Trusts

Vermont Trust Planning

Revocable Trusts; Irrevocable Trusts; Asset Protection; Tax Planning; Medicaid Planning

Whether you are planning for retirement, protecting your family's future, or ensuring your Vermont estate is distributed according to your wishes, a trust may be one of the most powerful tools available to you. At Nicole Peck McPhee, PC, we help Vermont families, individuals, and business owners create customized trust strategies that protect assets, minimize taxes, and provide lasting security for the people and causes they care about most.

Attorney Nicole Peck McPhee has drafted and administered Vermont trusts for more than 30 years; her practice is grounded in the Vermont Trust Code (14A V.S.A. §§ 101–1204), Vermont Medicaid rules, and federal estate and gift tax law. In-person meetings are available at her Rutland office; virtual consultations are available to Vermont families statewide.

A trust is a legal arrangement in which one person, known as the grantor, settlor, or trustor, transfers ownership of assets to a trustee; the trustee holds and manages those assets for the benefit of one or more beneficiaries. Trusts are among the most flexible and effective estate planning tools available under Vermont law.

Trust assets can include virtually any type of property; cash, investment accounts, real estate, business interests, personal property, vehicles, and more. In most revocable living trusts, the grantor serves as both the initial trustee and primary beneficiary; retaining the same practical control over assets as before the trust was created.

The Three Parties to Every Vermont Trust

Living Trusts (Inter Vivos Trusts)

Created during your lifetime, a living trust allows for immediate management of your assets. Living trusts are among the most widely used estate planning tools in Vermont because they avoid probate, maintain privacy, and provide seamless continuity if you become incapacitated. You do not need to wait for death or court approval; the trust operates immediately and continuously.

Testamentary Trusts

Established through your Last Will and Testament, a testamentary trust takes effect only upon your death. These are commonly used to manage assets for minor children, protect inheritances for family members with special needs, or carry out charitable goals. Unlike a living trust, a testamentary trust does not avoid Vermont probate; it is created through the probate process.

Nicole Peck McPhee, PC helps clients select, draft, and administer the right type of trust for their individual circumstances. Vermont trust services include the following.

Revocable and Irrevocable Living Trusts

•     Revocable Living Trust: Allows you to retain full control of your assets during your lifetime while avoiding Vermont probate, maintaining privacy, and planning for incapacity. You can amend or revoke the trust at any time; it is the most widely used trust in Vermont estate planning.

•     Irrevocable Living Trust: Once established, the trust generally cannot be modified. Assets transferred into an irrevocable trust are removed from your taxable estate; offering significant benefits for Vermont estate tax planning and asset protection.

Asset Protection Trusts

•     Spendthrift Trust: Protects beneficiaries who may struggle to manage money responsibly or face creditor claims. The trustee controls distributions; shielding assets from misuse and protecting your legacy.

•     Substance Abuse Trust: Specially designed to support a loved one struggling with addiction; while safeguarding inherited assets from being used to fund harmful behaviors. Drug testing, treatment requirements, and direct-to-provider payments can all be built into the trust.

•     Discretionary Trust: Grants the trustee broad discretion over when and how much to distribute to beneficiaries based on their individual needs and circumstances.

•     Third-Party Spendthrift Trust: Set up by a grantor to protect a beneficiary's inheritance from their creditors or their own poor financial decisions.

Special Planning Trusts

•     Special Needs Trust (Supplemental Needs Trust): Provides financial resources for a loved one with a disability without jeopardizing their eligibility for Medicaid, SSI, or other government benefits; a critical planning tool for Vermont families.

•     Pet Trust: Ensures the continued care of your animals should you become incapacitated or pass away; designating a trustee and funds specifically for their needs.

•     Legacy Trust: Spans multiple generations to preserve and transfer wealth, values, or family assets across time; ideal for Vermont families focused on long-term stewardship.

•     Support Trust: Directs the trustee to make distributions specifically for a beneficiary's health, education, maintenance, and support.

•     Sprinkle Trust (Spray Trust): Gives the trustee discretion to distribute income or principal among multiple beneficiaries based on their relative needs; a flexible and tax-efficient distribution tool.

Estate and Gift Tax Planning Trusts

Vermont imposes a state-level estate tax; federal estate taxes apply to larger estates. Nicole Peck McPhee, PC helps clients use the following tax planning trusts to minimize or eliminate estate and gift tax exposure.

•     Irrevocable Life Insurance Trust (ILIT): Holds a life insurance policy outside your taxable estate; providing estate liquidity that is particularly valuable for Vermont family-owned businesses and larger estates.

