Massachusetts Trust Lawyer

What is a trust?

A trust is a legal arrangement in which one person or institution, the trustee, holds and manages property for the benefit of others, the beneficiaries, according to written instructions. The person who creates the trust is called the grantor, settlor or donor.

Every trust has the same basic parts:

• A trust document that sets out the rules: who benefits, when they receive property, and what the trustee may and may not do
• A trustee who manages the property and follows those rules
• Beneficiaries who receive the benefit of the trust
• Trust property, which only becomes part of the trust once it is transferred, or funded, into the trustee’s name

The right trust depends on what you want to accomplish. Below is an overview of the trusts Massachusetts families use most often, with links to detailed pages.

Revocable living trusts

A revocable living trust is the most common trust in estate planning. You create it during your life, usually serve as your own trustee, and can change or cancel it at any time.

A revocable trust can:

• Avoid probate for property held in the trust
• Keep your estate plan private
• Let a successor trustee manage your property if you become incapacitated
• Control when and how children and grandchildren inherit
• Include planning to reduce Massachusetts estate tax for married couples

A revocable trust does not protect your assets from MassHealth long-term care costs or from your own creditors, because you keep control.

Irrevocable trusts and MassHealth planning

An irrevocable trust generally cannot be changed by you once it is signed and funded. In exchange for giving up control, the property can be protected.

The most common irrevocable trust for Massachusetts families is the income-only trust, used to protect a home and savings from nursing home costs. You can keep the right to live in your home and receive the trust’s income, while the principal is protected once the five-year MassHealth look-back has passed. A properly drafted trust can also preserve a step-up in basis for your children.

Supplemental needs trusts

A supplemental needs trust, sometimes called a special needs trust, holds property for a person with a disability without disqualifying them from SSI, MassHealth or other needs-based benefits. The trustee can pay for things that improve quality of life, such as education, therapies, travel, equipment and recreation, while public benefits continue to cover basic needs.

There are two main types:

• Third-party trusts are funded by parents, grandparents or others, often through a will or revocable trust. They are the most flexible and can pass any remaining property to other family members after the beneficiary’s death.
• First-party trusts hold the disabled person’s own money, such as a settlement or inheritance received directly. They have special rules, including repayment to MassHealth after the beneficiary’s death.

If you have a child, grandchild or other relative with a disability, leaving them an inheritance outright can do more harm than good. A supplemental needs trust protects both their benefits and their future.

Testamentary trusts in a will

A testamentary trust is created by your will and only comes into existence after your death. It is often used to hold property for minor children until they reach an age you choose. Because it is part of your will, the property passes through probate first, and the Probate and Family Court may have ongoing involvement.

For many families, a revocable trust offers the same protections for children without probate.

Irrevocable life insurance trusts

Life insurance on a policy you own counts toward your taxable estate. Massachusetts taxes estates of more than $2 million, and a large policy can push an estate over that line. An irrevocable life insurance trust owns the policy so the proceeds are kept out of your estate and are managed for your beneficiaries under your instructions.

Charitable trusts

A charitable remainder trust can pay you or your family an income for life or a term of years, with the remainder going to charity. A charitable lead trust works the other way, paying a charity first and your family later. These trusts can provide income tax deductions, reduce capital gains on appreciated property, and support causes you care about. They are most useful for clients with substantial appreciated assets and charitable goals.

Realty trusts and nominee trusts

Massachusetts has a long tradition of realty trusts and nominee trusts for holding real estate. They can keep the names of the beneficial owners off the public record and make transfers simpler. But a nominee trust is generally a privacy and convenience tool, not asset protection, and it does not by itself avoid MassHealth or estate tax. We explain when one makes sense and how it fits with the rest of your plan.

Trusts for asset protection

Massachusetts does not allow self-settled asset protection trusts, in which you are both the person who creates the trust and a beneficiary who can reach the principal, to shield property from your own creditors. Real protection usually comes from a combination of tools: insurance, the Massachusetts homestead, properly structured business entities, and irrevocable trusts in which you do not control the principal.

