There are many different types of trusts available. Each has its own specific use for specific situations. However, deciding on the right trust for you and your needs can be difficult if you don’t understand the different types of trusts. A trust is a three-party agreement between the trustor,or grantor or settlor (you), the trustee (the person in charge of managing the trust, who may be you as well), and the beneficiary (you and then the person who will inherit the trust upon your demise).
How Is A Trust Used?
The way a trust is used can depend on the people involved and the situation. A trustor could use a trust to manage his or her assets while alive or after they have passed on. Depending on the terms of the trust, some trustors can benefit from the trust while they are alive. It can also be used to avoid Probate and provide an easier way to give your estate to your beneficiaries. It is easier to manage your property, assets, and estate, if it is in a trust. A trust is especially important if your beneficiary is a minor or an individual that is incapable of being financially accountable to manage the assets themselves. Remember to solicit trust advice from a reputable real estate attorney from such as the law offices of Gary I. Handin, P.A.
The Different Types Of Trusts
There are many different types of trusts available. Even though the basic nature of the trust is similar, the differences in each trust are there for a reason. It depends on your purpose and needs.
This form of trust is created while you are still alive. It is comprised of your assets/property that you will utilize during your lifetime. You are still able to benefit from the trust while you are alive, and your assets will be passed on to your chosen beneficiary once you have passed on. The benefits of a living trust include avoiding the expense and delay of probate and gives you a greater control over your estate while you are still alive. You would be able to set-up a trust that your minor receives when they attend college to pay for tuition or you could use a living trust to protect your assets from greedy relatives. Remember that a living trust can also be revocable or irrevocable, depending on the details of the trust.
If you are the trustor, revocable trusts can be changed, altered, or annulled by you, during your lifetime. It allows you to transfer assets out of probate and upon your death, your chosen trustee will be put in charge of the trust to ensure that your beneficiary benefits/receives your estate.
Unlike it’s counterpart, irrevocable trusts cannot be altered or changed. Not by the trustor while he/she is alive nor after their death. In an irrevocable trust, the assets can only be moved “forward” to the next beneficiary and not back to the trustor. These types of trusts are favorable because they may have little to no estate taxes attached to them, but they cannot be changed.
Credit Shelter Trust
These types of trusts are favorable for those who would like to keep their estate tax free. The trustor is able to give beneficiaries a specific amount until the estate tax exemption limit. The estate will therefore remain tax free even if the estate grows.
These types of trusts have no relatives or the like as the beneficiary. Instead a charity or non-profit organization will be the beneficiary. This means that the nominated NPO or charity of choice will receive those funds in order to continue their work. In some instances, a charitable trust can form part of a normal trust. It is merely added in – allowing an NPO or charity to receive part of the estate along with the trustor’s inheritors. Obviously there are tax advantages to creating such a charitable Trust. This is because you can take advantage of the charitable tax deduction now even though the money will not go to the charity until a certain event, such as your death. It is wise to have a discussion with your certified public accountant in order to determine whether this type of Trust is beneficial to you.
In the case of a blind trust, the estate itself is managed at the discretion of the trustees without the beneficiary’s knowledge. This does require a lot of confidence on the trustor’s behalf, especially with his or her chosen trustee. This type of trust is used primarily by family’s wishing to avoid internal conflicts over the estate.
Finding The Right Trust For You
Overall there are many different kinds of trusts, such as a special needs trust, in order to provide for a disabled member of the family. The type of trust that you need is dependent on you and your situation. While the format may be similar (trustor, trustee, beneficiary) each trust is different in its own way. If you are struggling to decide which trust is right for you don’t hesitate to contact us at + 1-877-815-4560. We’ll help you find the right trust for you.