For some, estate planning may seem overwhelming, especially when considering the number of options available for protecting and distributing your assets. Among these options are trusts. While trusts offer a great deal of power in safeguarding your assets, there exist various types of trusts each designed to meet individualized needs, and as a result, trusts, as a means of estate planning, often require a broader understanding of the particularized nuances for each.
In this blog, we briefly summarize the two most common trusts in Massachusetts which include testamentary and living trusts to introduce you to the realm of trusts.
Testamentary Trusts
A testamentary trust, or a will trust, is created as part of a will by an individual known as the testator. This type of trust specifies how trust assets should be managed and distributed after the testator’s death.
Testamentary trusts offer significant control and flexibility in the sense that you can specify with detailed instructions how you intend your assets be managed and distributed over time. These trusts could be particularly useful for minor children or individuals with special needs. However, because the trust is part of the will, it must go through probate, which could be time-consuming and potentially costly. Additionally, it is important to note that since the trust derives from a will, which is a public recorded document, the testamentary trust also become part of the public record during probate, if there exist privacy concerns.
Living Trusts
A living trust, or an inter vivos trust, is created during the lifetime of the person establishing the trust, or the grantor. This type of trust manages both the grantor’s assets during their lifetime and distributes those assets after their death without going through probate.
Living trusts offer several advantages including avoiding probate, which allows for faster and more private distribution of assets. The grantor can also manage and benefit from the trust assets while they are alive and capable, and in case of incapacity, a successor trustee can manage the trust assets without court intervention, meaning the details of a living trust are not made public.
Choosing Between a Testamentary Trust and a Living Trust in Massachusetts
Deciding between a testamentary trust and a living trust depends on your specific needs, goals, and circumstances. Several factors to consider include:
- Control and Management During Lifetime: If you are primarily concerned with managing and distributing assets after your death and prefer to use a will as your main estate planning tool, a testamentary trust could be the right choice. However, if you want to retain control over your assets while providing for seamless management in case of incapacity, a living trust might be more suitable. You can serve as the trustee and manage the trust assets, appointing a successor trustee to take over if you become unable to do so.
- Probate Concerns: If you are concerned about the probate process or if you have a relatively simple estate, a testamentary trust might be sufficient. On the other hand, avoiding probate can save time and protect the privacy of your estate. If these are important considerations, a living trust offers significant advantages.
- Cost and Complexity: A testamentary trust is generally simpler and less costly to create, as it is part of your will. However, it may result in probate costs and delays later on. While a living trust can be more complex and expensive to set up initially, it often saves money and hassle in the long run by avoiding probate.
Practical Advice for Estate Planning in Massachusetts
When considering whether to establish a testamentary trust or a living trust, think about your long-term goals, the nature of your assets, and your family’s needs. Here are some practical tips:
- Consult with an Estate Planning Attorney: Working with an experienced estate planning attorney could help you understand the benefits and drawbacks of each type of trust in the context of Massachusetts law.
- Consider Your Assets: Evaluate your assets and determine how they should be managed and distributed. For example, if you have minor children, a testamentary trust may help you provide for their needs until they reach adulthood.
- Think About Privacy: If privacy is a priority, a living trust can keep your estate details out of the public record.
- Plan for Incapacity: A living trust can provide a plan for managing your assets if you become incapacitated, ensuring continuity and avoiding court intervention.
Casey Lundregan Burns, P.C.
Understanding the differences between testamentary trusts and living trusts is crucial for effective estate planning, as each type of trust offers unique benefits, and the best choice depends on your individual circumstances and goals.
At Casey Lundregan Burns, P.C., we are here to help you every step of the way in creating an estate plan that aligns with your wishes. To schedule your case evaluation contact us at (978) 878-3519 or book an consultation online.