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There are three ways to avoid probate. First, if you own property jointly with another person, then upon your death the asset will pass by operation of law to the surviving joint owner – immediately. Second, by contract – which usually is by way of a beneficiary designation form where you name a person to receive your life insurance death benefit or bank account upon your death. Third, you will avoid probate by titling ownership of an asset into the name of a Trustee of a Trust, and or by designating a Trustee of Trust as the beneficiary upon your death.

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Even if you set up a Revocable Trust, you should always have a Last Will and Testament in place. If you have minor children, your Last Will designates a guardian for your children. If you have a power of appointment in another person’s Will or Trust, you must exercise it in your Last Will. Second, your Last Will designates an Executor or Personal Representative to serve should a probate become necessary. If you set up a Revocable Trust, and title assets into the name of your trust (also called “funding” your Revocable Trust), a probate will not be required when you die. However, if a parent, or other relative dies and leaves assets to you, or if you forget to title any asset (for example - those US Savings Bonds in the drawer at home, or your car) you will need to open a probate in order to get those assets over to your heirs. For those reasons, the Last Will serves as a safety net to get your assets into your Revocable Trust, if probate becomes necessary for any reason.

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A Revocable Trust is normally created by a Grantor, also known as a Settlor or Donor, and also has an initial Trustee when it is created. “Revocable” means that the Grantor can amend, alter or revoke any part of the trust at any time by way of an Amendment to the Revocable Trust. In order to amend a trust agreement, the Grantor must have testamentary capacity to do so. This means the Grantor must not be incapacitated and understands the changes being made to his Revocable Trust

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A Revocable Trust usually becomes irrevocable upon the death of the Grantor. However, a Grantor can also set up an irrevocable trust during his or her lifetime. Irrevocable means that the trust cannot be amended or changed once it is established. Irrevocable trusts were common when the unified federal tax exclusion amount was much lower. With the unified federal tax exclusion amount over $11 million per person for decedent’s dying in 2019 (as adjusted for inflation), less gifts are being made of life insurance death benefits to get the value of life insurance out of a person’s total gross estate for federal estate and gift tax purposes. 

It is important to note that transfers to an Irrevocable Trust are usually a gift for federal estate tax purposes and may require the Grantor to file an U.S. Estate Gift Tax Return by April 15th of the year proceeding the date of the gift to the trust.

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Powers of attorney are important because they avoid the need for instituting a guardianship proceeding for a person who has become incapacitated or incompetent. Powers of attorney can be either for financial or health care matters. Typically, you will have one of each because the person you designate to handle your medical decisions may not be the same person you nominate to handle all of your financial matters for you should you be unable to handle them yourself. 

Financial powers of attorney are very powerful documents. They typically become effective when you sign them, and are not contingent upon you becoming incapacitated or incompetent. Durable means the powers are still effective once you become incapacitated or incompetent. Many durable powers of attorney are accompanied by a letter that indicates when they “spring” into effect. Because these documents are powerful, and your Agent or attorney-in-fact can use them immediately to transfer your bank account, change your beneficiary designations over life insurance policies, or sell your real estate, it is very important that they are stored in a safe place until they are released to avoid any abuse by the persons you designate to act on your behalf.

Health care powers of attorney are also known as a NH Health Care Directive in New Hampshire, or in Massachusetts they are called a Massachusetts Health Care Proxy. These health care powers become effective only when you can no longer make your own health care decisions for yourself. This document will authorize someone to deal with your doctors and all health care professionals to make all your medical and health care decisions for you, including the withholding or withdrawal of life sustaining treatment should it become evident that your death is imminent.

