How to Choose the Right Trust
Estate plans should include a Last Will and Testament, a durable power of attorney, and a medical power of attorney. Some people also prepare other documents, like a Living Will or a trust. But, when you start working on your estate plan, how will you know which trust is right for you?
Consider Your Goals
People who set out to develop an estate plan usually have goals in mind. Take some time to think about what you want your estate plan to do. You might ask yourself the following questions:
- Do I want to be able to change my trust?
- Will a trust help me to reduce my tax burden and my heirs’ potential tax bill?
- Do I want to transfer my wealth to my descendants over several years or even generations?
- Should the trust be created now or through my Will after my death?
- Am I concerned about future needs of a family member?
- Do I need to protect my assets?
- Do I need income during my retirement?
- Would I like my heirs to avoid probate and keep their inheritance from becoming public record?
Once you know what you want, take the next step.
Learn More to Choose the Right Trust
There are different trusts for different purposes, but not everyone needs a trust. Your estate planning lawyer may discuss the following trusts with you:
- Revocable and Irrevocable Trusts. These are general terms that may be used to describe a trust. Some trusts may be changed or altered (revocable), while others are difficult or impossible to change (irrevocable). In some cases, trusts should be irrevocable for you to receive the full benefit of the trust.
- Spendthrift and Discretionary. This type of trust affords beneficiaries some protection from creditor claims, ex-spouses, civil judgments, or general fiscal irresponsibility.
- Living Trusts and Testamentary Trusts. A trust established during the grantor’s lifetime may be called an inter vivos or living trust. Testamentary trusts, on the other hands, are created through the grantor’s Will after the grantor has passed.
- Specific Trusts. A special needs trust can provide support to a loved one without jeopardizing public benefit eligibility. Gun trusts offer firearms owners a safer way to pass firearms to their heirs. Pet owners may rest easier knowing that a pet trust can provide funds to care for their pets after they are gone. Some trusts, like charitable remainder trusts, may provide the grantor with an income while accomplishing other important estate planning goals.
This is by no means a comprehensive list of trusts. However, an attorney who specializes in trusts can help you to choose which, if any, of these trusts are right for you.