Irrevocable Family Trust Laws in Massachusetts

By Wayne Thomas

An irrevocable family trust can be effective estate planning tool. When an individual establishes this type of trust, he appoints an individual, known as a trustee, to oversee the administration of the trust. In Massachusetts, specific rules apply to the trustee. State law also sets forth the limited circumstances for the modification or termination of the trust. Understanding the state laws that apply to irrevocable family trusts will help ensure the proper distribution of property held in the trust.

An irrevocable family trust can be effective estate planning tool. When an individual establishes this type of trust, he appoints an individual, known as a trustee, to oversee the administration of the trust. In Massachusetts, specific rules apply to the trustee. State law also sets forth the limited circumstances for the modification or termination of the trust. Understanding the state laws that apply to irrevocable family trusts will help ensure the proper distribution of property held in the trust.

Overview of Irrevocable Family Trusts

An irrevocable family trust involves the holding of property for the benefit of one or more relatives. The person creating the trust, referred to as the settlor, has complete discretion in determining which family members to include in the trust; these persons are referred to as the beneficiaries. The settlor deposits property into the trust, which is then distributed to the beneficiaries by the trustee according to the specific instructions as described in a written trust instrument. The trust is said to be irrevocable because the settlor has no authority to modify or terminate the trust after its creation.

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Notice

Once an irrevocable family trust is created, Massachusetts law requires that the trustee keep the beneficiaries informed. Specifically, within 30 days after his appointment, the trustee must provide his name and address to the beneficiaries listed in the trust instrument. The trustee is also required to furnish a statement of accounting covering all trust property to the beneficiaries on a yearly basis, or upon request. Failure to follow the notice requirement can result in removal of the trustee.

Modification and Termination

In Massachusetts, if all beneficiaries and the settlor consent, the trust instrument may be modified or terminated even if the action conflicts with the reason the trust was created, referred to as the "material purpose" of the trust. An example might be a trust created to support a settlor's children through college. If all parties agree, the trust could be modified or terminated while a beneficiary is still in school. In addition, the court may allow the modification or termination without the consent of all the beneficiaries if the court is satisfied that the interests of any non-consenting beneficiary are protected. An example might be if the beneficiary still in college has sufficient resources to support himself. In addition, state law allows modification or termination of the trust without the consent of the settlor, provided all beneficiaries consent and the change does not conflict with the material purpose of the trust.

Uneconomical Trust

Massachusetts law also allows the termination of an irrevocable family if the total value of the trust is so low that continuing to operate the trust becomes impractical. By law, a trustee is authorized to terminate a trust if its value is less than $200,000 and the administrative costs make it no longer possible to effectively carry out the trust's terms. In addition, a judge may terminate a trust or order appointment of a new trustee for a trust of any value if the court determines that the administrative costs relative to the value of the trust require this action.

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North Carolina Law on Irrevocable Living Trusts

References

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How to Settle a Trust in Indiana

Keeping assets well away from probate court is the main idea of trusts. These legal structures allow a settlor to place investments and property under the management of a trustee. A trust also names beneficiaries who receive assets -- without the assistance of the court system -- when the settlor dies. This event begins settlement of the trust, which is the responsibility of the trustee.

Does an Irrevocable Trust Automatically Terminate Upon a Certain Date?

An irrevocable trust is an estate planning tool that the grantor can use for a variety of reasons, including minimizing estate taxes, providing for family members and keeping financial information confidential. Three parties are involved in irrevocable trusts: the grantor, who creates the trust; the trustee, who manages the trust; and the beneficiaries, who benefit from the trust. Unlike a revocable trust, an irrevocable trust can only be modified or terminated in certain circumstances. An irrevocable trust may automatically terminate on a specific date if the grantor specified a termination date in the trust document. If the grantor did not provide a termination date, an irrevocable trust may be terminated for other reasons.

Rights of the Beneficiary of an Irrevocable Family Trust

An irrevocable family trust is a noncharitable trust set up by the creator, or settlor, for the benefit of family members. This type of trust is typically a permanent agreement that controls family assets placed into the trust for the benefit of the beneficiaries named in the trust papers. Although state laws establish irrevocable trust beneficiary rights, some rights are common across all or most states.

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