When planning your estate, trusts can be a crucial way to protect your assets after death. A trust is something that a person can create during their lifetime and designates a beneficiary or it can be created by a will after death. There are many types of trusts someone can set up. In this post, we’ll discuss four common types of trusts.
Revocable Trusts
Revocable trusts are exactly how they sound. They are trusts that are set up that can be changed in some way. They can be altered or even revoked completely. Revocable trusts can also be called a living trust because they are made or transferred during the lifetime of the person who established the trust. While living or revocable trusts are a good way to avoid probate (or when someone dies without a will and the government takes control of their assets), but the trust needs to be made into an irrevocable trust in order to protect your assets.
Irrevocable Trusts
Unlike a revocable trust, an irrevocable trust is one that cannot be changed, even by the person who created the trust. A person could purchase survivorship life insurance which allows the trust to be used to help with estate planning, but having the insurance could have negative financial consequences.
Asset Protection Trusts
An asset protection trust is simply a trust that protects someone’s assets. It is a way that says a business owner, can protect their assets if their company was sued and/or creditors tried to attack him personally. Asset trusts are sometimes offshore accounts that lie outside of the United States, but they can also be housed here in the US as well. These are assets that the owner puts into someone else’s name so that if every sued, they would not show up in the report.
Special Needs Trusts
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This trust is set up for those who have special needs so that if anything happens to the person taking care of them, they will be provided for beyond just receiving government benefits. This is legal under Social Security as long as the special need has been confirmed. This special needs trust is available to people who are already receiving benefits from the government. They are set up to ensure the happiness and comfort for those who are not able to take care of or provide for themselves. When a person has a disabled child, setting up a special needs trust in their will gives them comfort knowing that their child will not only be financially taken care of, but that they will not be disqualified from receiving any government benefits.
It’s important to understand how to protect the assets and finances you accumulated during your lifetime. By setting up different types of trusts, you don’t have to worry about what will happen to your family members and other loved ones in the future. Whatever type of trust you decide is best for you, you should always consider reaching out to a Folsom estate planning lawyer for help putting the trust together.
Thank you to our friends and contributors at Yee Law Group, P.C. for their insight into estate planning and the four types of trusts.
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