I Am A Senior Citizen. Do I Need A Trust?
A trust is a legal entity that can either hold your assets for you during your lifetime or hold your assets for your beneficiaries after you pass away. The following article will discuss some common types of trusts and will provide a list of potential benefits from establishing a trust.
Types of trusts
Before you decide whether to create a trust, you should know the different types of trusts there are to determine which one is the best for you and your financial goals. These types of trusts include the following:
- Living Trusts: A living trust is a trust which allows an individual to access and benefit from the trust during his lifetime. This type of trust lasts for as long as the creator of the trust specifies and can entail the distribution of his assets both during his lifetime and after he passes. A living trust can either be revocable or irrevocable. If you are interested in estate tax planning, your plan may include both depending upon your specific goals. An irrevocable trust is generally used for long term care purposes.
- Testamentary Trusts: A testamentary trust is a trust that is established from the terms of an individual’s will. The testamentary provision in the will would typically name a person to be trustee of the trust, which is a person who will administer the assets of the trust according to the terms of the will. A testamentary trust only comes into existence when the testator dies.
- Charitable Remainder Trusts: A charitable remainder trust is a tax-exempt irrevocable trust that distributes assets to named beneficiaries for a specified period and then donates the remainder of the trust assets to a specific charity named by the trust creator.
- Special Needs Trusts: A special needs trust is a trust that allows physically or mentally ill and chronically disabled individuals to receive income without impacting any public assistance disability benefits (i.e. Social Security, SSI, Medicare, or Medicaid) they may already receive. This is crucial because some public assistance programs have income restrictions; trust assets are not used in determining income.
Benefits of establishing a trust
There are many potential benefits that may come with the creation of a trust. Some of these benefits include the following:
- You can transfer your property without the expense and delay of probate (which is the legal process of administering your estate after you pass away)
- You have the authority to determine who is entitled to your assets and how much they should get
- If you have a child with special needs, you can ensure that he is financially provided for
- A trust can protect any children you may have from a past marriage
- Trusts keep assets and their disposition private
- Trusts can offer regular income to you and/or named dependents
- Trusts can result in tax savings for you, such as estate taxes and capital gains taxes. In Massachusetts, the estate tax exemption level of $1 million is much lower than the 2021 federal tax exemption level of $11.7 million. With the state’s high real estate values, many estates are subject to the Massachusetts estate tax that could be minimized with prior estate planning.
Do You Have Questions about Establishing a Trust? Contact our Firm
When deciding to create a trust, it is important to consult an elder law attorney to ensure that all of your assets are properly disposed of and that all of your wishes are addressed. If you are considering creating a trust, the experienced Greater Norwood elder law attorneys of Fisher Law LLC can thoroughly explain your options and help you throughout the process.