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This article was last updated: Dec. 1st, 2023

Generally speaking, an Irrevocable Trust may not be changed, but several narrow exceptions allow a deceased spouse’s Irrevocable Trust to be amended. To make any changes, the surviving spouse should have the advice and services of the right Cape Cod estate planning attorney.

Irrevocable Trusts have become increasingly popular in recent years as an estate planning tool. Irrevocable Trusts often reduce the tax burden on a Donor’s estate (a Donor is the person who creates the Irrevocable Trust) while transferring the Donor’s assets to his or her loved ones.

Additionally, assets in Irrevocable Trusts are protected from creditors and legal judgments because an Irrevocable Trust will not be a party to a lawsuit. In return for these benefits, the Donor gives up his or her right to amend the terms of an Irrevocable Trust.

However, after a spouse’s death, the law in Massachusetts (specifically Massachusetts General Law Chapter 203E § 411) does allow for revisions to a deceased spouse’s Irrevocable Trust, provided that specific criteria are met and that the appropriate legal procedures are followed.

What Are Irrevocable Trusts and How Do They Work?

A Revocable Trust becomes irrevocable upon the death of the person or persons who have the right to amend the trust.  If each spouse has a separate revocable trust, when one spouse dies, that spouse’s trust becomes irrevocable.  In many cases, the trust is designed to split into two or more irrevocable sub-trusts. This is usually done for a specific, limited purpose, such as estate tax reduction.  The Typical A-B Trust does just that.  In some states, like Massachusetts, it is necessary to create A-B-C trusts to shelter a portion of the estate from the state estate tax.  But after one spouse dies, it may become desirable to modify the irrevocable trust because of changes in the law, tax changes or changes in a family’s situation.

After the death of a Donor, a Successor Trustee is responsible for the administration of the Trust. In Massachusetts, a Successor Trustee may need the advice of a Cape Cod Trust attorney to ensure a smooth and straightforward administration of the Trust at every stage of the process.

Amending an Irrevocable Trust by Petitioning the Court

After a Donor’s death, if all of the beneficiaries agree, they may petition a Massachusetts court to amend an Irrevocable Trust. If their proposed revision does not conflict with the original aims of the Trust, the court will usually grant the beneficiaries’ request and allow the amendment.

A petition for court-approved modification of an Irrevocable Trust may be particularly helpful after a Donor has died and the beneficiaries need to modify the Trust because circumstances have changed.

What Is Decanting?

“Decanting” allows the Successor Trustee of an Irrevocable Trust to distribute – or to “decant” – assets from the original Irrevocable Trust into a second Trust with more favorable provisions.

The original Irrevocable Trust must contain a provision that gives the Trustee authority to decant the trust. Decanting doesn’t “amend” an Irrevocable Trust, but decanting instead creates a new Trust that in effect amends the original Irrevocable Trust.

There is no Massachusetts law that specifically authorizes decanting, but in the case of Kraft v. Morse (2013), a Massachusetts court held that when an Irrevocable Trust gives a Successor Trustee the authority to make discretionary distributions, decanting is included in that authority. Additionally, the Kraft case requires that going forward, a decanting provision must be included in the original trust document for a Trustee to decant an irrevocable trust in Massachusetts.

What Are Trust Protectors?

Some trust documents may include Trust Protector provisions. A Trust Protector may be an individual may be named within the document, or sometimes the trust may allow for naming the person to act as a trust protector in the future. The language in the Trust document spells out the precise authority that a Trust Protector has, but essentially, a Trust Protector’s role is to protect the inheritance that is passing through the trust.

Some Trusts grant a Trust Protector limited authority to amend the Trust. This authority may include the ability to amend the Trust in response to changes in tax law, to remove a Successor Trustee, or to take other actions to protect the Trust assets. If granted the authority, a Trust Protector may:

1. amend the language of the Irrevocable Trust document
2. remove a Successor Trustee or beneficiary
3. modify distributions based on the beneficiaries’ circumstances

Can a Trust Document Provide for Its Own Changes?

Trusts have developed over time, and today’s Irrevocable Trusts may include many provisions that were not usually included in older versions of these documents. These provisions may offer more flexibility in the distribution of assets and the management of the Trust. In fact, in many states, the law allows for an Irrevocable Trust to be amended by an agreement among the Donor (if available), all beneficiaries and the Trustee. For states where there is no such provision under state law, an Irrevocable Trust document may allow the trust to be amended if the Trustee and the beneficiaries all agree on the terms of the amendment. Amending by Agreement can save families thousands of dollars by avoiding the need for a court proceeding to amend the trust.

If your spouse has passed away, a Cape Cod estate planning attorney can review your deceased spouse’s Irrevocable Trust and scrutinize the document’s language to determine if it allows for amendments or changes.

If you need to amend a deceased spouse’s Irrevocable Trust, and if the change is legal, reasonable, and does not conflict with the general goals of the Irrevocable Trust, a Cape Cod Trust attorney can probably help you make any necessary changes.

Why Would You Change a Deceased Spouse’s Trust?

While an Irrevocable Trust may need to be changed, for example, in order to respond to changes in the tax laws, a Trust may also need modification for specific and personal reasons. Let’s say that a husband creates an Revocable Trust, for himself and names his wife and adult children as beneficiaries after his death, and names his wife’s brother as the Successor Trustee.

Upon the husband’s death, the Trust becomes Irrevocable. Typically the Irrevocable Trust would now become a new taxpayer. Most Irrevocable Trusts are taxed at very high rates – 37% on income over $13,451 as of 2022. If the surviving spouse wished to lower the taxes, a simple amendment can change the way the Irrevocable Trust is taxed. For example, the Irrevocable Trust could be amended so that the trust is essentially ignored for income tax purposes. This would result in the income being taxed at the same bracket as the beneficiary – and result in significant tax savings every year.

But remember, an Irrevocable Trust must include a provision for (1) amending by agreement, (2) amending through a Trust Protector, or (3) amending by decanting. Otherwise, any change of this nature requires unanimity among all of the beneficiaries. If even one beneficiary opposes an amendment to an Irrevocable Trust, a Massachusetts court will not approve or even consider the modification proposal.

