Estate planning has four major goals (and lots of minor ones). The most important are to determine:
Choice: Will or Trust
Before around 1970, a Will was the more frequently used document in Massachusetts (and nationwide) estate planning.
Compared to having no estate planning at all, having a Will can be useful.
The major benefit of having at least a Will is that you can change the rules that apply under state law when you have no Will. Without a Will, the law dictates whom will receive your assets at your death, and whom will likely be in charge of your affairs.
But a Will may not help you make a more nuanced estate plan that the minimal state law provides.
This is because a Will generally lacks including the element of time - that is - it doesn't generally use the concept of a trust - an arrangement in which one person holds the property for the benefit of another person until the second person can handle it. Think minors. Think drug addicts. Think alcoholics.
A trust added to a will or a separate Living Trust can be more nuanced than a will without a trust provision
On the other hand, a 'MA Living Trust' allows for either immediate distribution on a person's death or, instead, a provision that one or more beneficiaries will receive the money over time.
With this added 'time element' that a trust can provide if you want that arrangement, the trust concept can be used for many different types of purposes. While there are business uses of a trust, the personal trust is more common. This is called a 'Living Trust' or a 'Revocable Trust.' Sometimes an irrevocable trust will be used instead, but usually created after MA Living Trust is created.
Personal use of the trust concept: You may want your assets to be held for another person until they are mature enough to handle those assets.
We like to say, we 'don't trust anyone under the age of 30.' In the meantime, the trustee can distribute assets to the under-age beneficiary as the trustee determines to be 'for the benefit of' the beneficiary.
Another trust feature is that the beneficiary is not considered the owner of the property.
So, when that person dies, the assets in the trust generally not part of their 'estate.' You, as the original owner, if you choose, can determine whom will receive the assets after the first beneficiary.
Many times you are the trustee for your own trust. And the trust names the person or persons whom will take over for you if you die, become incapacitated, or resign because you are too ill to act.
For some people, trusts can help lower estate taxes. They've been used for this purpose since the 14th century in England.
Some people set up a trust to avoid 'probate'. Probate is a court process that is needed to make a will effective. Until the will is approved by the probate court, it is only a collection of papers stapled together.
After a judge declares it a will, the person named in the will has the authority to collect the assets of the deceased person and distribute them according to the will's terms.
A benefit of all trusts is that you don't need to probate or 'probate' the will to make the trust effective. Even if you, alone, are the sole trustee.
Because the law considers you, as trustee, as different from you dying with the asset in your sole name. Only assets in your sole name need to be passed through probate of a will.
A trust describes what should happen to the property during the trust's existence. A trust has a beginning, an existence, then it ends (terminates).
You should realize that at the beginning of a trust, you can and often will be the trustee. In the trust, you are entitled to all the income and principal of your trust. And you can have the power to amend or revoke your trust. At the beginning of the trust, you are likely the sole current beneficiary.
After you die, a trust can have one or several beneficiaries. If you have children, chances are high that they will be the future beneficiaries of your trust. They become current beneficiaries when you cease to be the current beneficiary - usually at your death.
If you become incapacitated or die, another person will become the trustee. That person is called a successor trustee.
If you're married, chances are high you and your spouse will both be trustees of your trust. After the death of one spouse, the surviving spouse will be the sole trustee.
Let's imagine that you have assets and property that you're still enjoying now. You plan to pass these assets and property along to a beloved relative, Pat, after your death. But Pat, for whatever reason, isn't up to handling large amounts of money or property.
You can create a trust that names a responsible person (the trustee) as owner of the property. The trustee will use the property and assets for the benefit of Pat, the beneficiary. The trustee will give her money, and in addition, pay bills that Pat incurs if the trustee deems the bills to be reasonable. But not bills for drugs or other negative habits in the trustee's opinion.
A trust includes a direction to the trustee about to whom to give the assets when the trust ends. If a trustee dies during the trust's lifetime, the trust will dictate the next trustee (the successor trustee).
There may be more than one or successor trustee, and they can act either together (jointly) or singly (one at a time, in a listed order).