Most people know that they need to do something in terms of handling assets after death. However, with all of the options, we find that people often have difficulty even getting started.
We often see confusion surrounding trusts. Here are five different types with explanations.
1. Living
A living trust holds your assets while you are alive. It could be separate from you for some taxation and financial purposes, depending on the subtype.
2. Testamentary
As opposed to living trusts, testamentary types come into force after you die. For example, you could stipulate in your will that you would like your estate to fund a trust with your family home. This could allow a loved one to live there without owning the property.
3. Special needs
Special needs trusts are common tools for maintaining government disability benefits eligibility. You could establish one in preparation for helping a loved one with special needs. You could also establish one for yourself — if you received an inheritance or a court award, for example.
4. Revocable
With a revocable format, you could maintain control over whatever you place in trust. This could be advantageous for certain financial and charitable purposes.
5. Irrevocable
Irrevocable trusts require you to give up control of the trust assets. Even though you would no longer have the ability to make decisions after you establish an irrevocable trust, you could still benefit in the form of distributions — payments from the trust back to you.
There are solutions for nearly every situation you could imagine. For example, you could have your living trust establish a testamentary trust. Your goals — more so than the constraints of trust options — would probably be the main concern when deciding which alternatives to use.