Sometimes, there may be additional methods to amending a trust, so don’t rule out the option if you think it may be difficult to get one beneficiary’s approval. Instead you should consult with a Cape Cod estate planning attorney who can tell you your options.

When Should You Contact a Massachusetts Trust Attorney?

If you do not have a Trust, Will, or estate plan established, you probably should, especially if you have a family, own a business, or own property or assets. We cannot predict tomorrow, so you should consult an estate planning attorney now about protecting your estate and your loved ones.

When an Irrevocable Trust document does not precisely spell out how a Trust dispute is to be resolved, a beneficiary or Successor Trustee may need the advice and services of a Massachusetts Trust attorney to help manage and resolve the dispute.

Massachusetts Trust attorneys also offer Trustee and estate administration services aimed at helping a Successor Trustee effectively handle his or her many obligations.

If you need to make changes to a deceased spouse’s Irrevocable Trust, a Massachusetts Trust lawyer will work with you and will provide the insights and legal services you may need. To learn more – or to begin the process of amending an Irrevocable Trust – you should contact a Trust attorney now.

Does Your Business Structure Protect Your Personal Assets?

When businesses flourish, it’s exciting and often worth the effort you put into them. A strong business of any size can help finance your future and be a legacy you can leave to your family.

Even when businesses intelligence software succeed long-term, however, they can create risks for their owners. Some people use trusts, Family Limited Partnerships, or Family Limited Liability Companies to try to safeguard business assets, including brands, stocks, or property. It’s also important to consider how to safeguard your personal assets if you’re a business owner.

Every business venture comes with risks. Statistically, 20 percent of businesses fail within the first two years and around 50 percent don’t make it past the five-year mark. Should a business fail, the owner is usually facing personal liability. Even successful business owners face significant liability – accidents, employee errors and contractual liability may cause a business owner to lose everything. But when a business is properly structured, the owner’s personal liability can be limited and often eliminated.

How Does a Business Put Personal Assets at Risk?

Your personal assets might be at risk if your business is unable to pay its bills or is sued by another party.

Here are a few examples of scenarios that might put a business owner’s assets at risk:

• The business is a sole proprietorship, which means there aren’t many boundaries between the business as an entity and the person who owns it
• A business owner or executive signs a contract agreeing to personally guarantee a debt
• A business and its owner are sued due to a liability or malpractice issue

While the outcome of each scenario depends on factors such as business structure, it’s not impossible in some cases that a person could lose their home, personal savings, or other assets because of a business issue.

How Can the Right Business Structure Help?

There are ways to protect your personal assets from creditors, family members, and others. There are also options for protecting those assets from your own business. One of the most important is to choose a business structure that’s right for your business and personal needs.

Sole Proprietorship

Many small businesses start as sole proprietorships because they are considered by many to be the easiest businesses to launch. The paperwork is minimal. But a Sole Proprietorship offers no liability protection.

In this structure, there isn’t a wholly separate business entity. You are the business, and that means that your personal and business assets may be treated similarly. A Sole Proprietorship may be owned only by one person – it can not have a co-owner. This means that without proper advance planning, the business and all of its assets are subject to court proceeding called a Conservatorship if you become incapacitated and probate at your death. Court proceedings like a conservatorship or probate can take months for the right person to get authority to continue the business or have access to the business assets, like bank accounts. This means that a spouse or other family members won’t be able to use the business assets, even for things like payroll software. So none of your employees (including family members) can get paid! And remember, if you enter into a debt for your business, the creditor might be able to come after your personal assets to settle the debt if you don’t pay it.

Partnership

General partnerships can also be very informal. When two or more people go into business together they are forming a general partnership. While no formal partnership agreement is required (because the government has written one for you), most partners choose to create a formal partnership agreement to outline the rules for the business owners. General Partnerships do not offer asset protection – in fact they create more liability than sole proprietorships because each partner is totally responsible for business related actions of the other partner(s). If one partner causes an injury in the course of the business, the injured person may sue both general partners to recover damages.

Limited Partnerships (LPs) are also a type of partnership. A limited partnership requires a formal agreement and registering with the state or states in which the limited partnership does business.

A limited partnership requires a that there be at least one General Partner who will have personal liability for the business. There are also Limited Partners, whose liability is limited to the investment made in the business. That means they won’t be held personally responsible for debts that the partnership as a business entity holds. They also may not be held responsible for actions taken by the general or other limited partners. Limited Partnerships are often used as an estate planning tool within families who want to transfer an on-going business or investment portfolio to the next generation and at the same time teach investment and management strategies. This type of LP is called a Family Limited Partnership (FLP). FLPs have a number of advantages in tax planning and asset protection planning.

However, not all partners have the same level of limited liability and not all partnerships are created equally. The level of protection you have depends on the details of your partnership agreement.

Corporation

A corporation provides significant protection for personal assets because it creates a “wall” between you, the person, and your business (and its liabilities) by creating a new and separate entity. A corporation requires significant legal compliance, which makes it a poor choice for business owners who want to concentrate on their business and not the legalities of keeping their corporation compliant. For example, corporations require annual filings (paperwork and fees) with every state in which the corporation does business. Additionally, corporations are required to document meetings (at least an annual meeting), elections of directors and corporate officers, like a President, Secretary and Treasurer, and creating of corporate resolutions, like a resolution to open a bank account for the company’s business account. When the owner(s) of a corporation fail to keep proper books a records, the protections offered by a corporate entity may no longer exist. This allows creditors to “Pierce the Corporate Veil” which permits a creditor to attach the personal assets of the business owner. Additionally, there are tax considerations when you start your corporation.

Corporate entities may choose between C-Corporation and S-corporation tax status. Which tax status is best depends on a variety of considerations which are unique to each business.

