Movies and TV shows like to vilify characters with trust funds, portraying them as spoiled, entitled and averse to any kind of hard work. This repeated characterization has helped shape society’s view of trusts. Most people think that trusts are only useful to the very wealthy, or that creating a trust will make their heirs lazy. Neither of these are true. In fact, most people in Massachusetts could probably benefit from these powerful estate planning tools.
These myths cannot be dispelled unless people understand what trusts actually are. At its most basic, a trust is simply a legal entity meant to hold a person’s assets. The trust then protects assets from things like estate taxes, probate and more. The person who created the trust — the grantor — can still exercise control over those assets, including after his or her death.
Every trust will involve three different parties. The grantor, the trustee and the beneficiary. The trustee is the person or organization responsible for managing the trust, which includes things like making sound financial decisions and making distributions to beneficiaries. As the name implies, beneficiaries are the individuals who benefit from the trust.
The grantor can set whatever terms he or she likes — as long as they don’t violate the law — and may use either a revocable or irrevocable trust. A revocable trust — which may be more commonly known as a living trust — can be changed or revoked entirely during the grantor’s lifetime. An irrevocable trust cannot be altered at all, so creating one should be done with a significant amount of care and attention. Also, a revocable trust will become irrevocable upon the grantor’s death.
Trusts may still sound a bit complicated, but that is because estate planning is not a simple matter. Each person in Massachusetts must take the time to consider his or her assets and wishes, which must then be crafted into an appropriate estate plan. Trusts are just one component of a much larger process. Understanding how trusts help round out estate plans can be very helpful, so it might be a good idea to speak with an attorney who can provide further guidance.