Estate planning is so important for a number of reasons. With the proper legal tools in place, you can find peace of mind and a sense of control in an otherwise uncertain future. While many people think of a will when estate planning is brought up, it is about so much more than that. Trusts, for example, can be very beneficial to a solid estate plan. There is not, however, just one type of trust. There is a variety of trust types and each can bring unique benefits to your estate plan.
What Kind of Trusts Can I Use in My Estate Plan?
A trust is established by the trust grantor who transfers assets into the trust in order to fund it. The trust is then managed by the appointed trustee who manages the trust for the benefit of the beneficiaries. Trusts can have many benefits including allowing trust assets to avoid going through the cost and time-consuming probate process and also allowing for significant tax savings, among other things
The two main types of trusts are irrevocable and revocable trusts. An irrevocable trust is one that cannot be amended or revoked except in a narrow set of circumstances that requires the agreement of all trust beneficiaries. A revocable trust, on the other hand, can be amended or revoked at any time during the grantor’s lifetime. These, however, are just the two overarching trust categories. There are a variety of other, more specific trust types.
For example, a testamentary trust is one created by a person’s will. What happens, essentially, is that assets from the estate go to fund the testamentary trust. The assets are then distributed to the beneficiaries according to the terms of the trust. A testamentary trust can be useful if you want to place limits and conditions on how your beneficiaries use and are granted access to trust funds. For instance, you can stipulate in your testamentary trust that trust distributions are to only be made once a beneficiary reaches the age of 18 and may only be used to cover educational expenses.
A special needs trust is another type of trust that can be very beneficial to a person’s estate plan, especially if they have a loved one with special needs. You see, a special needs trust is one set up for the benefit of a special needs beneficiary. With a special needs trust, you can provide financial support for a loved one with special needs without risking the loss of government benefits that person may be receiving. That is because, when properly structured, a special needs trust is not included in government benefit calculations.
Another type of trust is a spendthrift trust. A spendthrift trust is another type of irrevocable trust that is managed by a trustee right from its creation and continuing on after the grantor dies. A spendthrift trust is mainly used when a person wishes to leave someone’s assets, but fears that the beneficiary may waste it or it will be quickly taken by creditors or future creditors. Perhaps the beneficiary has a gambling problem, a substance abuse problem, or is simply terrible with money. A spendthrift trust can allow a person to still provide financial support to this loved one, but help keep the money safe from his or her creditors or his or her poor spending habits. The trust keeps most of the assets over an extended period of time and makes only qualified distributions to the beneficiaries over that time
Estate Planning Attorney
Are you interested in learning more about what a trust can accomplish for you? The dedicated estate planning attorneys at OC Wills & Trusts are here to discuss your many options. Contact us today.