Estate Planning Primer – The Revocable Trust

Not as well known as a Will, Revocable Trusts have become, in many ways, the most important document of all when creating and structuring an estate plan. If the Will is the foundation of your estate plan, then the Trust represents the walls and passageways, securing the assets in your estate, protecting them from prying eyes, and ensuring that they flow to their intended recipient.

Trusts come in many different forms, but the most common are the Revocable or “Living Trust” and Irrevocable Trust, with the Revocable Trust being the focus of this post. First we will explore what a Revocable Trust actually is, and then we will explain the three main reasons why a Revocable Trust is a necessary piece of any comprehensive estate plan.

What is a Revocable Trust?

Similar in structure to a Will, a Trust is a document executed by an individual that dictates who will receive assets upon that individual’s death. Although they are similar in structure, the Revocable Trust is perhaps the single most important document in your estate plan, for reasons explained below.

The typical Revocable Trust provides that any income received by the Trust shall be distributed to the Grantor. The Grantor usually appoints himself or herself as the initial Trustee, and also appoints a backup Trustee to manage the Trust in the event of incapacity or death of the Grantor.

A Revocable Trust can be altered during the life of the Grantor. Such alteration can range from appointing a new Trustee or amending the Trust to terminating the Trust entirely. It is important to note that upon the death of the Grantor, the Trust becomes Irrevocable, meaning no further substantive changes can be made until the Trust terminates. (Most Trusts provide for administrative or Trustee changes upon the death of the Grantor, for instance if the Trustee becomes incapacitated or dies and can no longer carry out the duties of Trustee, a new Trustee can be appointed.).

A Revocable Trust paired with a Will is one of the more common devices used in estate planning. It works by drafting a Will that contains a “pourover’ provision which provides that on death, all assets of the estate not already in the Revocable Trust are transferred into the Trust, to be managed by a Trustee appointed by the Testator. This is an important device to include in any estate plan to ensure that no assets pass through probate on the death of the Grantor. It should be noted that assets that are titled, such as your home, cannot be transferred to a Trust through a pourover Will. For titled assets, the Grantor must execute a separate document transferring that document into the Revocable Trust.

A Revocable Trust is also very useful in the event of incapacity on the part of the Grantor. If the Grantor becomes incapacitated, then a successor Trustee can step in and continue managing the assets of the Grantor. This allows Trustees to have power during the life of the Grantor, as opposed to the power of a personal representative, which only vests upon the death of the testator.

Why You Need a Revocable Trust

1) Avoiding Probate: a Revocable Trust is essential to avoid the probate of your estate upon your death. When an individual dies, his or her estate must go through probate, which is a legal procedure where a court administers the estate, resolves any claims against the estate, and distributes the assets of the estate. This can come with substantial cost and can be a prolonged process. Having assets flow into a revocable Trust is done as a way of minimizing costs to the estate, as the expenses associated with Probate can mount quickly. Many people think that if they do not own significant assets, then they do not need to have a Revocable Trust as part of their estate plan. This can be a costly assumption, as a smaller estate may end up having most of its value wiped away through the probate process. This is why its especially important for those with smaller estates to have a Revocable Trust in place to avoid the costs of Probate.

2) Incapacity: Another benefit to a Revocable Trust is that in the event of an individual’s incapacity, a Trustee can step in and continue to manage the assets of the Trust. This negates the need for the court to appoint a guardian or conservator to manage the assets of the incapacitated individual.

3) Privacy: People today are more concerned than ever about their privacy, and a Trust provides a veil of protection against those seeking to know your wishes regarding your assets. As opposed to a Will, which is filed in court and available to anybody who wishes to view it, a Trust is not filed and thus its contents are kept secret from prying eyes.

Conclusion

The Revocable Trust is one of the most powerful instruments available in Estate Planning. It is particularly useful because it allows the avoidance of probate and thus minimizes costs to an estate. It also can be useful during the life of the individual if that individual is rendered incapacitated. Finally, it is the polar opposite of a will in that its contents never become public record and your wishes remain private.

It is the position of McCarthy & Golden, LLC that every individual creating an estate plan should also consider executing a Revocable Trust. If you have questions about estate planning in general or are contemplating making changes to your current plan or creating a new plan, please contact us at (508) 833-0800.

Estate Planning Primer – Why You Need A Simple Will

Of all the documents that constitute a typical estate plan, the Will is by far the most recognized. There are several different types of Wills, and today’s focus is on a basic or “simple” Will. You may have a general sense of how a Will works and why it’s important. The purpose of this post is to answer three questions:

1) What is a Will?

2) Why is a Will important?

3) Do I need a Will?

NOTE: Some of the terminology used in Wills can be cryptic to those not familiar with estate planning, so I will take a moment and define a few of the more nebulous terms. “Testator” or “Testatrix” refers to the person for whom the Will is drafted, with the suffix dependent on whether the person is male or female. “Estate” refers to all assets or property held by the Testator. “Personal Representative” refers to the person or entity chosen by the testator to handle the administration of the testator’s estate. “Descendants” refers to individuals who are biologically related directly to the testator or the beneficiaries of the Will, depending on the context.

Part I – What is a Will?

