Trusts make it easier to pass on your assets to beneficiaries in the manner that you see fit. Trusts are also great for minimizing taxation and avoiding probate.
In fact, there are many types of trusts to choose from. In general, trusts can be revocable or irrevocable. And one particular kind of trust — a special needs trust — is an effective way of providing for a vulnerable loved one.
1. Irrevocable trusts
An irrevocable trust is one that you can’t change once you create it. For example, if you place your home in an irrevocable trust and add your child as a beneficiary, you’ll never be able to remove the home from the trust or change anything about the trust’s requirements. If you plan to use an irrevocable trust, make certain that you are 100 percent positive on the assets you’re including and their planned distribution.
2. Revocable trusts
Revocable trusts are more common because they give you a right to revoke or change the terms of the trust during your lifetime. Revocable trusts can be useful if one of your goals is to keep assets out of probate. Avoiding probate can help minimize costs and ensure that beneficiaries receive assets on a schedule that you determine. Sometimes assets get caught up in probate when family members need them most.
Note: the assets inside a revocable trust may still be accessible to creditors, so be wary if you have debts that will be due following your death.
3. Special needs trusts
One of the most important types of trusts is the special needs trust. This kind of trust is set up for a person who has a disability or special needs. This trust is allowed by the U.S. government as a supplemental form of income for those who receive governmental benefits on the basis of disability and financial need — for example, disability benefits such as Supplemental Security Income. Since the person with special needs can’t change or control the trust, the government won’t terminate his or her benefits simply because of an inheritance.
These are three trusts you may want to consider for your estate. Each has its positives and negatives, so choose wisely. An experienced estate planning attorney can assess your specific situation and help you develop a customized plan that meets your family’s needs.