You’re deep into estate planning and just decided that you need a trust. Now, there are more decisions to be made because you must next determine what kind of trust you want.
A trust is essentially a legal entity that owns the assets you put into it. You, as the creator of the trust are the settlor. You will also name a trustee, who oversees the trust, and the beneficiary, who receives and benefits from the assets.
When is the trust active?
First, decide if you would like your trust to be active during your life or after your passing.
A living trust, also known as an inter vivos trust, is the version that is active during your life. This type of trust can keep your estate from going through probate after your death.
The creation of a testamentary trust occurs after the settlor’s death. The instructions for the trust are in your will and your executor will follow those instructions to create it and distribute assets to beneficiaries accordingly.
Can you change the trust?
The next thing to determine is how final you want your trust to be. The answer will determine if you should use a revocable or irrevocable trust.
If you opt for a living trust, you may choose if you would like it to revocable or irrevocable. With a revocable trust, you can change what assets are in it and who the trustee and beneficiaries are. An irrevocable trust, on the other hand, cannot be changed by you. You will not be able to revoke the trust or change the trustee or beneficiaries. Irrevocable trusts can, however, help protect some of your assets from taxes, creditors and exclusion from government programs.
Figuring out what type of trust is best for you can be confusing. It’s always best to work with your estate planning lawyer to really understand your options and which will be most beneficial for y