Trusts: More Uses Than You Might Think

Often times, when meeting with clients, I bring up the topic of a trust. Most people immediately dismiss the idea, claiming they’re not worth millions of dollars and don’t need a trust. They’re right — one reason to establish a trust is to help protect large amounts of wealth from high estate tax penalties. But there are four other common reasons to consider a trust, and they don’t depend on you being a multi-millionaire:

  1. Control Assets After Your Death
  2. One of the most common reasons clients use a trust is to have a mechanism in place where they can control the distribution and use of assets after their death. Parents with young children don’t always have a lot of cash assets on hand but they may own property and likely have life insurance, which means if they were to die, there would be significant assets in their estate. If both parents were to pass away, however, their children would become eligible to receive those assets when they turned twenty-one. Instead, by creating a trust, you (or other relatives) can control those assets, and direct the assets be held for the benefit of your children, but not distributed until your children are older, or have reached a specific point in their lives (graduating college, or getting married, for example).

  3. Hold and Share Control of Real Estate or Business Interests
  4. Real property or business assets can be placed into a trust for the purpose of sharing control of the asset between the trustees, or sharing the distribution of the value of the asset between the beneficiaries. Instead of transferring the asset directly to individuals, you can use the trust to make sure the asset will eventually be transferred, but will remain cared for and under a level of control for as long as the trust exists.

  5. Protect Assets Prior to Applying for Medicare Assistance
  6. To be approved for nursing home care through Medicare, you cannot have any significant assets in your own name. The government, however, looks to see if the applicant has gifted away assets any time over the last five years (this is referred to as the “five year look back period”). It’s important to consider moving assets out of your name earlier so you can avoid the five year look back period, but transferring your house or cash assets directly to your children can be filled with risks. One way to minimize those risks is to transfer assets into an irrevocable trust, which moves them out of your name without granting full ownership in any individual.

  7. Provide for the Care and Protection of Your Pets
  8. Recent changes in Massachusetts law allow you to leave money in trust for your pets. These Pet Trusts can provide guidance about the level of care the pet should receive, and leave room to name both a caretaker for the pet and someone to ensure the trust is being enforced. (For more information, see our earlier post about Pet Trusts.)

If you have questions about trusts, or any estate planning issues, contact us at or 413-570-3170.

Enforcement of Non-Competition Agreements Depend on Competition

Investing in employees is important for all businesses, and the appropriate use of a non-compete agreement can help protect an employer from making these investments and then watching their employees leave to work for a competitor. Whether a non-compete agreement will be enforced, however, can be significantly impacted by whether the old employer and new employer are actually competing, according to a recent U.S. District Court ruling.

Like most requests to enforce a non-compete agreement, the ruling was part of a request for a preliminary injunction, which is made at the initial stage of litigation and requires a clear set of facts for the judge to rule on. In this case, the former employer provided recording keeping and administrative services to Section 529 savings plans; in contrast, the new employer provided recording keeping and administrative services to Section 529 prepaid plans. Ultimately, and in part because of the difficult standard that must be reached in a request for preliminary injunction, the court determined the employee had created enough doubt regarding whether the record keeping functions between the two employers were similar enough to constitute competition. Because the court could not determine the employers were actually competing, it declined to enforce the non-compete agreement.

This case is a very good reminder that whether or not a non-compete agreement will be enforced is often determined when the agreement is drafted, LONG before a dispute arises. If you have questions about non-compete agreements, or would like to discuss any employee issues within your company, contact us at or 413-570-3170.

New Rules for Notices in Probate Administration

Recent statutory changes now require that anyone filing an estate in the Probate Court must also provide notice of the filing to the Division of Medical Assistance, regardless of whether the filing is informal or formal. The DMA must be provided notice of the filing seven days before the petition is filed with the court. (The new procedure is outlined here.)

This new requirement adds to the many steps that must be undertaken to correctly probate an estate.

If you have any questions regarding the administration of an estate, or would like to discuss your estate plans, contact us at or 413-570-3170.

Use Supplemental Needs Trusts to Ensure Benefits Are Not Lost

When someone suffers from a physical or mental disability, they may be eligible for state and federal benefits. Many benefit programs, however, are “need based,” which means the individual is prohibited from having too much income or too many assets. The asset limitations can often be as low as $2,000, which means that even the smallest, well-meaning gifts or bequests from family members to the disabled individual can have dire consequences for that individual’s care.

To avoid an inadvertent disqualification, any gifts or bequests to the disabled individual should be made to a Supplemental Needs Trust (SNT) which names the disabled individual as the beneficiary, but allows an independent trustee to determine exactly how and when money is spent on the beneficiary’s behalf. The funds and assets in the SNT can be used to pay for additional services or care which are not covered by the benefit programs. These services and care can include:

• Transportation
• Training and rehabilitation programs
• Specialized equipment
• Medical expenses
• Entertainment
• Home health aide expenses
• Items and possessions to enhance quality of life.

An SNT can hold most types of assets, and can even be the beneficiary of a life insurance policy. The most important thing to remember, however, is that an SNT should be drafted in advance to ensure it accomplishes the desires of the person funding the trust and meets the needs of the disabled beneficiary.

If you have any questions about Supplemental Needs Trusts, would like to gift money to someone with a disability, or would like to discuss other estate planning questions, contact us at or 413-570-3170.