Trusts: What Kinds Are There?
We’ve often discussed the benefits of trusts, and how a trust can help you administer an estate. But what kinds of trusts are there? There are actually a large number of trusts, and the trust that’s right for you is an individual choice based on your specific situation.
Still, it may be helpful for you to have a quick rundown of the kinds of trusts that may be available to you when doing an estate plan.
As the name implies, a revocable trust is made during the lifetime of the person creating it, and it can be revoked at any time. This is also called a living trust. A revocable trust will become irrevocable once the maker (settlor) of the trust passes away.
An irrevocable trust can never have property taken out of it—not even by the person making the trust. The benefit though is that this kind of trust gets a great deal of protection from creditors.
As the name implies, this kind of trust benefits a particular charity, or public interest. Money left to charities or nonprofit organizations often can avoid otherwise costly gift or estate taxes.
Special Needs Trusts
Often, people who inherit money will inherit so much money that it could threaten need-based government benefits that they receive. But a special needs trust will allow that person to inherit the money, without risking government benefits. The trust can have language that automatically terminates, should it even threaten the beneficiary’s benefits.
Special needs trusts often go towards paying for the needs of someone who is disabled, but the recipient does not have to be disabled. Paying for things like medical or educational expenses can be included in a special needs trust as well.
A spendthrift trust is a trust where the beneficiary may receive things from the trust, but the beneficiary does not receive all of what is in the trust, and the beneficiary may not get control over the assets in the trust—the trustee maintains that control.
This is often used for creditor protection, or to keep someone from spending all of the money at once, or spending it in a careless or irresponsible manner.
A Totten Trust is simply a payable on death account, held at a financial institution. It is primarily used to pass on money. Whoever starts the account is the trustee, and the financial institution will release the funds to whoever is designated, when the owner of the account or creator of the trust, passes away. A Totten Trust does avoid probate, and can be altered during the creator’s lifetime.
A pet trust leaves money that will go to care for your animal, after you pass. The trust can designate a caretaker, pay the caretaker, and make sure the caretaker has the financial needs to take care of your beloved animal.
Create an estate plan that’s right for you. Call the Torrance estate planning attorneys at Samuel Ford Law today.