A trust is an estate planning tool that will help you protect your assets. There are two major types, revocable and irrevocable, that offer different types of protection. For example, an irrevocable trust takes assets out of your name and shields them from collections. A revocable trust helps keep your assets out of probate if you pass away.
While many people believe that they don’t need trusts unless they’re wealthy, the reality is that you can benefit from a trust even if you’re not. A trust holds your assets and makes sure that they will pass on to your preferred beneficiaries. A trust may hold your life insurance benefits after you pass away and set up requirements that a beneficiary has to meet before it pays out, too.
Which kinds of trusts are best?
The kind of trust you need will depend on the specifics of your estate plan, but some that you may want to look into include:
- Asset protection trusts
- Special needs trusts
- Irrevocable life insurance trusts
Each of these has their own benefits. For example, the asset protection trust holds your assets to shield them from creditors. The special needs trust holds assets on behalf of a loved one or beneficiary with special needs, so that their government or state benefits are not impacted by an inheritance. Finally, the irrevocable life insurance trust excludes life insurance from your taxable estate and also makes sure the funds go to your beneficiaries under the terms you agree to.
The kinds of trusts you will use in your estate plan will depend on what you want to do with your assets and how you’d like to divide them among your beneficiaries.
Why choose trusts?
Trusts give you control, even once you’ve passed away. Trusts protect your assets by making sure they do not pass on into the hands of a beneficiary without meeting the requirements that you set up. This is a great way to set up inheritances to be sure they go to the right people at the right time. Your attorney can tell you more about the above three trusts as well as others that exist today.