Trusts Frequently Asked Questions
The Benefits of Placing Property in Trust

A Revocable Living Trust is a legal entity that is created during the settlor’s lifetime (the person creating the trust) by transferring assets to a person known as a Trustee for the benefit of a Beneficiary. Some primary purposes of a Revocable Living Trust are to accomplish that which a Will alone cannot do: avoid the delays and expenses of Probate, minimize Massachusetts Estate Taxes and Federal Estate Taxes, shield property from creditors, and provide a way to manage assets in the event of the settlor’s incapacity.

Below, please find some frequently asked questions about Massachusetts Revocable Living Trusts:

How is a Revocable Living Trust Created?

Do I lose Control of Assets Placed in a Revocable Living Trust?

How can a Credit Shelter Trust Help me Save Estate Taxes?

How is a Revocable Living Trust Created?

A Revocable Living Trust is created and funded during the settlor’s lifetime (by comparison, a trust that is created and funded by Will is called a Testamentary Trust). The terms of a Revocable Living Trust, and its beneficiaries, can be changed at any time while the settlor is alive but at death becomes irrevocable and cannot be changed. One of the most important reasons for having a Revocable Living Trust, compared to just a Will, is that once the assets are placed in the trust, the settlor no longer owns them in his or her name alone. When this is done, the trust assets are completely removed from the Probate process. Virtually any type of asset may be placed in the Trust, such as real estate, money, stocks, mutual funds, life insurance process, etc. Any asset not placed in the trust during the settlor's life will be added to it after death through a "pour over Will".

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Do I lose Control of Assets Placed in a Revocable Living Trust

Although legal ownership of assets in a Revocable Living Trust is passed to the Trust itself, this does not necessarily mean that control has passed with it. You may be the trustee and the beneficiary during your lifetime and retain the power to remove your assets from the trust. Essentially, the assets can be used in the same manner as if they were owned individually.

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How can a Credit Shelter Trust Help me Save Estate Taxes?

Although assets placed in a Revocable Living Trust will avoid probate, such assets are still included in the gross taxable estate. Married couples, however, can enjoy both savings in Probate costs as well as estate taxes. This dual benefit is accomplished through what is commonly known as a Credit Shelter Trust (also called a "by-pass trust", “AB trust” or “Marital/Family Trust”).

The way the Credit Shelter Trust works is that the spouse who dies first places up to the then applicable estate tax exemption amount in a trust for the surviving spouse and children (or other beneficiaries). Although the assets placed in the trust are not directly left to the surviving spouse, the income earned and the principal may go for the support of the surviving spouse and children. After the surviving spouse dies, the trust assets pass to the children, or other named beneficiaries, free of estate taxes. Moreover, the surviving spouse can still pass an amount of assets, up to the then applicable exemption amount, free of estate tax to his or her beneficiaries. The net result is that the two estate tax exemptions are used so that double the amount may be passed to your beneficiaries estate tax free while still providing for the surviving spouse.

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