October 2022 Newsletter
October 2022 Issue
An Introduction to Trusts
One of the first questions many clients ask us is whether they need a trust. Our answer always depends on each client’s unique needs and goals, but since so many clients are interested in trusts, we thought this would be a good time to discuss them in some detail.
What is a trust?
A trust, in essence, is an agreement outlining how assets will be managed and held for the benefit of another person. There are many types of trusts, capable of accomplishing a wide range of goals, so let’s begin by discussing the elements and terminology shared by most trusts.
All trusts have a grantor, also known as a settler or trustor. The grantor is the person who creates the trust and has the legal authority to transfer property held in the trust. If you are the one interested in establishing a trust, you would be the grantor.
The trustee is the individual or institution that can act on behalf of a beneficiary. The trustee is responsible for managing the property according to the rules described in the trust document and must do so with the best interests of the beneficiaries in mind.
The beneficiary is the person who “benefits” from the trust. A beneficiary can be one person or multiple parties. For example, many of our clients will name their children as beneficiaries.
For a trust to accomplish its goals, it must be “funded” by you, the grantor. A funded trust is one in which “property” has been put inside the trust. Sometimes trusts are funded through a will provision called a “pour-over.” Property can be any type of asset, such as securities, real estate, money, jewelry, and more.
Revocable v. Irrevocable Trusts
A revocable trust is a trust that can be altered by the grantor during their lifetime. This option allows you to maintain complete control over your assets while you are alive and after you have passed away. You don’t have to transfer your assets to the trust all at once, you can do so over time and even add to the trust as you acquire new assets.
Other benefits of a revocable living trust include:
- Avoiding probate. The probate process is time consuming, needlessly expensive and exposes your assets and estate to public scrutiny
- It can be changed over time, to compensate for changes in your financial and family situation
- Basic wills can lead to disagreements among family members. A revocable living trust can help eliminate challenges to the will and ensure beneficiaries receive what you have intended for them
- It allows for ongoing financial management. As your wealth accumulates, so too will assets in the trust
When most people think about trusts, a revocable living trust is the one they have in mind.
On the other hand, an irrevocable trust is a trust that cannot be changed by the grantor (except under extraordinary circumstances) because the grantor forgoes total control of the property and must obey all trust rules and guidelines. A trust can also be revocable during the grantor’s lifetime and then become irrevocable upon death.
Conservatorship v. Guardianship: Which is Right for Your Loved One?
The aging process looks different for everyone, and as your loved one ages you may need to consider creating a conservatorship or guardianship in order to properly protect and care for them. But which is right for you and your family?
A conservatorship will allow you to formally assist a loved one who is unable to handle their affairs without assistance. A conservatorship can help someone with their day-to-day financial decisions, large purchases, or other financial obligations.
In Massachusetts, the Probate and Family Court will appoint someone, known as a conservator, to help your loved one make these decisions. Petitions for conservatorships are heavily scrutinized by the court and will need to be accompanied by a current medical certificate, signed by a professional, which indicates the need for a conservatorship. The court will also require the conservator to file reporting so that the judge can ensure the appointment is serving your loved one’s best interests.
Conservatorships can also be temporary or permanent. In Massachusetts, a temporary conservatorship appointment is usually 90 days. However, in extraordinary circumstances, a judge can set the conservatorship for a longer period of time.
Massachusetts law also provides for a protection known as a guardianship. Unlike conservatorships, which are created to help an individual with their financial obligations, guardianships are created to help someone make personal and health-related decisions.
Guardians are also appointed by the Probate and Family Court and also require certification that such a protection is necessary. Additional reporting is also required for guardians. Again, this important requirement is in place so that the judge can review the report and ensure your loved one’s best interests are being protected.
There are two types of guardianships in Massachusetts, a plenary (full) guardianship or a limited guardianship. Plenary guardianships allow the guardian to make all the decisions for a person who is unable to make decisions for themselves and their own care. Whereas a limited guardianship allows the guardian to only make certain decisions for the incapacitated person that have been approved by the court.
In some cases, your loved one may benefit from both a guardianship and a conservatorship. While courts tend to err on the side of making such appointments as limited as possible, every situation is unique and dependent upon your loved one’s individual needs. If you are ready to establish either a conservatorship or a guardianship, Susana Lannik, JD CELA* (*Certified as an elder law attorney by the National Elder Law Foundation, the only organization approved by the American Bar Association to offer certification in the specialization area of Elder Law) will be able to help guide you through the process.
A Personal Note From Susana
Resolve Family Issues Now!
This has been my red-letter month for people approaching my office with unsolved family issues that are impacting elderly family members’ well-being and legal planning for older age. There was the elderly mother who promised two daughters the same things, and the two daughters were squabbling. Nothing had been written down before Mom lost competency, so it was anyone’s guess what Mom really wanted. And the daughters’ arguments were really about who Mommy loved best—not about the things.
There was the step-brother and step-sister fighting over who would be responsible for Dad who was fast dementing and who had never stated how he wanted to spend his last years or who should care for him; or where he would live. He just knew it wouldn’t be a nursing home, which is where he would end up because the step-siblings hated each other and were not capable of seeking the necessary Medical and legal guidance to create a care plan for their Dad. Their argument was really about responsibility: who had it who didn’t and who was capable of being responsible. If Dad had just signed a Health Care Proxy and a Durable Power of Attorney he would have maybe enabled these step-siblings to get to know and like each other
There was the mother who instructed her attorney to draft a will and leave the family home to one of four kids; but who refused to equalize her estate in any way or express her feeling that three of the kids were fine and had their own homes. Her final words were “Well, the kids will argue anyway.” That’s like throwing the apple of discord among the gods (Greek Myth about the Golden Apple) Again the root of the siblings wanting “their fair share” was the feeling that they were being neglected in favor of the one who was unable to earn a proper living on their own.
Being the parent of an only child—because my own issues with my younger sister were never resolved; and because I didn’t want a sibling rivalry, I determined to not have another child to argue with the first one. My parents never attempted to sit down and talk through the issues we had with them or with each other. That was a big mistake on their part. Their lack of candor impacted my relationship with my sister forever and may have cost me a second child. It’s taken that long for me to admit that to anyone—let alone the audience that might read this little comment.
So, the best counsel I can give to my clients whose families have issues is to sit down together this coming holiday and try to discover what the issues really are, who feels slighted, insulted or left out, and have candid conversations with each other. If these conversations are too difficult then I urge families to seek professional counseling BEFORE they come to a lawyer’s conference room.
Have a beautiful fall season.