The Will, simply put, is the foundation upon which your estate plan is built. An estate plan without a Will is a fragile house of cards, so we advise all of our clients to execute a Last Will & Testament as an integral part of their overall estate plan.
The typical Will is broken up into sections or “Articles” that provide answers to the questions that arise at the death of the testator. They three most common articles cover the following areas:

a.) Personal Representative: The personal representative is an individual appointed by the testator to administer the estate of the testator. The most common choices for a personal representative are the spouse, parent, close friend, or trusted advisor (such as an attorney or accountant) of the testator.

b.) Distribution of Assets: This Article is the roadmap for the disposition of assets from the testator’s estate. This can be a relatively straightforward distribution to family members, or friends, or you can choose to leave percentages to various organizations or charities. There is an infinite array of choices for how to distribute the assets from your estate, and it depends on your wishes regarding those assets.

c.) Guardianship: If the testator has minor children, the guardianship article will appoint a guardian in the event that the testator dies before their children reach the age of majority.

In order to be valid, the Will must be signed by the testator and witnessed by two individuals. Though beneficiaries of the Will are permitted to be witnesses, it is the preferred practice of most law firms (McCarthy & Golden, LLC included) to have witnesses not be beneficiaries to avoid any appearance of bias.

Part II – Why is a Will important?

When a person dies, their estate must go through probate. Probate is the process by which the court of appropriate jurisdiction handles the estate of the deceased. The goal of probate is to transfer assets owned by the deceased to the persons or organizations that the deceased has designated to be the recipients of the deceased’s assets in their Will. Without a Will, a person dies intestate, and their estate assets are distributed under the laws of intestacy. These laws vary by state, but a simple explanation is that a court will determine how assets are to be distributed from the estate based upon the law, as well as determining who will act as “administrator” of the estate (the “administrator” is a court appointed person who performs the same duties as a personal representative) Under this same scenario of a person dying intestate the Court would also determine who would act as the guardian of the deceased minor children. Thus even if one has little or no assets but has minor children a Will is a critically important document because it appoints a person or persons to act as guardians for the deceased minor children.

A will is important because it makes the wishes of the testator known to the court, and makes the probate process quicker and more efficient. As a side note, it is better to avoid probate all together and usually this can be accomplished with the execution of a Trust and the proper titling of assets to that Trust. Trusts and their purposes will be discussed in a future \ posting.

Part III – Do I need a Will?

It is the position of McCarthy & Golden that all individuals over the age of 18 should consider having a will. If your assets are limited or you don’t have any children, you may not understand the necessity of having a Will. But as tends to happen, people grow older and advance in their careers, assets begin to accumulate, and those same people may also get married and have children, and before they know it, those people need a Will to ensure their wishes regarding the property in their estate and the needs of their family, friends and possibly their wishes with respect to charitable giving are carried out.

Conclusion:

To sum it up, your Will is the first and most important step in the creation of your estate plan, and its purpose is to memorialize in writing your wishes regarding the disposition of your estate upon your death.

The attorneys at McCarthy & Golden, LLC advise that if you are recently married, have had a change in marital status, become a new parent, purchased a home, received a financial windfall, or have moved from one state to another that you consider contacting us about the execution of an estate plan. It is critically important that you protect your assets and your family, and the Will is the first step in creating a full protection plan for your estate.

Welcome!

 Welcome to the blog at McCarthy & Golden. In the coming days and weeks expect further updates and entries discussing aspects of the various areas of law in which our team of attorneys practice. If you take a moment to explore our website, you will see that our firm has experience in many different areas of the law.

 To those who are not well versed in the law, the rules and regulations concerning these areas can be overwhelming and confusing. Our hope is that through this blog we can educate and inform you to make the law a little less confusing.

 A small reminder to those of you who have made your way here: Do not interpret any post on this blog as legal advice. Everyone has facts and circumstances that are different, which is why it is important to speak with an attorney either face to face or by telephone. If you are concerned about a potential legal issue, seek answers from an attorney, not a blog.

You can contact the attorneys at McCarthy & Golden by calling (508) 833-0800 or (617) 332-1633.

-Justin B. McCarthy

Sweeping Reforms to Massachusetts Law Governing Wills, Trusts and Estates

Dear Valued Estate Planning Client,

In the past few months sweeping reforms to Massachusetts law governing trusts and estates have gone into effect.These reforms affect the interpretation of estate planning documents, laws related to administration of Trusts and procedures required to administer an estate or probate a will. In addition, recent changes to the homestead law have also been enacted which broaden the benefits of placing a homestead on your primary residence.

In an effort to reach out to all of our clients we are offering a complementary review of your current estate plan in light of the recent law changes. We will be scheduling these appointments beginning in late August through the end of October in both our Newton and Plymouth offices.

If you haven’t sat down with us in the past year we recommend that you make an appointment to have your planning reviewed. In addition to these new and very major changes it is always a good idea to review your planning documents if you have experienced any life changes, asset fluctuations, and changes in your wishes regarding any aspect of your plan including your choice of trustees, executors, guardians or agents.

Although a personal face to face focused meeting is the best way to review your plan, we will also be scheduling telephone conferences with those clients who are unable to personally attend a plan review.

Please contact us to schedule a plan review at 617-332-1633 or 508-833-0800 FREE or estateplan@mrglegal.com.

Sincerely,
Kathleen M. McCarthy Andrew T. Golden