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Wills and Trusts

Wills and Trusts?

Decisions about one's Last Will and Testament can be daunting. While the process of drafting a Will is not necessarily that complex, the ability to face one's own mortality and make final decisions can be difficult. Adults of all ages should have a Will because tragic, unexpected events can occur at any age, however unlikely. It becomes increasingly important for same-sex couples who are in a relationship that may not be fully recognized by the law and/or one's natural heirs to make an Estate Plan. The same is true for all LGBT people if their intended beneficiaries are not only their bloodline relatives.

A Will is an important part of every estate plan. A Will provides specific instructions about how and to whom a person's estate shall be distributed upon their death. Without a valid Will, state laws known as "intestacy statutes" provide who will receive your assets. The government - and not you - would dictate how your property, your assets, and your other valuables would be divided among family members. More importantly, without a proper Will and accompanying estate plan, your loved ones may have to proceed with a costly and time-consuming probate process. A Will can help avoid this - especially when drafted in conjunction with simple trusts.


A Will provides certainty as to who is responsible for handling your estate - whatever size it may be. Even if you are not wealthy, a simple appointment of an executor in your Will can save your loved ones substantial money in court costs and allows you to choose who you want to be in charge after your death. The person (or persons) you appoint to serve as your Executor will be responsible for gathering your assets, paying debts, hiring any necessary professionals, such as to prepare tax returns, and making certain filings in court.  Finally, your Executor will have the duty to ensure that your remaining assets are distributed in accordance with your wishes.   

Another important function of a Will is that it allows you to designate a guardian who would take care of your minor children in the unlikely event of an untimely death. While a difficult thing to discuss, it is better to decide before a tragedy who would care for your children and how they would be provided for in the future.  You can also designate in your Will  someone to serve as Conservator of your minor children to ensure that any money you leave them is properly managed on their behalf.  If you also establish a revocable trust, you can ensure proper management of finances even beyond when your children turn 18.

Estate planning goals evolve and change over time, just as your hopes, dreams, and you yourself change over time.  Your Will - along with other estate planning documents - can be amended as your personal circumstances, goals, and planning purposes change. We recommend a regular review of your estate plan to ensure that it addresses changes to the tax laws, your own personal family situation and best practices.  Additionally, other life events can change or even possibly invalidate your Will.  These include: marriage, re-marriage and divorce.  If any one of these events occurs, you should make sure to review your Will with a qualified attorney.

 


Trusts?

Put simply, a trust is a set of instructions for people near to you. As a legal matter, it is a contract that serves to manage assets by one person (or entity) – the Trustee - for the benefit of others (the beneficiaries). A trust creator (the "settlor" or "grantor") creates the trust, usually contributes assets to the trust, appoints a trustee to manage the trust and its assets, and designates the beneficiaries of the trust. The Trustee has a legal responsibility to manage the assets of the Trust for the benefit of the beneficiaries.

Depending on how the trust document is set up, the beneficiaries can have some rights to the assets immediately. For example, the beneficiaries can be entitled to any interest or profit earned by the trust each year—and/or the beneficiaries can have rights down the road, like a trust that grants assets to the beneficiaries when the beneficiaries reach a certain age. Trusts can have many uses in estate and legacy planning because they can provide much more flexibility than a simple, outright grant of property. Below are some different types of trusts that can be used in estate planning:


Revocable Living Trust?

A Revocable Living Trust (also sometimes referred to as a Revocable Trust, Living Trust or even a 'Loving Trust') is established during the trustmaker's life to determine disposition of his/her assets if he or she becomes mentally disabled and upon the trustmaker's death. This type of trust, which can be changed by the trustmaker at any time for any reason, is central to most estate plans and is consequently often used in our practice. During the trustmaker's life, the trustmaker (you) can be both the trustee and beneficiary of the trust, and therefore, have complete control over and derive all benefits from (and, alas, pay all taxes on) the trust assets during his/her (your) life. The Living Trust identifies specific trustees and beneficiaries to be automatically designated upon the disability or death of the trustmaker.

If properly done, these trusts can leave one's assets in protected ways for loved ones and also provide a terrific vehicle for leaving instructions for loved ones. A fully funded Living Trust can also help avoid costly and time-consuming probate proceedings and mitigate the exposure to contests that sometime occur by disgruntled heirs post mortem. Care must be taken not only to fund these trusts (meaning change assets into the name of the trust) but to keep them funded during your lifetime. We therefore strongly encourage our clients to fund these trusts during their lifetimes, and we offer to assist them in this process.
 


