Which Type Of Trust Is Right For You?
The cornerstones of most estate plans are wills and one or more trusts. While a will allows you to name heirs who will inherit your assets after your death, trusts give you considerably more control over how, when and in what manner assets are passed to your intended beneficiaries.
If you need help creating trust or want to learn more about your options, contact our lawyers at Jurist Law Group, PLLC. We have decades of experience in estate planning and trust law, including considerable experience in the creation and administration of trusts.
Understanding Revocable Vs. Irrevocable Trusts
While there are many different types of trusts created for specific purposes (described below), any trust will be classified as either revocable or irrevocable. If a trust is revocable, it can be changed or revoked after being created. A common estate planning strategy is to create a revocable living trust, in which the creator places most or all of their assets. While they are still living, the trust is revocable and they continue to control the assets. Once they pass away, the trust becomes irrevocable and must be administered according to its provisions.
Trusts that are created as irrevocable can only be administered, not changed or revoked. There are, however, special conditions under Arkansas Law that even an irrevocable trust may be terminated or amended. Sometimes, certain amendment powers can be reserved in the trust agreement by the settlor, but only in special situations, such as when a settlor reserves the right to change the beneficiaries of the trust by his or her will. Sometimes, amendments are reserved to third parties such as a Trust Advisor or Trust Protector.
What Are The Duties Of A Trustee?
Trustees are typically responsible for:
- Protecting and preserving the assets in the trust.
- Administering trust assets to beneficiaries.
- Managing any debts attached to the trust.
- Paying any taxes on asset distributions from the trust.
- Keeping accurate records of the trust.
The person you choose as a trustee should be honest, responsible and dependable. You can choose a loved one or find a professional trustee. We can help you make these decisions and feel good about them.
How Do You Set Up A Trust?
Here is a breakdown of the process:
- Determine the type of trust you want: You can choose from multiple types of trusts; some may work better for your situation than others. Learn more about your options by speaking with an experienced estate planning attorney.
- Determine what assets to put in it: Most people put things like real estate properties, investment portfolios and family businesses.
- Decide who you want your beneficiaries to be: Beneficiaries can be anyone from friends, spouses, children or other loved ones. You could also name a charitable organization as a beneficiary in your trust.
- Have a lawyer help you set it up: A seasoned estate planning attorney can help you review all your trust documents to ensure you set up everything the way you want and that they’re free of errors.
The process of creating and establishing a trust can feel cumbersome. However, with help from the right attorney, you can feel confident about how you’ll manage your future assets.
Trusts Can Be Tailored For Many Different Purposes
A trust can and should be highly tailored to serve the purposes of its creator and provide for its beneficiaries. The revocable living trust was described above. Other examples of custom trusts include:
Special needs trusts: These are designed for someone who has a disability or incapacity. The beneficiary is someone who is also benefiting from government benefits and support. Parents who wish to secure a stable financial future for their child without disrupting their government support usually opt for a special needs trust. Since the trust, not the beneficiary, controls and owns the assets, the child is not in danger of losing their Supplemental Security Income and Medicaid benefits. It does not matter whether a special needs trust holds $10,000 or $1 million. A beneficiary’s benefits will not be affected as long as they do not own the trust. As a result, the low threshold that is set by the government programs will never be met.
Spendthrift trusts: If you have children or other heirs who either cannot manage a lump-sum inheritance or should not be trusted with one, a spendthrift trust may be the solution. It allows you to distribute assets over time and in a controlled manner, ensuring that they last and reducing the chances that they will be squandered.
Irrevocable life insurance trusts: These can be used to own life insurance policies, among other things, to cover the costs of estate taxes, taking that burden off of beneficiaries.
Charitable remainder annuity trusts: These allow you to both leave assets to your heirs and divert any remaining assets to a charitable cause of your choosing.
Generation-skipping trusts: If you leave assets directly to your children, they might be subject to a significant estate tax. By setting aside those same assets to someday be distributed to your grandchildren, you can provide important financial resources to your grandkids while also avoiding those tax obligations.
Grantor retained annuity trusts: These are one of several types of trusts that help you minimize tax obligations on financial gifts to your beneficiaries.
There are dozens of commonly used trusts, and those described above are just a small sample of what’s available. Our attorneys can discuss your needs to help you choose, then create the most appropriate trust for your situation.
Is A Trust Always The Right Decision?
It can depend on the situation. You may find a trust beneficial if you own a home and wish to give it to children or other family members, or you have valuable stock investments you’d like to pass down.
At the same time, your situation is unique to you. An attorney can help you determine if creating a trust could add value to your estate plan.