Do I Need a Trust?

This is a common question we hear.  Maybe you have a disabled child and you want a trust to permit that child to inherit without losing government benefits.  Maybe you or your spouse are having health problems, and you can foresee eventually needing long-term care benefits.  Trusts will allow you to avoid the expensive, public, and lengthy probate process that the law ordinarily requires before your beneficiaries can inherit after you pass.  Or, you might be in the classic “trust fund” situation, where you’re concerned that your children won’t be able to manage money wisely.

These are all excellent reasons to consider a trust.  But what kind of trust?  A quick count shows there are at least thirteen different types of trusts.  Which one is best suited to your needs?

Here’s the basic idea behind trusts, to help you understand why you might need one.

What is a Trust?

Think of a trust like a treasure chest.  You originally bought property or earned money in your own name.  You then transfer those assets into the trust’s name – into your treasure chest, in other words.  The treasure chest becomes a legal entity separate from you, which now holds your property in its name, not yours.

Then you identify people who will occupy the three roles involved in managing trust property.  First, you are the grantor, settlor, or trustmaker – all those words mean the same thing, the person establishing the trust.  Second, you appoint a trustee.  That person is responsible for managing trust assets and following the directions contained in the trust document.  Third, you decide whom you want to receive trust assets – your beneficiary or beneficiaries, in other words.

In legal terms, a trust is a fiduciary agreement between you, your trustee, and your beneficiary.  The trust document contains instructions for what you want done with the trust property, both for how you want it invested, and for how you want trust assets to be distributed when you pass.  Consequently, trusts are a highly efficient hybrid between a power of attorney, an asset-management vehicle, and a last will and testament, all rolled into one legal entity and document.

There are two basic kinds of trusts to understand, before they split off into their thirteen (or more) different flavors:  revocable or irrevocable trusts.

The Revocable Trust

A revocable trust can be thought of as a treasure chest with an open lid.  As grantor of a revocable trust, you can get at trust assets freely.

You yourself can also occupy all three roles in a revocable trust –grantor, trustee, and beneficiary.  If need be, you can also tinker with trust terms, by freely amending them to change the directions, beneficiaries, or trustees.  Or, you can revoke the whole thing.  Before that point, though, the trust document will be there to take care of everything you want it to.

If you should have an accident and lose capacity, the terms of your trust will designate a person to step in on your behalf and, thus, avoid the need to go to court to get a guardian for you.  The trust will also direct who inherits your assets, thus keeping your affairs private and out of probate court.  This feature is especially important if you (formerly) and then the trust (after you created it) owns real property in various states.  The savings in court costs in that situation could be significant.

The Irrevocable Trust

This is the trust for you if you anticipate the need for MaineCare long-term care benefits in your future, or you work in a field where lawsuits are common, such as owning a small business or in the construction industry.

The disadvantage to an irrevocable trust, however, is that you will be sacrificing all or almost all control over trust assets, unlike in the revocable-trust situation.  Once an irrevocable trust is established, you as grantor/settlor/trustmaker cannot directly alter the terms and, generally speaking, your access to trust money is restricted or entirely precluded – as is required in order to enjoy the potent benefits of this kind of trust.

Think of an irrevocable trust as being a treasure chest with a locked lid.  Your trustee –who generally cannot be you –is the one with the key.  You yourself can no longer reach your assets.  This relinquishment of control is necessary to shelter your assets from creditors, or to protect your assets when entitlement to government benefits would otherwise require you to spend almost all you own first.

There are ways to draft an irrevocable trust carefully, so you can still exert your will over how assets are to be used.  Just as in the revocable situation, you can impose conditions that must be met before a beneficiary can receive funds.  You can designate how trust income is to be used for specific purposes like college tuition, business start-up, or travel.  You can also authorize a person or entity as “trust protector,” who can alter trust language, correct drafting errors, or create a new similar trust if the law changes.

Trust Caveats

Some sophisticated trusts do convey tax benefits, but, for the most part, the IRS considers revocable trusts to be invisible.  You as grantor/settlor/trustmaker will still pay tax on the revocable-trust income, albeit at your individual rate and not at the prohibitive trust rate.

As for estate taxes, trusts have no effect – but, at least regarding federal estate taxes, those are currently moot for most people.  They are not incurred until the value of the estate exceeds $11.58 million as of 2020.  Maine imposes an estate tax on estates valued at more than $5.8 million as of 2020.

Also, keep in mind that revocable trusts provide no protection against creditors.  If you lose a legal action, a judge can force you to change the beneficiary of your trust to the winner. Irrevocable trusts are free from that kind of interference.

Still, irrevocable trusts must be established long before you run into that kind of trouble.  If you create such a trust while credit problems are looming or have already arrived, you risk that your trust will be undone as a fraudulent conveyance.

Trust Your Attorney

Consult the attorneys at Skelton Taintor & Abbott – we have experience and expertise in trust and estate law.  Designing a treasure chest to fit your specific needs is our job.


This article is not legal advice but should be considered as general guidance in the area of elder law.  You can contact us at 207.784.3200.  Since 1853, Skelton Taintor & Abbott has provided a full range of high-quality legal services to individuals, companies, and municipalities of Maine. The firm’s main office is located in Auburn and in January 2019, a mid-coast office was opened in Waldoboro. You can contact us at 207.784.3200, or by visiting