A living trust can be a great option to ensure your assets are dispersed exactly as you want them to be in the event of your death. While it does not exactly replace a will, it is a tool that can save you money in the long run. There are several different types of living trusts. While you do not need a lawyer to develop a trust, it may not be a bad idea to hire one.
The Benefits of a Living Trust
One of the greatest upsides to a living trust is the complete circumvention of probate court. You do not have to worry about a court deciding what to do with your assets. In addition, with other options such as a will, there is always the chance that a friend or family member will contest for your assets. A living will can protect you from that.
Second, but not least, it can be cheaper. The execution of a living trust upon death should not cost much because it does not require a court or attorneys.
A Revocable Trust
This type of trust offers great flexibility. It allows the settlor (the person who created the trust) to make changes or completely revoke the trust at any time. Utilizing a revocable trust, the settlor can designate himself or herself as the trustee (the person in control of the trust). There is a downside with this option; if the settlor is the trustee and the estate is worth more than $11.18 million, federal estate tax must be paid.
An Irrevocable Trust
As the name implies, this type of living trust cannot be changed or revoked. While that may sound like a serious downside, there are, of course, positives. Assets within an irrevocable trust cannot be evaluated by creditors. In other words, if a person were to get sued, the assets within an irrevocable trust could not be touched. However, if you get into tax trouble, the IRS can put a lien against assets in this type of trust.
Asset Protection Trust
Like an irrevocable trust, an asset protection trust is a safeguard against creditors. One defining characteristic of this type of trust is shelf life. The trust only lasts for a defined period of time and then the assets go back to the trustee. This trust is irrevocable. It does allow for distributions if the asset generates income, but those distributions are passed along at the discretion of the trustee.
The name says it all. A charitable trust can be created to benefit a charity. A huge upside to this type of trust is the tax benefits. These tax benefits come in the form of reduced or eliminated estate and gift taxes.
If you do not have a plan in place to protect your assets after death, you need assistance. Elias Dsouza has been assisting people with estate planning, will and trusts, and much more for over 15 years. Contact Elias today for a free consultation.