What Are the Main Types of Trusts?
A last will and testament is likely the most crucial estate-planning document. However, only 46% of American adults have one. Unfortunately, even fewer have a trust.
A trust is another critical estate-planning tool that provides power a will doesn’t. But there are different types of trusts, and you must choose the right kind.
The first step is learning the different types. Then, you can choose the right option. Keep reading this guide to learn the most common types of trusts.
Basic Principles of Trusts
One of the first things to consider is the difference between a will vs. trust. A will is a legal document stating who gets your assets when you die. You name your beneficiaries and list what each person receives after you die.
A will can also state other things, including the type of funeral you desire. Hiring a lawyer is vital when creating a will, but it’s also crucial when creating a trust.
Creating a trust is also part of the estate planning process, but it serves a different role. A trust is an entity, and you place assets in it after creating it. The trust protects these assets and owns them, in a sense.
When you die, your will controls who gets these assets, but the trust simplifies the transfer of the assets. Your beneficiaries can avoid going to court if you have a trust and can receive the assets faster and simpler.
Types of Trusts
A lawyer provides estate planning tips, including explaining the different types of trusts. Trusts come in two primary categories.
An irrevocable trust is one you can’t change. For example, if you place assets in it, you can’t remove them. Once you establish an irrevocable trust, it remains the same.
The more common option is a revocable trust, which is one you can change. You control the trust while alive and can make any changes you desire anytime.
Here are some of the common types of trusts:
Joint Trust
A joint trust lets you create one with someone else, generally a spouse. If one spouse dies, the other spouse owns the trust individually. The surviving spouse can change the trust at that point or convert it to a different type.
Special Needs Trust
A special needs trust is designed to protect a special needs child or relative.
One benefit of this is that the special needs child receives the financial help they need through the trust without risking the loss of government programs due to their assets.
Asset Protection Trust
People use asset protection trusts to protect their assets from creditors primarily. Creditors can’t seize assets protected within a trust.
Credit Shelter Trust
A credit shelter trust is ideal for reducing estate taxes. These trusts pass to a person’s children without requiring estate taxes.
Contact a Lawyer for Advice
Creating a trust is a helpful step for protecting your family. However, the different types of trusts can be confusing. As a result, you’ll benefit by talking to a lawyer who provides estate planning services.
Contact us at Crosson Richetti & Daigle for advice and help. We offer legal services in Allentown, PA, and can help you with all your estate planning needs.
