise rules for determining when an account is in someone's estate. A trust set up for Sue's benefit is not in Sue's taxable estate. Lawyers use trusts to keep account(s) outside of Sue's control so that it's not part of Sue's estate, nor in the estate of the trustee, who controls the trust.