A trust is a great estate planning choice if you want legal protection for your assets. It guarantees that the will distributes assets, saves time, eliminates pointless paperwork, and might even lower estate taxes. Therefore, trust is a vital tool to include when planning your estate. However, you might not know which trust is best for your needs if you’ve only recently started looking into estate trusts. Today, we’ll talk about three types of trust in estate planning attorneys that are worthwhile taking into account.
Estate Planning Attorneys: Three Common Types of Trust
Let’s look at three popular trust types that can help you safeguard your assets while doing estate planning attorneys:
Revocable Living Trust in estate planning attorneys
A revocable trust frequently makes the most sense for many people due to the increased importance of control over assets. The trustee must be named in a living trust, which you must create legally. In the end, the trustee is in charge of administering your assets by the guidelines you established when you established the trust.
With a revocable living trust, you can change or even revoke the trust while you’re still alive.
Additionally, a revocable living trust gives you the flexibility to
- Increase or decrease the trust’s assets
- Delete previous beneficiaries
- Add additional recipients
- Modify the trust’s rules of conduct
- Sell the trust’s property
- Prevent probate
The trust will become irrevocable upon death. Although your beneficiaries can avoid probate with this kind of trust, it does not provide as much tax protection as an irrevocable trust. But this trust is ideal for many families because of the ease and flexibility of making adjustments as circumstances demand.
Revocable trusts are frequently used with pour-over wills because they can only deal with the assets named in the trust. This will designate your revocable living trust as the beneficiary of anything not named in your will. However, it is crucial to remember that before any assets included in the pour-over can be transferred into the trust, they must go through the probate process.
A revocable living trust is the best option for those who want more flexibility and control over how their assets are distributed.
Irrevocable Living Trusts
A revocable trust and an irrevocable trust share several essential characteristics. However, the most significant distinction is that an irrevocable living trust cannot be changed or revoked once it has been established.
You are essentially transferring ownership of your assets when you create an irrevocable living trust because you are limited in changing certain things.
There are some facets of the trust that you won’t be able to alter quickly.
- Your beneficiaries listed
- The initial guidelines outlined in the trust
- The capacity to liquidate assets
The process of altering the terms isn’t the simplest for those with an irrevocable trust. A document signed by the trustee and all beneficiaries are required to modify this trust; in other words, you need the beneficiaries’ consent to change any of the provisions above. Obtaining a judge’s order is another choice.
Because there are more restrictions, irrevocable living trusts are less popular than revocable ones. As a result, it’s best to feel confident about your choices, such as who will serve as your trustee, your beneficiaries, and the specifics of your trust.
You might wonder why someone would pick an irrevocable trust over a revocable one.
Revocable trusts have fewer tax advantages for the grantor and their beneficiaries than irrevocable trusts. However, this might be a better choice for people with high net worth since it enables high-value assets to be exempt from estate taxes.
Using an irrevocable living trust is best if you want to protect your assets even further and keep your estate’s estate taxes to a minimum.
Asset Protection Trusts
A trust for asset protection (APT) does exactly what it says on the tin. Protecting assets from potential creditors is the main objective of an asset protection trust. Asset protection trusts protect the following:
- Decisions made against your estate
It’s crucial to understand that asset protection trusts will self-settled. They allow you to name yourself as a beneficiary and access your assets whenever necessary. In addition, grantors can stop creditors from seizing assets if the agreement is structured correctly.
Let’s look at the two categories of asset protection trusts:
- Domestic APTs
These offer the most adaptable asset protection trust regulations in the United States with a straightforward setup. They are, however, only delivered in 17 states, excluding North Carolina. Therefore, you will need to work with an estate planning lawyer to set up the trust in another state if you’re thinking about this kind of trust.
- Foreign APTs
A foreign APT should keep outside of the United States in an offshore account. Because a foreign APT has more privacy safeguards than a domestic one, many people prefer it. Even though it’s more expensive, it’s a great option if you’re concerned about your assets’ safety.
Who Should Use an Asset Protection Trust?
Asset protection trusts are available to everyone. However, business owners and people with comparatively higher incomes and assets will gain the most. Notably, anyone with a net worth greater than $250,000 ought to think about creating an asset protection trust.
There are numerous trusts that people can utilize. Thinking about your current and long-term financial goals is crucial if you’re unsure which option is best for you and your assets. To determine which trust will benefit you the most, it’s also essential to consider your current financial situation.
Revocable, irrevocable, and asset protection trusts are some of the most typical types to consider. Furthermore, these trusts provide long-term advantages that can improve your estate plan and safeguard your assets.