What Is a Trust?

Understanding the world of trusts can be a daunting task, but you are not alone. We understand the unique aspects of Massachusetts trust law and can help tailor a trust that aligns with your individualized needs and goals. Here at Casey Lundregan Burns, P.C., we aim to make complex legal concepts accessible to everyone by addressing aspects of Estate Planning that may cause confusion. 

The Essence of a Trust

A trust is a legal arrangement allowing a third party, a trustee, to hold and manage assets on behalf of one or more beneficiaries. The trust operates like a financial safety deposit box, where you entrust your valuable assets to someone who manages them for the benefit of others under rules that you set.

Types of Trusts in Massachusetts

In Massachusetts, as in other states, several types of trusts are available, each designed to meet individual as well as familial needs and goals. Understanding the nuances of each trust type is crucial for effective estate planning. Here, we provide a detailed explanation of the common types of trusts used in Massachusetts:

  1. Revocable Living Trusts: A Revocable Living trust is created during the trustor’s lifetime that can be altered, changed, or revoked entirely. The trustor retains control and can modify the trust as circumstances change. Assets in a revocable trust bypass the probate process, ensuring privacy and potentially faster distribution to beneficiaries. In the event of incapacitation, the trust provides a seamless transition of asset management.
  2. Irrevocable Trusts: An Irrevocable Trust cannot be easily changed or revoked once established. Assets placed in the trust are removed from the trustor’s taxable estate with the potential for estate tax benefits. These trusts offer protection from creditors and legal judgments against the trustor. Effectively, this particular trust is created based on instructions in a will that come into existence upon the trustor’s death. It is often used for managing inheritances for minor children or beneficiaries who need help to handle a lump sum inheritance effectively.
  3. Charitable Trusts: There are two main types – Charitable Remainder Trusts (CRTs) and Charitable Lead Trusts (CLTs), which are established to benefit a charitable organization or cause. CRTs provide income to beneficiaries for a period of time and the remaining assets going to charity, while CLTs receive payment and the remaining assets eventually pass to non-charitable beneficiaries.
  4. Special Needs Trusts: Special Needs Trusts distribute assets to a beneficiary with disabilities without disqualifying them from government benefits like Medicaid or Supplemental Security Income (SSI). These trusts must be carefully managed to ensure compliance with legal requirements while providing for the beneficiary’s needs.
  5. Spendthrift Trusts: Spendthrift Trusts are designed to protect beneficiaries from creditors and provide beneficiaries with a system for managing money. The trustee controls how and when the funds are distributed to the beneficiary, safeguarding against unintentional spending.
  6. Life Insurance Trusts: A Life Insurance Trust is a trust established with a life insurance policy as an asset, removing the death benefit from the estate for tax purposes. Including life insurance in a trust can be beneficial, especially for larger estates, as it offers the potential for reducing or eliminating estate taxes in regards to the insurance proceeds.
  7. Marital Trusts: Marital Trusts are often used in estate planning for married couples, most commonly instances of a second marriages or when there are significant estate taxes. These particular trusts include qualified terminable interest property (QTIP) and marital deduction trusts. While a QTP trust provides income to the surviving spouse, with the principal going to other beneficiaries (like children from a first marriage) upon the spouse’s death, a martial deduction aims to maximize estate tax exemptions.

The Role of a Trustee in Managing a Trust

A trustee is the cornerstone of a trust. They are responsible for managing the trust’s assets according to your guidelines. In Massachusetts, trustees must adhere to strict legal standards, ensuring that their trust is administered in the best interests of the beneficiaries.

Benefits of Creating a Trust in Salem, MA

Trusts offer multiple advantages. They can provide greater control over asset distribution, protect assets from creditors, and potentially reduce estate taxes. In Massachusetts, trusts can also help individuals avoid the commonly lengthy public probate process.

Common Misconceptions About Trusts

Many believe that trusts are only for the wealthy or are too complex to understand.  A trust can be an effective tool for many as they can be tailored to fit various estate sizes and complexities, making them a versatile option for many families.

Partner with Us, Casey Lundregan Burn, for Your Trust Needs

Work with the compassionate attorneys at Casey Lundregan Burns to prepare your trust. The decisions involved in creating a trust require careful consideration. With over 90 years of experience, our team guides you through these decisions, ensuring your wishes are followed. To learn more and take the next step in securing your legacy, contact us today to schedule your case evaluation online or at (978) 878-3519.