Hyden, Miron & Foster, PLLC Law Blog

Monday, February 22, 2021

What Are the Different Trusts that Can Be Used in Estate Planning?

A trust can be a valuable tool to implement in an estate plan. With a trust, you transfer assets into the trust to fund it and then designate a trustee to manage the trust for the benefit of the named beneficiaries. A trust can provide for a swift and smooth transfer of assets to your heirs. It can help avoid the costs and delays associated with probate. A trust can also help avoid costly taxes. There are a variety of trust types and each has unique characteristics to help you accomplish specific goals.

What Are the Different Trusts that Can Be Used in Estate Planning?

There are two broad categories of trusts: irrevocable and revocable. An irrevocable trust is characterized, not surprisingly, by the fact that it cannot be modified or revoked except for under very limited circumstances. The circumstances being limited to those where all trust beneficiaries grant permission to change or revoke it. Once established, the grantor of an irrevocable trust gives up both ownership and control of the assets held in the trust. While inflexible, an irrevocable trust offers a number of potentially significant benefits. There can be substantial tax advantages as well as asset security which can make them particularly appealing to those with sizeable estates.

With a revocable trust, the grantor has much more flexibility. A revocable trust can be changed or revoked at any time by the grantor of the trust. Frequently, the trust grantor also acts as beneficiary of the trust during his or her lifetime. With a revocable trust, the assets held in the trust are still considered to belong to the trust grantor. This is why the trust grantor will remain responsible for including revenue generated by the trust in his or her personal taxes. Upon the death of the grantor, the revocable trust then becomes irrevocable.

Within these broad categories of trusts, there are more specific types of trusts. For instance, a testamentary trust is one set up through a provision in a person’s will. A trustee is appointed to manage the trust assets as well as distribute them according to the terms set forth in the trust document. With a testamentary trust, you can provide limitations as well as stipulations on how, when, and how much of the trust assets can be distributed to beneficiaries. For instance, you may want to include a provision in the trust that says trust access can only be accessed by a beneficiary when they reach 18 years of age and can only be used for educational expenses.

A special need trust is another common type of trust that can be quite valuable as it offers several critical benefits. A special needs trust is established to provide financial support to a beneficiary with special needs. It can either be funded by the special needs individual, which is a first-party trust, or by someone other than the special needs beneficiary, which is a third-party trust. The major benefit of a special needs trust is that it allows you to provide for a loved one with special needs without jeopardizing any receipt of need-based government benefits.

Estate Planning Attorneys

For more information on what a trust can accomplish for you and your loved ones, discuss your options with the knowledgeable attorneys at Hyden, Miron & Foster, Contact us today.


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