How to choose the right trust

There is no single best trust. We start by understanding your family and your goals, then recommend the simplest plan that accomplishes them. Common goals and the trusts that fit them:

• Avoid probate and plan for incapacity: revocable living trust
• Protect your home from nursing home costs: irrevocable income-only trust
• Provide for a family member with a disability: supplemental needs trust
• Hold property for young children: revocable trust or testamentary trust
• Reduce Massachusetts estate tax: revocable trust with tax planning, or an irrevocable life insurance or gifting trust
• Support a charity and reduce taxes: charitable remainder or lead trust
• Keep real estate ownership private: nominee or realty trust

Many families use more than one. For example, a couple may have a revocable trust for most of their property and an irrevocable trust for their home.

Choosing a trustee

The trustee is the person who makes the trust work. A trustee must be honest, organized and willing to follow the trust’s instructions, keep records, file tax returns when required, and treat beneficiaries fairly.

You can choose a family member, a trusted friend, a professional, or a combination. For revocable trusts, you are usually your own trustee during life, with successors named to take over. For MassHealth trusts, you generally should not be the trustee. We help you think through the choice and explain the role to the people you select.

Funding: the step that makes a trust work

A trust only controls the property transferred into it. Signing a trust and never funding it is one of the most common and costly estate planning mistakes. Funding can include:

• A new deed to your home, recorded at the registry of deeds for the county where the property is located
• Retitling bank and investment accounts, or naming the trust as a beneficiary
• Assigning business interests and personal property
• Coordinating life insurance and retirement account beneficiary designations

We prepare and record the deeds ourselves and give you written instructions for everything else. When we transfer a home, we also review your Massachusetts homestead declaration so your protection continues.

When a trustee takes over: trust administration

When the person who created a trust dies or becomes incapacitated, the successor trustee steps in. Trust administration usually involves:

• Locating trust assets and securing the home
• Obtaining a tax identification number for the trust when it becomes irrevocable
• Paying final bills, expenses and any taxes, including the Massachusetts estate tax when it applies
• Keeping beneficiaries informed and providing accounts
• Distributing property or continuing to hold it under the trust’s instructions

Trustees are personally responsible for following the trust and the law. We guide successor trustees through each step, so the process stays organized and families avoid disputes.

Common trust mistakes

• Signing a trust but never funding it
• Using a revocable trust when the goal is MassHealth protection
• Serving as trustee of your own MassHealth trust
• Leaving an inheritance outright to a beneficiary who receives disability benefits
• Naming beneficiaries on accounts that conflict with the trust
• Never reviewing the trust after a marriage, divorce, death or move

Trusts as part of a complete estate plan

A trust works alongside your other documents:

• A pour-over will to catch property left outside the trust and to name guardians for minor children
• A durable power of attorney for property outside the trust
• A health care proxy and living will for medical decisions
• A HIPAA authorization so your agents can get medical information

How we work with you

• Free consultation. We learn about your family, your property and your goals, in English, Portuguese or Spanish, and tell you the cost before you decide.
• Clear recommendation. We explain which trust, if any, fits your goals, and why.
• Drafting and review. We prepare your trust and related documents and go through them with you.
• Signing and funding. You sign in our office, and we prepare your deeds and funding instructions.
• Ongoing help. We are here for your trustee and your family when questions come up.

Frequently asked questions

Do I need a trust or just a will?

It depends on your property, your family and your goals. A will may be enough for a simple estate. A trust is often better if you own a home, want to avoid probate, have young or vulnerable beneficiaries, or want MassHealth or estate tax planning.

Does a trust avoid probate in Massachusetts?

Yes, for property that has been transferred into the trust before your death.

Which trust protects my home from the nursing home?

An irrevocable income-only trust, created and funded more than five years before you apply for MassHealth long-term care benefits. A revocable trust does not protect your home.

Can I be the trustee of my own trust?

For a revocable trust, yes. For an irrevocable MassHealth trust, generally no.

What is a nominee trust?

A Massachusetts arrangement often used to hold real estate privately. It offers privacy and convenience, but not asset protection on its own.

Can you explain trusts in Portuguese or Spanish?

Yes. Our team includes fluent Portuguese-speaking and Spanish-speaking staff who work with Attorney Botelho.