You may not be aware of all the benefits and uses of a trust. Like many other people, you may believe that a trust is something only put together by the most wealthy or famous. But a trust can be used for many different things and more importantly, trusts are for everyone, regardless of wealth. A trust can manage a trustor’s assets while they are alive, reduce estate tax liability or it can be a simpler way to bestow an estate to beneficiaries.
Though trusts will all have the same basic structure, there are different types of trusts with each having its own specifics and purposes. Here is a list of different types of trusts that you can review to see which will best fit your estate planning needs.
Revocable Living Trust – This type of trust will contain your instructions on how you want your assets to be distributed after your death or if you become incapacitated in some way. This trust can transfer assets outside of probate and is able to be changed, altered or canceled at any time by the trustor.
Testamentary Trust – This type of trust is sometimes called a will trust because it is an agreement that is set-up to benefit a beneficiary after the trustor’s death. Unlike a living trust, this type of trust does not avoid probate.
Irrevocable Trust – This is a trust that cannon be altered or changed by the trustor and cannot be revoked after their death. Since this type of trust contains assets that cannot be taken out and put back into the trustors possession, it has beneficial tax benefits associated with it.
Incentive Trust – This trust will have provisions within it made by the trustor that a trustee must follow before they can receive any assets.
Beneficiary Controlled Trust – This trust is set-up to have the primary beneficiary be the only trustee and they will have the ability to remove a co-trustee and select another. Typically, this person is the grantor’s child or even grandchild and can distribute assets to themselves.
Asset Protection Trust – You can create this type of trust to hold your assets and keep them shielded from creditors. This trust will allow creditors to work out terms with the debtor and avoid litigation.
Offshore Trust – You can create this trust which will be very similar to other trusts, the only difference being is that it is created in a jurisdiction that may be more attractive to trustors because of the modified laws in that area.
Insurance Trust - With this type of trust, you can combine your life insurance policy within the trust which keeps it from being taxed on the estate itself. This type of trust is irrevocable, so you are not able to borrow or change the policy. This trust does allow the policy to assist in paying for expenses on the estate after your death.
Charitable Trust – The beneficiary of this trust will be a charity or non-profit organization of your choice. You can also create a charitable trust to be part of a normal trust, where the beneficiaries would receive part of the trust on your passing and the rest would go to the charity of your choice.
The above list shows just a few of the different types of trusts that you can choose. Trusts can have many benefits, such reduced taxes, allocating assets, protects privacy, shielded from creditors and avoiding probate. If you have questions about setting up a trust, you should contact an estate planning attorney who can provide in-depth knowledge about how a trust can work for you.