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Examining Different Types of Trusts

If you want to protect your assets, it’s wise to create a trust so that you can preserve the value of the inheritance passed onto your family after you are gone. When you are ready to start, the simplest solution is to talk to an industry expert to learn about your options and ensure you pick the best type of trust for you.


Here’s a quick overview to help you compare your options:


1. Revocable Living Trust

You can create this type of trust at any point, and it offers flexibility as it can be altered or revoked as long as you maintain mental competency. The goal of a revocable living trust is to avoid probate, a potentially lengthy and expensive legal process of administering the estate after you pass away. When the grantor dies, the trust assets are transferred to the chosen beneficiaries without a need to go through probate. One notable benefit is that this type of trust offers privacy, and the details always remain confidential.


2. Irrevocable Trust

An irrevocable trust can’t be modified or terminated without the beneficiaries agreeing to the changes. When your assets are moved into your irrevocable trust, they are no longer part of your estate. The benefit is that the assets are protected from estate taxes and creditors.


3. Testamentary Trust

A testamentary trust is established through a will and goes into effect when you die. Unlike revocable living trusts, testamentary trusts are not designed to avoid probate. This type of trust provides for the management and distribution of assets and is usually used when the beneficiaries are minors, incapacitated, or lack financial management skills. A designated trustee oversees the trust assets until specific conditions are met, and the beneficiary can take control.


4. Special Needs Trust

A special needs trust is designed for individuals with disabilities who need protection for their assets while still allowing them to maintain eligibility for government benefits. When assets are put in a special needs trust, an individual with disabilities can continue receiving funds for additional care, medical expenses, education, travel, and more while still receiving needs-based benefits.


Keep in mind that trusts are complex, which is why professional advice is always recommended. Talk to an expert for more information about the best trust type for your unique needs. A lawyer and/or financial advisor can review your assets and personal goals, then help you design the ideal plan that will ensure the best outcome in the future.

Written by Becki Andrus in partnership with Checkworks personal and business checks.


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