Limited Liability Company (LLC)

For many business owners a Limited Liability Company (LLC) may be the best choice because it provides more asset protection than a sole proprietorship or a partnership but without the all legal formalities of a corporation. LLCs require an Operating Agreement and annual filings with the state or states in which your business is organized and will operate. For income tax purposes an LLCs may be setup as (1) a disregarded entity, which means the income and expenses of the business are reported on your personal income tax return – much like a sole proprietorship – but this option is only available when there is only one owner of the LLC; (2) When there is more than one owner of an LLC the business may choose Partnership tax status – so your business will file partnership return which is helpful for real estate related businesses; (3) C-Corporation status so your business can take advantage of the 21% corporate income tax rate; and (4) S-Corporation status. With any business, if you do something wrong, like injure someone in the course of your business, you continue to have personal liability. However if an employee injures someone while on the job, your investment in the business may be at risk, but you probably won’t see your home or personal savings put at risk.

LLCs can also be used as a Family Limited Liability Company (FLLC) and offer many of the same benefits as a Family Limited Partnership, but without the need of a General Partner (and the on-going liability a General Partner must have). Today many planners prefer FLLCs as stronger asset protection vehicle.

Choice of Entity Chart – Some of the “Pros & Cons”

Business Entity	Pros	Cons
Sole Proprietorship	Simplicity: Easy setup and management. Direct Control: Full decision-making authority. Tax Simplicity: Profits and losses on personal tax return.	Unlimited Personal Liability: Personal assets at risk for business debts. Limited Credibility: May seem less trustworthy.
General Partnership	Shared Responsibility: Partners contribute and share duties. Tax Benefits: Pass-through taxation to partners.	Unlimited Personal Liability: Each partner liable for all partnership obligations. Internal Conflicts: Disagreements among partners can hinder decisions.
Limited Partnership	Limited Liability for Limited Partners: Limited partners have liability limited to their investment. Expertise and Capital: Limited partners contribute without operational involvement.	General Partner Liability: General partners personally liable for partnership debts. Complexity: Requires more formalities and documentation.
Corporation	Limited Liability: Shareholders’ personal assets shielded from business liabilities. Perpetual Existence: Continues to exist despite ownership changes. Credibility: High level of credibility in the business world.	Double Taxation: C Corporations may face double taxation on profits. S-Corp Taxation available by election Complexity and Formalities: Extensive administrative requirements.
Limited Liability Company (LLC)	Flexible Taxation: Choose taxation as a disregarded entity, corporation (C or S), or partnership. Limited Liability: Members’ personal assets protected from business liabilities. Simplicity: Fewer formalities than corporations.	State-Dependent Rules: Regulations vary by state, affecting legal protections. Limited Perpetual Existence: LLCs may dissolve upon member departure.

Safeguard Your Assets for the Future With Help From Legal Professionals

While limited liability companies (LLCs) tend to provide the widest lines between personal and business assets, the best structure for protecting your assets depends on your situation. There’s no single right answer as to which business structure is the right choice. Consulting with an asset-protection and estate-planning professional can help you understand what factors to consider and what options might be right in your case. 

An attorney experienced in trusts, Family Limited Liability Companies, Family Limited Partnerships, and other legal asset protection tools can do more than safeguard your wealth from business risks. They can help you plan for the future of yourself and your family by:

• Supporting you as you create a plan to leave a legacy for your children and other heirs
• Providing guidance in estate planning so you know what options might be right for you and how your wishes can be protected
• Creating trusts and other legal structures to protect your assets during your lifetime
• Administering your trust or estate in the future to ensure your preferences are upheld

If you have a business — or are planning to start one — and want to create a financially secure foundation for yourself before you begin, consider working with the team at the Law Offices of Boyd & Boyd, P.C. We can help you understand which personal assets might be at risk and how to protect them. Give us a call at 508-444-9688 to make an appointment to discuss our services.

Generally speaking, an Irrevocable Trust may not be changed, but several narrow exceptions allow a deceased spouse’s Irrevocable Trust to be amended. To make any changes, the surviving spouse should have the advice and services of the right Cape Cod estate planning attorney.

Irrevocable Trusts have become increasingly popular in recent years as an estate planning tool. Irrevocable Trusts often reduce the tax burden on a Donor’s estate (a Donor is the person who creates the Irrevocable Trust) while transferring the Donor’s assets to his or her loved ones.

Additionally, assets in Irrevocable Trusts are protected from creditors and legal judgments because an Irrevocable Trust will not be a party to a lawsuit. In return for these benefits, the Donor gives up his or her right to amend the terms of an Irrevocable Trust.

However, after a spouse’s death, the law in Massachusetts (specifically Massachusetts General Law Chapter 203E § 411) does allow for revisions to a deceased spouse’s Irrevocable Trust, provided that specific criteria are met and that the appropriate legal procedures are followed.

What Are Irrevocable Trusts and How Do They Work?

A Revocable Trust becomes irrevocable upon the death of the person or persons who have the right to amend the trust.  If each spouse has a separate revocable trust, when one spouse dies, that spouse’s trust becomes irrevocable.  In many cases, the trust is designed to split into two or more irrevocable sub-trusts. This is usually done for a specific, limited purpose, such as estate tax reduction.  The Typical A-B Trust does just that.  In some states, like Massachusetts, it is necessary to create A-B-C trusts to shelter a portion of the estate from the state estate tax.  But after one spouse dies, it may become desirable to modify the irrevocable trust because of changes in the law, tax changes or changes in a family’s situation.

After the death of a Donor, a Successor Trustee is responsible for the administration of the Trust. In Massachusetts, a Successor Trustee may need the advice of a Cape Cod Trust attorney to ensure a smooth and straightforward administration of the Trust at every stage of the process.

Amending an Irrevocable Trust by Petitioning the Court

After a Donor’s death, if all of the beneficiaries agree, they may petition a Massachusetts court to amend an Irrevocable Trust. If their proposed revision does not conflict with the original aims of the Trust, the court will usually grant the beneficiaries’ request and allow the amendment.

A petition for court-approved modification of an Irrevocable Trust may be particularly helpful after a Donor has died and the beneficiaries need to modify the Trust because circumstances have changed.

What Is Decanting?

“Decanting” allows the Successor Trustee of an Irrevocable Trust to distribute – or to “decant” – assets from the original Irrevocable Trust into a second Trust with more favorable provisions.

