Estate planning trusts

May 9, 2022

John Brennan, Senior Vice President of Trust and Financial Services at Cape Ann Savings Bank in Gloucester, Massachusetts, talks about how trusts are used in estate planning. He emphasizes the importance of working with an expert who can optimize your use of a trust and help you understand its potential.

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Podcast Transcription:

Transcription Disclosure: Below is a transcript of the conversation between John Maher and John T. Brennan. Please note, this is an unedited "word for word" rendition of the actual conversation and is not intended to be grammatically correct.

John Maher: Hi, I'm John Maher and I'm here today with John Brennan, Senior Vice President of Trust and Financial Services at Cape Ann Savings Bank in Gloucester, Massachusetts. Today our topic is estate planning, trusts. Welcome, John.

John Brennan: Hi, John.

What Is a Trust?

John Maher: So John, we've talked about trusts before, but we want to talk a little bit more about them in the context of estate planning. Tell me a little bit more about a trust and what it is.

John Brennan: Okay. So as we were talking about wills, which are obviously the core of estate planning, trusts are very similar in that trusts are, again, an expression of your wishes. In the estate planning context, they express the wishes of somebody who has passed away.

As you know, from listening to our other podcasts, when you have a revocable living trust, which is a concept we talk about, the reason trusts are powerful is both an individual and their document, which expresses their wishes, their trust, can hold title to the property at the same time. So trusts are important in the estate planning context because one of the things trusts do is they can operate on property when you're alive, they can hold any type of property, and trusts could also spring in case of disability, if you have a problem while you're alive.

And a trust has the ability to align your property for your benefit and have the trustee, who potentially could not be you, be assigned with a job of organizing that property for your benefit in helping you out. The trust is also... The reason why it's an important part of an estate plan is that a will retitles property, it takes property from point A, maybe goes through the state and then distributes it. So it goes “A” person who's passed, “B” into the estate, and “C” reassigned to the person named to the will.

A trust has a longer relationship with the property, a trust can be a tax paying entity in its own right, where you could create a trust that could potentially benefit someone for decades following your death, and keep your property and act on your property. It's a fiduciary relationship to property where it directs the property according to your trust terms.

Different Types of Trusts

John Maher: Okay. What are some of the basic different types of trusts?

John Brennan: Well, we talked about this the other day, we had talked about revocable living trusts. We talked about the husband and wife having twin revocable living trusts in order to maximize their ability to pass property free of the estate tax.

We talked about special needs trusts, which are trusts for disabled individuals who receive public benefits, who could still potentially receive the benefit of some extra income that's directed in their favor. We talked about ILITs or irrevocable life insurance trusts, which are trusts set up to hold life insurance on someone's life and then collect a gift which pays the premium, or the policy gets paid to the trust and then the trust operates on the assets.

And then after that, you can pretty much use your imagination, and there's all different types of trusts. So there's many, many, many parameters. You tell me what the trust wants to do and we could probably make it work.

How Do You Set up a Trust?

John Maher: Okay. How do you go about setting up a trust?

John Brennan: Again, a trust can be relatively simple, but I always recommend an attorney for something like a trust. The law is complicated, there are certain things you want to make sure you have in there just to check the box on certain things. So I'll always recommend the use of counsel, but a trust could be relatively simple, where property, purpose, trustee, it can be really broken down to very basic elements. But if you're out there, I recommend working with a lawyer.

What Is a Certificate of Trust?

John Maher: In terms of documents that are involved in trusts, I've heard of a certificate of trust. What is that and how does that fit into the idea of trust in an estate plan?

John Brennan: So a certificate of trust would be, let's say you own a trust and you put a house in a trust, a certificate of trust would be something that would be filed at the Registry Of Deeds, which would show that a trust exists, so and so was the trustee and they were empowered to act. What it does is it lets people know that someone has the ability, that a trust is real and this person has the legal authority to act on the property in the trust. So if it's a piece of real estate, a lender might see that and say, "Okay so and so here's the filing. They have the authority to borrow against this property for the trust purposes."

John Maher: Okay. So anytime you're assigning some of your property to a trust, it's important to have that certificate of trust so that it, again, it just proves that the trust has ownership over that.

John Brennan: In some ways it's like wearing a badge. It says, "Yes, I have the authority to act here." Yeah, that's what that certificate does.

The Importance of Getting Help With Your Trust

John Maher: Any tips or final thoughts on trusts as part of an estate plan and why they're important? John Brennan: Well, as you know, we talked about it extensively in some other podcasts, so I would say I'm certainly open to talking to individuals about how they might use their trust. But I would say the ability to do different things with a trust is vast. You can pretty much do whatever you want, it's just a question of language and how. And people often come to me and I tell them what their trust says, and I tell them what the trust does... When it's operating on assets and it's benefiting people who are named in the trust, what that will look like and what those parameters might actually translate to in the real world. So I suppose that's my advice for trusts.

John Maher: Is to have somebody go over it with you and make sure you understand what it is that it's doing?

John Brennan: Smart people get stymied by them because you could understand in the lawyer's office, but the concepts are often pretty foreign. I tell people there's nothing wrong with taking a little bit of knowledge from various sources, even things like web searches and YouTube can be helpful, and then things like your friendly trust officers here at the Cape Ann Savings Bank are the type of people who can be helpful just in terms of understanding what you got and knowing how it's going to work.

Contact Cape Ann Savings Bank to Learn More About Trusts

John Maher: All right, well that's good advice. Thank’s John for speaking with me today.

John Brennan: Sure thing, John.

John Maher: And for more information, contact Cape Ann Savings Trust & Financial Services at 978-283-7079, or visit the website at capeannsavings.bank.

Investments purchased through the Cape Ann Savings Trust & Financial Services Department are not FDIC insured, not FDIC, guaranteed, not bank guaranteed, and may lose principal value.