One of the functions of your estate plan is to help provide for your loved ones as much as possible after your death. There are several elements to an estate plan that can do this. Two primary ones include your will and any trusts. When the estate plan goes through probate, the will is part of the record. Trusts move assets to the beneficiary without having to go through the probate court.
If you choose to incorporate trusts into your estate plan, you must remember that there are different types. Setting up the appropriate trusts for the situation is important. In order to do this, you have to think about your intentions and the beneficiary’s circumstances. This can help to narrow down the types of trust that might work for the situation.
There are two very broad categories of trusts to know – revocable and irrevocable. A revocable trust means that you can pull the assets out and change the terms. These are subject to creditor claims against you. Irrevocable trusts can’t be altered and aren’t subject to claims from creditors.
Within these categories, there are types of trusts to meet a variety of needs. For example, a special needs trust is an irrevocable trust that ensures a person who relies on needs-based or asset-based programs won’t lose access to those because of the inheritance.
Other types of trusts have different purposes. For example, a charitable trust enables the person to support a favorite cause and may help to lower the gift or estate tax.
Discussing your situation with someone familiar with estate planning can help you learn the options you have and evaluate them. From there, you can set things up so they reflect your wishes.