The original Irrevocable Trust must contain a provision that gives the Trustee authority to decant the trust. Decanting doesn’t “amend” an Irrevocable Trust, but decanting instead creates a new Trust that in effect amends the original Irrevocable Trust.

There is no Massachusetts law that specifically authorizes decanting, but in the case of Kraft v. Morse (2013), a Massachusetts court held that when an Irrevocable Trust gives a Successor Trustee the authority to make discretionary distributions, decanting is included in that authority. Additionally, the Kraft case requires that going forward, a decanting provision must be included in the original trust document for a Trustee to decant an irrevocable trust in Massachusetts.

What Are Trust Protectors?

Some trust documents may include Trust Protector provisions. A Trust Protector may be an individual may be named within the document, or sometimes the trust may allow for naming the person to act as a trust protector in the future. The language in the Trust document spells out the precise authority that a Trust Protector has, but essentially, a Trust Protector’s role is to protect the inheritance that is passing through the trust.

Some Trusts grant a Trust Protector limited authority to amend the Trust. This authority may include the ability to amend the Trust in response to changes in tax law, to remove a Successor Trustee, or to take other actions to protect the Trust assets. If granted the authority, a Trust Protector may:

1. amend the language of the Irrevocable Trust document
2. remove a Successor Trustee or beneficiary
3. modify distributions based on the beneficiaries’ circumstances

Can a Trust Document Provide for Its Own Changes?

Trusts have developed over time, and today’s Irrevocable Trusts may include many provisions that were not usually included in older versions of these documents. These provisions may offer more flexibility in the distribution of assets and the management of the Trust. In fact, in many states, the law allows for an Irrevocable Trust to be amended by an agreement among the Donor (if available), all beneficiaries and the Trustee. For states where there is no such provision under state law, an Irrevocable Trust document may allow the trust to be amended if the Trustee and the beneficiaries all agree on the terms of the amendment. Amending by Agreement can save families thousands of dollars by avoiding the need for a court proceeding to amend the trust.

If your spouse has passed away, a Cape Cod estate planning attorney can review your deceased spouse’s Irrevocable Trust and scrutinize the document’s language to determine if it allows for amendments or changes.

If you need to amend a deceased spouse’s Irrevocable Trust, and if the change is legal, reasonable, and does not conflict with the general goals of the Irrevocable Trust, a Cape Cod Trust attorney can probably help you make any necessary changes.

Why Would You Change a Deceased Spouse’s Trust?

While an Irrevocable Trust may need to be changed, for example, in order to respond to changes in the tax laws, a Trust may also need modification for specific and personal reasons. Let’s say that a husband creates an Revocable Trust, for himself and names his wife and adult children as beneficiaries after his death, and names his wife’s brother as the Successor Trustee.

Upon the husband’s death, the Trust becomes Irrevocable. Typically the Irrevocable Trust would now become a new taxpayer. Most Irrevocable Trusts are taxed at very high rates – 37% on income over $13,451 as of 2022. If the surviving spouse wished to lower the taxes, a simple amendment can change the way the Irrevocable Trust is taxed. For example, the Irrevocable Trust could be amended so that the trust is essentially ignored for income tax purposes. This would result in the income being taxed at the same bracket as the beneficiary – and result in significant tax savings every year.

But remember, an Irrevocable Trust must include a provision for (1) amending by agreement, (2) amending through a Trust Protector, or (3) amending by decanting. Otherwise, any change of this nature requires unanimity among all of the beneficiaries. If even one beneficiary opposes an amendment to an Irrevocable Trust, a Massachusetts court will not approve or even consider the modification proposal.

Sometimes, there may be additional methods to amending a trust, so don’t rule out the option if you think it may be difficult to get one beneficiary’s approval. Instead you should consult with a Cape Cod estate planning attorney who can tell you your options.

When Should You Contact a Massachusetts Trust Attorney?

If you do not have a Trust, Will, or estate plan established, you probably should, especially if you have a family, own a business, or own property or assets. We cannot predict tomorrow, so you should consult an estate planning attorney now about protecting your estate and your loved ones.

When an Irrevocable Trust document does not precisely spell out how a Trust dispute is to be resolved, a beneficiary or Successor Trustee may need the advice and services of a Massachusetts Trust attorney to help manage and resolve the dispute.

Massachusetts Trust attorneys also offer Trustee and estate administration services aimed at helping a Successor Trustee effectively handle his or her many obligations.

If you need to make changes to a deceased spouse’s Irrevocable Trust, a Massachusetts Trust lawyer will work with you and will provide the insights and legal services you may need. To learn more – or to begin the process of amending an Irrevocable Trust – you should contact a Trust attorney now.

If you do not have an estate plan in place, it’s time to begin planning your estate with the advice and insights of a Cape Cod estate & trust administration attorney. You will encounter a variety of legal terms as you begin planning your estate, so you will need to know the definitions of these terms.

What, for example, is the definition of an executor? A testator? What are trustees and guardians? What is a beneficiary? How do these roles differ? What parts do they play in the probate process?

If you will keep reading this brief introduction to estate planning terminology, you’ll learn the answers to these questions. You’ll also learn the details about executors, trustees, guardians, and you will find out more about the probate and estate planning processes.

Do You Need to Prepare a Last Will and Testament?

A will – that is, a last will and testament – is a legally enforceable document that articulates “your will,” meaning your directions for what happens to your assets and properties upon your death. So long as you’re legally competent and still alive, you can change your will as you wish.

Other legal documents may additionally be part of your estate plan. Everyone’s circumstances are unique, so the documents you need will depend on your personal circumstances and requirements. An estate planning lawyer can assist you with preparing a customized estate plan that’s right for you.

If your will does not designate an executor, a Massachusetts court will designate a person to wrap up your estate. Usually, the court will name a close family member, but if no relative is apparent or available, a court could name a total stranger to be the executor of your will.

Your probate or estate planning attorney should ensure that you have selected an appropriate individual to be the executor of your will.

What Is a Testator?

