Trusts are an integral part of the estate planning process. If you suddenly pass away or become ill, a person of your choosing can hold and distribute money in your trust. Establishing a trust allows you to give a trustee the right to hold and manage assets for a specific purpose.
There are many types of trusts, and each of them can benefit you in a specific financial situation. As you get older and your needs change, making informed and strategic financial decisions — like establishing trusts — can be crucial. Knowing the different types of trusts and their functions can help you make financial plans that evolve with your needs.
Why should you consider including a trust in your estate plan?
Unlike other elements of your estate plan, trusts are not subject to probate. Probate is a public court process that ensures that a will is enforced. The probate period can be time consuming and expensive. Since a trust does not pass through a probate, it can save your loved ones time and money while maintaining their privacy.
5 types of trusts to consider before building your estate plan
Depending on your situation, you may want to include a certain type of trust in your estate plan. Knowing the different types of trusts that work for you can help you build an estate plan that fits your situation. Below are some examples of a few types of trusts so you can distribute your assets according to who you want to receive them:
1. Living trust — If you establish a “living trust,” you are establishing yourself as the trust’s current trustee and beneficiary. You are therefore in complete control of your assets in the trust. You can name a successor of the trust in case you pass away or become incapacitated.
2. Testamentary trust — This kind of trust is created after your death. If you would like a trust to be established after your death, you can list that desire in your will. Upon your death, your will then goes through probate court. The testamentary trust is then established. However, this type of trust does not avoid probate.
3. Revocable and irrevocable trusts — All trusts are either revocable or irrevocable. A revocable trust allows the grantor to change the trust’s details. The grantor can even terminate the trust if they wish. Meanwhile, irrevocable trusts cannot be removed or altered by anyone after it is executed.
4. Charitable trusts — A charitable trust is an irrevocable trust established for charitable purposes. A charitable trust typically has unique planning and tax benefits.
5. Special needs trusts — The goal of a special needs trust is to ensure that loved ones with a disability are financially secure. If they receive money from a special needs trust, they are still eligible for government benefits like Medicaid and Supplemental Security Income (SSI). This trust can also help loved ones pay for expenses that are not covered by government assistance.
Talk to a ProVise CFP® professional about what type of trust is right for you
Are you worried about finding the right trust for your financial situation? At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about which type(s) of trusts to include in your estate plan? Contact ProVise today to schedule a complimentary consultation.