All adults should have at least a basic estate plan. For some, creating a will is sufficient but other people will need to have at least one trust to pass their assets down to their heirs and beneficiaries.
Anyone who’s considering establishing trusts should understand a few basic points about them. This can help you to make decisions about how to proceed. One of the major benefits of a trust is that it provides privacy for the beneficiaries. Unlike a will, the trust doesn’t have to go through the probate process.
Categories of trusts
Trusts have two main categories – revocable and irrevocable. A revocable trust is one that you can cancel or change. You keep control of the assets so you’re able to do what you want. The downside to this type of trust is that creditors can come after the contents of the trust since you still have control over them.
An irrevocable trust is one that you can’t change once you establish it. The only way to change it or cancel it is to get permission from everyone named in it. Because you don’t have control over the assets while they’re in the trust, creditors can’t make claims against irrevocable trusts.
Types of trusts
There are many different types of trusts available. Once you know the category of trust you need, you can explore the options to determine which is the most suitable for your needs. Each one serves a specific purpose.
For example, a special needs trust is meant to provide support for someone who’s receiving needs’ based assistance. This is an irrevocable trust that they don’t have control over so it doesn’t count toward their available assets.
A Totten trust is an example of a revocable trust. This is also known as the payable-on-death designation that’s established when you fill out paperwork for a new account at a financial institution. You can change the designation anytime and you retain control of the account.
Ensuring you understand your options and how they can help your loved ones after you die is important when you’re creating your estate. Working with someone who can help you find solutions to challenges with your estate plan may help you to keep the stress down while you get everything set up.