In Massachusetts, your will must be written and on paper – a “hard” copy. “Testator” is a legal term for someone who makes a will. When you create a will in Massachusetts, you must:

• Determine what assets and properties will be included in the will.
• Determine who will inherit those assets and properties.
• Select an executor who will manage your estate.
• Select a guardian who will care for your minor children (if the worst should happen).
• Also, select a person who will manage the property of your children.
• Create your will with the advice and insights of a Cape Cod estate planning lawyer.
• Sign the will in the presence of two witnesses.
• Store the will securely.

What Does an Executor Do?

When you prepare your will, you will select someone you trust to act as your will’s executor. Your executor will have the duty to manage and administer your estate and to ensure that your beneficiaries receive your assets and properties as you have instructed in the will.

The executor of your will must be a person who’s dedicated to protecting your interests. In fact, your executor should be a person you trust with everything you own, because trusting that person with everything you have is precisely what you’re doing when you designate an executor.

Specifically, the executor of a will is responsible for:

1. general oversight of the entire probate process
2. filing the appropriate legal paperwork with the probate court
3. managing the deceased person’s assets
4. notifying the estate’s beneficiaries and creditors
5. paying off the estate’s bills, debts, and creditors
6. defending the deceased person’s will against challenges and lawsuits

In Massachusetts, estate executors can receive the legal advice and help they may need by contacting a Cape Cod estate planning attorney.

What Is a Trustee?

A trust gives one or several trustees the legal ownership of the trust’s properties and assets on behalf of the beneficiary or beneficiaries. If you establish a trust, you’ll need to name a trustee to manage that trust, but a trustee does not have the same obligations as the executor of a will.

Several types of trusts may be established in Massachusetts, but the primary purpose of any trust is to preserve the properties and assets in the trust for the beneficiary or beneficiaries. The creator of the trust may spell out whether the trust’s properties and assets are transferred over time, upon the creator’s death, or after the beneficiary or beneficiaries reach a particular age.

Many trustees will have questions regarding their role. If you are designated as a trustee in Massachusetts, a Cape Cod estate planning lawyer can answer those questions for you and address any of your other trust-related concerns. Specifically, a trustee is responsible for:

1. locating, gathering, and protecting a trust’s properties and assets
2. keeping track of the trust’s liabilities, properties and assets, and creditors
3. filing necessary tax returns and ensuring that taxes owed by the trust are paid
4. moving properties and assets to the beneficiary or beneficiaries as directed by the trust

What Is a Guardian?

Massachusetts courts may designate a guardian for an incapacitated adult or for a minor in certain situations. Parents may designate a guardian – someone who will care for their minor child or children if the worst should happen – in the text of a will or a trust.

If a minor child’s parent or parents cannot for any reason properly care for a child, or if an adult becomes incapacitated, a concerned adult may submit a Petition for Guardianship to the court. Massachusetts courts may name a guardian for an adult who is disabled, incapacitated, legally incompetent, or not able to make his or her own decisions.

A guardian has extensive authority to make decisions for a minor or an incapacitated adult, so the courts set exacting standards for guardianship. Prospective guardians must prove they are fit and able to serve as guardians and must pass an extensive background check.

Guardians, executors, and trustees must meet all of the requirements spelled out by Massachusetts law. The task may seem daunting, but you can ask a Massachusetts estate planning or probate attorney to guide, advise, and direct you as a guardian, trustee, or executor.

Who Should Be a Guardian, Trustee, or Executor?

When you name a guardian, trustee, or executor, the most important quality you should look for is trustworthiness. Trustees and executors should also be individuals with some financial knowledge and experience.

Guardians – whether they are the guardians of minors or incapacitated adults – must be patient and compassionate individuals. If they have previous experience as caregivers, that’s a plus.

When you establish a will or a trust, or if you are filing a Petition for Guardianship in Massachusetts, do not try to do it alone. Any mistakes that you make could be costly or could substantially delay the process. Working with a probate or estate planning attorney ensures that your will, trust, or guardianship will accomplish its purpose and comply with Massachusetts law.

If you own a home, own a business, or have a family in Massachusetts, schedule a consultation at once with a Cape Cod estate & trust administration attorney to prepare an estate plan or to review your current plan. Every adult with assets, properties, or a family should have an estate plan in place.

You might be surprised to learn that estate planning dates back thousands of years. In the Old Testament, the Book of Proverbs tells us that “A good man leaves an inheritance to his children’s children.”

Who Wrote the First Will?

The first written wills were in ancient Greece. The Greek philosopher Plutarch tells us the written will was created by Solon, an Athenian statesman. Roman law advanced the development of inheritance laws and wills and is still the basis of inheritance laws in many European nations.

Romans understood that the memories of the living can’t be trusted, so in the later Roman Empire, all wills were put in writing. Witnesses to the signing of a will were an early requirement, but only free men – not women or slaves – could witness a will in ancient Rome.

What Was the Statute of Wills?

In England, the Statute of Wills, enacted in 1540, made it possible for a landholder to determine who would inherit his land upon his death by establishing a will. Prior to 1540, land was subject to primogeniture, under which a first-born son – alone – inherits a parent’s entire estate.

Also prior to the Statute of Wills, when a landholder died without any living relatives, his land went to the Crown. The statute was a compromise between Henry VIII and English landowners, who had grown frustrated with primogeniture and with the royal control of land.

What Was the Wills Act?

After the Statute of Wills, a number of types of wills – and ways of handling them – developed in England before the Wills Act of 1837 established uniformity regarding wills in that nation. The main provisions of the Wills Act were:

1.  All property, real and personal, may be disbursed with a will.
2.  No will made by anyone under age twenty-one is legally valid.
3.  Every will must be put in writing.
4.  Gifts to a witness or the husband or wife of a witness are not allowed.
5.  A will takes effect upon the death of its creator (the “testator”) unless stated otherwise.

Like the laws of England, the basis for many of our laws in the United States can be traced back to the ancient Greeks and Romans. However, wills have existed around the world for centuries. The Qur’an, for example, outlines inheritance law and other processes governing succession.

How Have Wills Changed?

