Getting your estate plan in order can be a daunting task. Even if you already have one in place, life events give cause to revisit your plan to make necessary updates. Whether it is a marriage, divorce, birth of a child or a significant inheritance or increase in income, it is important to consider all new developments when you are updating your plan.
While a will is an essential estate planning document to create and update, it is also important to consider trusts, how they operate and if they would be a beneficial document to include.
Types of trusts
To determine if a trust is right for you, you should have a basis for the different types available. The five most common types of trusts will be briefly discussed.
The first is a living trust. This is a trust made during your lifetime and is also referred to as a living trust. If your living trust is revocable, you can make changes to it throughout your lifetime. You can also choose to terminate the trust as well. After you pass, the assets held in the revocable trust will transfer outside of the probate process.
You can also choose to create an irrevocable living trust. Much like a revocable trust, this is created during your lifetime; however, it cannot be easily modified. While you give up control of your assets placed in an irrevocable trust, they are better protected from creditor claims and can sometimes avoid being subjected to estate taxes.
A testamentary trust is created in a will and only becomes active after the probate process. These are often made if you seek to leave assets or certain property to an individual after you pass but require a trustee to manage them.
Next, you could create a charitable remainder trust, which is used to provide a donation to a charitable donation. Finally, you could create a special needs trust. These are created to benefit a disabled loved one without impacting their eligibility to receive government benefits.
Considerations
There are many factors and considerations that go into the creation of a trust. However, it is important to consider what is necessary now. Do you want the flexibility of a revocable living trust? Or is it more ideal to have an irrevocable trust that provides more protection?
Do you seek you pass your property and assets to someone that cannot effectively manage their own inheritance? Or do you seek to provide for a disabled loved one? A legal professional can help answer any questions you have, helping you navigate this matter.