Many people leave worrying about what could happen to their property and other assets on death until it is too late. If you die before making a will or establishing a trust, your entire estate will be the responsibility of the court to distribute according to Massachusetts’ intestacy rules. There are many reasons why planning what should happen to your estate if and when you pass away well in advance has a lot of advantages. The two primary ones are that the things you own will go to the people you want them to and the process will be cheaper, less frustrating and potentially contentious.
One process which becomes necessary after you die is probate. The probate court is responsible for ensuring that someone’s will is distributed to the beneficiaries named in it, debts and taxes are paid and anyone who wishes to contest the will for whatever reason has an opportunity to do so.
A trust can avoid the need for probate in MA
Probate court and the process of probate can be avoided if assets are ultimately distributed from a trust that has been set up instead of a will. A living revocable trust is an arrangement that must be set up and maintained well before potential death. While the settlor (the person whose assets are transferred to the trust is still alive, any of these assets can still be accessed and the details of the trust can be altered, hence the terms living and revocable are used to describe the trust. All assets retained in the trust on death are distributed to the named beneficiaries almost straight away after any remaining taxes or debts are paid without the burden of going through probate, a process that can easily take a year or more and may absorb significant amounts of fees and taxes, thereby reducing what can ultimately be distributed to beneficiaries.
How a living revocable trust works
When you decide to establish a trust to transfer assets to, you will normally need to use an estate lawyer to set it up. The trust agreement needs to be initially drafted by you (the settlor or grantor) with legal help and then signed by you once the agreement has been established.
At the outset, you, the settlor will also be the trustee, the person who administers the trust, although you can nominate someone else. Normally, successor trustees will be named. These will act as trust administrators if and when you die or if you become incapable of directly administering the trust. While you are alive, you can change details of the trust such as how much of your assets have been transferred to the trust and who successor trustees are.
The other major components of a living revocable trust are the beneficiaries. These are the people or other parties (such as charities or organizations) who will receive portions or all of your assets which are held in trust for them. The initial beneficiary is you, the settlor, until you pass away. After death, the trust becomes irrevocable and cannot be changed, hence the reason why probate is avoided. The beneficiaries named in the trust will receive the assets of the trust as decided by the trust agreement you made.
The trust should be the main holding account for as much of your assets as possible
Once a trust agreement has been established and signed, the main task is to transfer your property and other assets into it. Not all assets can be transferred straight away as there may be assets tied up in things like retirement funds. However, it is important to try and make an effort to transfer as much of your estate over to the trust as possible before death. Retirement funds can be directed to the trust account as beneficiary and any other property can also be passed over to the trust through a deed of transfer held by the respective council.
Only property that remains in your name, e.g. if you receive an amount of money or other property just before your death and there is no time to have that transferred to the trust account, needs to go through probate court. Probate is only necessary to decide on final distribution of assets owned by a named individual and not by a trust.
When a “pour-over” will in addition to a trust may have some benefits in Massachusetts
There are often circumstances in which some of your assets evade the trust account. It is usually because the assets are obtained well after the trust was established or just before an untimely or unexpected death and there wasn’t time to transfer it into the trust. These assets will then remain in your individual name and not in the name of the trust. Without a will, these assets will then have to be distributed under Massachusetts intestacy rules and also go through probate. The same issues that were the reason for establishing a trust in the first place may then arise, e.g. assets not being given to the preferred beneficiaries, lengthy process and extra expenses involved. The alternative is to make what is called a “pour-over” will. This is a will that accounts for all individual assets that are not in the trust in the event of your death. This type of will names the trust as a beneficiary for all assets that are not actually in the trust on death. These assets still have to go through probate but will ultimately be distributed through the trust according to the trust agreement you set up before.
There are other advantages of having a will in addition to a living revocable trust. A will can appoint a guardian for any surviving children who are minors and cancel debts owed to the deceased. These are acts that cannot be performed by a trust agreement alone.
If you, or anyone you love, requires guidance regarding trust or probate, don’t hesitate to check out or website or to contact us for a free consultation.