The process of establishing a will has changed significantly over time as family structures, customs, and legal systems have changed. While the purpose of a will has stayed the same – to say who gets what after a testator’s death – wills have evolved and changed with society.

Undoubtedly, the biggest difference between ancient and modern wills involves the role of women. Wills in ancient Greece and Rome only allowed property and possessions to transfer between males.

How Have Trusts Evolved?

Roman law had a concept of a trust (a “fideicommissum”) created by a will. A fideicommissum allowed a creator of a will to leave assets or properties to a party or parties he was not related to. However, these did not develop into modern trusts that can be used while their creator is alive.

Modern trusts began to develop in England in the 12th century. When a landowner left to fight in the Crusades, he conveyed legal ownership of his land to someone else to manage the estate and to pay and receive feudal dues, on the condition that he would resume ownership upon his return.

Some crusaders did not have their land returned, and courts had to compel the return of the crusaders’ lands. The crusader was the “beneficiary” in these cases and the “legal” landowner was called a “trustee.” The legal use of another’s land developed into what we now call a trust.

Trusts in the Modern Era

The first revocable living trust in the Americas was created for Francis Fauquier, the Lieutenant Governor of Virginia, in 1765. Fauquier had his attorney – Patrick Henry – prepare a trust so that his family wouldn’t have to deal with probate in order to inherit his assets upon his death.

However, it was not until the 1960s that revocable living trusts gained wide popularity. Today, revocable living trusts are a standard estate planning tool for avoiding the lengthy and costly probate process.

Specialized trusts – spendthrift trusts and special needs trusts, for example – also emerged in the modern era in response to consumer needs. A Massachusetts estate planning lawyer can provide you with personalized advice and help you set up a customized trust that’s right for you.

How Did Modern Estate Planning Develop?

Estate planning in the United States evolved in response to estate taxes, which – prior to the 20th century – were only imposed to fund wars and then repealed at a war’s end. However, with World War I and the estate tax that was enacted in 1916, the estate tax was here to stay.

People quickly realized that they could avoid the estate tax by gifting their estates to members of their families, so the federal government responded by enacting a gift tax in 1924. The Tax Reform Act of 1976 merged the estate tax and the gift tax into the same tax schedule.

In the 21st century, comprehensive estate planning involves various types of wills, various types of trusts, beneficiary designations, gifts, and powers of attorney, specifically the durable financial power of attorney and the durable medical power of attorney.

Now Is the Time to Begin Planning Your Estate

Estate planning has evolved like technology has evolved. As photography has evolved from black and white photos to color photos and Hollywood blockbusters, estate planning has evolved from wills to trusts to comprehensive estate planning with a number of options and choices.

Technology also lets attorneys provide estate planning information and services that are easy to access. You can learn more about the services a Cape Cod estate planning lawyer provides by taking part in an online seminar or “webinar” without leaving the comfort of your home.

Income, gift, and estate taxes must be considered when you plan your estate. A Cape Cod estate planning attorney can help you develop a plan that protects your assets, ensures that your instructions are followed, and provides for your loved ones when that time comes.

Estate planning takes time and thoughtful consideration, and since no one can predict the future, the time to begin planning your estate is now. If you have already established your estate plan, let a Cape Cod estate planning lawyer review it with you to ensure that it still meets your needs.

Here in Massachusetts, smart estate planning requires the guidance of a Massachusetts estate  & trust administration attorney to help you create the documents you’ll need. Keep reading to learn the basics about Trusts, how they work, and why you likely should create a Trust as part of your estate plan. One common question is, “can an irrevocable trust be changed?”

If you have loved ones who rely on you, now is not too early to start planning your estate. Put simply, estate planning is about making wise choices and putting those choices in binding legal documents to ensure that your instructions are adhered to faithfully at the time of your death.

Wills and Trusts are key estate planning documents that perform many of the same functions, but if you have assets or real estate holdings (that are worth roughly $100,000 to $200,000), a well-drafted and adequately funded Trust ensures that your assets and properties will be handled and distributed according to your wishes.

Eventually, all Trusts become irrevocable. A Trust is irrevocable when the Donor (the person who creates the Trust) is no longer able to amend it. Some Trusts are set up as irrevocable from the start. Others start out as revocable (meaning the Donor may alter, amend, or even cancel the Trust), but become irrevocable at the death of the Donor.

 

Whichever path you choose for your Trust, it is imperative that your Trust be flexible – able to adapt to changes in the law, changes in family circumstances, or changes in the way the Trust should be managed.

What is Modification by Consent?

It is possible for an Irrevocable Trust to be amended – just not by the Donor. Over the past decade or so, multiple methods for amending Irrevocable Trusts have become popular. In Massachusetts, there is statutory authority for amending Irrevocable Trusts (Massachusetts General Law Chapter 203E § 411).

If the Donor and all the beneficiaries agree, they may petition the Probate Court for permission to amend an Irrevocable Trust. If the amendment will not frustrate the original purpose of the Trust, the Court will typically allow the amendment.

What is Amendment by Agreement?

Some Trust documents will permit amendment by other means. Irrevocable Trusts may be amended without Court approval, but only if the terms of the Trust agreement are governed by the laws of a state that allows such action or if the Trust agreement permits amendment by agreement within its own terms.

What is Amendment by a Trust Protector?

Alternatively, some Irrevocable Trusts use the role of a Trust Protector. A Trust Protector is usually an independent party, not related to the Donor or the trust beneficiaries, who is given special powers that a Trustee is not given.

Often, a Trust Protector will be permitted limited authority to amend an Irrevocable Trust. This authority might include the ability to change the Trust due to changes in tax law, or to remove a Trustee, or to take other actions that are intended to protect the Trust assets from negative outside influences.

What is “Decanting” an Irrevocable Trust?

Finally, an Irrevocable Trust may be amended by “decanting”. In Massachusetts, Trust decanting is permitted if the Trust instrument authorizes the Trustee to remove the assets from one Irrevocable Trust and place them in a new Irrevocable Trust with the same trust beneficiaries.

