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The Heritage Law Center, LLC Blog

The Flexibility of Living Trusts

POSTED ON: December 2, 2019

What is a Trust?

  • A living trust is a legal document that can hold legal title to your assets. Think of it like a box where you can hold your assets for your benefit during your lifetime, and thereafter for the benefit of another person (beneficiary).
  • You can manage the trust yourself or choose someone else to do it (trustee). If you’re managing the trust and pass away, the successor trustee you had chosen then takes charge of the trust.
  • You can use a trust to distribute property before death, at death, or afterwards.
  • In order for property to be included in a trust, it must be put in the name of the trust.
  • A living trust is revocable, so you can change or end it at any time.

Building Flexibility into a Trust

These days living trusts can be drafted with more flexibility, which is great considering we never know what the future will be. Here are some simple ways to create a trust with some flexibility:

You can give the trustee discretion in making distributions for the benefit of the beneficiary.
Instead of mandating distributions (indicating exactly how much and when a beneficiary should receive funds), you can give the trustee discretion to provide funds if the beneficiary needs them for health, education, or support. You can also give the trustee the right to decide distribution based on their own judgment.

You can give the trustee the discretion to hold back distributions.
For example, if you pass away when your child is young, you might have included wording in the trust that your child should receive a significant amount of money at the age of 21. But what if your child has been abusing drugs? In that case, you wouldn’t want them to get the money because they might spend it all on drugs, which would cause them harm. Your trust can give your trustee the discretion to hold back the funds as they deem needed.

You can give limited powers of appointment liberally.
This allows you to postpone certain decisions until more information is available, and it allows the person to give distributions to specific people, or a certain type of people like children or grandchildren, in certain situations. When a person receives a limited power, generally there are no estate tax consequences for him or her.

For example, Tom gives his wife, Sandy, a limited power of appointment to allocate assets among her children as she sees fit. This gives her the discretion to decide what amount will go to whom, and even allows her to leave out one or more children. If one child becomes a doctor who’s financially very well off, and the other child works for a charity and lives paycheck to paycheck, Sandy can choose to give more to one of them.

Even the most comprehensive estate plan can’t anticipate every possibility. Adding flexibility to trusts is a great way to make sure that your wishes are met.

We’re here to help you protect your assets by guiding you to the right estate planning tools for your situation. Call us today at 617.299.6976 or send an email to mkarr@maheritagelawcenter.com to schedule a confidential, no-cost consultation.