Most people do not have a clear understanding of the different types of trusts and how they can affect your estate when you pass.
It is important to get some fundamental knowledge of trusts before you start making decisions about where your assets will go.
We are going to give a rundown of the four essential types of trusts and when you should choose them for your estate.
Understanding Types of Trusts
There are four primary types of trusts that we will cover here: living trusts, testamentary trusts, revocable trusts, and irrevocable trusts.
A trust can hold two of those titles, as living and testamentary trusts refer to the state of the trust once it is created, and the accessibility of the trust applies to the other terms.
Living trusts are those that become effective immediately after being created.
That does not mean that the beneficiary will have access to those assets, though. The accessibility of those assets will be laid out in the terms of the trust.
One perk of living trusts is that they do not require probate when they are dispersed.
Testamentary trusts are not effective until the grantor dies. These trusts are typically created in conjunction with wills. This poses issues of privacy, as wills are public documents.
They are relatively easy to set up in comparison to living wills because they are created at the same time as a trust and exist within that context.
Additionally, testamentary trusts give you the ability to make adjustments. While adjusting a trust or a will can be costly and difficult, there may be a chance to do so.
Revocable trusts are those that have the ability to be amended and changed before the grantor dies.
People often take the option of revocable trusts in order to make adjustments, should their mental health decline in old age. Additionally, if any life changes occur that affect one’s decision to name individuals in their trust, they will be able to make those changes.
Irrevocable trusts are unable to be changed after they are in place. So, once the paperwork is done, the assets are in the hands of the beneficiary and cannot be accessed until the grantor’s death.
That rule is unflinching in most cases. Despite one’s best efforts, the chances of changing an irrevocable trust are minimal at best. There are some good reasons to choose this kind of trust, though.
These reasons are primarily tax-related. You can significantly reduce estate taxes by using an irrevocable trust.
Interested in Learning More?
There is more specific information available on the different types of trusts. It is important that you do more research before you make a decision.
If you are interested in finding more of that information and making a confident decision, visit our site to learn more. You can also contact us if you are ready to start discussing estate planning services.