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Legal Notes

Revocable Living Trusts

Pam OddyAttorney Pamela OddyRevocable Living Trusts are a nifty device to avoid probate, to provide continuity of ownership and to protect the person who establishes the Trust. Anyone who is trying to establish an estate plan or who already has an estate plan but is looking to review it should seriously consider the benefits of a Revocable Living Trust.

It is called a Living Trust because it is drafted and becomes effective while the person is alive (hence, living) and it may own certain assets such as real estate or checking and savings accounts as well as some stock portfolios. Oftentimes, when the trust is drafted, the home is the most common asset that is deeded into the trust. However, vacation homes and bank accounts, including Certificates of Deposit, may be owned by the Trust as well.

The person who establishes the Trust (the settlor) is often the Trustee and the beneficiary. For tax purposes, it is a grantor trust so that any income tax deduction that the settlor received prior to the establishment of the Trust may still be claimed on the settlor's individual tax return. In other words, the Trust does not require its own separate tax identification number nor does it require its own tax return.

Succession is built into the Trust so that it is clear who becomes Trustee if the initial trustee/settlor dies or becomes incompetent. The Trust also has provisions that define how and to whom and in what proportions the trust assets are to be distributed after the death of the settlor. As part of the overall estate plan, a settlor's Will is often re-drafted to state that all assets are left to the Trust. It is called a "pour over'' Will.

The Trust is revocable so that the settlor may change the terms of the Trust, including who the successor trustee is as well as the beneficiaries. The Trustee may also add assets to the trust at any time.

There is a lot to like about this type of trust including the fact that the Trustee is in complete control of the trust and assets that are owned by the Trust avoid probate and pass on to the person(s) named as the beneficiaries in the Trust.

The most serious drawback of this Trust is that the assets owned by the Trust count toward the asset limit for most needs-based public benefits, including MassHealth.  If more than $2,000 is owned by the Trust, a person could not qualify to receive MassHealth benefits.

However, it is still worth exploring this trust with an attorney with estate planning expertise to ascertain whether or not it would be beneficial.

The views expressed in this column represent general information. To address your particular and specific needs consult your own attorney. If you need help with referral to an attorney, contact the Franklin County Bar Association at (413) 773-9839 or the Worcester County Bar Association at (978) 752-1311. Elder law resources may be found through the National Academy of Elder Law Attorneys, Massachusetts Chapter, at massnaela.com or 617-566-5640.

Community Legal Aid (CLA) provides legal services free to people age 60 and older for civil legal matters with an emphasis on access to health care coverage (MassHealth and Medicare) and public benefits as well as tenants’ rights. A request for legal assistance can be made by phone at 413-774-3747 or toll-free 1-855-252-5342 during their intake hours (Monday, Tuesday, Thursday, and Friday from 9:30 a.m. to 12:15 p.m. and Wednesday from 1:30 p.m. to 4:15 p.m.) or any time online by visiting www.communitylegal.org.