When it comes to estate planning, trusts are an invaluable tool for protecting assets and providing security for the future. Through a trust, you can specify who will receive certain possessions after your death or who should manage those assets until then.
A wide variety of trusts are available; understanding their purpose and benefits can help you decide which type is best suited to achieving your goals.
1. Revocable living trust
A revocable living trust is created during a person’s lifetime to manage their assets and property. It is called “revocable” because the person who creates the trust (the grantor) can change or revoke it at any time during their lifetime, as long as they are mentally competent.
2. Irrevocable trust
Another popular type of trust is an irrevocable trust. This type of trust does not allow for any changes once it has been established, and you no longer own all assets transferred into it—they become owned by the trustee and managed according to the terms outlined in the agreement.
3. Charitable trust
A charitable trust is set up to benefit one or more charitable organizations. It is established by the donor, who transfers assets to be managed by a trustee, who distributes income or principal from the trust to the designated charities or causes.
4. Special needs trust
A special needs trust is created to benefit an individual with disabilities. It is set up to allow the person to receive financial support without losing eligibility for government benefits, such as Medicaid or Supplemental Security Income (SSI). This type of trust can provide peace of mind for families who want to ensure that their loved ones with disabilities will have the financial support they need for their lifetime.
No matter what type of trust you choose, legal guidance can help you decide on the right way to protect your assets, your heir and your legacy.