Introduction
A trust is a legal agreement. The trust holder permits the trustee to hold their assets for another person, known as a beneficiary. Adding a trust offers additional protection for your family and other beneficiaries as part of estate planning. There are various trusts available. In this guide, we’ll explore some of the most common types of trusts to help you decide which one is best for you.
Types of trusts
Here are some of the most common types of trusts:
1. Living trust
A living trust is also known as a revocable trust. This means that the trust can be changed while the trust holder is still alive. Irrevocable trusts cannot be changed without the consent of all the beneficiaries. Living trusts protect beneficiaries, but they can be accessed by creditors. They do not go through probate.
2. Joint trust
A joint trust is a popular option for couples. This type of trust enables two people to create a trust together. Both parties have control of the trust and it passes to the surviving partner automatically if the other holder dies.
3. Will trust
A will trust is made as part of somebody’s will. It doesn’t come into force until the individual dies. It is important to note that this type of trust must pass through probate.
4. Charitable trust
If you wish to donate money to a good cause or a charitable organization, it’s a good idea to set up a charitable trust. In this case, the organization is the named trustee.
5. Special needs trust
A special needs trust is a type of trust, which benefits people with special needs who need long-term care. These trusts are available to people under the age of 65.
6. Asset protection trust
An asset protection trust helps to protect assets from creditors. This is an example of an irrevocable trust. It is more expensive to set up this type of trust, but it’s a good option if you want to protect your estate against judgments.
7. AB trust
An AB trust is an alternative to a joint trust for couples. It works slightly differently, as the trust is split into A and B when one of the holders dies. This option offers tax benefits.
8. Insurance trust
An insurance trust is designed for people who want to hold their insurance policy in trust. It can help to reduce tax liabilities on the policy when the holder passes.
Which type of trust is best for me?
Some types of trusts are better suited to individuals or couples than others. When you’re researching trusts, it’s important to think about your requirements and objectives. Consider the types of assets you have, your marital status and the value of your assets. It’s wise to seek expert advice to help you decide which trust is best for you and your family.
Conclusion
Setting up a trust is a great way to protect your assets and your partner or family members. There are lots of different types of trusts, which have pros and cons. It’s a good idea to get expert advice before you decide which trust to open.
Family.Estate can match you with a qualified estate planner in your area to help you decide which trust is most suitable.
Disclaimer: This is not legal advice and information may vary between states. Information found on this website is general in nature. Please consult with a estate planner for personal support.
Sources:
https://www.investopedia.com/articles/pf/08/trust-basics.asp