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If you die domiciled in one state, and own real estate individually in another state, then an ancillary administration will be required to clear the title to that real estate. In order to avoid an out of state ancillary administration, you can transfer the real estate into your Revocable Trust during your lifetime to avoid the costs and delays of an out of state administration. For the cost of the preparation of a deed, this can be a significant savings to your beneficiaries and family. Nadine Catalfimo is licensed in Massachusetts and New Hampshire and can prepare deeds in those states. We will coordinate with attorneys in other states for the preparation of deeds to your trust, as needed, to avoid this type of administration upon your death.

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Typically there are three types of fiduciaries that you can nominate to serve as Trustee, or as Executor (also known as Personal Representative in some states) of your Estate. The first category is usually a family member or friend of the family. These individuals typically do not charge a fee for serving as your fiduiciary, although they are entitled to compensation for their services. Individuals are not required to be bonded to serve as a Trustee of your Trust. In New Hampshire and often in Massachusetts, your Executor or Personal Representative will be required by the probate court to post a personal or corporate surety bond with the court before she or he is appointed as the Executor or Personal Representative of your Estate. Once a bond is filed with the court, any beneficiary or heir at law, creditor or other interested person can sue against the bond should the fiduciary breach any fiduciary duties while serving as Executor or Personal Representative of the Estate.

The second category is usually nominating a CPA or Attorney to serve as your successor Trustee or Executor. CPAs and attorneys normally charge by their hourly rate to serve in any fiduciary capacity. Furthermore, they typically will carry errors and omissions liability insurance that will protect them in the event they are sued for any breach of fiduciary duties or against lawsuits from beneficiaries or heirs-at-law.

The third category is nominating a bank or financial institution to serve as Executor or successor Trustee. Normally a bank will want substantial assets in an estate or trust before they will agree to serve as a successor Trustee or Executor. They typically will charge the trust or estate a quarterly administration fee and take a certain percentage of the estate or trust assets each year for their compensation for serving as a fiduciary. For this reason, they can be expensive. However, if you have a sizeable estate or trust, there are bank and financial institutions with departments trained and equipped to manage your trust or estate. However, normally your estate or trust should exceed a million or two before it would make economical sense to use a bank or financial institution as a fiduciary.

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Yes. During your lifetime, a Revocable Trust typically will not protect your assets from creditors. Upon your death, creditors normally will be able to reach your assets in your trust to satisfy any claims or debts you have upon your death. The same may not be true with respect to an Irrevocable Trust, when you no longer have an interest in the trust assets and you are not a Trustee. You cannot avoid your creditors by setting up a Revocable Trust during your life. Any transfers into trust to avoid a creditor can be set aside by a court as a fraudulent transfer if the intent was to avoid paying a creditor.

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Typically the short answer is no. There are very specific spend down rules relating to gifting your assets to individuals and the five year look back period. Many people believe that by setting up a Grantor type inter vivos revocable trust during their lifetime, that it will protect them from nursing home costs. This is not true. Assets held in most revocable trusts will be countable for Medicaid qualification purposes. 

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Yes. With the exception of your spouse, you can omit any beneficiary you like from receiving your assets upon your death. A spouse has certain statutory rights upon your death and will require a certain amount be left to him or her to avoid a spouse from electing to take a forced elective share under the law. However, you can omit a child or heir-at-law with the proper planning.

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A no contest provision is also known as an in terrorem clause. These provisions can be found in both your Last Will and Testament and in a Revocable or Irrevocable Trust. They are used to discourage a beneficiary from filing suit against a Trustee or Executor, and typically are used when it is anticipated that a particular beneficiary will be difficult and give the Executor or Trustee a hard time when administering your estate and or trust, or who you anticipate may contest the provisions of your estate plan. These provisions normally provide that if a beneficiary contests your estate plan, either directly or indirectly, by filing any motion or lawsuit against your Estate or trust, or contests the provisions of your estate plan in anyway, he or she will forfeit their inheritance entirely and receive nothing. There are exceptions that apply. 

