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Understanding different types of trusts

On Behalf of | Feb 5, 2020 | Estate Planning

Depending on your estate planning goals, establishing a trust could be an important step in your personal process. Trusts protect your assets and preserve your wealth for the next generation. With a trust, you establish an account with a trustee who holds assets on behalf of your desired beneficiaries.

Learn about the various types of trusts and how you may want to use this tool in your estate plan.

Revocable trusts

Sometimes called a living trust, a revocable trust provides continued control of property held in the trust while you are alive. That means you can end or update the trust for any reason. For example, you may want to add property to the trust or change beneficiaries to reflect a new marriage or baby. Revocable trusts allow you to avoid probate and keep the details of your estate private, unlike with a will that becomes public record. This type of trust also helps shield your assets from creditors who may try to collect on debts after you die.

Irrevocable trusts

Unlike revocable trusts, you cannot change this type of trust once you put it in place. Although an irrevocable trust provides less flexibility than a revocable trust, they also do a better job of protecting your assets from seizure for old debts. You can also use this type of trust to help your heirs avoid gift and estate tax on their inheritances. This makes the revocable trust a popular choice for individuals who expect to leave behind a sizable estate.

Charitable trusts

If you want your income to support a favorite cause, you can set aside funds for a specific organization in this type of trust. The trustee will invest these assets to provide income during your lifetime, and the charity will receive the remainder of the trust fund upon your death.

These are just a few of the many estate planning trusts available. Research your options before finalizing a plan for your estate.