If you are creating an estate plan, then you should be aware of your asset protection options. While your will can instruct how your assets are distributed, a will is not the only document that can do this. You can create a trust to do the same.
Why would you have a trust if it does the same thing as a will? The benefit of having a trust is that you can protect your estate from probate, disputes and estate taxes. You can also use a trust to make specific requests. Here is what you should know:
How do trusts work?
A trust is a legal arrangement between you and a trustee. A trustee is the person who is responsible for managing trust funds. A trustee also holds legal title to assets in a trust, which can help limit taxation on assets. After you pass away, the funds in a trust can be distributed directly to beneficiaries, bypassing probate.
What are the different kinds of trusts?
There are many different kinds of trusts. A revocable trust is one of the most common. You can alter the contents of a revocable trust at any time. After you pass away, the revocable trust becomes irrevocable and may not be altered.
By customizing your trust, you can specify how much and why assets are dispersed. This can help protect your assets from being misused and help ensure your wishes are met. Some common trusts include:
- Pet trust
- Incentive trust
- Spendthrift trust
- Special-needs trust
- Generation-skipping trust
If you are considering making a trust, you can seek out legal guidance to help you plan for the future of your estate.