Trusts play an important role in estate planning, and they help you to manage and protect your assets for your future generation. There are many trusts available, so it can be hard for you to select the right one. In such a situation, it is important to get legal guidance.
Some law firms like The Ebbert Law Firm, specialize in helping their clients select the right trust by making them understand the benefits and limitations of each trust type and making sure that their estate is managed correctly and efficiently.
Read this article to learn more about trusts, how they work, and what you should consider when you are selecting the trust that is best for you.
What are Trusts?
Trust is basically a legal arrangement in which a third party (trustee) is responsible for managing assets held on behalf of a beneficiary. Trusts can be helpful in many ways and for many purposes, which includes estate planning, asset protection, and tax reduction.
There are very distinct features of different types of trusts that you need to understand before you decide which one is best for you.
Revocable vs. Irrevocable Trusts
The first decision you will have to make is that you want a revocable or irrevocable trust. This decision is important, and it determines your control over your assets.
Revocable Trusts
These trusts are flexible, as the grantor (the person who creates the trust) can hold control over your assets, and you can make any change you want or dissolve the trust in your lifetime. This trust can be helpful if you change your mind and want to adjust the terms of the trust according to you.
The downside of getting a revocable trust is that it is considered part of your taxable estate.
Irrevocable Trusts
These trusts provide better protection from creditors and help save estate taxes. They are hard to change or dissolve. Even though you lose control over your real estate, it is not considered part of your taxable estate, which can help save taxes.
The decision to choose depends on your priority. If you want flexibility and control, then revocable trust is the right choice for you, but if you want to protect your assets and save estate taxes, then irrevocable trust might be a good option.
Different Trust Types
Apart from revocable and irrevocable, there is a wide range of trusts that are made to address specific needs and objectives, such as living trusts, testamentary trusts, and charitable trusts.
Living Trusts
These trusts are basically created in your lifetime, and the main goal of such trusts is to help avoid probate. Probate can take a lengthy time and be even more costly. Assets that are held in a living trust are passed directly to the beneficiaries as instructed. This helps in transferring wealth smoothly and also helps in saving unnecessary expenses.
Testamentary Trusts
These trusts are made by your will, and they only come into action after your passing. They are useful for a minor child or for an adult who may not be financially responsible for any reason. This makes sure that the assets are managed by someone responsible.
Charitable Trusts
If you are a philanthropist and want to support a cause that you care about, you can open a charitable trust. These types of trusts become a source of income for the charity you choose. A charitable trust helps you get tax benefits and also leaves a long-lasting legacy for you.
Factors You Need To Consider
Before you select a trust, it is important that you understand and look at all the factors so that you can make sure that the trust can help you in your long-term goal. Trusts can help you save taxes and also protect your property, but this, in turn, can take your control over your property.
Choosing a trustee is the most important decision when you are setting up a trust. It is important that you choose someone who is experienced and trustworthy, as they will be responsible for managing your assets.
Hire A Professional Today!
Choosing the right trust is important in securing your family’s financial future. Work with an experienced legal team who can help you make the right choice so that you can fulfill your goals.
