Estate planning provides many options for different types of trusts, which each provide its own benefits. The common goal of a trust is to transfer assets to a loved one or charitable organization, for their own benefit. Trusts can also be useful in protecting parts of your estate from liability or probate, avoiding a costly litigation process, and potentially saving some money on taxes.
Revocable Trusts
Revocable trusts, also known as living trusts or revocable living trusts, are generally used to contain assets that you want to pass on to loved ones. While they don’t provide as many benefits as other types of trusts, they do allow you to modify or transfer assets in and out as necessary. They will keep your assets out of probate, which may be all you require of a trust. If so, a revocable trust is recommended for its simplicity and flexibility.
Irrevocable Trusts
As opposed to the revocable trust, an irrevocable trust is unable to be changed after it is created. Once assets are transferred to the trust, you can no longer remove them. Irrevocable trusts, however, provide other benefits than revocable trusts. The most common use is to protect assets from creditors, as an irrevocable trust essentially removes those assets from your estate. This can minimize your estate tax liability, or shelter important assets from collection.
Testamentary Trusts
Testamentary trusts are established at the time of death. They are generally used to dictate the timing of when a beneficiary will receive the assets of a trust while allowing another individual to manage the assets in the meantime. This can be useful for passing on assets to children who are adolescents, and so cannot receive the assets of a trust at the time of the grantor’s death. They may also be used to provide income to a beneficiary over a longer period of time, instead of receiving all of the assets at once.
Special Needs Trusts
Because many people with special needs or physical disabilities rely on government assistance programs, a special needs trust is sometimes necessary to ensure that they retain their eligibility for these programs. Often, eligibility for these programs is dependent on income, so special needs trusts are structured in a way that won’t disrupt their eligibility.
This is by no means an exhaustive list of every type of trust available for your estate planning needs, so consulting with an estate planning attorney is always recommended to determine the best type of trust to suit your needs. If you’re ready to make use of a trust, or want to begin your own estate planning process, contact our team at (713) 455-6661 or through our website.
Albright & Lumpkin, PC
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