Have you heard about trusts and are you interested to learn more? There are actually many different types of trusts and each one has unique characteristics, as well as, a unique role in the estate planning process. Let us take a look at four of the most commonly utilized types of trusts.
- Revocable. As the name implies, a revocable trust can be changed or even revoked at any time by the trust creator. This type of trust typically provides for the creator, during his or her lifetime, and directs the disbursement of the trust’s property following his or her passing. The key benefit of a revocable trust may be that it bypasses the public, lengthy, and expensive probate process. A revocable trust can also include provisions regarding the management of the creator’s property, should he or she become incapacitated.
- Irrevocable. Similarly, as the name implies, upon creation, an irrevocable trust cannot be changed or revoked, except under a narrow set of circumstances. Once property is transferred into the trust, it is no longer considered to be the property of the creator. The key benefits of the irrevocable trust may be minimizing or eliminating income and estate taxes, protection from the creator’s creditors, and not having the assets considered in determining Medicaid eligibility.
- Spendthrift. A spendthrift trust can be created when it is the desire of the creator to control the use of income or property by the beneficiary. The best example of this may be the situation where a beneficiary has a gambling or substance abuse issue. Another key benefit of the spendthrift trust may be protection of the trust property from the beneficiary’s creditors.
- Special Needs. A special needs trust may be most typically created by parents to provide for a disabled child after their passing. Another key benefit of a special needs trust can be providing for the child without impacting his or her eligibility for government programs.
Having a basic understanding of what each estate planning tool can do for you can be a great starting place for estate planning. For more information on trusts and other estate planning tools, please reach out to our office to schedule a meeting time.