Thinking about the best way to structure your estate may not be particularly enjoyable, but it’s essential if you want to leave a financial legacy to your family. For many, a great way to streamline things is through the creation of a living trust. The primary benefit of choosing a living trust instead of just writing a will is that your family will be able to avoid probate altogether. Whether you’re in the process of creating a trust or any other type of financial plan, you might also benefit from talking to a financial advisor who serves your area.
How to Create a Living Trust in Massachusetts
There are six steps to creating a living trust in the Bay State. They are:
- Decide between a single or joint trust: A single is obviously a good match for those that are unmarried. On the other hand, a joint trust allows a married couple to place shared property and assets in a single place.
- Review your property: This is where you decide what you want to include in your living trust, such as real estate, investment accounts, jewelry and more. Retirement accounts typically have their own beneficiaries, so you cannot place them in a living trust.
- Pick a trustee: The person you choose to be your trustee will retain control of your trust and its contents. You can name yourself trustee, or it could be a friend or family member. If you’re trustee, though, make sure to name a successor for after you pass away.
- Get your trust documents together: At this point, it’s time to write out your living trust with the help of an online program or an estate planning lawyer.
- Sign your living trust: This must be done in front of a notary public.
- Fund your trust with your assets and property: Transferring your property to your living trust is a complex venture, so consider an estate planning lawyer if you haven’t already.
There are some online resources that can help you through each step, provided your situation isn’t too complex. It’s also never a bad idea to consult an estate planning attorney for matters like this.
What Is a Living Trust?
A living trust is a document that allows you to legally grant ownership of your assets to beneficiaries or express a desire to do so after you die. A living trust can become effective while you’re still alive, and it remains in effect after you’ve passed. Every trust has a trustee, which is an individual chosen to manage the assets and their dispersal as described in the trust. You can name anyone to be your trustee, including yourself.
Living trusts come in two primary forms: irrevocable and revocable. With an irrevocable living trust, you can’t remove assets or make changes without permission from every single person named in the trust. This is because the trust owns these assets now, not the grantor. Similarly, taxes on these assets are the responsibility of the trust.
More flexibility is afforded with a revocable living trust. With this option, you’re able to make any desired changes to the trust and its assets. Consequently, you maintain ownership of the assets and pays taxes on them as per usual.
How Much Does It Cost to Create a Living Trust in Massachusetts?
The cost of creating a living trust in Massachusetts can vary wildly depending on the process you use. If you go the online, “DIY” route, you might wind up paying less than $100. However, some web resources can charge up to $400.
If an attorney helps you set things up, the attorney’s fees will obviously raise your total costs. There’s no one-size-fits-all cost, but they can frequently exceed $1,000. When looking for a lawyer, make sure you’re considering people who specialize in creating trusts and who are familiar with Massachusetts state law.
Why Get a Living Trust in Massachusetts?
The primary reason many people create living trusts is to avoid the headaches that come with the probate process. Probate is the legal process that handles verifying and following the edicts of someone’s will after they die. Often, this process can be complicated, drawn-out and potentially expensive. However, most of it can be avoided by creating a living trust.
This contrast isn’t quite as stark in Massachusetts as other states, as it has adopted the Uniform Probate Code, which significantly eases the probating of a will. Consequently, the benefits that a living trust provides may be reduced.
Who Should Get a Living Trust in Massachusetts?
Living trusts have a reputation among some as being instruments only for the extremely wealthy. But people without a high net worth can still reap the benefits of a living trust, the biggest one being that it allows you to avoid the probate process.
In Massachusetts, one exception would be for estates worth less than $25,000. These estates qualify for a simplified probate process, which means a living trust might not be worth the time and effort.
Creating a living trust, like any decision, isn’t without its downsides. For one, the process is more time-consuming and expensive than simply creating a will, especially if an attorney is helping you. Because the terms of a living trust can potentially extend for years after your death, that also means that the window for legal contests surrounding your assets extends as well.
Ultimately, it’s up to you to decide what makes the most sense for your family and financial situation. Of course, a financial advisor or an attorney can help you think through your options.
Living Trusts vs. Wills
Even if you get a living trust, you’ll still need a will. If some piece of property doesn’t end up in the living trust, the will can make it clear who that property should be passed to. Just as a trust has capabilities that a will does not, a will can do things that a trust cannot. These include:
- Naming an executor
- Providing instructions for paying taxes and debts
- Selecting managers for children’s property
- Establishing guardianship for children
The table below compares what living trusts and wills offer:
Living Trusts vs. Wills
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes in Massachusetts
Massachusetts levies a graduated estate tax on all estates worth more than $1 million. Unlike some states, Massachusetts levies this tax on the entire estate, rather than just the amount above the $1 million threshold. The tax rates range from 0.8% to 16.0%.
Massachusetts does not have an inheritance tax or a gift tax. However, if you’re inheriting money from someone who lives in a different state, the inheritance laws of that state may apply instead.
The federal estate tax may also come into play here. For 2022 and 2023, it’s levied on estates worth at least $12.06 million and $12.92 million, respectively. These values are doubled for the estates of married couples.
Despite the presence of the Uniform Probate Code, a living trust could still be a very useful tool for many people in Massachusetts, but especially for wealthy residents. If you think a living trust could work for you, make sure you’re either thinking about all the potential factors or consulting with an expert to help you along the way.
Tips for Planning Your Estate
- Estate planning can get complicated, which is why many people choose to work with a financial professional. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- When it comes to preparing for serious medical issues, having the right health insurance is extremely important. Make sure to choose a plan with a deductible that’s appropriate for your situation, and check that your doctors accept the plan.
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