Did you know that 46% of Americans have a will?
Estate planning is an essential process that everyone needs to take part in at one point or another. Whether you are young and have a lot of life ahead of you or are well along in your years, everyone needs to plan for the unexpected. This can involve carrying out one or more types of trusts.
Here are some of the most common types of trusts explaining why estate planning is so important.
Living Trust
A Living Trust is a trust set up during the lifetime of the person who owns the assets or property. This trust is created and managed by a trustee and is funded by the individual who sets it up. The trust can hold many assets, such as real estate, cash, and investments.
The person setting up the trust will decide how the trust should be managed and how the assets will be distributed. The creator of the trust, or the settlor, can also choose the beneficiaries and how much each person will receive from the trust. With a Living Trust, the settlor can control their assets during their lifetime and after death.
Irrevocable Trusts
An Irrevocable Trust is an arrangement where the grantor transfers legal ownership of assets to a trust. The legal ownership transfer is a one-way street, as the grantor can no longer change, alter, or end the trust. Irrevocable Trusts are a popular type of trust that many people use as part of their estate planning.
The assets in the trust can be passed down to beneficiaries detailed in the trust document. Irrevocable trusts are popular because they provide asset protection, cannot be taxed in most cases, and can be used for charitable giving.
Testamentary Trust
A testamentary trust is one of the main types referred to in estate planning. Individuals commonly use a testamentary trust to provide support and financial security for their dependents. This type of trust allows the grantor to determine how the assets within the trust are distributed.
Furthermore, assets within the testamentary trust typically do not need to pass through probate before being distributed to heirs. As such, this can help reduce costs, paperwork, and time-related tasks to estate administration.
Charitable Trusts
A charitable trust is a trust set up for a specific charity’s benefit. The trustee has legal and equitable duties to distribute income in the trust to a charity or charities specified by the maker of the faith. Charitable trusts can be used to ensure that one’s money fulfills their wishes after death by donating money to favorite charities.
People wanting to set up a charitable trust need to make sure that the trust is formed according to the laws of their state and that there is a valid charitable purpose. By doing so, they can ensure that the distribution of their money helps those who need it most.
These trusts are also used to reduce taxes paid on one’s estate and offer other tax savings benefits. If you are looking for estate planning tips, check out this LGBTQ estate planning.
Understanding the Types of Trusts
The estate planning process can be complex and overwhelming. Knowing the different types of trusts available and their unique benefits can go a long way in easing your worries. From charitable trusts to irrevocable trusts, each class can be tailored to meet your individual needs.
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