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If your trust is set up correctly, the spouse of a child or grandchild will not be able to reach assets held in trust. Normally this requires giving the Trustee full discretion to make distributions of income and principal to a beneficiary and incorporates spendthrift language in your trust. Spendthift language will prohibit a creditor from reaching a beneficiaries’ trust share and prohibits a beneficiary from alienating or assigning his interest in the trust to anyone during the trust administration.

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Yes absolutely. This is typically done in the provisions of your Revocable Trust and not in your Last Will, as testamentary trusts in a Last Will are not recommended. It is very common for a married couple with minor children to set up distributions to their minor children at specific ages upon the death the surviving spouse. For example, children could receive trust distributions in increments at various ages, such as 25, 30 and 35. During the period of the trust administration for a child, the Trustee would have the discretion to make distributions of income and principal to a minor child for their support, maintenance in health, for education and for medical purposes. This way they are provided for, but ensures they do not spend their inheritance at a young age due to financial immaturity.

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Yes you can, however, you should set up a special needs trust for the benefit of this type of beneficiary so that the beneficiary on state or federal aid does not lose their benefits and assistance. This is typically a sub-trust within the trust which incorporates specific language regarding the administration of the trust with the specific intention of not affecting or eliminating the aid the beneficiary is receiving from a state or federal agency of the government. 

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Yes you can, however if you set up a joint dual grantor trust during your lifetimes, you need to be aware that the survivor of you can typically amend or change the provisions upon the death of one of you. This means that if you set up a dual grantor trust with your spouse, you have to trust him or her not change the trust provisions upon your death and cut out your children. If this is a concern, because you each have assets and children from a previous relation or marriage, then you may want to consider each setting up separate Revocable Trust to avoid any confusion or unintended changes to your estate plans upon the death of one spouse. 

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Probate can be time consuming and it costs money. Your Executor will need to file many court pleadings to administer your estate, pay filing fees, and bond fees before being appointed by the probate court to serve as a fiduciary. The process is not only costly and time consuming, but requires court supervision over every aspect of the administration. For that reason, many people choose to set up a Revocable Trust to avoid probate and stream line distributions to beneficiaries. If a Trustee of trust cannot serve for any reason, the successor Trustee can step in immediately, by accepting his or her appointment, and begin controlling the assets of a trust, including selling them immediately.

You certainly do not have to set up a Revocable Trust if you do not want one. However, normally the cost of an estate administration will exceed the cost of setting up a trust and is worth it. It is done with your family and beneficiaries in mind, since it makes the process of administering and distributing your assets upon your death easier and faster than probate.

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No. If your Last Will and Testament leaves your assets to a minor, and they are unable to utilize a Uniform Minors Act to get a distribution to a minor beneficiary, then a guardianship would need to be opened with the probate court for that minor heir to receive the distribution from your estate. The guardianship would be opened in the probate court and requires annual reports and filings until the minor beneficiary reaches eighteen years old. For that reason, it is better to set up a trust and handle distributions to minors in the trust. Avoiding a guardianship for a minor will save the minor in significant attorney fees and costs, and allows a Trustee to make distributions for the benefit of a minor in many different ways or scenarios, including directly to a parent or indirectly for the benefit of the minor beneficiary.

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Yes, you have a right to receive information regarding the assets in the estate and the trust, including an accounting. Under Massachusetts and New Hampshire laws, the Trustee has many statutory fiduciary duties and must comply with the terms of a trust. The Trustee must also follow the terms of the trust and make distributions to the beneficiaries as directed by the trust. A Trustee has a duty to keep you informed and to report to you, including a trust accounting, normally at least annually regarding the trust administration. The accounting can also be waived to save in administration fees and costs if everyone is in agreement. If a Trustee fails to carry out his or her duties, and comply with the laws, then the Trustee can be removed or compelled to do so by the probate court. If you are a beneficiary and need assistance with determining what your rights and interests are in an estate and or trust, please call us. We can guide you through this process and demand the information you need to ascertain your rights and protect your interests in an estate and trust.

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