If you're thinking about creating an estate plan, you're probably running into lots of information about trusts, some of which may seem confusing or contradictory. There are many different types of trusts and many ways that you might use them, depending on your needs and wishes for your estate.
In general, a trust is a financial planning tool that allows people to remove items from personal ownership but still control how and when they or others access those items. You may find it helpful to think of a trust as a box. You can take things that you own -- money, real estate, etc. -- and place them in the box. Once they are in the box, you do not legally own them, protecting them from unnecessary taxation or preserving them from claims of creditors. You may even use a trust to reduce your income to qualify for government assistance.
If you believe that trusts may serve as an important part of your estate plan, don't hesitate to reach out to an experienced estate planning attorney. An attorney can help you evaluate your options and identify a trust that fits your needs.
Revocable or irrevocable trusts?
All trusts are either revocable or irrevocable, and not all types of trusts offer both options. While the specifics may vary, revocable trusts allow you to retain greater control over the assets you place in them at the expense of some kinds of protections and benefits. On the other hand, irrevocable trusts limit the amount of control you have over assets you place in them, but generally offer greater protections or benefits.
As you consider your trust options, be mindful of where a particular trust falls on the spectrum between revocable and irrevocable, and the implications that may have on your choices.
Charitable trusts allow you to give freely to a cause you support while enjoying some additional benefits. There are few things as satisfying as using your resources to further the interests of a cause you care about, while simultaneously providing important benefits to you. These trusts often offset tax obligations by one or both parties involved, and may present opportunities to gift some assets to a charitable organization and receive ongoing financial benefits at the same time. If charitable giving is a part of your wishes, a charitable trust is worth considering.
Special needs trusts
Not all trusts are about preserving assets from taxation or creditors. A special needs trust allows people to reduce their personal net worth to qualify for government assistance. The assets within the trust can then go to provide care and luxuries for the beneficiary without endangering the beneficiary's candidacy for government assistance. These are very helpful to those who have some assets and don't want to squander them on health care costs, especially in old age.
These are only brief overviews of some types of trusts available, but there many more.
However you choose to proceed, be sure to do so prudently, with professional guidance. An experienced attorney can help you understand all of the moving parts in play in your estate and craft an estate plan the uses the strength of the law to protect you and your assets for years to come.