If you’re interested in establishing a trust for your family, you should  ask yourself some important questions: what do you hope to accomplish, and will a trust be the right vehicle to help you accomplish those goals? Whom should you select as the trustee, and what duties and responsibilities will you prescribe to that trustee? 

Trusts: Are They Right for Your Family?

By Ursula Furi-Perry, Esq.

According to the National Consumer Law Center, “a trust is a legal arrangement where one person (known as the trustee) controls property given by another person (known as the grantor or trustor) for the benefit of someone else (known as a beneficiary).” For some families, a trust may be the right legal vehicle to protect not only assets, but also the interests of the beneficiary.

“A trust is a way to have legal title over the assets held by the trustee for the benefit of the beneficiaries, who hold equitable title,” explains Joseph Devlin, assistant dean and professor at the Massachusetts School of Law at Andover, who teaches courses on wills and trusts. “All sorts of trusts are acceptable in Massachusetts: revocable trusts, irrevocable trusts, Medicaid planning trusts, life insurance trusts,” Devlin adds. “The list is endless, depending on the needs of the client.”

For families, establishing a trust may be the right answer if they have minor or incapacitated children for whose benefit they’d like to hold property, says Devlin. For example, you can create a trust to finance your child’s education; a trust to protect the interests of your spouse – or your entire family – in the event of your death; a trust to support an elderly parent; or a trust to make a charitable donation. “The main planning concern is providing financial security for minor and/or incapacitated children after the death of one or both parents,” Devlin says.

There are two common misconceptions about trusts, Devlin explains. “First, parents need not give up control, if they do not wish,” he says. By making the trust revocable, parents can retain some control over the trust. “Second, trusts are not always the best way to save estate taxes,” Devlin details. For example, “[f]or those with large estates, trusts can provide significant estate tax savings. For smaller estates, the tax savings are at best minimal,” he says.

If you’re interested in establishing a trust for your family, consulting an attorney and a financial advisor are the best options, says Devlin. You should also ask yourself some important questions before deciding on this arrangement: For instance, what do you hope to accomplish, and will a trust be the right vehicle to help you accomplish those goals? Whom should you select as the trustee, and what duties and responsibilities will you prescribe to that trustee? How much will it cost to establish and administer the trust, and what tax and financial advantages will the trust offer?

“Trusts have so many uses, it's impossible to quantify any drawbacks or problems without discussing exactly what a trust might be used for, and any problems which might arise,” Devlin explains. “A qualified attorney who knows what the concerns of the parents are can draw up a trust to alleviate or mitigate any concerns parents have.”

Related Resources:

Massachusetts Trial Court Law Libraries, “Massachusetts Law about Trusts,” http://www.lawlib.state.ma.us/subject/about/trusts.html

Massachusetts Bar Association, “Will a Trust Help You?” http://www.masslawhelp.com/lawhelp/legal_info/?sw=3125&full_id=189

National Consumer Law Center, “Avoiding Living Trust Scams: A Quick Guide for Advocates,” http://www.nclc.org/initiatives/seniors_initiative/avoid_scam.shtml