Family and Marital Trusts?

These are types of sub-trusts that we often use in Revocable Living Trusts.  The purpose of these trusts is to maximize the amount of property that may be passed on to loved ones free of state and federal estate tax and to ensure that no estate taxes will be owed until the death of the surviving spouse.  To achieve these tax-saving goals, if the trustmaker dies with a taxable estate, the Living Trust is divided into sub-trusts. First, a Marital Trust is established for the sole benefit of the surviving spouse during his or her lifetime (which is often further divided for tax-saving purposes into two or more sub-trusts in order to take advantage of the different state and federal estate tax exemptions).  Second, is what is often referred to as the Family (or Credit Shelter) Trust, which can be for the benefit of the spouse, children, and/or any other beneficiaries that the trustmaker wishes.  There are countless variations of this type of trust that we could draft, depending upon a client’s circumstances and estate planning objectives. 

When we draft these trusts, we also ask people to consider whether they want us to include remarriage protection provisions.  For example, if Bill & Mary Smith intend to leave their entire estate to the other when the first of them passes – we ask whether, in the event the survivor were to re-marry and, if later, that remarriage were to end in divorce, they would care if the surviving spouse’s inheritance were subject to that divorce proceeding ?  If they do care, we often suggest that they add certain re-marriage protection provisions to the Family and Marital Trusts.

Family and Marital Trusts become more complicated for gay couples depending on whether you live in a state that recognizes the marriage and whether you die in a state that recognizes the marriage. Our trusts are designed to provide ultimate flexibility – sometimes with 'toggle' provisions so that the operations will 'toggle' depending on the state of the law and the jurisdiction whose law applies. Given the complex and changing rules around gay marriage and its different application in states and under Federal law, we strongly encourage clients to seek advice from a seasoned expert in this field.
 


Irrevocable Trust?

In contrast to the revocable trust, an irrevocable trust is a trust that cannot be modified once created. Therefore, an irrevocable trust is best used when one wishes to make a permanent gift. Because the trustmaker has relinquished control over whatever assets may be put into these trusts, care must be taken in drafting the instructions for the Trustee and for use by the beneficiaries of the assets. There are many different types of irrevocable trusts, which depending on client objectives, we can use in addition to the Living Trust, to provide clients with a way to further maximize estate tax savings and protect and transfer wealth.
 


Irrevocable Life Insurance Trust?

These trusts, commonly referred to as “ILITs” are often used when people own large life insurance policies.  Although the proceeds of life insurance are not subject to income tax , those proceeds may be subject to state and/or federal estate tax unless the insurance policy is owned and maintained according to a properly drafted life insurance trust.  One of the great benefits of these types of trusts is that the life insurance proceeds can be distributed to beneficiaries in protected ways that protect it from creditors and predators.


Special Needs Trusts?

A special needs trust, or supplemental needs trust, is a trust whose beneficiary is an individual who has a disability, and who may be eligible for governmental assistance in the form of Supplemental Security Income, subsidized housing, Medicaid, etc.  Because these programs are generally needs-based, eligibility to receive benefits is dependent on falling below certain wealth thresholds.  Assets held in a Special Needs Trust for the benefit of a person with a disability (if set up properly) will not be counted towards determining that person’s total assets, so they will not impact eligibility for governmental aid. Federal law dictates that we use different kinds of special needs trusts, depending on the age of the disabled person and how the trust is funded.

There are a variety of other types of trusts that we use, depending on a client’s goals and objectives, including tax savings and Medicaid eligibility.  


If we can help you with your Wills or Trusts, please do not hesitate to contact us at (617) 716-0300 or info@squillace-law.com.




The premiere law firm of Squillace and Associates serves the gay and lesbian community in the Boston Massachusetts area including Allston, Brighton, Back Bay, Bay Village, Beacon Hill, East Boston, Roxbury, South End, Dorchester, Roslindale, Jamaica Plain, Hyde Park, West Roxbury, Mattapan, and Charlestown and all of the Boston Metro areas including Cambridge, Somerville, Brookline, Chelsea, Medford, Everett, Watertown; South Shore areas like Quincy, Braintree, Milton, Hingham, and Cape Cod: Metrowest areas like Lexington, Concord, Wayland; and North Shore areas like Melrose, Stoneham, Reading, Andover.



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