•     Spousal Limited Access Trust (SLAT): Allows one spouse to transfer assets out of the taxable estate into a trust that still benefits the other spouse and family members; leveraging the federal estate tax exemption.

•     Grantor Retained Annuity Trust (GRAT): Transfers appreciation on assets to heirs free of gift or estate tax while the grantor retains an annuity stream for a fixed term.

•     Qualified Personal Residence Trust (QPRT): Transfers your Vermont home or vacation property out of your taxable estate at a reduced gift tax cost while allowing you to remain in the home for a set term.

•     Intentionally Defective Grantor Trust (IDGT): Removes assets from your estate for estate tax purposes while allowing appreciation to grow inside the trust; income taxes paid by the grantor further reduce the taxable estate.

•     Generation-Skipping Transfer Trust (GST Trust): Designed to pass wealth to grandchildren or later generations while minimizing or avoiding the generation-skipping transfer tax.

•     Credit Shelter Trust (Bypass Trust): Maximizes use of both spouses' federal and Vermont estate tax exemptions; keeping more wealth in the family.

•     Qualified Terminable Interest Property Trust (QTIP Trust): Provides income to a surviving spouse during their lifetime while ensuring the ultimate distribution of trust principal is controlled by the first spouse to die; and can yield substantial Vermont estate tax savings.

Charitable Trusts

For clients with philanthropic goals, Nicole Peck McPhee, PC structures charitable trusts to benefit Vermont charities, educational institutions, and other nonprofit organizations while simultaneously reducing income and estate taxes.

•     Charitable Remainder Trust (CRT): A tax-exempt irrevocable trust that provides income to the grantor or other beneficiaries for a term; with the remaining assets passing to charity at the end of that term.

•     Charitable Lead Trust (CLT): Provides income payments to one or more charities for a set period; after which the remaining assets pass to family members or other non-charitable beneficiaries.

Medicaid Planning Trusts

Vermont's long-term care costs can quickly deplete a lifetime of savings. A Medicaid Qualifying Trust, an irrevocable trust structured to comply with Vermont Medicaid rules, can help protect your principal from spend-down requirements; preserving assets for your family while still allowing you to qualify for Medicaid assistance. Vermont's 60-month look-back period makes early planning essential.

Benefit	What It Means for You
Probate Avoidance	Assets held in a living trust pass directly to beneficiaries without Vermont probate court proceedings; saving time and cost.
Privacy	Unlike a will, a trust is not a public record; your asset distribution remains confidential.
Incapacity Planning	A living trust ensures seamless management of your assets if you become unable to manage them yourself.
Asset Protection	Irrevocable trusts shield assets from creditors, lawsuits, and certain Vermont Medicaid rules.
Estate Tax Reduction	Strategic trust structures reduce or eliminate estate taxes in Vermont and at the federal level; preserving more wealth for your family.
Medicaid Planning	Properly structured trusts can protect assets from Vermont Medicaid spend-down requirements.
Business Continuity	Trusts ensure the smooth transition of Vermont family businesses without disruption or forced sale.
Beneficiary Protection	Spendthrift and discretionary trusts protect inheritances from beneficiaries' creditors or poor financial decisions.
Charitable Impact	Charitable trusts allow you to support Vermont organizations and causes you care about while receiving meaningful tax benefits.

Many Vermont clients wonder whether a revocable living trust or a Last Will and Testament is the better choice for their estate plan. The answer depends on your individual circumstances, the size and complexity of your estate, and your goals for asset management and distribution.

A Last Will and Testament takes effect only upon death; it is subject to Vermont probate; and it becomes a public record. A revocable living trust, by contrast, takes effect immediately; allows for incapacity planning during your lifetime; avoids probate entirely; and remains completely private. For many Vermont clients, a revocable living trust combined with a simple pour-over Will provides the most comprehensive and efficient estate plan.

•     A Will is required to designate a guardian for minor children; a trust cannot do this

•     A trust avoids Vermont probate; a Will does not

•     A trust provides incapacity planning during your lifetime; a Will does not take effect until death

•     A trust is a private document; a Will becomes a public record through the Vermont probate process

•     Many comprehensive Vermont estate plans use both; a trust for asset management and distribution; a pour-over Will as a safety net

A Vermont trust is a legal arrangement in which a grantor transfers assets to a trustee; the trustee holds and manages those assets for the benefit of one or more beneficiaries according to the terms of the trust document. Vermont trusts are governed by the Vermont Trust Code (14A V.S.A. §§ 101–1204) and can serve a wide range of planning goals; from probate avoidance to tax reduction to asset protection.