Some states have statutes that authorize Trust decanting, but Massachusetts does not. Instead, estate planning attorneys in Massachusetts rely on case law (the case, Kraft v. Morse, 466 Mass 92 (2013), involved the Kraft family – the owners of the New England Patriots).

Under the Kraft decision, Trustees who have authority under an Irrevocable Trust to make discretionary distributions may distribute the Trust assets to a new, Irrevocable Trust with the same beneficiaries and with terms and conditions that better fit the needs of the beneficiaries. While not exactly amending a Trust, decanting an Irrevocable Trust has the same effect.

How Does a Revocable Trust Work?

A good estate planning lawyer can help you decide if your estate plan should be based on a will, a Revocable Trust (also known as a Living Trust), or an Irrevocable Trust. With a Revocable or Living Trust, you can move assets into the Trust’s ownership while you retain control of those assets.

In order to understand how a Revocable Trust can help you and your family, you should understand what a Revocable Trust is. Essentially, a Revocable Trust is a contractual agreement among three parties: (1) a Donor – the person who creates the Trust and gives some property/asset to the Trust; (2) a Trustee – the person who will manage and control the assets of the Trust; and (3) a beneficiary – the person (or persons) who will get the use and enjoyment of the assets in the Trust.

Initially, most people set up their Trust and take on all three roles. But in order to have a valid Trust there must be at least one other person involved in the Trust. An easy way to add another person is to add a future interest beneficiary – someone to be the beneficiary after you pass away.

This is typically a spouse, if you are married, followed by the children (or whomever you wish to receive your wealth at the time of your death). This achieves your testamentary disposition needs.

What is the Role of a Successor Trustee?

Additionally, a Trust will provide for a Successor Trustee, someone to be the Trustee if you are no longer able to act in that capacity. If you are ill or unable to act as your own Trustee, your Successor Trustee may step in to manage the Trust assets on your behalf.

Eventually the Successor Trustee will manage the assets of the Trust after you pass away, making sure the inheritance is quickly and efficiently available for your heirs, the future interest beneficiaries.

You may modify or cancel a Revocable Trust as you wish, and the assets that are owned by your Revocable Trust at the time of your death will transfer to or for the beneficiaries without being subjected to the often costly and lengthy probate process.

For example, an IRA Inheritance Trust ™ is a Revocable Trust that becomes the beneficiary of your IRA (individual retirement account) after your death. It provides your beneficiaries with protection from creditors, divorce, bankruptcy and estate taxes, all while allowing for distributions over a beneficiary’s lifetime.

How Does an Irrevocable Trust Work?

Irrevocable Trusts are often created for very specific, sometimes limited purposes, such as asset protection, estate tax reduction, income tax reduction, gifting, or eligibility for certain government benefits. Often, when you create an Irrevocable Trust, you give up the ownership and control of whatever assets are placed in the Trust.

A properly designed Irrevocable Trust will consider a number of variables, such as:

1. Whether the assets of the Trust should be included in the estate of the Donor for important income tax benefits, or whether the assets should be \excluded from the estate of the Donor for estate tax savings;

2. Whether the transfer to the Trust should be a completed gift (often requiring the filing of a gift tax return – Form 709) or should be an incomplete gift – meaning the Donor may change who will ultimately receive the gift;

3. When the income of the Trust is received by a beneficiary, whether the income tax liability will stay with the beneficiary or be shifted to the Donor. When the tax is paid by the Donor, it is done so without a gift tax consequence, which can significantly increase the perceived value of the assets given to the Trust;

4. After the death of the Donor, whether the income taxes should be paid by the Trust or by the beneficiary (often Trust tax rates are quite high, so having the beneficiary bare the tax planning burden – even if the income is retained by the Trust – is a money-saving choice);

5. Where the Irrevocable Trust should be established – in Massachusetts or in a state with more favorable Trust laws;

6. The choice of Trustee – the beneficiary or a professional Trustee; and

7. What distributions should the Trust authorize? Generally the best asset protection can be achieved if the Trust is purely discretionary – so that the Trustee may decide what, if any, distributions will be made and when they will be made.

Each decision will impact how the Trust will work and the degree of benefit it can convey. But if you create an Irrevocable Trust, you must remember that it is not reversible. Generally, the assets you gift to an Irrevocable Trust cannot be given back to you.

However, in some Irrevocable Trusts, the Donor may be given the power to “swap” assets with the Trust. But possessing such a power does have income tax consequences, and it is not advisable to include a swapping power in an Irrevocable Medicaid Planning Trust.

What Are Some Specific Examples of Irrevocable Trusts?

Irrevocable Trusts can hold and then distribute assets to a beneficiary weeks, months, or even years after your death. Examples of Irrevocable Trusts include:

#1: A Capital Gains Avoidance Trust

A Capital Gains Avoidance Trust is an Irrevocable Trust to which you give highly appreciated assets. The Trust then sells the highly appreciated asset. Normally, the sale would trigger a capital gains recognition, resulting in income taxes.

But because of the way this Trust is designed, after the sale, the entire proceeds from the sale of the highly appreciated asset may be reinvested without payment of capital gains taxes. Instead, an income stream is paid to the beneficiary (who is usually the Donor), and as the income is received, capital gains taxes are paid on a portion of the income payment.

When the beneficiaries die, whatever remains in the Trust, if anything, is paid to a charity of the Donor’s choice. This Trust lets you avoid the capital gains tax when you sell appreciated real estate, stocks, or other capital assets. This type of Trust can be structured so that the capital gain is spread out over many years, thereby reducing the total tax paid. This Trust is also sometimes called a Charitable Remainder Trust.

#2: An Irrevocable Life Insurance Trust

An Irrevocable Life Insurance Trust is a Trust designed to own a life insurance policy. It controls and owns your life insurance policy while you are alive, and it manages and distributes the proceeds from the policy after your death.

Many people know that life insurance death benefits are generally not subject to income tax, but when life insurance is owned by the insured, it is a part of the owner’s taxable estate and therefore subject to estate taxes.

By having your life insurance owned by an Irrevocable Life Insurance Trust, not only will the death benefit pass free of income tax, it will also pass free of estate tax.

