A trust is a legal arrangement where a granter allows a trustee to hold and manage assets on behalf of their estate and designated beneficiaries. Using a trust allows the granter to control how assets are managed and distributed after they pass away. Furthermore, a trust can protect wealth from debt collectors, estate taxes and disputes.
There are several types of trusts you may find beneficial if you add them to your estate plan. These include:
1. A revocable trust
A revocable trust is one of the most common types of trusts. This trust allows you to retain lifetime control over your assets and alter the contents of the trust at any point during your life. For example, you can add or remove beneficiaries or trust funds from a revocable trust. Once you pass away, a revocable trust becomes irrevocable and cannot be altered, protecting those assets from creditors and disputes.
2. An incentive trust
You may want your legacy to be used for a specific purpose — or you may worry that sudden wealth will actually cause your heirs to lose purpose and focus in their lives. With an incentive trust, you can control how your assets are distributed and used. For example, you may set up an incentive trust to be used only to pay for student loans.
3. A spendthrift trust
Do you have a beneficiary who cannot manage their finances? You can set up a spendthrift trust to limit access to trust funds. This can help prevent a beneficiary from spending all of their inheritance at once and can protect them from their worst instincts.
4. A charitable trust
Do you want your money to do something good after you are gone? You can use a charitable trust to donate money to charities, private organizations or research groups. Funds from a charitable trust can be distributed at regular intervals until funds are depleted.
5. A pet trust
If you have a pet, you can set up a pet trust to provide for its care after you pass away. Pet trust funds can be used to pay for their care, grooming, housing and food.
If you want to learn more about your trust options, it may be time to reach out for legal guidance.