A revocable living trust can be amended or revoked by the grantor at any time during their lifetime; the grantor retains full control over the assets. An irrevocable trust generally cannot be modified once established; assets transferred into it are removed from the grantor's taxable estate. Revocable trusts are used primarily for probate avoidance and incapacity planning; irrevocable trusts are used for estate tax reduction, asset protection, and Medicaid planning.

Yes; assets held in a properly funded Vermont revocable or irrevocable living trust pass directly to beneficiaries at death without going through Vermont probate court. This saves time, reduces cost, and keeps your estate distribution entirely private. A Will does not avoid probate; a trust does.

A Vermont Special Needs Trust, also called a Supplemental Needs Trust, provides financial resources for a loved one with a disability without jeopardizing their eligibility for Medicaid, SSI, or other government benefits. Without this type of trust, an inheritance can disqualify a disabled beneficiary from the government programs they depend on. A properly drafted Special Needs Trust preserves both the inheritance and the benefits.

A Vermont Medicaid Planning Trust is an irrevocable trust structured to comply with Vermont Medicaid rules; it protects assets from the Medicaid spend-down requirement while still allowing the grantor to qualify for Medicaid assistance with long-term care costs. Vermont's 60-month look-back period means that planning must begin well in advance of any anticipated need for Medicaid.

A Vermont Substance Abuse Trust is designed to support a beneficiary who struggles with addiction while preventing inherited assets from being used to fund harmful behaviors. The trust can require drug testing before distributions, mandate enrollment in a qualified treatment program, direct payments to service providers rather than to the beneficiary directly, and expand access to funds as sobriety is verified over time. It is one of the most carefully structured and consequential trusts Nicole Peck McPhee drafts.

An ILIT holds a life insurance policy outside your taxable estate; the death benefit is paid to the trust rather than directly to your estate; keeping it free from Vermont and federal estate tax. ILITs are particularly valuable for Vermont business owners and families with larger estates who need estate liquidity to pay taxes or buy out business interests without forcing a sale of assets.

Vermont imposes a state estate tax with a $5,000,000 exemption and a flat 16% rate on the taxable amount above that threshold. Vermont's exemption is not portable between spouses; meaning married couples with combined assets above $5 million face significant Vermont estate tax exposure without coordinated trust planning. Credit Shelter Trusts, SLATs, ILITs, GRATs, and QPRTs are among the tools Nicole Peck McPhee uses to reduce or eliminate this exposure.

A Vermont Pet Trust is a legally enforceable trust that designates a trustee and sets aside funds specifically for the care of your animals should you become incapacitated or pass away. Vermont law recognizes pet trusts as valid and enforceable; ensuring your animals receive the care you intend even when you can no longer provide it yourself.

The cost depends on the type of trust, the complexity of your estate, and the documents required. Attorney Nicole Peck McPhee discusses fees transparently at the outset of every engagement. The cost of a properly drafted Vermont trust is modest compared to the probate costs, estate taxes, and family conflicts it can prevent.

Yes. Nicole Peck McPhee drafts and administers Vermont trusts for clients throughout the state. In-person meetings are available at her Rutland office; virtual consultations are available statewide via secure Zoom for clients who cannot travel.

A Vermont trust is only as effective as the attorney who drafts it. Attorney Nicole Peck McPhee brings more than 30 years of Vermont trust drafting and administration experience to every client engagement; ensuring that your trust is legally sound, properly funded, and part of a coordinated estate plan that truly protects your family.

•     You work directly with Nicole; never a paralegal or associate

•     Every trust is grounded in the Vermont Trust Code (14A V.S.A. §§ 101–1204); Vermont Medicaid rules; and federal estate and gift tax law

•     Plain-language advice; no legal jargon and no surprises

•     Fees discussed transparently at the outset of every engagement

•     Integrated estate planning; your trust is coordinated with your Will, power of attorney, and advance directive

•     Admitted to practice before all 14 Vermont Probate Divisions

•     In-person meetings available in Rutland; virtual consultations available statewide

Schedule a Consultation with Attorney Nicole Peck McPhee

Whether for estate planning and wills or trusts, a real estate transaction, business formation or acquisition, or a private adoption matter, the first step is a focused one-on-one consultation. Nicole will learn about your situation, clearly explain your legal options, and outline exactly what is needed and at what cost. Consultations are available in person in Rutland or by secure Google Meet for clients anywhere in Vermont.

Contact us at 802-775-4845 or by email at [email protected] or contact Nicole Peck McPhee, PC.