#3: A Domestic Asset Protection Trust (DAPT)

A Domestic Asset Protection Trust is a self-settled Irrevocable Trust that is intended to protect your assets from potential future creditors. Currently nineteen states recognize some form of a self-settled Asset Protection Trust, but Massachusetts is not one of those states.

Even though Massachusetts does not yet recognize these Trusts, the use of DAPTs can have an important role in your estate plan. These Trusts can be used to reduce the Massachusetts estate tax in addition to providing asset protection.

#4: A Spousal Limited Access Trust (SLAT)

A Spousal Limited Access Trust is another tool that may provide asset protection and estate tax reduction benefits in Massachusetts. This type of Irrevocable Trust is similar to a By-Pass or Credit Shelter Trust that is established as a lifetime gift instead of a gift to the spouse at the time of the Donor’s death. Trust assets are available for the needs of a spouse but are not owned by the spouse.

Because Massachusetts does not have a state level gift tax, and because the federal lifetime exemption is so high, using SLAT can have significant Massachusetts estate tax reduction benefits by exempting Trust assets from the estates of both the Donor and the Donor’s spouse.

#5: A Medicaid Planning Trust (MPT)

A Medicaid Planning Trust, sometimes called an Irrevocable Income Only Trust (IIOT) is a special Trust with a very limited purpose. A Donor will establish this kind of Trust if s/he intends to preserve the estate from the cost of nursing home care.

COVID-19 has certainly done some damage to this type of Irrevocable Trust – a recent article in the Boston Globe revealed that nearly 62 percent of all COVID-19 related deaths in Massachusetts occurred in nursing homes and rest homes.

Since this type of Irrevocable Trust is set up to make the Donor eligible for state-paid nursing home care, it is now less attractive to use this kind of Trust, given the deadly mix of virus-susceptible nursing home residents and COVID-19.

Unfortunately, what most people who use this Trust don’t realize is that the principal placed into this type of Trust is NEVER available for the use of the Donor or the Donor’s spouse. The Trust assets may only be used to produce income for the Donor or the Donor’s spouse. Five years after the assets are given to the Trust, the assets are protected from the Medicaid look-back rules (the “five-year look-back”).

What is the Main Problem With an MPT?

However, the problem with this type of Trust is its lack of flexibility. An MPT can not include any provisions for amending the Trust. Furthermore, it should not include any ability for the Donor to “swap” assets with the Trust.

While assets in these Trusts are protected from nursing home expenses after the five year look-back period has passed, the assets can not be used for most assisted living arrangements (which most people need before they need nursing home care).

Additionally, most people desire in-home care, but the assets in an MPT are not available to be used that way, in most cases. However, these Trusts may make sense if you have a diagnosis that will definitely require you to reside in a nursing home.

Understanding the Limitations of an MPT is Imperative

But before setting up this kind of Trust, you must understand the limitations on you and your spouse. If you die first, your spouse will need to live with the restrictions of this Trust – and the assets will still be unavailable to your spouse.

Consider this: the average cost of nursing home care in Massachusetts is approximately $130,000 to $150,000 per year (as of 2020). The average stay is approximately two years. So, the total cost is approximately $300,000.

Certainly, that is a lot of money. But what is the total value of your estate? Add up the value of everything you own – real estate, retirement accounts, investments, bank accounts, life insurance, etc. Does it make sense to you to give away the total value of your estate, making it forever unavailable for the needs of you and your spouse, to save a rough average of $300,000?

If you answer “yes,” then this type of Trust may be appropriate. The bottom line is this: if an attorney is suggesting an MPT for you, be sure to ask a lot of questions. Make sure you understand the lifetime ramifications of this kind of Trust.

If you are told there is a back door, or that there can be a tacit understanding with the kids that the assets of the Trust may somehow be returned to you, then Massachusetts (MassHealth) will take the position that the assets ARE available to pay for your nursing home care. Yogi Berra said it best: “If you don’t know where you are going, you’ll end up someplace else.”

What Steps Are Required to Create an Irrevocable Trust?

To establish an Irrevocable Trust in Massachusetts:

1. Identify the properties and assets that you want to move into the Trust.
2. Determine your beneficiaries.
3. Determine who is qualified to act as the Trustee.
4. Have a qualified Massachusetts estate planning lawyer prepare the Irrevocable Trust.
5. Transfer the appropriate assets to the newly formed Irrevocable Trust.
6. Let the Trustee manage the Trust – don’t try to manage it for the Trustee.

Is It Really Irrevocable?

To create an Irrevocable Trust and to take advantage of the benefits it offers, the terms of an Irrevocable Trust must prevent you from revising or amending it. Can an Irrevocable Trust ever be changed or amended? The answer is no, not by the person who creates it.

In rare cases, however, beneficiaries or the Trustee may be able to make a change to an Irrevocable Trust when such a change is in the best interests of a beneficiary and is not in conflict with the intentions of the person who created the Trust (the “Grantor” or “Donor”).

For example, if you designate assets for a child’s or grandchild’s education, but after your death the child or grandchild develops a serious medical condition that requires costly treatment, your Trustee may seek a modification that will allow the Trust’s funds to pay for necessary treatment.

Upon a Grantor’s death, a Trustee becomes responsible for the administration of the Trust. By working with the right Cape Cod estate planning attorney, a Trustee in Massachusetts can obtain the sound legal advice needed for proper administration of the Trust at every stage of the process.

What’s Right for You?

Every estate plan is unique, so an Irrevocable Trust may or may not be right for you. But without the right estate plan, the Internal Revenue Service (IRS) or the Massachusetts Department of Revenue may be able to take a significant portion of your family’s assets after your death.

A good estate plan is a smart idea for everyone, regardless of age, health, or financial status. Although no one knows what tomorrow may bring, the proper estate plan will provide for your loved ones and put them in the best possible position to deal with whatever the future holds.

The right Massachusetts estate planning attorney will answer your estate planning questions, address your concerns, and provide the legal services and personal assurances you need to help you create the best possible estate plan for you and your family.