If you’re putting together your estate plan, now is a good time to talk about different trust options. Trusts have the ability to protect your assets, prevent tax issues and more, depending on the type you select.
Trusts are legal arrangements that allow you to place assets in the hands of a third party. Those assets are then managed by the trustee in whatever way the trustor (you) feel is right. They will distribute the trust’s assets following your death or during life, depending on how the trust is designed.
What kinds of trusts are there?
The two main forms of trusts are revocable trusts and irrevocable trusts. Irrevocable trusts can’t be changed once you set them up, but revocable trusts can.
There are also many special types of trusts you might want, including:
- “A” trusts, which are established to benefit your spouse if you pass away
- Bypass trusts, which help avoid estate tax
- Testamentary trusts, which become irrevocable upon death and limit access to the trust by beneficiaries until a preset time
- Special needs trusts, which are designed to give someone with special needs additional assets or income without affecting their benefits
- Generation-skipping trusts, which allow you to bypass leaving assets to your children and instead send them to your grandchildren or others
- Life insurance trusts, which hold life insurance proceeds for your beneficiaries
- Charitable trusts, which donate assets to a charity that you choose upon your death
These are only a few of many types of trusts that exist today. If you want to protect your assets and to help your beneficiaries, it’s a good idea to select one or more kinds of trusts to use.
How can trusts protect your assets right now?
To protect your assets right now, it’s smart to set up an irrevocable trust. Putting your assets into an irrevocable trust helps protect them against creditors and collections. Additionally, if you do pass away, then those assets won’t be a part of your estate for the purpose of taxation. This will potentially help your family save money and make sure that the assets get to your beneficiaries untouched by creditors.