By Jessica S. Batsevitsky
 
When I meet with clients, we often discuss whether one or more trusts might help achieve their estate planning goals. More than one client has remarked that he or she thought trusts were “only for the wealthy.” Media images of “trust fund babies” help to create this misconception.

So what are trusts, and are they really only for the wealthy?

A trust is a legal relationship. One person or entity (the “Settlor”) transfers property into the hands of another person or entity (the “Trustee”) to hold and manage the property for the benefit of a third person or entity (the “Beneficiary.”)

Trusts are useful tools whenever it is preferable to have funds held for another by a third party, rather than giving funds outright.

Examples include:

1. Placing inheritances into a trust for children, rather than giving them property outright, can protect funds from youthful inexperience or an expensive court-appointed conservatorship. A trustee can manage and spend funds on the children’s behalf until they reach an age when they are ready to manage significant amounts of money on their own. 

2. Transferring funds into a trust, rather than into a beneficiary’s individual name, may reduce the size of the beneficiary’s estate at death, resulting in less estate tax liability. 

​3. Funds held in a special needs trust can benefit a beneficiary with special needs without negatively affecting his or her entitlement to public benefits. 

Trusts are not only for the wealthy. Trusts can be helpful to individuals and families of many ages and income levels, in order to achieve various estate planning goals. A qualified estate planning attorney can help you to understand the benefits of trusts for you and your family.

​By Jessica S. Batsevitsky
 
If you are divorced, it is especially important to re-visit your estate plan. In all likelihood, your former spouse is the primary beneficiary of your will or trust, and holds many important positions upon your death or incapacity. This is probably no longer appropriate.

The first question to ask, however, is whether there are limitations on your ability to change your estate plan.

Several factors might bring limitations:

• You may have entered a prenuptial or postnuptial agreement containing terms related to your estate planning.

 

• While a divorce action is pending in Massachusetts, an automatic temporary restraining order is placed on the assets of both parties.

 

• Your divorce agreement or judgment may contain requirements related to your estate plan, such as a requirement to maintain a life insurance policy for the benefit of your former spouse and/or children.

 
If it is permissible to proceed, revising your estate plan can help ensure that your interests are protected in case of your incapacity, and your loved ones are cared for in your absence.

Questions to consider include:

• Who will make medical and financial decisions on your behalf if you become incapacitated?

 

• How should your property be divided and distributed when you pass away?

 

• Who will hold and manage funds for your children if they are minors when you pass away?

 

• Who should serve as your minor children’s guardian if you and your former spouse are both deceased?

 
A Massachusetts law revokes certain transfers to spouses, and appointments of spouses to fiduciary positions, after divorce. However, reliance on this law alone is not recommended. When the law applies, it could leave holes in your estate plan after a former spouse is removed. Worse, in some cases, is that the law might not be uniformly applied to all of your assets.
 
Pay special attention to the death beneficiary designations on your retirement plans. Many people neglect to update these designations following a divorce, so the former spouse remains the designated beneficiary. Some administrators of retirement plans take the position that, under federal law, they are required to pay proceeds to whomever is designated on the plan, even if there has been a divorce, and even if state law holds otherwise.

​An experienced estate planning attorney can help you through the process of creating an estate plan that fits your new circumstances. This can help you find peace of mind in knowing that people you trust are empowered to act on your behalf if needed, and your loved ones will be cared for in your absence.